The opinion of the court was delivered by: BECHTLE
The Receiver also filed a counterclaim to recover the sum of $750 from Girard. This amount, representing one month's rent received from the state liquor store, was paid by the Receiver to Girard subsequent to the filing of the Chapter XI petition. The Receiver alleges that in the absence of a perfected security interest, Girard must be considered as a general, unsecured creditor and not entitled to receive this payment.
The Bankruptcy Court denied Girard's reclamation petition and ordered the petitioner to return to the Receiver the $750 which had previously been paid under the Receiver's mistaken assumption that Girard's security interest in the lease had been perfected.
The parties have filed a stipulation which sets forth the relevant facts. In January, 1971, the debtor delivered to Girard its promissory note in the amount of $185,000. This note provides that as security for the payment of the obligation the debtor pledges with Girard "the Commonwealth's Pennsylvania Liquor Control Board lease for State Store #9112 -- 10 yrs."
By agreement dated January 28, 1971, the debtor did "assign, transfer and set over unto Girard Trust Bank all of its right, title and interest, in and under an agreement of lease dated September 29, 1969" between the debtor and the Commonwealth of Pennsylvania. The agreement further provides that none of the duties under the lease are assigned to Girard, and Girard does not assume any duties under the lease. The agreement does, however, specifically provide that "it secures the undertakings" of the debtor to Girard, and that the assignment shall be null and void at such time as the principal and interest on the note, and all other charges due the bank, have been paid in full.
Girard Bank did not file a financing statement or any other document with any recording officer in the Commonwealth of Pennsylvania setting forth its interest in the lease agreement between the debtor and the Commonwealth of Pennsylvania or the rentals due thereunder. The bank contends that the assigning of the lease, and the rents thereunder, is not included within the coverage of Article 9 of the Uniform Commercial Code; hence, there was no necessity to file a financing statement to perfect its interest in the lease.
The issue presented for this Court's determination is whether assignment of a lease, and the rentals due thereunder, for the purpose of securing the payment of a promissory note creates a security interest in personal property within the meaning of Article 9 of the Uniform Commercial Code.
Article 9-102(1) provides that, with certain exceptions enumerated in Article 9-104, Article 9 applies to any transaction which is intended to create a security interest in personal property or fixtures. "Security interest" is defined in Article 1-201(37) as an interest in personal property or fixtures which secures payment or performance of an obligation.
To come within the coverage of Article 9, the transaction in question must create a security interest in personal property; under Pennsylvania law, which governs this case, a lease is personal property. Wilford v. Dickey, 196 Pa. Super. 468, 175 A.2d 98 (1961); J. Stern, Trickett on the Law of Landlord and Tenant in Pennsylvania (3rd ed.), p. 2. Consequently, a security interest in personal property was created by the assignment to Girard of the lease agreement and the rentals thereunder. Accordingly, the provisions of Article 9 are applicable to the instant transaction. See, 1 Gilmore, Security Interest in Personal Property, § 10.8, p. 312 fn. 3.
Girard Bank argues that Article 9-104(j) excludes the assignment of the rentals due the debtor from the Commonwealth of Pennsylvania. Subsection (j) provides that, "This article does not apply . . . to the creation or transfer of an interest in or a lien on real estate, including a lease or rents thereunder." The purpose of this provision is to exclude from Article 9 the creation or transfer of an interest in real estate. However, the assignment of the lease or the assignment of the rentals thereunder did not create an interest in real estate, but rather provided Girard with a security interest in the lease and rentals due thereunder. The debtor did not transfer to Girard any interest in the real estate. The debtor maintained full ownership of the property involved, which is now occupied by the state liquor store. The assignment expressly recognizes that none of the obligations of the debtor under the lease are assigned to or assumed by Girard. As indicated above, upon payment of the amount due under the note, the assignment agreement will be null and void.
This Court does not hold that a lessor of real estate must file a financing statement in order to protect his interest in the rentals due from the lessee under the terms of the lease. This is exactly the type of transaction which Article 9-104(j) excluded from the coverage of Article 9. The Court does hold, however, that an assignment by the lessor of the lease and the rentals thereunder to secure the ...