The opinion of the court was delivered by: LUONGO
On May 30, 1975, Bankruptcy Judge Goldhaber entered an Order in this Chapter XI proceeding ruling that certain financing and continuation statements filed by the First National Bank of Boston (Bank) created and maintained a perfected status for Bank's present security interest in accounts receivable and other assets of the Debtor, Gilchrist Company, as recited in the financing and continuation statements. Gilchrist Company and the Receiver filed the instant appeal.
While this appeal was pending, Gilchrist and its creditors entered into a Plan of Arrangement. The Plan has been confirmed by the Bankruptcy Judge, but an appeal has recently been filed by some creditors from the Order of Confirmation. That appeal is presently pending. In view of the confirmation of the Plan, the Receiver's responsibilities have concluded except for the ministerial role of disbursing to the creditors the funds held by the Court. If, however, the confirmation of the Plan is upset on appeal, the Receiver will be restored to full powers and, in such event, will have an interest in whether these assets are subject to Bank's security interest or not. For that reason, the Receiver remains on the record in this appeal, although he has not participated in the briefing or argument.
The matter presently on appeal before me has been fully briefed by counsel for Gilchrist and for the Bank. Upon consideration of the briefs, oral argument and after careful review of the record before the Bankruptcy Court, I am satisfied that the ruling was correct and the Order appealed from will be affirmed on Bankruptcy Judge Goldhaber's opinion (copy of which is attached hereto) with these few additional comments.
Counsel for Gilchrist points to the fact that the Bankruptcy Judge did not discuss, and therefore urges that he must have failed to consider, two cases cited and relied upon by Gilchrist: Wilmor Finishing Corp., Bankruptcy No. 66-1302 (D. Mass. 1968), and Commerce Union Bank v. Hunley, 10 UCC Rep. Serv. 1252 (Tenn. Ct. App. 1972). Gilchrist contends that Wilmor is particularly significant, indeed that it is "binding," since it interpreted Massachusetts law, and the parties here have stipulated that Massachusetts law is applicable. Neither Wilmor nor Commerce Union Bank affords any basis for upsetting Bankruptcy Judge Goldhaber's well reasoned ruling.
In Wilmor the Bankrupt, in 1964, financed the purchase of two pieces of equipment with the lender, who perfected a security interest in the equipment. In 1965, the Bankrupt financed the purchase of three more pieces of equipment with the lender, who perfected a security interest therein. In June 1966, the Bankrupt paid in full the obligation stemming from the 1964 purchase, but did not demand a termination statement from the lender and none was filed. In July 1966, the Bankrupt refinanced the obligation arising under the 1965 purchase, which was then in default. Under the refinancing agreement, the lender was granted a security interest in all five pieces of equipment, but the lender failed to perfect that security interest because of incomplete filing. The lender then attempted to resort to the 1964 filing to obtain priority over the Trustee. The Bankruptcy Judge, without citation of authority, denied lender's petition to reclaim the three pieces of equipment purchased in 1965, stating only the following:
"Massachusetts General Laws Annotated, Chapter 106, Section 9-404. Termination Statement provides:
(1) Whenever there is no outstanding secured obligation and no commitment to make advances, incur obligations or otherwise give value, the secured party must on written demand by the debtor send the debtor a statement that he no longer claims a security interest under the financing statement, which shall be identified by file number.
If, under these circumstances, the debtor neglects to obtain from the secured party a termination statement, on file with the office of the Secretary of State and the Town Clerk of Bondsville, can it be said that the financing statement which is on file will serve to perfect future security interests under Massachusetts General Laws Annotated, Chapter 106, Section 9-302? I think not."
(See copy of "Findings of Fact [etc.]" at pp. 643-645 of the instant Record on Appeal.)
In light of the above quoted terse "discussion," Wilmor is hardly an authoritative statement of Massachusetts law. Moreover, it is distinguishable from the case at bar on at least two grounds. First, the 1964 financing statement covered different collateral than that secured by the 1966 refinancing agreement, whereas in the instant case the collateral was substantially identical. Second, the Bankruptcy Judge, although acknowledging that "a single financing statement can cover a series of transactions where the parties so intend," found that "there was no intention that [the 1964] contract and financing statement cover any future financing." In the instant case, the financing statement was unquestionably intended to cover a series of future loans. Additionally, the Bankruptcy Judge's ruling in Wilmor is particularly perplexing in that he failed altogether to mention the status of the 1965 financing statement. He made no finding that it had been terminated, yet one is left with the distinct impression that it must have been terminated, otherwise the lender's petition to reclaim the three pieces of equipment covered by the 1965 financing statement (which is all the petition sought to reclaim) should have been granted.
All in all, even if Wilmor is not distinguishable, it is not persuasive and I would not follow it.
The peculiar combination of circumstances in Commerce Union Bank bears no resemblance to the facts in the instant case. Gilchrist is hardly in the position of a "bona fide purchaser" since it was actually aware of Bank's secured position. Gilchrist, of course, claims the shelter of the Receiver's, rather than its own, position with respect to knowledge and notice. But even granting to the Receiver the status of an ideal lien creditor, he is only entitled to that status "as of the date of bankruptcy." (§ 70(c) Bankruptcy Act, 11 U.S.C. § 110(c) Supp. 1975). On the date Gilchrist filed its Petition for Arrangement, Bank's loans to Gilchrist were in fact on a secured basis. The recorded financing and continuation statements put the Receiver on inquiry notice and, had he inquired, he would have ascertained that the loans were then secured. In Commerce Union Bank, the absence of notation on the title certificate appears to have borne great weight with the Court. ...