In re Pocono Airlines, Inc.
| Decision Date | 18 July 1988 |
| Docket Number | Bankruptcy No. 5-88-00332. |
| Citation | 87 BR 325 |
| Parties | In re POCONO AIRLINES, INC., Debtor. |
| Court | U.S. Bankruptcy Court — Middle District of Pennsylvania |
John H. Doran, Robert C. Nowalis, Wilkes-Barre, Pa., for Pocono.
Robert P. Shiels, Andrew Hailstone, Scranton, Pa., for Northeastern Bank.
The debtor, Pocono Airlines, Inc. (hereinafter "Debtor") commenced this proceeding requesting this Court to vacate an earlier Order regarding the use of cash collateral entered into between the debtor and Northeastern Bank of Pennsylvania, N.A. (hereinafter "Bank"). For the reasons provided herein, we find that the Bank has properly perfected its security interest in the debtor's accounts receivable and, therefore, we will deny the debtor's Motion to Vacate the Order regarding debtor's use of cash collateral.
As of the filing of this voluntary Chapter 11 proceeding on May 25, 1988, the debtor was indebted to the Bank on five (5) separate loans evidenced by notes and secured by liens on certain aircraft, equipment, mortgages, and security interests in accounts, inventory and general intangibles. On or about May 20, 1988 the Bank setoff approximately $160,000 in the debtor's general operating accounts and approximately $51,000 in the debtor's payroll account. Shortly thereafter, the debtor filed this proceeding and the parties entered into a Stipulation for the use of cash collateral. The debtor claims that shortly after the Stipulation for use of cash collateral was preliminarily approved by this Court the debtor discovered, pursuant to its own investigation, that the Bank did not file a financing statement in Luzerne County, Pennsylvania on the accounts receivable and, therefore, was unsecured as to those accounts. The debtor subsequently filed a Motion requesting the Court to vacate its earlier Order stating that "the debtor's consent to the prior cash collateral order was premised upon the incorrect factual representation that Northeastern Bank held a valid, perfected and enforceable security interest in the debtor's accounts receivable." Further, debtor asserts that "restrictions placed upon the debtor's use of cash collateral unduly restricts the debtor and, therefore, places an unnecessary impairment on the debtor's reorganization." (See Motion of Debtor to Vacate Order regarding Use of Cash Collateral at Paragraphs 6 and 7).
The debtor's argument is essentially that it does business in only one County of this Commonwealth, namely Luzerne County, and therefore, the Bank should have filed its financing statement in both the Office of the Secretary of the Commonwealth and in the office of the Prothonotary of Luzerne County in order to perfect its security interest pursuant to the dictates of Uniform Commercial Code § 9-401(a)(3). The debtor's argument suggests the Bank believed the debtor had only one place of business in the Commonwealth, since it attempted to perfect its security interest by actually filing a financing statement with the Prothonotary of Lackawanna County. Debtor further claims Lackawanna was the wrong County in which to file the financing statement. The Bank's response indicates that the debtor has a place of business in more than one county of the Commonwealth and consequently, when it filed its original financing statement in March of 1981 in the Office of the Secretary of the Commonwealth in Harrisburg, it was and continues to be duly perfected on the debtor's accounts receivable. The main issue, therefore, is a factual one centering on whether or not the debtor has a place of business in more than one County in the Commonwealth. We note that other than this issue, no one has contested whether or not, in all other respects, the financing statement at question was properly filed under all the dictates of the Uniform Commercial Code as adopted by the Commonwealth of Pennsylvania.
Title 13 Pa.C.S.A. § 9401(a)(3) provides as follows:
In determining what constitutes a "place of business", we find guidance in the case of In re McCrary's Farm Supply, Inc., 705 F.2d 330 (8th Cir.1983) which provides at Page 332 the following:
.
Courts have formulated a number of tests when making a factual determination as to what constitutes a "place of business". In re McCrary's Farm Supply, supra, at 332 further provides:
"White and Summers described two possible tests for use in making the factual determination of what constitutes a place of business: a `quantity\' test based on how much work was accomplished at a particular location; and a `notoriety\' test which involves the extent to which creditors and others know that the debtor is in fact doing business at the place in question." (citations omitted).
The Court describes, in a footnote, other tests such as the one used in In re Mimshell Fabrics Company, Ltd., 491 F.2d 21, 23 (2d Cir.1974), which required that the debtor actually do business at the location as evidenced by frequent and notorious use and a Sixth Circuit test found in Ford Motor Credit Co. v. Weaver, 680 F.2d 451, 460 (6th Cir.1982) which focuses on whether the debtor actually conducted business activities at a particular place. Still other courts focus on whether there is frequent use by the debtor of that location in the production of revenue. See In re Alsted Automotive Warehouse, Inc., 16 B.R. 926 (Bankr.E.D.N.Y.1982) at pages 929 and 930 (citations omitted). This Court, like the McCrary court also finds it unnecessary to choose between the various tests cited above and we base our conclusion on practical observation and common sense considering the economic realities presented by the facts of this case.
The debtor herein seems to base its whole argument on its claim that the debtor had a "principal" place of business in Luzerne County. The issue of the "principal" place of business is not the one with which we are concerned. UCC § 9401(a)(3) does not speak to where the "principal" place of business is, but whether the debtor has a place of business in one or more counties of the Commonwealth. In fact, the debtor's Brief submitted at the time of the hearing does not discuss case law or this issue whatsoever, but concerns itself with the hardship the debtor might suffer if the debtor did not have unrestricted use of its cash collateral, viz a viz, negotiations with new airlines.
Initially, we note the Wilkes-Barre/Scranton International Airport, is in fact physically located in both Luzerne and Lackawanna...
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