American Card Co. v. H. M. H. Co., 3092

• Decision Date: 09 December 1963
• Docket Number: No. 3092,3092
• Citation: 196 A.2d 150,97 R.I. 59
• Parties: , 1 UCC Rep.Serv. 447 The AMERICAN CARD COMPANY, Incorporated, v. The H. M. H. CO. Equity
• Court: Rhode Island Supreme Court

Page 150

196 A.2d 150

97 R.I. 59, 1 UCC Rep.Serv. 447

The AMERICAN CARD COMPANY, Incorporated, v. The H. M. H. CO.

Equity No. 3092.

Supreme Court of Rhode Island.

Dec. 9, 1963.

Winograd, Winograd & Marcus, Allan M. Shine, Providence, for claimants.

Melvin A. Chernick, George F. Treanor, Pawtucket, permanent receivers--pro se.

CONDON, Chief Justice.

This is a partnership creditors' claim for priority as a valid security interest under the uniform commercial code, G.L.1956, Title 6A. The claim was duly filed in the above-entitled equity receivership proceeding and upon consideration the receivers recommended disallowance as a secured claim but allowed it as a general claim. After a hearing thereon in the superior court, a decree adopting the recommendation of the receivers was entered and from that decree the claimants have appealed to this court.

The sole question for our determination is whether the superior court erred in holding that § 6A-9-203(1)(b) of the code requires in a case of this kind a written security agreement between the debtor and the secured party before a prior security interest in any collateral can attach. The claimants, Oscar A. Hillman & Sons, a copartnership, contend that a separate agreement in writing is not necessary if the written financing statement which was filed contains the debtor's signature and a description of the collateral. In support of that position they point out that G.L.1956, § 6A-9-402, recognizes that a security agreement and a financing statement can be one and the same document. They further argue that 'under the unique circumstances that exist in this case' the minimum requirements of § 6A-9-203 are satisfied by the agreed statement of facts and by exhibits A, B, and C appended thereto.

Those circumstances may be summarized as follows. On February 21, 1962 the debtor corporation executed a promissory note in the sum of $12,373.33 payable to claimants. On March 14, 1962 the corporation as debtor and claimants as secured parties signed a financing statement form provided by the office of the secretary of state and filed it in that office in accordance with the provisions of the uniform commercial code, G.L.1956, § 6A-9-402.

On July 2, 1962 Melvin A. Chernick and George F. Treanor were appointed co-receivers of the debtor corporation. On October 6, 1962 claimants duly filed their proof of debt and asserted therein a security interest against certain tools and dies of the debtor which were mentioned in the financing statement as collateral. Finally, there is in addition to the agreed statement of facts testimony of claimants' agent who attempted to collect the debt. He testified that the treasurer of the debtor corporation admitted the inability of the debtor to pay the debt and agreed to the execution of the promissory note and to the designation of the tools and dies as collateral security therefor.

The claimants argue that the code requires no "magic words', no precise, formalistic language which must be put in writing in order for a security interest to be enforceable.' And they further argue that 'the definition of a security agreement indicates, the question of whether or not a security interest is 'created or provided for' is a question of fact which must be decided upon the basis of the words and deeds of the parties.' They rely on the definition of 'agreement' in § 6A-9-105(1)(h) for support of this latter contention.

Upon consideration of those provisions of the code, we are of the opinion that they are not decisive of the special problem posed in the instant case. The receivers contend here, as they did successfully before the superior court,...