The opinion of the court was delivered by: WELSH
Upon this Certificate of Review the sole question is: Under the Commercial Code may a reclamation petitioner recover all of the tangible assets of the bankrupt under a security agreement even though prior thereto he had obtained a judgment, issued execution and caused a levy to be made?
The facts are not in dispute and may be stated as follows:
On September 10, 1957, the bankrupt, Adrian Research and Chemical Company, Inc., in consideration of an accumulation of rent arrearages to the extent of $ 7600 due to William M. Kirkpatrick, its landlord, executed a Security Agreement in that amount in favor of Kirkpatrick, mortgaging and creating a security interest in certain items of office, laboratory and plant equipment, more particularly therein designated, as well as 'all other furniture, equipment and personal property whatsoever in and about the leased premises etc.'
The Security Agreement was duly recorded in the Office of the Prothonotary of the Court of Common Pleas of Montgomery County, wherein the property was located, and in the Office of the Secretary of the Commonwealth in conformity with the requirements of the Uniform Commercial Code. Art. 9, Sec. 9-401, 12A Purdon's Penna.Stats.Ann.
Judgment was entered on the note in the Office of the Prothonotary of the Court of Common Pleas of Montgomery County on September 12, 1957.
On or about March 12, 1958, by reason of a default occurring on or about February 15, 1958, in the payment of current rent, execution was issued on the judgment and a levy made by the Sheriff on all of the personal property on the premises of the bankrupt and bills were posted for a sale thereunder.
A voluntary petition in bankruptcy having been filed on March 27, 1958, and Norman Klauder having been appointed Receiver on March 28, 1958, upon the receiver's application on March 30, 1958, an order was entered restraining the sheriff's sale which was scheduled to be held on March 31, 1958.
No effort had been made by the petitioner prior to the initiation of the bankruptcy proceedings to obtain possession of the personal property subject to the security agreement by legal process or otherwise; nor was demand for its possession made.
The question of law herein involved was raised by the reclamation petition of William M. Kirkpatrick, which seeks to recover possession of all of the tangible assets of the bankrupt, Adrian Research and Chemical Company, Inc., consisting of equipment, fixtures and inventory, and the answer thereto of Norman Klauder as receiver.
A hearing thereon was held before Bertram K. Wolfe, Referee in Bankruptcy on April 30, 1958. On May 9, 1958, prior to the determination of the question, a stipulation was entered into between the reclamation petitioner and the receiver whereunder the receiver was permitted to expose the assets in question at public auction and the petitioner was relegated to the fund to be realized therefrom; such proceeds to be subject only to the auctioneer's costs and expenses incident to the sale. The public sale was held on June 4, 1958, and confirmed on June 6, 1958. The sale realized $ 2368. The auctioneer's costs and expenses amounted to $ 332.12, so that the fund subject to disposition amounts to $ 2035.88. On September 22, 1958, the learned Referee filed his opinion and order denying the petitioner's claim, and on October 8, 1958, recorded his findings of fact and conclusions of law. The case now comes before this Court on a Certificate of Review from such order.
The secured interest in this case was filed and perfected under the provisions of the Uniform Commercial Code and therefore the rights of the secured party on default as defined by the code must govern. Article 9 of the code concerns itself with security transactions. Enforcement of a security agreement in case of default of its terms must be in accordance therewith. In this connection Section 9-501 (12A Purdon's Pa.Stats.Ann. § 9-501) provides in part:
'(1) When a debtor is in default under the security agreement a secured party may reduce his claim to judgment * * * If the collateral is goods, he may in ...