John Deere Co. v. First Interstate Bank of Arizona N.A., 1

Decision Date09 May 1985
Docket NumberNo. 1,CA-CIV,1
Citation147 Ariz. 256,709 P.2d 890
Parties, 42 UCC Rep.Serv. 1110 JOHN DEERE COMPANY, a Delaware corporation, Plaintiff-Appellant, v. FIRST INTERSTATE BANK OF ARIZONA, N.A., a national banking association, Defendant-Appellee. 7054.
CourtArizona Court of Appeals
OPINION

MEYERSON, Presiding Judge.

This appeal involves competing claims of two creditors of the Gallo Machinery Company (Gallo Machinery). The ultimate issue presented in this dispute is whether the financing statement filed in connection with the extension of credit by plaintiff-appellant John Deere Company (John Deere) to Gallo Machinery perfected John Deere's security interest even though Gallo Machinery was not incorporated at the time the financing statement was signed and filed with the Arizona Secretary of State. The trial court ruled that as a matter of law, the pre-incorporation signing of the financing statement could not be subsequently adopted by Gallo Machinery and therefore the security interest of defendant-appellee First Interstate Bank of Arizona (First Interstate) was perfected prior to that of John Deere. For the reasons hereinafter stated, we reverse the judgment of the trial court and remand with instructions that partial summary judgment be entered in favor of John Deere.

I. FACTS

In the fall of 1971, Anthony J. Gallo applied for a John Deere dealership in Willcox, Arizona. Gallo intended to operate this business as a corporation under the name of Gallo Machinery Company. Prior to the filing of the articles of incorporation, Gallo executed a number of documents which were requirements of John Deere. Among these were a financing statement and security agreement. These documents were signed on November 18, 1971, and filed with the Secretary of State on December 2, 1971. The financing statement identified the debtor as "Gallo Machinery Co." and was signed "Gallo Machinery Co. by A.J. Gallo, President."

The articles of incorporation of Gallo Machinery were filed with the Arizona Corporation Commission on December 8, 1971. The company began doing business that same month. The minutes of the first board of directors meeting of Gallo Machinery reflect that Anthony Gallo was one of three initial directors and the chairman of the board, as well as the president of the company. Additionally, he was issued 500 of 501 shares of stock.

Gallo testified in his deposition that when he signed the financing statement he intended to do so on behalf of Gallo Machinery. The board of directors of Gallo Machinery also passed a resolution which provided that Gallo was "authorized to contract and execute any and all necessary documents to secure the ownership and rights to a John Deere dealership for Willcox and related areas."

Gallo Machinery was a John Deere dealer until March, 1982. During this period, all of its purchases of John Deere products and replacement parts were made with credit supplied by John Deere. Indeed, Gallo Machinery purchased almost $50 million of goods from John Deere on credit for resale to its own customers.

In 1980, Gallo Machinery transferred its banking business to First Interstate. First Interstate conducted a credit investigation and discovered the John Deere financing statement filed in 1971. As part of First Interstate's extension of credit to Gallo Machinery, a security agreement and financing statement were executed and the financing statement was filed by First Interstate with the Secretary of State. It is undisputed that First Interstate had a perfected security interest in Gallo Machinery's inventory.

Subsequently, Gallo Machinery became financially troubled and defaulted on its obligations to both John Deere and First Interstate. John Deere attempted to foreclose upon Gallo Machinery's inventory. Because John Deere's financing statement was executed in the name of Gallo Machinery prior to the time that the company was incorporated, First Interstate claimed that it had a prior, perfected security interest in the Gallo Machinery collateral. This lawsuit then ensued. The parties filed cross-motions for summary judgment, each contending that their respective security interests were perfected prior to the other. The trial court ruled in favor of First Interstate and John Deere has brought this appeal.

II. APPLICABLE PROVISIONS OF THE UNIFORM COMMERCIAL CODE

With certain exceptions not applicable here, a financing statement must be filed to perfect all security interests. A.R.S. § 44-3123 (current version at A.R.S. § 47-9302). The formal requisites of a financing statement are as follows:

A. A financing statement is sufficient if it is signed by the debtor and the secured party, designates by typing or printing the names and mailing addresses of both the debtor and the secured party and contains a statement indicating the types, or describing the items, of collateral....

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E. A financing statement substantially complying with the requirements of this section is effective even though it contains minor errors which are not seriously misleading.

A.R.S. § 44-3141(A), -(E) (current version at A.R.S. § 47-9402(A), -(H)). This provision is derived from § 9-402 of the Uniform Commercial Code (UCC) and adopts "notice filing." Plemens v. Didde-Glaser, Inc., 244 Md. 556, 563 n. 7, 224 A.2d 464, 468 n. 7 (1966). "The notice itself indicates merely that the secured party who has filed may have a security interest in the collateral described." Uniform Commercial Code § 9-402 official comment 2, reprinted in 4 R. Anderson, Uniform Commercial Code 459 (2d ed. 1971). In interpreting this provision of the UCC, courts have done so liberally "in favor of creating a security interest," In re Sport Shack, 383 F.Supp. 37, 41 (N.D.Ca.1974), recognizing that the purpose of the UCC is, among other things, to modernize the law governing commercial transactions, and to permit the expansion of commercial practices through custom, usage and agreement of the parties. A.R.S. § 44-2202(B) (current version at A.R.S. § 47-1102(B)).

As noted above, a financing statement must be "signed by the debtor." The UCC defines "signed" as "any symbol executed or adopted by a party with a present intention to authenticate a writing." A.R.S. § 44-2208(39) (current version at A.R.S. § 47-1201(39)). The interplay between these statutes lies at the crux of this dispute.

III. ANALYSIS

In support of the trial court's ruling, First Interstate contends that the financing statement executed in the name of Gallo Machinery was ineffective to perfect John Deere's security interest in the Gallo Machinery collateral. This is so, First Interstate contends, because Gallo Machinery was not in existence at the time the financing statement was signed and filed. Therefore, the bank concludes that the financing statement was not and could not have been signed by the debtor--Gallo Machinery. First Interstate makes no contention that the financing statement was "seriously misleading." 1

The bank's argument rests upon the language of A.R.S. § 44-2208(39) which defines "signed" as "any symbol executed or adopted by a party with present intention to authenticate a writing." Because Gallo Machinery did not come into existence until the filing of its articles of incorporation, Malisewski v. Singer, 123 Ariz. 195, 196, 598 P.2d 1014, 1015 (App.1979), First Interstate argues that Gallo Machinery could not have had the present intent to execute the financing statement and it therefore could not have been "signed" as required by A.R.S. § 44-3141(A). 2 In our view, however, what is required is that the "party" signing the financing statement must have the present intent to authenticate it on behalf of the debtor 3 and it must appear on the face of the financing statement, Plemens v. Didde-Glaser, Inc., 244 Md. 556, 564, 224 A.2d 464, 469 (1966), or from the surrounding circumstances, In re Great Basin Transport, Inc., 32 B.R. 365 (Bkrtcy.W.D.Okla.1983), that such person acted on behalf of the debtor.

Although we have found no case directly on point, courts have not applied these statutes in the literal manner suggested by First Interstate. For example, in Sherman v. Upton, Inc., 90 S.D. 467, 242 N.W.2d 666 (1976), the financing statement identified the debtor as "Upton, Inc." It was signed, however, by Rodney and Janet Upton. It was contended that the financing statement was insufficient because the signatures of the Uptons appeared to be those of the "signers as individuals rather than as corporate officers." Id. at 670. The court found the discrepancy to be "at worst" a minor error and concluded that the financing statement was not seriously misleading. The court refused to go "back into the morass of nitpicking from which the UCC has refreshingly led us," and concluded that it was evident that Upton, Inc. was the debtor. Id.

Similarly, in In re Excel Stores, Inc., 341 F.2d 961 (2d Cir.1965), a security agreement was signed "Excel Department Stores, by Andrew F. Machado," where the true name of the corporation was Excel Stores, Inc. In rejecting a contention that the document was not properly "signed," the court concluded that there was substantial compliance with the UCC's requirements and the document was not seriously misleading. Id. at 963-64.

Finally, we have found one decision which comes extremely close to the factual situation before us. In re Wilco Forest Machinery, Inc., 491 F.2d 1041 (5th Cir.1974). In that case, the financing statement was signed by Timberjack Machines, Ltd. (Timberjack), as the secured party. Timberjack had ceased to exist, however, one month...

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