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In re Knapp

decided: April 20, 1978.


Appeal from an order of the United States District Court for the Northern District of New York, Howard G. Munson, Judge, dated January 4, 1978, holding that Red Carpet Homes of Johnstown, Inc. possesses a perfected security interest in a mobile home.

Kaufman, Chief Judge, Lumbard and Smith, Circuit Judges.

Author: Kaufman

KAUFMAN, Chief Judge

Article Nine of the Uniform Commercial Code (U.C.C.), responding to the myriad of existing security devices, established a comprehensive statutory scheme for the creation and regulation of security interests. Yet, despite this simplification and clarification of the law, the answers to relatively straightforward questions remain clouded by uncertainty. This case presents one such issue -- the proper place to file a document perfecting a security interest in consumer goods, where the debtor changes his place of residence between the time of attachment and the time of filing. To place this question in proper perspective, the undisputed facts underlying this appeal will be reviewed briefly.*fn1


On July 23, 1973, Gloria and Douglas Knapp bought a 1973 Titan Mobile Home from LTS Homes, Inc., for $16,162.20, financing their purchase by conveying a security interest in their home to LTS Homes. The contract signed by the Knapps listed their address as Star Route, Stratford (in Herkimer County), although the Knapps were actually living in Fulton County and had resided there for approximately fourteen months. Indeed, the full Fulton County address, 50 Washington Avenue, Gloversville, had been listed by Douglas Knapp five days earlier, on July 18, as the Knapps' place of residence, when he executed a credit statement in connection with the purchase. The Knapps, despite their residence elsewhere, decided to refer to the Herkimer County address on the July 23 contract for two reasons. They were planning to move into the mobile home upon its delivery to the site in Herkimer County, and had so informed the secured seller. In addition, the tax rate in Herkimer County was substantially lower than that prevailing in Fulton County.

The mobile home was delivered as planned to its Herkimer County site sometime between July 27 and August 1. At a date prior to August 6, the Knapps moved from Gloversville to Star Route. On August 6, 1973, following this change in residence, the secured creditor's assignee, the Central Trust Co. of Rochester, filed a financing statement pursuant to U.C.C. § 9-401 in the office of the County Clerk of Fulton County.*fn2

Three years later, the Knapps filed voluntary petitions in bankruptcy listing, among other debts, the unpaid installment balance on the home. Shortly thereafter, Central Trust reassigned its interest in the security agreement to Red Carpet Homes of Johnstown and, pursuant to the terms of that agreement, Red Carpet repossessed the mobile home. The trustee in bankruptcy, acting on behalf of the Knapps' general creditors, thereupon opposed Red Carpet's claim to secured creditor status because of alleged improper filing of the security interest. In sum, he urged that the financing statement did not operate to perfect the security interest in the mobile home because it had been filed in Fulton County, from which the secured seller had known the Knapps were departing, and not in Herkimer County, where they had intended to reside. Although the bankruptcy judge accepted the trustee's position, Judge Munson reversed him, holding that the place of actual residence at the time the security interest attached was controlling. This appeal followed.


In seeking to overturn Judge Munson's decision, the trustee makes two arguments. First, he urges that, if the debtor's residence at the time the security interest attaches is dispositive, then the intention of the debtors as manifested to the creditor is controlling. Alternatively, he argues that the place of filing should be determined with reference to the debtor's residence at the time of filing. While the trustee's position cannot be dismissed as totally lacking in policy justification, we believe Judge Munson's view is better supported by reason and precedent, and follows the wiser and more pragmatic course.


One of the primary purposes motivating the drafters of U.C.C. § 9-401 was to simplify the creditor's task in choosing the proper place to file. Accordingly, they denominated the place of filing for consumer goods as the county of the debtor's actual residence.*fn3 Since residence, under New York law, "means living in a particular locality and requires bodily presence as an inhabitant in a given place," Marine Midland Trust Co. of Binghamton v. Dugan, 202 Misc. 847, 119 N.Y.S.2d 714, 718 (1954), it is clear that the Knapps were residing in Fulton County at the time the security interest attached.

Significantly, the Code eschews any scheme that would require a secured party to maintain regular and continuing surveillance of the debtor. A security interest, once perfected by filing, remains effective regardless of the number of times or places the debtor or the collateral moves. U.C.C. § 9-401(3). To suggest that the express intention of the debtor respecting residence controls would needlessly complicate the Code's design. If, for example, the Knapps had moved their mobile home to a third county between the date of its delivery to Herkimer County and the filing date of August 6, filing in Herkimer County would have borne little relation to the incidents of the underlying transaction, and would leave creditors even more confused.

The sparse precedent we have found supports the secured creditor's position. See In Re O'Donnell, 7 U.C.C. Rep. Serv. (Callaghan) 888 (D. Me. 1970). Indeed, the facts of O'Donnell, cited by both parties to buttress their contentions, are quite similar to those of the case before us. In O'Donnell, the debtor resided in East Millinocket, Maine, when she signed a security agreement to finance the purchase of a mobile home. She could not find an available lot for her trailer in that community and accordingly notified the seller to deliver the trailer to Medway. Subsequently, the debtor took up residence in Medway and, following that change, the secured party's assignee filed a financing statement in the appropriate office for recording such transactions involving East Millinocket residents. The Court, pointing to the need for commercial certainty, held that the assignee properly filed the statement in East Millinocket, since ...

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