Republic National Bank v. Fitzgerald (In re E.A. Fretz Co.)

On April 3, 1971, E.A. Fretz Co., Inc. (Fretz) (debtor) executed three security agreements naming Revlon, Inc. (Revlon) as the secured creditor. The security agreements aimed to secure Fretz’s debts to Revlon and Revlon’s present or future affiliates, as well as any other of Fretz’s debts that Revlon acquired by assignment or otherwise. Fretz gave Revlon a security interest in Fretz’s then-owned and after-acquired equipment and inventory, and their proceeds. Revlon filed a financing statement on April 5, 1971, which named only Revlon as the secured party. On June 30, 1971, Fretz entered into a security agreement with Republic National Bank of Dallas (Republic) (plaintiff) to secure Fretz’s present and future debts owed to Republic. Fretz gave Republic a security interest in Fretz’s then-owned and after-acquired inventory and their proceeds. Beforehand, Republic unsuccessfully negotiated with Revlon to obtain priority over Revlon’s security interest. Republic filed a financing statement on August 11, 1971. On August 23, 1972, Fretz filed for bankruptcy. On September 19, 1972, Revlon’s wholly owned subsidiaries, Revlon-Realistic Professional Products, Inc. (RR) and Cosmetic Capital Corp. (CC), assigned their claims against Fretz to Revlon. The bankruptcy court ordered the sale of Fretz’s equipment and inventory. Revlon, RR, CC, and Republic (creditors) claimed interests in the proceeds. The bankruptcy court found Fretz’s debts to RR and CC, which they assigned to Revlon, was secured by Revlon’s security interests and perfected by Revlon’s financing statement. Accordingly, the bankruptcy court approved Revlon, RR, and CC’s applications for payment, which left no proceeds for Republic. The district court affirmed. Republic appealed and argued the Uniform Commercial Code (UCC) Article 9 does not permit the use of floating secured parties.