Harry R. Levy, Pittsburgh, for appellant.
Roy F. Walters, Jr., Pittsburgh, for appellee.
Jones, C. J., and Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Roberts and Nix, JJ., concur in the result.
On March 15, 1962, appellee, Citizens National Bank (hereinafter referred to as "Citizens") and Green Hills Lumber Co. (hereinafter referred to as "Green Hills"), duly executed an agreement in which Citizens agreed to advance the sum of $60,000 on a term basis and additional sums, not to exceed $60,000, on a revolving credit basis. Under the terms of the agreement, Green Hills granted Citizens a security interest in (1) all of its present and after acquired accounts receivable and proceeds arising therefrom; (2) all of its present and after acquired inventory as well as the proceeds of the sale of
such inventory; and (3) certain corporate stock owned by Green Hills in other corporations. On March 19, 1962, Citizens filed a financing statement with the Commonwealth of Pennsylvania indicating its security interest in the property of Green Hills. Citizens did not, at that time, file a financing statement in Allegheny County where Green Hills' sole place of business was located. On January 29, 1966, Citizens and Green Hills entered into a supplemental agreement which amended the 1962 agreement in that the amount of the loan was increased and the terms of repayment were modified. The 1966 amendment also added as security additional corporate stock which Green Hills had acquired from several account debtors. The 1966 amendment specifically provided that all other terms and conditions of the 1962 agreement were to remain in full force and effect. In order to underwrite the increased amount of the loan, Citizens entered into a Loan Participation Agreement with the Union National Bank on January 31, 1966. Green Hills was not a party to the Loan Participation Agreement since this agreement did not affect Green Hills' duty to repay its loans or the method of their repayment.
On March 15, 1967, Citizens filed a financing statement with the Prothonotary of Allegheny County. Then, on March 20, 1967, Citizens filed a Continuation Statement with the Secretary of the Commonwealth referring specifically to the original financing statement which had been filed on March 19, 1962.
During the next year Green Hills' financial difficulties worsened to the point where it was no longer able to fulfill its obligation to repay Citizens under the terms of the 1962 agreement as amended. Claiming default by Green Hills, Citizens, on February 14, 1968, took possession of Green Hills' inventory and accounts receivable as well as various other assets which were traceable as proceeds of the inventory and accounts receivable. On May
, 1968 the Court of Common Pleas of Allegheny County, upon petition of another creditor of Green Hills, appointed appellant, Edward A. Heights, as Receiver for Green Hills. Thereafter, on March 18, 1969, the appellant, in his capacity as receiver, filed a suit in equity against Citizens challenging Citizens' priority status as a perfected security interest holder and its concomitant right to take possession and dispose of collateral subject to its security interest. The matter was presented to the trial court under a stipulated statement of facts. On January 8, 1973, the trial court filed an adjudication dismissing appellant's complaint. Exceptions were thereafter filed and dismissed and final decree was entered on June 7, 1973. This appeal followed.
Appellant raises several issues on appeal most of which are directed at defeating appellee's claimed status as a perfected security interest holder. Because of the complexity of the factual context in which these issues are raised, they will be considered ad seriatim as they arise in our analysis of the progression of events. All section references in this opinion are to The Uniform Commercial Code of Pennsylvania. Act of April 6, 1953, P.L. 3, § 9-101 et seq., as amended and reenacted, 12A P.S. § 9-101 et seq.
Initially, it should be noted that under Section 9-301(3) of the Uniform Commercial Code a receiver in equity is accorded the status of a lien creditor. As such, his right to collateral is superior to that of creditors who have an unperfected security interest in the collateral but subordinate to that of creditors who have perfected their security interest in the collateral. Section 9-301(1) (b). In the normal situation wherein a debtor is in default, a secured creditor has the right to take possession of the collateral without judicial process and to sell or otherwise dispose of it and ...