Kalodner, Chief Judge, and McLaughlin and Hastie, Circuit Judges. McLaughlin, Circuit Judge (dissenting).
Prior to its bankruptcy United Thrift Stores, Inc. purchased Kelvinator appliances from Redisco, Inc., financing subsidary of the American Motors Corporation which manufactured them.
Subsequent to the bankruptcy Redisco sought to reclaim from the bankrupt estate certain Kelvinator appliances or the proceeds of their sale. The Bankruptcy Referee denied the reclamation claim and the District Court reversed, 242 F. Supp. 714 (D.N.J.1965). This appeal by the bankrupt estate and its Trustee followed.
The District Court premised its disposition on its holding that "trust receipts" relating to the transactions between the bankrupt and Redisco constituted enforceable security agreements under the Uniform Commercial Code as adopted by New Jersey, N.J.S.A. 12A:1-101 et seq.
On this appeal, bankrupt contends that it purchased the appliances from Redisco on "open account" and that (1) the "trust receipts" did not constitute security agreements because "they do not show an intention to give Redisco a secured status or a security interest"; (2) "the instruments themselves and the acts and conduct of the parties negate an intent to create a security agreement"; and (3) no "value" was given to the bankrupt for its execution of the "trust receipts".
The following facts are undisputed:
On March 12, 1963, a financing statement was filed with the Secretary of State of New Jersey, pursuant to the provisions of the Uniform Commercial Code ("Code"), N.J.S.A. 12A:9-401.*fn1 The statement covered "inventory of Kelvinator appliances". It named United Thrift as debtor, and Redisco as the secured party, and stated that proceeds of collateral were also covered.
On March 22, 1963, the Secretary of State certified that he had searched his files under the Code and found four previously recorded secured parties listing United Thirift as debtor. Redisco then sent notices to these other parties stating that it "has or expects to acquire a purchase money security interest in inventory of Kelvinator electric and gas appliances * * * which [it] will from time to time deliver or cause to be delivered to United Thrift. * * *"
Between July 29, 1964 and September 24, 1964, four separate agreements were entered into between the Kelvinator Division of the American Motors Sales Corporation (a subsidiary of American Motors Corporation), United Thrift and Redisco. Each agreement contained three sections, as follows: (1) a bill of sale from the Kelvinator Division to Redisco for the articles listed by model and serial numbers; (2) a trust receipt from United Thrift to Redisco, covering the same articles and setting forth a release amount opposite each item; and (3) a signed, but incompleted, promissory note from United Thrift to Redisco, bearing the same identification number as the trust receipt.
In the section captioned "trust receipt", United Thrift acknowledged receipt of the listed appliances and further acknowledged that they were the property of Redisco and would be returned to Redisco "on demand". United Thrift further agreed in the trust receipt, "not to sell, loan, deliver, pledge, mortgage or otherwise dispose of said articles to any other person until after payments shown in Release Amount column below".
The trust receipts also provided that the total release amounts are the "Amounts of Promissory Note." One of them provided for full payment in 90 days; the remaining three provided for payment in installments at the end of 30, 60 and 90 days. Redisco received two partial payments on the trust receipt calling for payment in full in 90 days. It also received two of the three installment payments due on one of the trust receipts calling for payment in 30, 60 and 90 days. It received no payments on the two remaining trust receipts. United Thrift did not pay a single "release amount" at the time it disposed of the appliances nor did Redisco seek to enforce the requirement of payment of "release amount" at the time an appliance was sold.
An inspection of collateral was made by Redisco on October 27, 1964 at which time several units of collateral were found to be missing.
On October 30, 1964 United Thrift filed a petition for arrangement under Chapter XI of the Bankruptcy Act. Redisco was listed in United Thrift's schedules as an ...