Matter of Fowler

• Decision Date: 21 November 1975
• Docket Number: No. 74-713.,74-713.
• Citation: 407 F. Supp. 799
• Parties: In the Matter of Joseph Arthur FOWLER, d/b/a Kaw Lake Cement and Fowler Construction Company, Bankrupt. Betty McMILLIN, Trustee, Appellant, v. FIRST NATIONAL BANK & TRUST COMPANY OF PONCA CITY, Appellee.
• Court: U.S. District Court — Western District of Oklahoma

407 F. Supp. 799

In the Matter of Joseph Arthur FOWLER, d/b/a Kaw Lake Cement and Fowler Construction Company, Bankrupt.

Betty McMILLIN, Trustee, Appellant, v. FIRST NATIONAL BANK & TRUST COMPANY OF PONCA CITY, Appellee.

No. 74-713.

United States District Court, W. D. Oklahoma, Bankruptcy Division.

November 21, 1975.

B. J. Brockett, Oklahoma City, Okl., for appellant.

J. E. Burns, Ponca City, Okl., for appellee.

DAUGHERTY, Chief Judge.

This is an appeal from an order of the Bankruptcy Court denying Appellant's application to reclaim a security interest in a portion of the Bankrupt's personal property. Jurisdiction is founded upon 11 U.S.C. § 67(c). The appeal is taken pursuant to Bankruptcy Rules 801-814.

Appellant is Trustee in Bankruptcy. Joseph Arthur Fowler is the Bankrupt. Appellee, the First National Bank & Trust Company of Ponca City, Oklahoma, is one of the Bankrupt's creditors. Appellee claims a prior security interest in certain personal property, intangibles and proceeds belonging to the Bankrupt. Appellant seeks to cut off this security interest on the grounds that a financing statement filed by Appellee to perfect this interest was formally insufficient under Oklahoma's version of the Uniform Commercial Code (U.C.C.).

Under Bankruptcy Rule 810 this Court on appeal may affirm, modify, reverse or remand a judgment or order of a Bankruptcy Judge. The Court shall accept the findings of fact of a Bankruptcy Judge unless they are clearly erroneous. The facts of this case are not in dispute and are adequately stated by the Bankruptcy Judge's findings of fact. These findings are as follows:

"1. The debtor, Joseph Arthur Fowler, prior to November 3, 1971, and until the filing of his petition in bankruptcy, was engaged in the paving construction business, usually under the trade name of Fowler Construction Company.

2. In July, 1971, Jerry Fowler, the debtor's son, commenced the business of selling ready mixed concrete under the trade name, Kaw Lake Cement.

3. On November 3, 1971, the First National Bank and Trust Company of Ponca City, Oklahoma, filed of record in Oklahoma County a financing statement which showed in the space under the name of the debtor the following:

Kaw Lake Cement Jerry A. Fowler & J. A. Fowler Kaw City, Oklahoma,

which financing statement was signed:

Jerry A. Fowler J. A. Fowler

4. In July, 1972, Joseph Arthur Fowler formed a partnership with his son, Jerry A. Fowler, by buying into the assets of Jerry A. Fowler's business and the partnership did business under the name of Kaw Lake Cement.

5. On April 6, 1973, Kaw Lake Cement executed and delivered to the First National Bank and Trust Company, Ponca City, Oklahoma, a security agreement securing an indebtedness to the Bank in the amount of one hundred sixty thousand dollars ($160,000.00), and upon which was pledged the assets of Kaw Lake Cement and certain equipment of the debtor, J. A. Fowler. The pledged equipment is listed in Exhibit A to the Complaint of the trustee and has a present value of approximately forty thousand dollars ($40,000.00).

6. On April 13, 1973, the Bank filed with the County Clerk of Oklahoma County a financing statement which, under the name of the debtor, has the following:

KAW LAKE CEMENT Fowler, J. A., Partner Fowler, Jerry A., Partner

and in which the body of the instrument contains the following language:

`All machinery . . . belonging to J. A. Fowler Concrete Construction Company, Ponca City, Oklahoma, . . .',

and which is signed as follows:

KAW LAKE CEMENT Jerry A. Fowler, Partner J. A. Fowler, Partner"

The Bankruptcy Judge concluded:

"The financing statement of November 3, 1971, when taken together with the financing statement of April 13, 1973, meets the statutory requirements for financing statements and gave notice of the existence of the Bank's security agreement in the controverted equipment.

The filed financing statements of November 3, 1971 and of April 13, 1973 fairly put on notice any prudent examiner that he should check with the instant bank as to a possible security interest in the debtor's equipment inasmuch as the clerk indexing included `J. A. Fowler' and such inquiry would have led to a confirmation of the bank's security agreement in the debtor's equipment."

Appellant's statement of issues to be raised on appeal is as follows:

(1) Is the filing and indexing of a financing statement under the name "KAW LAKE CEMENT", a fictitious trade name of a partnership between the Bankrupt and his son, sufficient to perfect a security interest in personal property owned by the Bankrupt and used by him in another business totally unrelated to the partnership?

(2) May two financing statements filed by a secured party, each of which is lacking all of the formal requisites of a financing statement, so that either one of the financing statements, standing alone, would be insufficient to perfect a security interest as against a Trustee in Bankruptcy, be construed together as one sufficient filing?

(3) Is the filing officer required to index according to the "signature" placed on the financing statement by, or on behalf of the debtor, or in accordance with the "name" of the debtor as furnished by the secured party?

See Bankruptcy Rule 806.

Appellee contends that either of the involved financing statements standing alone is sufficient to create a valid security interest prior in time and right to the rights of the Appellant. Appellee further adopts the position of the Bankruptcy Judge.

I

The gist of Appellant's argument under her first appellate issue is that Appellee's financing statements are insufficient under 12A Oklahoma Statutes § 9-402 to perfect a security interest in the Bankrupt's equipment as the manner in which the debtors are designated therein led the filing officer to file and index the financing statements only under the trade name of the debtor, Kaw Lake Cement, and not under his true name, Joseph Arthur Fowler. The gist of Appellee's response is that it gave all required information on its financing statements and it is not responsible if the filing officer failed to properly file and index the financing statements.¹

12A Oklahoma Statutes § 9-402(1) sets forth the formal requirements for financing statements:

"A financing statement is sufficient if it is signed by the debtor and the secured party, gives an address of the secured party from which information concerning the security interest may be obtained, gives a mailing address of the debtor and contains a statement indicating the types, or describing the items of collateral. . . ."

12A Oklahoma Statutes § 9-402(5) reads:

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

The notice filing system provided by the Uniform Commercial Code requires that a secured party, in order to perfect his security interest in collateral, provide for public record enough information to alert an interested party that there may be a prior security interest in that collateral. In Re Colorado Mercantile Co., 299 F.Supp. 55 (D.Colo.1969); In Re Excel Stores, Inc., 341 F.2d 961 (Second Cir. 1965); Owen v. McKesson and Robbins Drug Company, 349 F.Supp. 1327 (N.D.Fla.1972). Perfect accuracy in the identification of the debtor or the secured party is not required as long as the financing statement contains sufficient additional information to enable a prudent examiner to ascertain the exact state of affairs through further inquiry. In Re Colorado Mercantile Co., supra; cf. In Re Platt, 257 F.Supp. 478 (E.D. Pa.1966); Stafford v. Admiral Credit Corporation, 280 F.Supp. 818 (M.D.N.C. 1968).

12A Oklahoma Statutes § 9-402(1) does not expressly require the name of the debtor² to be given. However, it is clear, from the following cases, that the debtor's legal name must be given on a financing statement so that it can be filed and indexed in such a manner that a person searching the record under the debtor's legal name would be able to locate it.³In Re Leichter, 471 F.2d 785 (Second Cir. 1972); Leichter, a bankrupt, was doing business under the name "Landman Dry Cleaners". Leichter purchased equipment from Kenston on a conditional sales contract. Kenston filed a financing statement signed Landman Dry Cleaners by Matthew R. Leichter. The financing statement was indexed only under the name "Landman Dry Cleaners" and not under the name Leichter.⁴ The court held that this filing was insufficient as an interested party searching under the name "Leichter" would not find the financing statement listed under "Landman". In Re Thomas, 466 F.2d 51 (Ninth Cir. 1972) the debtor's legal name was Thomas but on a financing statement filed by his creditor the debtor's name was listed only under the name West Coast Avionics, the debtor's trade name. The court held this financing statement to be insufficient to perfect the creditor's security interest as a potential creditor searching the record under the name Thomas would not receive notice of the security interest. In Re Firth, 363 F.Supp. 369 (M.D.Ga.1973) and In Re Hill, 363 F.Supp. 1205 (N.D. Miss.1973) the courts followed the Leichter-Thomas rule in holding that financing statements showing only the trade name of a debtor were insufficient to perfect a security interest as they would fail to give notice to a potential creditor searching the records under the legal name of the debtor. Finally, in Siljeg v. National Bank of Commerce of Seattle, 509 F.2d 1009 (Ninth Cir. 1975) the court held that filing a financing statement under an assumed trade name is effective unless it is misleading. The court relied on In Re Platt, supra, wherein the court held that a financing statement listing the name of the debtor as Platt Fur Co. was sufficient where the name of the debtor was Henry Platt as the name Platt Fur Co. was sufficiently related to the name of the debtor to require those...