ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA
Gibbons and Hunter, Circuit Judges and Pollak,*fn* District Judge.
Credit Alliance Corporation (Credit Alliance) appeals from an order of the District Court, affirming a decision of the Bankruptcy Court which held that First National Bank and Trust Company of Washington, Pa. (the Bank) had priority in security in certain property of a debtor, Jebco Coal Company, Inc. (Jebco) over the security interest claimed by Credit Alliance. The Bankruptcy Court decision was made in an adversary proceeding instituted by Credit Alliance for relief from the stay provided in 11 U.S.C. § 362.*fn1 We reverse.
On January 19, 1975 Jebco, as buyer, executed a conditional sales contract with Highway Equipment Co. for a Fiat-Allis loader and a Fiat-Allis tractor. The time sales price totaled $235,207.00, and was payable in 36 monthly installments beginning on February 20, 1975. Thus the final installment was due on January 20, 1978. The conditional sales contract provided that interest would be paid "after maturity at the highest lawful contract rate." It also provided:
Title to the property is to remain in the Holder until the time balance and any and all other sums owing by the Buyer to Holder or any judgment thereof are fully paid and all the terms, conditions and agreements herein shall have been fulfilled.
In any jurisdiction where the Uniform Commercial Code is in effect the Buyer grants to Holder a security interest in any or all property wherever located now or hereafter belonging to Buyer or in which Buyer has any interest and agrees that Holder's security interest created by this agreement secures any and all other obligations owing by Buyer to Holder.
Credit Alliance became the holder of the conditional sales contract by assignment, and on January 20, 1975 it filed, in the Office of the Prothonotary of Fayette County, and in the Office of the Secretary of the Commonwealth in Harrisburg, a Pennsylvania Approved Standard Form UCC-I, together with the conditional sales contract.*fn2 The standard form financing statement contains Box No. 3, labeled "Maturity Date (optional) ", which was left blank. Box No. 5 of the form is labeled "This Financing Statement Covers the Following Types (or items) of Property." Box 5 was filled in:
All machinery, inventory, equipment and goods as described in attached entire agreement &/or in any Schedule prepared in connection therewith. This UCC form together with the attached Security Agreement &/or Schedule are being submitted for filing herewith as a financing statement.
In January of 1977 the Bank made a loan to Jebco, intended in part to pay Jebco's obligation to Credit Alliance. The Bank determined from Credit Alliance the balance due on the conditional sales contract, and Jebco paid that amount by a cashier's check. Although 12A P.S. § 9-404 (Purdon 1970), now 13 Pa. Cons. Stat. Ann. § 9404 (Purdon 1980 Pamph.), provided that Jebco could require from Credit Alliance a termination statement authorizing the filing officer to remove a financing statement from the files, none was requested. Thus when on January 25, 1977 the Bank filed its financing statement, covering collateral for its loan, including the Fiat-Allis loader and tractor, the Credit Alliance financing statement was still of record. In April of 1978 the Bank refinanced the 1977 loan and filed a second financing statement. Again the Credit Alliance financing statement remained of record.
On May 10, 1978 Credit Alliance financed Jebco's purchase of a Caterpillar excavator, and filed a financing statement for that transaction on May 15. Jebco defaulted on the payments required by the note which it issued for the purchase price of the Caterpillar excavator, and Credit Alliance repossessed it. The excavator was sold, but the sales price left a deficiency of $74,193.47, for which Credit Alliance claims security in the Fiat-Allis loader and tractor and other equipment. In December 1979, after Jebco filed a Chapter 11 petition, Credit Alliance filed a continuation statement with respect to its 1975 financing statement.
The parties agreed to sell some of the equipment and deposit the proceeds, $57,470.87, in escrow pending final determination of the conflicting claims of the Bank and Credit Alliance. Two other pieces of equipment, worth ...