In re Vincent Gaines Implement Co., Inc.

• Court: U.S. Bankruptcy Court — Eastern District of Arkansas
• Writing for the Court: JAMES G. MIXON
• Citation: In re Vincent Gaines Implement Co., Inc., 71 B.R. 14 (Bankr. E.D. Ark. 1986)
• Decision Date: 05 August 1986
• Docket Number: Adv. No. 86-59M.,Bankruptcy No. LR 86-30M
• Parties: In re VINCENT GAINES IMPLEMENT CO., INC. d/b/a Paul Gaines Implement Company, Debtor. VINCENT GAINES IMPLEMENT COMPANY, INC. d/b/a Paul Gaines Implement Company, Plaintiff, v. UNITED STATES, Small Business Administration, Defendant.

71 B.R. 14 (1986)

In re VINCENT GAINES IMPLEMENT CO., INC. d/b/a Paul Gaines Implement Company, Debtor VINCENT GAINES IMPLEMENT COMPANY, INC. d/b/a Paul Gaines Implement Company, Plaintiff, v. UNITED STATES, Small Business Administration, Defendant.

Bankruptcy No. LR 86-30M, Adv. No. 86-59M.

United States Bankruptcy Court, E.D. Arkansas, W.D.

August 5, 1986.

Stephen L. Gershner, Davidson Law Firm, P.A., Little Rock, Ark., for debtor/plaintiff.

Katherine S. McGovern, Asst. U.S. Atty., Little Rock, Ark., A. Doug Chavis, Asst. U.S. Atty., Little Rock, Ark., for the U.S.

Michael Price, Small Business Admin., Little Rock, Ark., for Small Business Admin.

MEMORANDUM OPINION

JAMES G. MIXON, Bankruptcy Judge.

Vincent Gaines Implement Company, Inc., filed a voluntary petition for relief under the provisions of chapter 11 on January 7, 1986. On February 11, 1986, the debtor-in-possession filed a complaint to determine the extent and validity of the lien of the Small Business Administration (SBA).

This adversary proceeding is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(K). The Court has jurisdiction to enter a final judgment. The following constitutes the Court's findings of fact and conclusions of law as required by Bankruptcy Rule of Procedure 7052.

The facts were stipulated. On July 13, 1978, the SBA filed a financing statement with the Circuit Clerk of Prairie County, Arkansas, covering all equipment, fixtures, inventory and accounts receivable now owned or hereinafter acquired by the debtor-in-possession. A financing statement was also properly filed in the the office of the Secretary of State although the parties did not stipulate the date the filing occurred.

On June 20, 1983, the SBA filed a continuation statement pursuant to Ark.Stat. Ann. § 85-9-403 (Cum.Supp.1980). The continuation statement was filed within six months prior to the expiration of the five year life of the original filing on July 13, 1978. The continuation statement was signed by the secured party and stated that the original filing was still effective. The continuation statement referred to the original filing by the erroneous document number, 577, instead of the correct number, 576.

A debtor-in-possession under chapter 11 has all of the rights and powers of a trustee. 11 U.S.C. § 1107(a). A debtor-in-possession, therefore, has the status granted a trustee under 11 U.S.C. § 544 of a judgment lien creditor whose lien is perfected under state law as of the commencement of the case. At the moment this petition was filed, the debtor-in-possession on behalf of unsecured creditors of the estate had a cause of action to avoid SBA's lien unless SBA's lien was perfected under state law prior to the petition. In re Shuster, 47 B.R. 920 (D.Minn.1985), rev'd on other grounds, 784 F.2d 883 (8th Cir.1986); 4 Collier on Bankruptcy ¶ 544.01 (15th ed. 1985).

The lender in this case is a federal lender, therefore, federal law governs the extent and validity of its lien. United States of America v. Landmark Park & Associates, 795 F.2d 683 (8th Cir.1986). However, the federal law adopts applicable state law "when the state law is derived from a uniform statute such as the Uniform Commercial Code and to do so would therefore not hinder the `federal interest in uniformity of the law.'" United States of America v. Landmark Park & Associates, at 686, quoting United States v. Kukowski, 735 F.2d 1057, 1058 (8th Cir.1984).

Ark.Stat.Ann. § 85-9-403 (Cum. Supp.1985) provides in pertinent part:

(2) Except as provided in subsection (6) a filed financing statement is effective for a period of five 5 years from the date of filing. The effectiveness of a filed financing statement lapses on the expiration of the five 5 year period unless a continuation statement is filed prior to the lapse. If a security interest perfected by filing exists at the time insolvency proceedings are commenced by or against the debtor, the security interest remains perfected until termination of the insolvency proceedings and thereafter for a period of sixty 60 days or until expiration of the five-year period, whichever occurs later. Upon lapse the security interest becomes unperfected, unless it is perfected without filing. If the security interest becomes unperfected upon lapse, it is deemed to have been unperfected as against a person who became a purchaser or lien creditor before lapse.

(3) A continuation statement may be filed by the secured party within six 6 months prior to the expiration of the five-year period specified in subsection (2). Any such continuation statement must be signed by the secured party, identify the original statement by file number and state that the original statement is still effective. A continuation statement signed by a person other than the secured party of record must be accompanied by a separate written statement of assignment signed by the secured party of record and complying with s

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