Court Opinion

ID: 8887431
Source: CourtListenerOpinion
Date Created: 2022-11-26 22:16:10.89851+00
Date Added: 2024-06-11T17:07:00.121327
License: Public Domain

SEITZ, Chief Judge
(concurring).
In my opinion Congress retained the responsibility of recording the judgment note upon default regardless of whether the assignment agreement purported to cover both the sales contract and the judgment note or, alternatively, the sales contract only. The assignment transaction between Sterling and Congress was governed by the Uniform Commercial
“A secured party must use reasonable care in the custody and preservation of collateral in his possession. In the case of an instrument or chattel paper reasonable care includes taking necessary steps to preserve rights against prior parties unless otherwise agreed.” N.Y.U.C.C. § 9-207(1) (McKinney 1964); Pa.Stat.Ann. Tit. 12A § 9-207(1) (1970).
Here Congress was in possession of the note at all times after the initial transfer. Accordingly, upon default it clearly had the duty to record the instrument unless “otherwise agreed” between itself and Sterling. Congress contends that it otherwise agreed by pointing to the language in the assignment whereby Sterling acknowledged “that any filing or recording or renewals . . . which [Congress] may undertake at [Sterling’s] request, or otherwise, shall be at [Sterling’s] expense and without responsibility whatsoever on [Congress’] part for any omission or invalid accomplishment thereof, whether through [Congress’] failure, neglect or for any reason, and such omission or invalid accomplishment shall not relieve [Sterling] of any responsibility to [Congress].” As I read this provision, however, it does not speak to the responsibility of the parties for recording the judgment note in the event of a default.
The assignment agreement does contain a warranty by Sterling regarding compliance with all filing requirements. However, such language obviously could not apply to the judgment note as of the date of the initial assignment because the note was not then in default and, therefore, could not have been recorded in Pennsylvania. As to future filings the assignment provision merely places the expense thereof on Sterling. It does not speak explicitly to the duty to record. It would seem reasonable that if the assignment provision emphasized *458by Congress were intended to obligate Sterling with regard to all necessary future filings, some provision would have been inserted in the agreement providing for notice to Sterling from Congress as of the time recording became timely, e. g., upon a default. No such provision appears. Coupling this observation with the unclear wording of the agreement, which was prepared by Congress, I conclude that the agreement did not cover the responsibility of recording the judgment note upon default.
Of course, the quoted provision from the agreement could be read as an exculpatory clause relieving Congress from any liability to Sterling regardless of which party had the responsibility to file the note upon default. To so construe the provision, however, would be to contravene § 1-102(3) of the Code which provides:
“The effect of provisions of this Act may be varied by agreement, except as otherwise provided in this Act and except that the obligations of good faith, diligence, reasonableness and care prescribed by this Act may not be disclaimed by agreement but the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable.” N.Y.U.C.C. § 1-102(3) (McKinney 1964); Pa. Stat.Ann. Tit. 12A § 1-102(3) (1970).
As I construe the assignment, Congress retained the duty to record the judgment note upon default according to the standard of reasonable care prescribed by the Code. The parties could agree to determine performance by some other standard “not manifestly unreasonable.” However, the exculpatory clause here was not such an agreement. Rather, it was an attempt by Congress to insulate itself from the consequences of noncompliance with what I find to be the statutory provision controlling the circumstances of this case.
It is possible, of course, that despite Congress’ failure to make a timely filing of the judgment note, Sterling would still remain liable as an indemnitor. However, neither party suggests that the debtors’ equity in the collateral realty at the time of the default was insufficient to cover the balance of the judgment note. Indeed, the record compels a contrary conclusion. Therefore, I concur in the conclusions reached by Judge Gibbons both as to the complaint and the counterclaim.
KALODNER, Circuit Judge
(concurring) .
I concur in the result for the reasons stated in the concurring opinion of Chief Judge SEITZ.