Matter of Pettit

• Citation: 18 BR 8
• Decision Date: 07 January 1981
• Docket Number: Bankruptcy No. LR-80-0627,Adv. No. 80-0417.
• Parties: In the Matter of Arch PETTIT and Ida Marie Pettit d/b/a Archangel Corp., La Pettit Roche, Quapaw-Quarters Shops and Ener-Kleen, Debtors. SEARS, ROEBUCK AND CO., Plaintiff, v. Arch PETTIT and Ida Marie Pettit, Defendants.
• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Eastern District of Arkansas

18 B.R. 8 (1981)

In the Matter of Arch PETTIT and Ida Marie Pettit d/b/a Archangel Corp., La Pettit Roche, Quapaw-Quarters Shops and Ener-Kleen, Debtors.

SEARS, ROEBUCK AND CO., Plaintiff, v. Arch PETTIT and Ida Marie Pettit, Defendants.

Bankruptcy No. LR-80-0627, Adv. No. 80-0417.

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

January 7, 1981.

Bryon S. Southern, Little Rock, Ark., for plaintiff.

Wright, Lindsey & Jennings, Little Rock, Ark., for defendants.

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND FINAL JUDGMENT ALLOWING THE CLAIM OF PLAINTIFF AS A SECURED CLAIM

DENNIS J. STEWART, Bankruptcy Judge.

The plaintiff initiated this action as one for reclamation of certain consumer goods in which it has a purchase money security interest. The parties have submitted this action to the court for decision on October 10, 1980, on a stipulation of the material facts as follows:

1. The consumer goods here in issue are the subject of a security agreement wherein the defendant purports to give plaintiff a security interest therein.¹

2. It would be the uncontradicted testimony of the defendant Arch P. Pettit that all the goods were used at all times in and exclusively for his rental property business.

3. Plaintiff has never filed any documents in any place in order to perfect a security interest under the Uniform Commercial Code.

4. Pertinently, the security agreement executed by the defendant provides that the security interest is given "in consideration of your selling merchandise and services for personal, family or household purposes to me . . . "

The narrow question which is presented to this court for resolution is whether the security interest is to be classified as consumer goods (in which case the purchase money security interest is perfected without the filing of any financing statement under Ark.Stat.Ann. § 85-9-302(1)(d) Supp. 1979) or whether it is to be regarded as equipment (in which case filing of a financing statement is required for perfection). From the foregoing facts which have been stipulated, it appears that, in the written security agreement between the parties, the defendant affirmatively and unambiguously represented to the plaintiff that he was purchasing the collateral "for personal, family, or household purposes." There is no stipulation, statement, or showing that the defendant ever informed the plaintiff that the goods purchased would be used for any other purpose.

Under these circumstances, considerations of fairness dictate that the security interest be regarded as a purchase money security in consumer goods and therefore perfected without the filing of any financing statement. The stipulated facts clearly demonstrate that the plaintiff had no reason to believe that the purchased merchandise was being used as anything but consumer goods. Under these conditions, the decisions which are clearly apposite hold that it is "inconsistent with the purposes of the Uniform Commercial Code to simplify, clarify and modernize the law governing commercial transactions to require a creditor to monitor use of the collateral in order to ascertain its proper classification. The uncertainty caused by the potentially shifting status of the goods is not desirable in the commercial world." Commercial Credit Equipment Corp. v. Carter, 83 Wash.2d 136, 516 P.2d 767, 769 (1973). Thus, the majority of decisions on the subject hold the security interest to be perfected without filing of any financing statements.²

The cases which have been cited and relied upon by the defendant are inapplicable, for none of them involve an express and unambiguous representation, as in this case, by the debtor that the purpose for which the goods were being purchased was that of personal and household use.³

The defendant in this case nevertheless urges that it would be unfair for the court to predicate its decision on the positive and unambiguous representation of household and personal use which the debtor made in the security agreement. Thus, it is argued that:

"The language relied on by Sears is part of a form used in every sale by Sears. A purchaser has no realistic opportunity to dicker with a Sears\' sales clerk for better or different terms. The debtors or any other person buying from Sears has no reasonable alternative but to agree to the terms set forth. If the language in the Sears\' form is held to be binding on the debtor, it would operate to produce an unconscionable result, namely, that every sale made by Sears would be a sale of consumer goods regardless of the actual intent of the purchaser or principal use made of the goods. The intent of the drafters of the Uniform Commercial Code to grant perfection only for purchase money security interests in consumer goods would be subverted and Sears would enjoy automatic perfection in every sale. Ark.Stat.Ann. Sec. 85-2-302 provides that if a court as a matter of law finds a contract clause to be unconscionable at the time it was made, the court may limit the application of the unconscionable clause so as to avoid an unconscionable result. The language in question should be limited.

"The principal use made of the goods purchased was in the Debtors\' business of renting houses. The actual intent of the Debtors at the time the security interest was created was to use the goods in that manner and Sears, its agents or employees either knew or should have known of the Debtors\' intent. Why else would a person buy four electric ranges within a two-month period?"

In the regard, however, no facts are stipulated from which it might reasonably be inferred that the defendant had no opportunity to inform the plaintiff that the goods were not purchased for the purpose of personal use. In such a case, a different result might be warranted, as it certainly would if there were a stipulation or evidence that the defendant informed, or attempted to inform, the plaintiff that the merchandise purchased was to be used as equipment for his rental property. But all that is before the court in this action is the stipulation of the parties which omits any facts upon which the court could predicate any finding other than that the defendant intended to inform the plaintiff that he intended the purchased goods for personal, family, or household use.

In the face of this unambiguous expression of intention, extrinsic circumstances are not admissible in evidence.⁴ And this rule, it seems, is particularly appropriate in the case at bar, in which the plaintiff, when the defendant clearly represented the intended use to be as consumer goods,⁵ should not be required to guess from other circumstances that the purchases were really for another purpose.

Accordingly, this court is compelled to find that the security interest of the plaintiff was...