Opinion ID: 760170
Heading Depth: 2
Heading Rank: 1

Heading: paulman's loans to filtercorp, inc.

Text: 8 Filtercorp, Inc. was a Washington corporation which developed and distributed carbonated pads used in the food service industry to filter cooking oils. Beginning in November 1991, the company took out a series of loans from Paulman, an individual salesman, to help fund further development and meet large orders. The loans were short term, ranging from two to three months, and memorialized by promissory notes drafted by Paulman's attorney. The final note-the subject of this litigation-was a three-month note, executed on June 30, 1992, and due September 30, 1992. 9 The June 1992 note provided for the following security: 10 This note is secured by 75,000 shares of Filter Corp. [sic] stock owned by Robin Bernard, the accounts receivable and inventory of Filter Corp. [sic] (See UCC-1 filing and attached inventory listing.) and John Gardner personally. 11 The parties never executed a separate security agreement. However, Paulman perfected his security interest by filing a UCC-1 financing statement on October 5, 1992. The UCC-1 statement identified the collateral as (1) accounts receivable and (2) materials inventory. Despite the note's reference to an inventory listing, none was ever attached to the note or the financing statement. 12 There is no contemporaneous evidence shedding light on whether the parties intended to secure after-acquired inventory or accounts receivable with the June 1992 note. In the course of this litigation, the parties presented conflicting versions of their intent. Paulman claimed that he and Filtercorp, Inc. understood the security interest to attach to future rather than presently-held inventory and accounts receivable so as not to interfere with the company's ability to raise additional capital. Hence, he did not attach the inventory listing. In contrast, Robin Bernard, President of Filtercorp, Inc., stated that in light of the short, three-month term of the loan he did not contemplate an ongoing security interest. 13 Filtercorp, Inc. defaulted on the June 1992 note and Paulman initiated a suit in state court in early October 1992 to enforce it. Filtercorp defended on the ground that the note was usurious. Paulman ultimately prevailed in November 1995 and obtained judgment in the amount of $710,572.81. 14