Court Opinion

ID: 9461094
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:05:40.562901+00
Date Added: 2024-06-11T17:36:53.227580
License: Public Domain

SEITZ, Chief Judge
(dissenting).
The majority holds that a secured party obtains no security interest, as against third parties, in the debtor’s accounts receivable acquired after execution of a security agreement and filing of a financing statement absent an explicit declaration of such interest’s creation in the documents. Requiring a security agreement explicitly to declare the parties’ creation of a security'interest in after-acquired property of many types both simplifies interpretation of such agreements and insures third parties of adequate notice of the extent of a perfected security interest in the debt- or’s property. I dissent, however, because I believe that the agreement involved here sufficiently notified interested persons that the Secured Party had a perfected interest in “all of Debt- or’s Accounts Receivable,” including after-acquired accounts.
Financing of inventories and of accounts receivable has for years been the particular province of the “floating lien.” Fluid financing arrangements in these areas are obviously necessary because the nature of specific inventory items or accounts is likely to vary daily, although the total value of a business’ inventory or accounts may remain reasonably stable for long periods. It would, thus, be commercially reasonable to anticipate, unless the financing statement indicated otherwise, that security interests in inventory or accounts would include after-acquired property, even though the presumption would be reversed for other property.
The Code generally mandates that courts interpret its provisions in light of what is commercially reasonable. 5A Del.C. § 1-102. This general direction is incorporated into the provisions dealing with secured transactions by making any description that reasonably identifies the collateral sufficient description for a Security Agreement, 5A Del.C. § 9-203, Del. Study Comment; see also 5A Del.C. §§ 9-110, 9-402, and allowing a financing statement substantially complying with the requirements of § 9-402 to be effective even though it contains minor, not misleading errors. Del.C. § 9-402(5).
In line with the mandate of the UCC that it be given a commercially reasonable interpretation I would not read the Code as requiring an explicit statement to perfect an interest in after-acquired inventory or accounts, even though the requirement may not seem onerous to this Court — the Code enjoins courts to interpret its provisions in a commercially reasonable manner rather than to require businessmen to follow judicial decisions and comply with them so long as they are not onerous. We deal in commercial litigation with matters of contract; few requirements will be onerous in themselves, but we cannot reasonably expect businessmen to fulfill the onerous task of familiarizing themselves with all the pertinent case law before taking any action in the conduct of their businesses.
To justify the imposition of its explicit declaration requirement, the majority relies on pre-Code hostility to the use of after-acquired property as collateral. Whatever hostility existed prior to the UCC is irrelevant to our decision. The Code clearly authorizes security interests in after-acquired property and abolishes many of the technical rules of pre-Code law. The Financing Statement and Security Agreement make debtor’s receivables security for its liabilities to the secured party. They define “Receivables” to mean “all of Debtor’s Accounts Receivable” and “Liabilities” to mean “all indebtedness of Debtor to Secured *1138Party . . . now existing or hereafter arising.” I would find, and I believe the pertinent state court would conclude, that under the UCC this language adequately notifies interested parties that the secured party had an interest in literally all debtor’s accounts receivable, including after-acquired accounts.