269 F.2d 734 (3rd Cir. 1959), 12847, In re Adrian Research & Chemical Co.

Docket Nº:12847.
Citation:269 F.2d 734
Party Name:Matter of ADRIAN RESEARCH AND CHEMICAL CO., Inc., Bankrupt, William M. Kirkpatrick, Appellant.
Case Date:August 25, 1959
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

Page 734

269 F.2d 734 (3rd Cir. 1959)

Matter of ADRIAN RESEARCH AND CHEMICAL CO., Inc., Bankrupt, William M. Kirkpatrick, Appellant.

No. 12847.

United States Court of Appeals, Third Circuit.

August 25, 1959

Argued May 8, 1959.

Page 735

John E. Landis, Lansdale, Pa., for appellant.

Bertram Bennett, Philadelphia, Pa. (Jenkins, Bennett & Jenkins, Philadelphia, Pa., on the brief), for appellee.

Before McLAUGHLIN, KALODNER and STALEY, Circuit Judges.

KALODNER, Circuit Judge.

This is an appeal in a bankruptcy case from the Order of the United States District Court for the Eastern District of Pennsylvania affirming the Order of a Referee in Bankruptcy which denied the petitioner's claim status as a secured claim.

The single issue presented is whether the petitioner is deprived of the lien of his perfected secured claim because he took judgment against the debtor, issued execution and caused a levy to be made.

The facts are not in dispute. On September 10, 1957, the debtor, in consideration of an accumulation of rent arrearages in the amount of $7, 600, entered into a security agreement with the petitioner, his landlord, creating a security interest in office, laboratory and plant equipment. The security arrangement was made pursuant to and perfected by compliance with, the Pennsylvania Uniform form Commercial Code-- Secured Transactions, Act of April 6, 1953, P.L. 3, Sec. 9-101 et seq., 12A P.S. Sec. 9-101 et seq.

Also, on September 10, 1957, as evidence of his obligation, the debtor executed and delivered to the petitioner a judgment note in the sum of $7, 600, and judgment was entered thereon on September 12, 1957.

On March 12, 1958, because of the debtor's default, the petitioner issued execution on the judgment and caused a levy to be made on all of the debtor's personal property, which included the personal property covered by the security agreement. Bills were posted advertising the sheriff's sale.

A voluntary petition in bankruptcy was filed by the debtor on March 27, 1958, and on the receiver's application an order was entered in the bankruptcy proceeding on March 30, 1958, restraining the sheriff's sale.

Thereafter petitioner filed a reclamation petition in the bankruptcy proceeding. On September 22, 1958, the Referee denied the claim as a secured claim and allowed it as a general claim only. On September 30, 1958, petitioner filed his petition for review, and the Referee certified his Order for review to the District Court.

The District Court held, as did the Referee, that since the petitioner elected to issue execution and to levy on the assets of the debtor, he was barred from asserting a security interest to 'retake' the personal property on the ground that the execution was inconsistent with the right to take possession: this conclusion was indicated by In re Elkins, D.C.E.D.Pa.1941, 38 F.Supp. 250, and In re Fitzpatrick, D.C.W.D.Pa.1923, 1 F.2d 445; nothing was found in the Pennsylvania Uniform Commercial Code to assist the petitioner. D.C., 169 F.Supp. 357.

The validity of petitioner's asserted lien is a question to be decided under Pennsylvania law, for it is not disputed that if petitioner has such a lien, he is in a protected position under the...

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