In re McQueen

• Decision Date: 07 February 1983
• Docket Number: Bankruptcy No. 81-00253,Adv. No. 82-0024.
• Citation: 27 BR 717
• Court: U.S. Bankruptcy Court — District of Vermont
• Parties: In re Raymond J. McQUEEN, Jr., and Barbara A. McQueen, Debtors. Douglas J. WOLINSKY, Esquire, Trustee, and Raymond J. McQueen, Jr., and Barbara A. McQueen, Intervenors, Plaintiffs, v. BRADFORD NATIONAL BANK, Defendant.

27 B.R. 717 (1983)

In re Raymond J. McQUEEN, Jr., and Barbara A. McQueen, Debtors Douglas J. WOLINSKY, Esquire, Trustee, and Raymond J. McQueen, Jr., and Barbara A. McQueen, Intervenors, Plaintiffs, v. BRADFORD NATIONAL BANK, Defendant.

Bankruptcy No. 81-00253, Adv. No. 82-0024.

United States Bankruptcy Court, D. Vermont.

February 7, 1983.

Douglas J. Wolinsky, Trustee, pro se.

Joseph C. Palmisano, Barre, Vt., for Debtors, intervenors as plaintiffs.

David C. Otterman, Bradford, Vt., for defendant, Bradford Nat. Bank.

Samuel C. FitzPatrick, Montpelier, Vt., for Agway, Inc., creditor.

MEMORANDUM AND ORDER

CHARLES J. MARRO, Bankruptcy Judge.

This adversary proceeding for the recovery of an alleged preference was instituted by the Complaint of the Trustee, Douglas J. Wolinsky, Esquire, against the Bradford National Bank. The Debtors moved to intervene as party plaintiffs and an Order was entered permitting them to do so. Subsequently, they filed an Intervenors' Complaint to recover part of the proceeds of the alleged preference by virtue of their claimed exemptions under § 522(d)(5) which grants to each debtor an exemption not-to-exceed $400.00 plus any unused portion of the $7,500.00 residence exemption granted to the debtor under § 522(d)(1). The unused portion of the residence exemptions claimed by debtors, Raymond J. McQueen, Jr., and Barbara A. McQueen are $5,000.00 and $4,400.00, respectively. Both the defendant, Bradford National Bank, and creditor, Agway, Inc., objected to the allowance of these exemptions and, after hearing, they were denied by Order entered by this Court on December 15, 1982. There is a pending appeal by the Debtors from this Order.

The preference alleged by the Plaintiffs is based on the transfer of certain livestock from the Debtors to the Defendant Bank within 90 days prior to the filing of the Debtors' Petition for Relief, which livestock was sold at auction by the Bank and the proceeds applied toward the payment of an antecedent debt.

FINDINGS OF FACT

The Debtors filed their Petition for Relief under Chapter 7 of the Bankruptcy Code on December 4, 1981 on which date Douglas J. Wolinsky, Esquire, was appointed interim trustee and he still is the duly qualified and acting trustee of the estate of the Debtors.

Prior to September 1, 1979 the Debtors owned a house in the Town of Orange, Vermont in which they had resided for a period of about ten years. While so residing in Orange they leased farm premises consisting of land and a barn in Williams-town, Vermont which they continued to lease until September, 1979. On September 1, 1979 they entered into a written lease as Lessees with George F. Lewis and Dorothy L. Lewis as Lessors for the use and occupation of certain farm premises situated in the Town of Groton, Vermont consisting of 35 acres of land, more or less, with house, barn, shed and other buildings thereon. This lease was for a term of one year from September 1, 1979 to August 31, 1980 and it contained an option to extend the leasehold interest for an additional term of one year upon 90 days' notice. Upon the execution of this lease the Debtors moved into the Groton, Vermont premises and it was their intention to negotiate for the purchase of them.

On April 11, 1980 while they were residing on the Groton, Vermont premises, they borrowed money from the Bradford National Bank which was evidenced by a promissory note in the sum of $14,874.39 payable in 60 monthly installments of $402.40 beginning May 25, 1980. This note was secured by a security interest in all livestock (including offspring then owned and thereafter acquired plus any replacements or substitutions thereof) granted under a written security agreement dated April 11, 1980 and signed by the Debtors. This security agreement provided for the payment of the note of even date and of any other notes or any renewals or extensions thereof and any other past, present or future obligations of the Debtors to the Bank as secured party.

On May 6, 1980 and May 8, 1980 the Bank caused financing statements to be filed in the offices of the Groton Town Clerk and of the Secretary of State signed by Laurette Sweet as loan officer with Raymond McQueen and Barbara A. McQueen listed as debtors with the address shown as Groton, Vermont and the Bank as secured party and the collateral described as the same livestock as shown in the security agreement. The Debtors also signed these statements.

In April, 1981 the Debtors needed additional financing and on April 15, 1981 they executed and delivered to the Bank a mortgage note in the sum of $22,447.20 which was secured, under a security agreement signed by them, by a security interest in all livestock including offspring then owned and thereafter acquired by them with any substitutions or replacements and also by equipment and machinery then owned and thereafter acquired by them.

On April 29, 1981 the Bank caused financing statements describing the aforesaid collateral to be filed in the offices of the Williamstown Clerk and of the Secretary of State. These statements were signed by the Debtors and by Paul J. Gallerani for the Bank with the address of the Debtors given as Box 28, East Barre, Vermont 05641. At the time that they signed the note and security agreement dated April 15, 1981 and the financing statements the Debtors resided in their homeplace in Orange, Vermont and the cattle, equipment and machinery in which the Bank acquired a security interest were located in Williamstown, Vermont. As residents of Orange, Vermont their mailing address was P.O. Box 28, East Barre, Vermont. When they refinanced their loan with the Bank on April 15, 1981 there was an outstanding balance due the Bank on their April 11, 1980 loan, but the Bank marked the note and security agreement dated April 11, 1980 "Paid by Renewal" but it retained possession of these instruments.

For the years 1980 and 1981 Debtor Raymond McQueen was on the checklist for the Town of Orange, but his wife, Barbara A. McQueen, was not. During at least part of the time that the Debtors were residing in Groton, Vermont on the premises leased from George F. and Dorothy L. Lewis (September 1, 1979 to August 31, 1980) their house in Orange, Vermont was occupied by Mr. Duso (a brother of Mrs. McQueen) and his family.

The Debtors defaulted on their loan and November 27, 1981 they owed the Bank a balance of $22,596.78. On that date the Debtors had 45 head of Holsteins which were subject to the security interest of the Bank and, with the consent of the Debtors, they were sold by the Bank at auction conducted by C.W. Gray & Sons, Inc. The net sum of $20,953.00 was realized from this sale and the Bank applied the proceeds toward the then outstanding balance of $22,596.78.

DISCUSSION

The issue to be determined is whether the transfer of the cattle and their sale by the Bank was in fact a preference which can be avoided by the Trustee, it having occurred within 90 days before the filing of the Petition at a time when the Debtors were insolvent. If in fact the Bank held a perfected security interest in the cattle sold on the date of the auction the Trustee's position could not be maintained and there would be no preference. The Court holds that the Bank did have a perfected security interest in the cattle sold. As a result no preference was created.

Under the Uniform Commercial Code livestock is included in "farm products." The pertinent section of the U.C.C., as adopted in this state as it applies to "farm products" and designates the proper place for filing of a financing statement to perfect a security interest is 9A V.S.A. § 9-401(1)(a), and this section provides that the filing shall be made in the office of the town clerk in the town of the debtor's residence. (Underscoring supplied.)

The meaning of residence is not spelled out in the U.C.C. As a result the courts have been required to construe the legislative intent as it applies to "residence" and the decisions are far from unanimous.

It has been held that "permanent residence" is contemplated under the statute. In Re Pelletier (D.Me.1968) 5 U.C.C. Rep. 327. In a more recent case, the Second Circuit construed the word residence as the debtor's "actual residence;" i.e., "living in a particular locality and required bodily presence as an inhabitant in a given place." In re Knapp, 575 F.2d 341, 343 (2d Cir.1978). It is obvious that there is a clear distinction between "permanent residence" or domicile and "residence." The latter may mean "a temporary, permanent or transient character," or it may mean one's fixed abode, depending upon the purpose of the particular object of its use. In determining its meaning as it is used in particular pieces of legislation, its context within the statute and the legislative purpose are examined. By comparison, domicile is said to be inclusive of residence, having a broader and more comprehensive meaning than residence. 25 Am.Jur.2d 7 § 4.

Domicile is defined as a place where a person lives or has his home, to which, when absent, he intends to return, and from which he has no present purpose to depart. Tower v. Tower, 120 Vt. 213, 221, 138 A.2d 602; Walker v. Walker, 124 Vt. 172, 174, 200 A.2d 267.

The Trustee and Agway, Inc., both contend that by filing the financing statement in the office of the Town Clerk of Groton where the Debtors resided on May 6, 1980 the Bank failed to meet the requirements of 9A V.S.A. § 9-401(1). Relying on Bonneau v. Russell, 117 Vt. 134, 85 A.2d 569 (1951) they assert that the financing statement should be filed at the domicile of the Debtors rather than their place of residence. The Court does not agree. Bonneau is a pre-code case which involves the recording of a mortgage and, for that reason, is not apposite.

The meaning of "residence" in the pertinent statute must be construed in the light of the Uniform Commercial Code and its legislative purpose. The purposes and rules of construction are...