In re Aliquippa Machine Co., Inc.
| Decision Date | 21 April 2006 |
| Docket Number | No. 05-33726-MBM.,05-33726-MBM. |
| Citation | 343 B.R. 145 |
| Parties | In re: ALIQUIPPA MACHINE CO., INC., Debtor. Bank One, a division of J.P. Morgan Chase Bank, N.A. Movant, v. Eric E. Bononi, Trustee of Aliquippa Machine Co., Inc., Respondent. |
| Court | U.S. Bankruptcy Court — Western District of Pennsylvania |
David K. Rudov, for Bank One.
Jonathan G. Babyak, Charleroi, PA, for Aliquippa Machine Co., Inc.
Bank One moves for relief from stay so that it may pursue collection of essentially all of the assets of the bankruptcy estate of Aliquippa Machine Co., Inc., the above-captioned debtor (hereafter "the Debtor"). Bank One contends that a grant of such stay relief is appropriate at this time because, argues Bank One, such assets are fully encumbered by the first priority perfected security interest that Bank One presently possesses in such assets. Bank One argues as much even though Bank One concedes that it let lapse the first financing statement that it had filed relative to its security interest in such assets. Bank One contends that it successfully remedied such lapse by filing a second financing statement subsequent to such lapse.
The Debtor opposes Bank One's stay relief motion — and so, presumably, does the Chapter 7 Trustee in the instant case (hereafter "the Trustee") — on several grounds. First, the Debtor contends that Bank One, as of the date of the Debtor's bankruptcy petition filing date, no longer had a perfected security interest in the Debtor's assets. The Debtor argues as much primarily because, contends the Debtor in turn, Bank One, as a matter of law, was precluded from reperfecting its security interest by filing a second financing statement after Bank One's first financing statement and, thus, the initial perfection respecting such security interest, had lapsed. The Debtor also contends that, even if Bank One, as a matter of law, could have so reperfected its security interest, Bank One was precluded from doing so on the ground that it lacked authority from the Debtor to so reperfect. Second, the Debtor contends that, even if Bank One reperfected its security interest as it so contends, intervening liens nevertheless arose during the period between the date when Bank One's initial perfection of its security interest lapsed and the date when Bank One reperfected such security interest, which intervening liens enjoy a priority higher than that of Bank One's security interest so as to preclude a grant of the stay relief that is presently sought by Bank One.
Bank One, as one might expect, argues that it was entitled and authorized by the Debtor to — and that it did — reperfect its security interest in the Debtor's assets by filing anew a second financing statement, although Bank One concedes that such security interest was not perfected for a period between when the first financing statement that it filed lapsed and when it filed its second financing statement. Because of the existence of such gap period during which its security interest was unperfected, Bank One concedes that its presently perfected security interest, as just recounted, is susceptible to being primed by liens that may have arisen during the aforesaid gap period.
For the reasons set forth below, the Court holds that Bank One was entitled and authorized by the Debtor to — and did — reperfect its security interest in the Debtor's assets. However, as also explained below, liens appear to exist which may prime Bank One's presently perfected security interest, thereby precluding an immediate grant of stay relief as is sought by Bank One. Furthermore, the Court is presently uncertain as to either the value of the assets that are subject to Bank One's presently perfected security interest or the present balance of Bank One's claim, which issues also heavily impact upon the propriety of a grant of the stay relief sought by Bank One. Therefore, the Court will continue Bank One's stay relief motion until May 11, 2006, at 2:30 p.m., at which time Bank One, such alleged intervening lien creditors, the Trustee, and the Debtor shall appear for a hearing so that the Court can make a final determination as to (a) the priority of the competing encumbrances upon the Debtor's assets, (b) the value of such assets, and (c) the propriety of a grant of the stay relief that is presently sought by Bank One.
The relevant facts are free from dispute. Bank One lent money to the Debtor on October 14, 1997, and again on January 8, 1999. To collateralize the foregoing financing, the Debtor entered into security agreements with Bank One on each of the foregoing dates, which security agreements (hereafter the "Security Agreements") both granted to Bank One a security interest in practically all of the Debtor's assets (i.e., "all inventory, chattel paper, accounts, equipment, and general intangibles," as well as proceeds and product thereof) (hereafter "Bank One's Security Interest"). See Bank One Mot. for Relief from Stay, Ex. A, p. 3 & Ex. B, p. 6. On January 20, 1999, Bank One properly filed a financing statement with respect to Bank One's Security Interest. Because Bank One neglected to file a continuation statement at any point so as to continue the perfection of its first filed financing statement, such financing statement lapsed on January 20, 2004, that is five years after January 20, 1999. On October 18, 2004, Bank One filed a second financing statement that is identical in all significant respects to the first financing statement that it had let lapse.
Pursuant to the Security Agreements, the Debtor (a) "irrevocably appoint[ed] Lender [ (i.e., Bank One) ] as its attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue the security interest granted in th[ese Security] Agreement[s]," and (b) agreed that "the Lender [ (i.e., Bank One) ] may at any time, and without further authorization from Grantor [(i.e., the Debtor)] file a carbon, photographic or other reproduction of any financing statement or of th[ese Security] Agreement[s] for use as a financing statement." See Bank One Mot. for Relief from Stay, Ex. A, p. 3 & Ex. B, p. 6.
As of September 30, 2005, which date is when the Debtor filed for bankruptcy, Bank One's claim against the Debtor, which claim is secured by Bank One's Security Interest, equalled $141,916.26. See Bank One Mot. for Relief from Stay, Ex. E; Proof of Claim No. 3. The Debtor alleges the following with respect to the value of the assets that are subject to Bank One's Security Interest:
(a) The value of such assets equalled $157,287.73 as of September 30, 2005, see Debtor's Bankr.Sch. B (i.e., $162,287.73 total less $5,000 for 1999 Chevy Silverado Truck encumbered by GMAC security interest);
(b) Such value was comprised of $77,287.73 for accounts receivable, $75,000 for machinery, fixtures, equipment, and supplies, and $5,000 for a 1982 Chevy Flatbed Truck, see Id.; and
(c) The Debtor, as of January 17, 2006, had received a bid of 840,000 for all of the foregoing assets save the accounts receivable, see Debtor's Mot. to Sell Business Property, ¶ 5 — in other words, a bid of $40,000 for property valued at $80,000 in the Debtor's bankruptcy schedules.
An examination of filed proofs of claim in the instant bankruptcy case reveals that at least two creditors take the position that at least part of their claims are secured by liens that they contend arose during the period between January 20, 2004, and October 18, 2004, namely the Internal Revenue Service (hereafter "the IRS") and the Pennsylvania Department of Labor & Industry (hereafter "the PDLI"). See Claims Register for Case No. 05-33726-MBM. The IRS asserts that a portion of its claim, in particular 843,008.18 thereof, is secured by a lien filed on April 6, 2004, see Proof of Claim No. 7, while the PDLI asserts that $5,840.90 of its claim is secured by a lien filed on August 9, 2004, see Proof of Claim No. 2.
The Debtor's hallmark argument is that Bank One, as a matter of law, could not have reperfected Bank One's Security Interest by filing a second financing statement after Bank One's first financing statement and, thus, the initial perfection respecting such security interest, had lapsed. The Court must reject such argument, however, because (a) reperfection of a security interest by the filing of a second financing statement after the lapse of a first financing statement was expressly permitted under Pennsylvania's Article 9 up until its amendment made effective July 1, 2001, see 13 Pa.C.S.A. § 9402(b)(3), amended by 13 Pa.C.S.A. § 9502 (Purdon's 2006) ); see also In re Abell, 66 B.R. 375, 378-81 (Bankr.N.D.Miss.1986) (); In re Tebbs Construction Co., Inc., 39 B.R. 742, 744-45 (Bankr.E.D.Va.1984) (...
To continue reading
Request your trial
-
Rancher's Legacy Meat Co. v. Ratcliff (In re Rancher's Legacy Meat Co.)
...parties may file a second Financing Statement after the lapse of an initial Financing Statement. See, e.g. In re Aliquippa Mach. Co., Inc., 343 B.R. 145 (Bankr. W.D. Pa. 2006). In fact, secured parties have been able to file multiple Financing Statements in many cases. See, e.g., Miami Vall......
-
Hancock Bank Of La. v. Financial, NUMBER 10-132-FJP-SCR
...express intent to prohibit the reperfection of a lapsed UCC-1, and the language in the current code does not evidence any such intent. The Aliquippa court also rejected the argument that under Section 509, which provides for the filing of "an" initial financing statement, a creditor may onl......