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IN RE LEASING CONSULTANTS

November 27, 1972

In the Matter of LEASING CONSULTANTS, INCORPORATED, Bankrupt

Weinstein, District Judge.


The opinion of the court was delivered by: WEINSTEIN

MEMORANDUM AND ORDER

WEINSTEIN, District Judge.

 This petition to review an order of the referee in bankruptcy presents the first impression question whether the creditor of a New York lessor of heavy equipment, installed in New Jersey by the New Jersey lessee, perfected a security interest. The creditor had filed a financing statement covering "continuing security interest in leases . . . including all related equipment described therein" with the New York Secretary of State in the county where the lessor was located. The creditor had also taken physical possession of the equipment leases and of an assignment by the lessor of its "rights, title and interest" in the leases. While the lessor had filed financing informational statements with the Secretary of State for New Jersey, it had not mentioned the creditor's name. The lease required the equipment to bear a plate stating only "Property of Leasing Consultants, Inc."; no evidence suggests that this term was not complied with.

 Although none of the statutory or policy arguments advanced emerges as clearly entitled to the greater weight, protection of creditors will best be served if the issue is definitely resolved one way or the other. For the reasons stated below, this court holds that the creditor, not having filed in New Jersey where the machinery was located, was not secured.

 I. FACTS

 Leasing Consultants, Inc. (lessor), a corporation whose principal place of business was located in New York, was adjudicated bankrupt on October 14, 1970. It had been involved in the business of leasing machinery, computers and aircraft. To assist in financing this business, in December 1969, the lessor entered into a "Loan and Security Agreement" with petitioner First National City Bank (Creditor), providing in part for the assignment of "a continuing security interest in the (leases) and the property leased" as collateral security.

 During the period from March to June of 1969, pursuant to the terms of the Loan and Security Agreement, the lessor assigned to the creditor eight personal property leases entered into between the lessor and Plastimetrix Corporation (lessee). The principal place of business of the lessee was in New Jersey where the leased equipment was at all times installed. Together with the assignments, the lessor physically delivered to the creditor the leases. The assignments also provided for the assignment of "the . . . equipment . . . described in the leases."

 The lessor filed financing statements "for informational purposes only," covering its interest in the leased equipment with the Secretary of State of the State of New Jersey. The creditor filed financing statements against the lessor with the Registrar of the City of New York, Queens County Division, and with the Secretary of State of New York, covering "continuing security interest in leases . . . including all related equipment described therein." No financing statements were ever filed in the State of New Jersey by the creditor, nor did the creditor take possession of the leased equipment.

 In October 1970, the lessee filed a petition under Chapter XI of the Bankruptcy Act in the United States District Court for the District of New Jersey. (The lessor had already been adjudicated a bankrupt.) During that proceeding the leases were apparently terminated and an independent offer to purchase the lessor's interest in the leased equipment for $60,000 was made. The parties in this court agreed to accept the offer and stipulated that the $60,000 would "be substituted for the Property, and the respective rights of the Trustee [of the lessor and the creditor] . . . impressed upon and relegated to said fund of $60,000."

 The lessor's trustee applied to the Referee in Bankruptcy in this court for an order directing the creditor to turn over the $60,000 plus interest, all parties agreeing that the sole issue for determination was the following question of law:

 
"Was the Bank required to file a financing statement against the bankrupt with the Secretary of State of New Jersey in order to perfect a security interest in the equipment leased by the [lessor to the lessee]?"

 Answering in the affirmative, the Referee ordered the creditor to turn over the $60,000, plus interest, to the Trustee. The creditor now petitions this court to review that order.

 II. LAW

 The avowed purpose of Article 9 of the Uniform Commercial Code is "to provide a simple and unified structure within which the immense variety of present-day secured financing transactions can go forward with less cost and with greater certainty." Uniform Commercial Code § 9-101, Official Comment. To further this aim the drafters of Article 9 eliminated many distinctions among security devices based on form alone. ...


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