Court Opinion

ID: 9462975
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:54:44.10329+00
Date Added: 2024-06-11T17:37:52.325696
License: Public Domain

MULLIGAN, Circuit Judge
(dissenting):
I respectfully dissent. I cannot agree that the filing of the financing statement here, which fully complies with N.Y.U.C.C. § 9-402, does not constitute notice to subsequent creditors of Gold’s security interest arising from the purchase by the corporation of his shares of stock. The majority opinion requires that the financing statement, in addition to the minimal requirements set forth in section 9-402,1 also indicate that the underlying transaction is a stock repurchase agreement. There is no such requirement in the Uniform Commercial Code and there is no. authority in any decision construing Article 9 which would even suggest that such additional information be included in the financing statement.
The entire thrust of Article 9 of the Code was to eliminate a transaction recording system which had proved to be unwieldy and ineffective and to replace it with a simplified and unified system of notice filing. 1 Gilmore, Security Interests in Personal Property 462-71 (1965). There is no dispute that section 9-402 was complied with here.2 The majority in effect is amending the Code by imposing an additional requirement contrary not only to the letter but also to the spirit and intent of Article 9.
The majority suggests that the U.C.C.’s innovation of notice filing was intended to cover a normal valid commercial transaction, and not a stock repurchase agreement which depletes corporate assets without any consideration of value moving to the corporation. While this distinguishes the security interest of Gold here from the usual financing agreement, it by no means follows that the security interest created by the agreement is not governed by the requirement of section 9 — 402. On the contrary, the intent of the draftsmen of the Code, which was fully studied and reported by the Law Revision Commission of the State of New York,3 is amply demonstrated by the language of section 9-4024 which *873makes Article 9 applicable to any transaction regardless of its form which is intended to create a security interest. The agreement here involved was intended to create such an interest in Gold and the fact that it arose from a stock repurchase agreement is not relevant. Professor Gilmore has observed that where counsel is confronted with a novel situation,
whatever name he may give to the documents he drafts, he will end up, if the “transaction” is one “intended to create a security interest,” within an Article 9 security interest, subject to the Article 9 rules, the Article 9 metaphysics and, most importantly, the Article 9 filing system.
1 Gilmore, supra at 296 (emphasis supplied).
Not only is a security interest arising from a stock repurchase agreement not excluded by the language of Article 9, but the observation has been made that “[t]he Code permits for all types of collateral the ‘notice’ filing which New York has heretofore permitted only for inventory — the Uniform Trust Receipts Act; Factors Lien Act; and the Dealer’s Chattel Mortgage Act.” Coogan, How to Create Security Interests Under the Code — And Why, 48 Cornell L.Q. 131, 150 (1962) (footnotes omitted). See also Coogan, A Suggested Analytical Approach to Article 9 of the Uniform Commercial Code, 63 Colum.L.Rev. 1, 23 (1963). In sum, a reading of the Code and the commentators leads inescapably to the conclusion that all transactions intended to create security interests are subject to the filing requirements of Article 9, which were fully followed here.
I further fail to find any overreaching or inequity in the notice filing here employed. The financing statement explicitly stated, “This Financing Statement has been executed pursuant to an agreement, dated December 16, 1970, between Charles Gold, the Secured Party, and Flying Mailmen Service, Inc. . . . ” As was stated in Beneficial Finance Co. v. Kurland Cadillac-Oldsmobile, Inc., 32 A.D.2d 643, 300 N.Y.S.2d 884, 887 (2d Dept. 1969):
The purpose of a notice-filing statute is to give protection to a creditor by furnishing to others intending to enter into a transaction with the debtor a starting point for investigation which will result in fair warning concerning the transaction contemplated.
(citations omitted). See also Marine Midland Bank v. Conerty Pontiac-Buick, Inc., 77 Misc.2d 311, 352 N.Y.S.2d 953, 958 (Sup.Ct. Albany Cty.1974); John Deere Co. v. William C. Pahl Construction Co., 59. Misc.2d 872, 300 N.Y.S.2d 701, 703 (Sup.Ct. Onondaga Cty.1969), aff’d, 34 A.D.2d 85, 310 N.Y.S.2d 945 (4th Dept.1970); Bank of Utica v. Smith Richfield Springs, Inc., 58 Misc.2d 113, 294 N.Y.S.2d 797, 799 (Sup.Ct. Oneida Cty.1968).
The intent behind the filing requirements of Article 9 has received recognition from the federal courts as well. In In re Excel Stores, Inc., 341 F.2d 961 (2d Cir. 1965), Judge Medina noted that under pre-Code law, the slightest deviation from statutory requirements often resulted in the invalidation of security interests.
The result was the scrapping of the old statutory scheme, which varied from State to State, and the substitution for it of the filing of a simple notice the purpose of which is only to “give the minimum information necessary to put any searcher on inquiry.”
Id. at 963. See also In re Grandmont, 310 F.Supp. 968, 971 (D.Conn.1970). Any subsequent creditor was clearly alerted to the agreement of December 16, 1970 between Gold and the corporation, which was the stock repurchase agreement giving rise to the security interest. It was an obvious lead to the underlying transaction which would hardly require the investigative talents of a Sherlock Holmes or Inspector Maigret to unearth.
*874Cross v. Beguelin, 252 N.Y.262, 169 N.E. 378 (1929) does not require that the obligation created by the stock repurchase agreement remain valid and enforceable against the corporation. It simply requires that the subsequent creditor have notice of the transaction. The real issue was between the seller of the stock and the subsequent creditor and there the court announced the rule, “The rights of the seller of the stock appear to be superior to those of subsequent creditors of the corporation who became such with notice of the purchase by the corporation of its own stock.” 252 N.Y. at 266, 169 N.E. at 379 (emphasis supplied). While the creditor in Cross had actual knowledge of the repurchase agreement, the majority concedes that something, less than actual knowledge may suffice. Here the subsequent creditor is bound by the filing of the financial statement which identified the transaction creating the security interest. There is nothing in the Code or the cases which requires that it designate the underlying arrangement as a “stock repurchase agreement.” As I have indicated, the nature of the underlying transaction is not important — Article 9 of the Code was intended to apply to any and all security interests.
I conclude therefore that Cross and the Code were satisfied here and that it is inappropriate for this court to engraft further filing requirements on Article 9 which was a well-conceived, thoroughly studied and all-embracive codification of state law.

. § 9-402(1) provides in relevant part:
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. .

. While it is true that a copy of the security agreement itself is sufficient as a financing statement if it supplies the information specified by section 9-402 and is signed by both parties (4 Anderson, Uniform Commercial Code .§ 9 — 102:b (2d ed. 1971)), it is of course not required but is an alternate procedure. National Cash Register Co. v. Firestone & Co., 346 Mass. 255, 191 N.E.2d 471, 475 (1963).

. 2 Report of the Law Revision Commission, Hearings on the Uniform Commercial Code 1011-214 (1954).

. "§ 9-102. Policy and Scope of Article
(1) Except as otherwise provided in Section 9-103 on multiple state transactions and in Section 9-104 on excluded transactions, this Article applies so far as concerns any personal property and fixtures within the jurisdiction of this State
(a) to any transaction (regardless of its form) which is intended to create a security interest in personal property or fixtures including goods, documents, instruments, general intangibles, chattel paper, accounts or contract rights; and also
(b) to any sale of accounts, contract rights or chattel paper.
(2) This article applies to security interests created by contract including pledge, assignment, chattel mortgage, chattel trust, trust deed, factor’s lien, equipment trust, conditional sale, trust receipt, other lien or title retention *873contract and lease or consignment intended as security. This Article does not apply to statutory liens except as provided in Section 9-310.
(3) The application of this Article to a security interest in a secured obligation is not affected by the fact that the obligation is itself secured by a transaction or interest to which this Article does not apply.” (emphasis supplied). The exclusions in 9-103 and 9-104 are not applicable here.