Shepard Co., In re

• Decision Date: 30 July 1975
• Docket Number: No. 74-236-A,74-236-A
• Citation: 115 R.I. 290,342 A.2d 918
• Parties: , 17 UCC Rep.Serv. 873 In the Matter of the SHEPARD CO. ppeal.
• Court: Rhode Island Supreme Court

Page 918

342 A.2d 918

115 R.I. 290, 17 UCC Rep.Serv. 873

In the Matter of the SHEPARD CO.

No. 74-236-Appeal.

Supreme Court of Rhode Island.

July 30, 1975.

[115 R.I. 303] William C. Hillman, Providence, Special Counsel to the Trustee-in-Bankruptcy, for petitioner.

Joseph B. Manello, Widett & Widett, Boston, Richard S. Mittleman, Zietz, Sonkin & Radin, Providence, for James Talcott, Inc.

Alfred B. Stapleton, Providence, for respondent.

Robert W. Edwards, Jr., Providence, for Nat'l Commercial Finance Conference, Inc., amicus curiae.

Peter F. Coogan, Ropes & Gray, Boston, James Radin, Zietz, Sonkin & Radin, Providence, for General Electric Credit Corp.

OPINION

DORIS, Justice.

The United States District Court for the District of Rhode Island, acting pursuant to Sup.Ct.R. 6, has certified to this court a question of law, together with a statement of the facts relevant to the controversy in which the question arose. The present action was initiated when both General Electric Credit Corporation (hereinafter GECC) and James Talcott, Inc. (hereinafter Talcott) filed reclamation petitions in the United States District Court for the District of Rhode Island alleging that they hold valid and perfected security interests in certain assets of the bankrupt corporation, The Shepard Company.

On or about September 8, 1972, The Shepard Company, a Rhode Island corporation, granted a security interest in certain of its assets of Talcott, and a financing statement was accepted for filing by the Rhode Island Secretary of State. On or about June 25, 1973, The Shepard Company granted another security interest in certain of its assets to GECC. Again the Rhode Island Secretary of State accepted a financing statement for filing. On September 24, 1973, The Shepard Company was adjudicated a bankrupt in the United States District Court for the District of Rhode Island. A Trustee in Bankruptcy was thereafter appointed.

The question certified to this court involves the legal adequacy of the financing statements offered for filing by GECC and Talcott. The question reads as follows:

'Is a financing statement under the Rhode Island Uniform Commercial Code, accepted for filing and in fact filed with the Secretary of State upon payment of the statutory fee, G.L.1956, Title 6A, as amended, sufficient to perfect a security interest if:

a. It is signed by the debtor and the secured party;

b. Gives an address of the secured party from which information concerning the security interest may be obtained;

c. Gives a mailing address of the debtor;

d. Contains a statement indicating the types of collateral, which collateral in fact is not consumer goods; and

e. Does not cover either crops or goods which are or are to become fixtures; but

f. Does not contain a statement indicating whether the collateral is consumer goods having an aggregate original purchase price of not less than three hundred dollars ($300), excluding interest, insurance and other finance charges?'

The initial issue for our consideration is whether Sup.Ct.R. 6 permits certification of questions of law by a bankruptcy judge. Sup.Ct.R. 6 provides that 'this court may answer questions of law certified to it by * * * a United States District Court * * *.' Under the provisions of the Bankruptcy Act, every district court is a court of bankruptcy when its jurisdiction is properly invoked, 11 U.S.C.A. §§ 1(10), 11 (1966). As a court of bankruptcy, it is granted broad legal and equitable jurisdiction to hear and decide questions involving significant property rights. 11 U.S.C.A. § 11 (1966). Even a referee is a judicial officer vested with the power to exercise the jurisdiction conferred on the courts of bankruptcy. 11 U.S.C.A. §§ 64, 66 (1968); Bankruptcy Rule 901(7). In this situation, we see no reason to distinguish a district court and its officers when exercising bankruptcy jurisdiction from a district court and its officers when exercising more a general functions. We conclude, therefore, that the terms of Sup.Ct.R. 6 encompass a question of law certified by a bankruptcy judge.

The terms of the certified question call into question the meaning and legal effect of G.L.1956 (1969 Reenactment) § 6A-9-402. The relevant portions of this statute read as follows:

'6A-9-402. Formal requisites of financing statement-Amendments.-(1) 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. A financing statement may be filed before a security agreement is made or a security interest otherwise attaches. When the financing statement covers crops growing or to be grown or goods which are or are to become fixtures, the statement must also contain a description of the real estate concerned and the name of the record owner thereof. A copy of the security agreement is sufficient as a financing statement if it contains the above information and is signed by both parties.

(5) For purposes of determining whether a financing statement or security agreement shall be received for filing (see § 6A-9-401(1)(c)) said financing statement or security agreement shall contain a statement indicating whether the collateral is consumer goods having an aggregate original purchase price of not less than three hundred dollars ($300) excluding interest, insurance and other finance charges, but the omission of such statement shall not affect the validity of the security interest described therein.'

Where the language of a statute is free of ambiguity and conveys a definite and sensible meaning not contradicting an evident legislative purpose, this court must give literal effect to the terms of the statute. Reardon v. Hall, 104 R.I. 591, 247 A.2d 900 (1968). However, as the arguments of the parties indicate, not only are several terms of § 6A-9-402 ambiguous, but the overall meaning and legal effect of the statute, and in particular of subsection 5, are far from obvious. In this situation, this court has the duty of attempting to ascertain the legislative intention by a consideration of the statute in its entirety, interpreting the language used therein in light of the overall nature and purpose of the enactment. Mason v. Bowerman Bros., Inc., 95 R.I. 425, 187 A.2d 772 (1963); Zannelli v. Di Sandro, 84 R.I. 76, 121 A.2d 652 (1956).

The petitioners in this case allege that they hold valid and perfected security interests in certain assets of the bankrupt. With various exceptions not relevant here, a financing statement must be filed to perfect a security interest. § 6A-9-302(1). Part 4 of Article 9 of the Rhode Island Uniform Commercial Code covers the filing of financing statements. Section 6A-9-401 governs the place of filing, here the office of the Secretary of State of Rhode Island, and in a proviso unique to the Rhode Island Uniform Commercial Code, it also prohibits the receipt for filing of any financing statement where the collateral is consumer goods under the value of $300. Section 6A-9-402 sets out the formal requisites of a financing statement, states what constitutes a sufficient financing statement, and in a subsection found only in the Rhode Island Uniform Commercial Code, requires the inclusion of a statement indicating whether the collateral is consumer goods under the cost of $300.

The terms of the certified question make it clear that petitioners not only filed their financing statements within the meaning of § 6A-9-403(1), but also filed them in the proper place under § 6A-9-401(1)(c). Nor is there any question but that the financing statements satisfied the formal requisites of a financing statement set forth in § 6A-9-402(1). The issue is whether the instant financing statements complied with the requirements of § 6A-9-402(5), and if not, what is the legal effect of this noncompliance.

Section 6A-9-402(5) states that a financing statement '* * * shall contain a statement indicating whether the collateral is consumer goods having an aggregate original purchase price of not less than three hundred dollars ($300) * * *.' The question is whether this language was intended to require a separate formal recitation, or whether the information required by § 6A-9-402(1), if inherently inconsistent with the code's definition of consumer goods (see 6A-9-109(1)), is sufficient to satisfy this subsection.

The petitioners take the position that where the status of the debtor or the description of the assets covered by the financing statement makes it impossible that the collateral be consumer goods as that term is defined by the code, § 6A-9-402(5) does not require a separate formal statement. They argue that this construction of § 6A-9-402(5) is mandated by the basic policy of the code to promote substance over form and '* * * to discourage the fanatical and impossibly refined reading of such statutory requirements * * *.' Comment to U.C.C., § 6A-9-402 n.5.

While § 6A-9-402(5) is ambiguous as to the precise nature of the requirement created therein, the unqualified command that the financing statement 'shall contain a statement' and the fact that this requirement is contained in a separate subsection suggest that the Legislature envisioned an express formal recitation. Moreover, § 6A-9-402(5) was adopted as a means of implementing the prohibition found in § 6A-9-401(1)(c) against receiving for filing financing statements where the collateral is low-cost consumer goods. Any construction of the requirements of § 6A-9-402(5) must be made with primary reference to this very specific purpose, and only secondarily in light of the more general policies of the code. An unvarying requirement of an express formal statement greatly facilitates the implementation of § 6A-9-401(1)(c) by making unnecessary the potentially difficult determination...