Standard Lumber Company v. Chamber Frames, Inc., PB 69-C-100.
| Decision Date | 28 September 1970 |
| Docket Number | No. PB 69-C-100.,PB 69-C-100. |
| Citation | 317 F. Supp. 837 |
| Parties | STANDARD LUMBER COMPANY, a Corporation, Plaintiff, v. CHAMBER FRAMES, INC., Rush W. Chambers and Royce W. Chambers and S. S. Kresge Company, a Corporation, Defendants, United States of America, Intervenor and Cross-Plaintiff. |
| Court | U.S. District Court — Eastern District of Arkansas |
E. Harley Cox, Jr., Coleman, Gantt, Ramsay & Cox, Pine Bluff, Ark., for plaintiff.
J. Bruce Streett, Streett & Plunkett, Camden, Ark., for Chamber Frames, Inc.
Philip S. Anderson, Jr., Wright, Lindsey & Jennings, Little Rock, Ark., for S. S. Kresge Co., defendant.
Walter G. Riddick, Asst. U. S. Atty., Little Rock, Ark., for the United States.
The plaintiff, Standard Lumber Company, a corporation, brought this action against the defendants in the Circuit Court of Jefferson County, Arkansas. The defendant, Chamber Frames, Inc., became indebted to the plaintiff for materials purchased on an account secured by a note dated April 15, 1968. The plaintiff seeks to recover from the defendants the sum of $2,548.31 with interest, of which sum the defendants, Rush W. Chambers and Royce Chambers, are jointly and severally indebted for the sum of $143.
On April 25, 1968, the defendant, Chamber Frames, Inc., delivered a shipment of materials to S. S. Kresge Company, doing business as K-Mart No. 4161 in the City of Dallas, Texas. In connection with the promissory note by Chamber Frames, Inc., to the plaintiff on the indebtedness the defendant, Chamber Frames, Inc., made, executed and delivered to the plaintiff an assignment of an account receivable due to it from defendant, S. S. Kresge Company, which amounted to $2,212.20, together with interest from May 25, 1968, until paid.
The defendant, S. S. Kresge Company, filed a bill of interpleader admitting that it was holding the sum of $2,212.20 due under the invoice and stating that a claim had been made upon the funds by the United States of America through its Internal Revenue Service. The defendant deposited funds with the court and asked to be relieved of any further responsibility.
The United States of America was permitted to intervene and assert its claim under liens arising from unpaid taxes.
Subsequently, the United States of America as intervenor removed the action from the state court pursuant to the provisions of 28 U.S.C. § 1441. The defendant, Kresge, was released and discharged of any further liability, having deposited the total sum due on the account in the registry of the court.
The only question at issue is the relative priorities of the parties, Standard Lumber Company and United States of America, to the sum interplead by Kresge in the sum of $2,212.20. Both parties have filed respective motions for summary judgment. The essential facts are not in dispute. Stipulation has been entered by the plaintiff and the United States of America.
The plaintiff is an Arkansas corporation and on or about April 15, 1968, was engaged in the business of selling building materials and mill work in Pine Bluff, Arkansas, and in addition, leased certain equipment and business place to Chamber Frames, Inc., an Arkansas corporation, engaged in the manufacture of picture frames.
As of April 15, 1968, and at all times to and including December 4, 1968, and at all times since, Chamber Frames has been indebted to the plaintiff for sums in excess of $2,212.20. On April 25, 1968, Chamber Frames, Inc., gave its promissory note1 payable to the order of the plaintiff for the sum of $2,778.82 with interest at 7% per annum, and, simultaneously, assigned to it an account receivable due Chamber Frames, Inc., in the sum of $2,212.20. The transfer of the account receivable was duly noted on copy of the invoice for the material and on May 9, 1968, the president of the plaintiff mailed a letter to K-Mart No. 4161 of Dallas, Texas, notifying it of the assignment to the plaintiff of the account receivable due from K-Mart No. 4161 to Chamber Frames, Inc. On November 26, 1968, following telephone contact with officers of S. S. Kresge Company, the president of the plaintiff wrote K-Mart at their address in Detroit, Michigan, reminding the company of the assignment of the account receivable and requesting payment.
On November 26, 1968, a notice of levy was duly issued by the United States of America through its Internal Revenue Service of total taxes due in the sum of $7,763.70. Copy of the notice of levy was duly filed in Jefferson County, Arkansas, on November 26, 1968. A copy was served on S. S. Kresge Company in Detroit on December 4, 1968. The taxes represented by this notice of levy were for a period ending March 31, 1968, in the sum of $2,704.24 for which assessment was made on September 20, 1968, and for the period ending June 30, 1968, in the amount of $5,058.26 for which assessment was made September 27, 1968. A balance in excess of $2,212.20 remained due and payable from Chamber Frames, Inc., for delinquent taxes reflected by the levy and lien.
To reach the question in this case the court must determine (1) whether the assignment of the account receivable from Chamber Frames, Inc., to the plaintiff was valid and security interest attached; and (2) if so, the relative priorities of the assignment with the tax lien of the United States.
The first question is to be determined by state law and the second question by federal law. In Re Mile Hi Restaurants, Inc., 233 F.Supp. 936 (D.C. 1964); Aquilino v. United States, 363 U.S. 509, 80 S.Ct. 1277, 4 L.Ed.2d 1365.
The validity of the assignment by Chamber Frames, Inc., to the plaintiff is governed by the Uniform Commercial Code, Ark.Stat.1947 Anno. 1961 Addendum) Section 85-9-101 et seq.
Section 85-9-204 provides when security interest attaches.2 No question is raised as to the agreement between Chamber Frames, Inc., and the plaintiff, or that value was given and as to the debtor having rights in the collateral. (Stipulation) The Court, therefore, concludes that the security interest of the plaintiff attached with the transfer of the one account in the sum of $2,212.20 as noted on the copy of the invoice dated April 25, 1968, as security for the note previously referred.
Section 85-9-303 provides when security interest is perfected, as follows:
Section 85-9-302 determines when filing is required to protect security interest, as follows:
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