In re Fibre Glass Boat Corporation, 69-420-BK.

• Decision Date: 15 March 1971
• Docket Number: No. 69-420-BK.,69-420-BK.
• Citation: 324 F. Supp. 1054
• Parties: In the Matter of FIBRE GLASS BOAT CORPORATION, Bankrupt.
• Court: U.S. District Court — Southern District of Florida

324 F. Supp. 1054

In the Matter of FIBRE GLASS BOAT CORPORATION, Bankrupt.

No. 69-420-BK.

United States District Court, S. D. Florida.

March 15, 1971.

Paul G. Hyman, of Feibelman, Friedman, Hyman & Britton, Miami, Fla., for petitioner.

William Kendrick, of Shutts & Bowen, Miami, Fla., for respondent Teleflex Industrial Products.

ORDER

FULTON, Chief Judge.

This cause came before the Court upon a petition of C. B. Johns, trustee of the bankrupt estate, for review of an order of the Bankruptcy Court dated May 1, 1970.

Teleflex Industrial Products, Inc. filed a claim in bankruptcy as a secured creditor with a security interest in certain assets of the bankrupt, including "all inventory used in the production of boats." It supported its claim with a financing statement filed in accord with Florida Statutes §§ 679.9-401, 679.9-402, F. S.A., and a letter from the comptroller of the bankrupt, Fibre Glass, to the creditor-claimant, Teleflex, dated February 18, 1969, which provided:

Pursuant to our telephone conversation, please find a duly executed copy of a financing statement received from your company, wherein the Fibre Glass Boat Corp. agrees to guarangee (sic) all inventory used in the production of boats, limited in the amount of fifteen thousand dollars, in order to cover all merchandise that may be purchased from your company.

By considering both the letter and the financing statement together, the Bankruptcy Court found that claimant Teleflex had a valid security interest in the inventory of Fibre Glass Boat used in the production of boats as of the date of the bankruptcy.

Petitioner has presented two issues on review. Whether the Referee erred in finding that the letter and the financing statement gave rise to a valid security interest, and whether the Referee erred in holding that the creditor-claimant Teleflex was entitled to a security interest in the specific inventory as of the date of the bankruptcy where no after-acquired property clause appeared in either the letter or the financing statement.

Section 9-109 of the Uniform Commercial Code classifies "goods" into four groups. Goods are "inventory if they are held by a person who holds them for sale or lease or to be furnished under contracts of services or if he has so furnished them, or if they are raw materials, work in progress or materials used or consumed in a business. Inventory of a person is not to be classified as his equipment." U.C.C. § 9-109. "Equipment," on the other hand, as defined by § 9-109, includes goods used or purchased for use primarily in business which are not inventory. According to Official Comment 3, U.C.C. § 9-109, goods are equipment when they are fixed assets or have a relatively long use. Inventory, in contrast, is goods used up or consumed in the production of an end product or held or prepared for sale.

It is clear that claimant Teleflex holds a valid security interest in the bankrupt's inventory used in the production of boats. Uniform Commercial Code § 1-201(37) defines "security interest" as "an interest in personal property or fixtures which secures payment or performance of an obligation." Section 9-203 of the U.C.C. provides that a security interest is not enforceable against third parties unless the debtor has signed a security agreement which contains a description of the collateral. Thus, to be a "security agreement" an agreement must be written, contain the debtor's signature, and contain a description of the collateral. See also Official Comment 1, U.C.C. § 9-203. An added step is necessary for the agreement to "attach;" value must be given and the debtor must obtain rights in the collateral. U.C.C. § 9-204. To "perfect" the interest, the third step of filing a financing statement must be taken. U.C.C. § 9-302. "Perfected" security interests ordinarily take priority over unperfected but attached interests. See ...