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Bank of North America v. Bank of Nutley

Decided: March 3, 1967.


Mehler, J.s.c.


These are cross-motions for summary judgment by two holders of security interests in an automobile, each claiming priority.

On December 3, 1964 Joseph Kaplan, a New York City resident, purchased a car from Lee Motors (Lee). To secure part of the purchase price, the parties executed a retail installment security agreement which gave Lee a security interest in the car. Lee assigned the agreement to defendant which, on March 24, 1965, filed a copy and a financing statement with the New York City Register, New York County (Register). It is this filing which has become the focal point of the controversy.

On April 7, 1965 Kaplan and defendant executed a new security agreement in favor of defendant. It provided for the payment of the old indebtedness and the cost of collision insurance which defendant provided at Kaplan's request, and also extended his time to make the payment next due.

On May 17, 1965 Kaplan borrowed $2,160 from plaintiff and, to secure repayment of this sum, executed a security agreement and financing statement which created a lien on Kaplan's car in favor of plaintiff. The financing statement was filed with the Register on May 20, 1965.

On Kaplan's default in making payments due to defendant, it repossessed the car in October 1965 and at the ensuing sale purchased it for $1,500. Plaintiff then brought this action, in which it charges conversion of the car and claims from defendant the amount due plaintiff from Kaplan.

Plaintiff moved for summary judgment. It conceded, for the purpose of the motion, that the filing of the December 3,

1964 agreement on March 24, 1965 "was proper in form and content and effective as to all subsequent parties in interest." However, it contended that the debt represented by that agreement had been satisfied and cancelled by the April 7, 1965 agreement and that the security interest given by that agreement was not good against plaintiff because neither that agreement nor a financing statement connected with it had ever been filed. Defendant countered with a motion for summary judgment. It contended that the original debt and agreement were not discharged by the April 7 agreement and that in any event plaintiff's filing was not effective as to defendant since plaintiff's financing statement does not accurately give the car's serial number and fails to cover all interests in the vehicle. In response to this motion, plaintiff now urges that defendant's filing on March 24, 1965 was ineffective because the agreement was filed under the name of Joseph Kaplas instead of Joseph Kaplan, and hence did not give notice of defendant's interest in the car.

To understand the issue thus presented, it is necessary to review the facts relevant to this contention and the law of New York, which both parties agree is applicable to this case because the car has been located in that State. See N.J.S. 12A:9-102 and comment thereunder. Statutory references hereinafter made are to sections of Article 9 of the Uniform Commercial Code of New York, 62 1/2 McKinney's Consolidated Laws of New York (Code), c. 38. These sections are, with few exceptions, identical to the correspondingly numbered sections of New Jersey's Code.

Generally speaking, a financing statement must be filed in order to protect a security interest in property not retained by the creditor. Section 9-302. A copy of the security agreement is sufficient as a financing statement if it contains the information which must be included in such a statement and is signed by both parties. Section 9-402(1). Priorities between conflicting security interests in the same collateral are determined in the order of filing if both are perfected by filing. Section 9-312(5)(a). Filing consists of the presentation for

filing of a financing statement, tender of the filing fee, and acceptance of the statement by the filing officer. Section 9-403(1). The statement is indexed by the filing officer according to the name of the debtor. Section 9-403(4). A security interest is perfected when it has attached and when all of the applicable steps required for perfection have been taken. Section 9-303(1). New York, being a "non-title" state for motor vehicles, provides for the perfection of a retail security interest in a motor vehicle required to be licensed or registered in that state by the filing of a financing statement or a ...

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