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  "name": "E. R. EVANS, Plaintiff v. W. B. EVERETT, EARLY & WINBORNE, INC., AND STANDARD BRANDS, INC., NATIONAL PEANUT CORPORATION, a division of STANDARD BRANDS, Original Defendants and SHIRLEY PIERCE, MARION ODOM AND LEBRON MORRIS, Owners of FARMERS TOBACCO WAREHOUSE, AND FARMERS COOPERATIVE EXCHANGE, Additional Defendants",
  "name_abbreviation": "Evans v. Everett",
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    "parties": [
      "E. R. EVANS, Plaintiff v. W. B. EVERETT, EARLY & WINBORNE, INC., AND STANDARD BRANDS, INC., NATIONAL PEANUT CORPORATION, a division of STANDARD BRANDS, Original Defendants and SHIRLEY PIERCE, MARION ODOM AND LEBRON MORRIS, Owners of FARMERS TOBACCO WAREHOUSE, AND FARMERS COOPERATIVE EXCHANGE, Additional Defendants"
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      {
        "text": "SHARP, Justice.\nThis case \u2014 one of first impression \u2014 is governed by the Uniform Commercial Code (Code), G.S. 25-1-101 et seq., which became effective on 1 July 1967. As of that date, the statutes which had previously governed agricultural liens for advances, G.S. 44-52 through G.S. 44-64, were expressly repealed by G.S. 25-10-102(1).\nThe appeal presents one question: Does plaintiff have a security interest in certain 1969 crops which defendant Everett sold to the other defendants ? The answer depends upon whether the financing statement executed by plaintiff and defendant Everett can also serve as a security agreement. To answer the question it is necessary to know the statutory definitions of the Code\u2019s terminology.\n\u201cSecurity interest means an interest in personal property or fixtures which secures payment or performance of an obligation.\u201d G.S. 25-1-201(37).\n\u201cSecurity agreement means an agreement which creates or provides for a security interest. ...\u201d G.S. 25-9-105(1) (h). In the Code the general term security agreement is used \u201cin place of such terms as chattel mortgage, conditional sale, assignment of accounts receivable, trust receipt, etc.\u201d See the Official Comment under G.S. 25-9-105.\n\u201cSecured party means a lender, seller or other person in whose favor there is a security interest. ...\u201d G.S. 25-9-105(1) (i).\n\u201cDebtor means the person who owes payment or other performance of the obligation secured. ...\u201d G.S. 25-9-105(1) (d).\nSubject to provisions of the Code not applicable to this case, \u201ca security interest is not enforceable against the debtor or third parties unless (a) the collateral is in the possession of the secured party; or (b) the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers crops ... a description of the land concerned.\u201d G.S. 25-9-203(1). See 44 N. C. L. Rev. 716, 723-724.\nAs pointed out in the Official Comment upon G.S. 25-9-203, formal requisites for a security agreement \u201care reduced to a minimum. The technical requirements of acknowledgment accompanying affidavits, etc. . . . are abandoned. The only requirements for the enforceability of nonpossessory security interests in cases not involving land are (a) a writing; (b) the debtor\u2019s signature; and (c) a description of the collateral or kinds of collateral. (Typically, of course, the agreement will contain much more) .... The formal requisites stated in this section are not only conditions to the enforceability of a security interest against third parties. They are in the nature of a Statute of Frauds.\u201d Absent a writing satisfying these formal requisites, a security interest is not enforceable even against the debtor.\nIn order to perfect a security interest in farm products, crops, and equipment used in farming operations from subsequently acquired rights of third 'parties, the secured party must file a financing statement in the county of the debtor\u2019s residence and also in the county where the land on which the crops are growing, or are to be grown, is located. G.S. 25-9-401(1) (a). See 44 N. C. L. Rev. 753, 761.\n\u201cA 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. A financing statement may be filed before a security agreement is made or a security interest otherwise attaches. When the financing statement covers crops growing or to be grown or goods which are or are to become fixtures, the statement must also contain a description of the real estate concerned and the name of the record owner or record lessees thereof. A copy of the security agreement is sufficient as a financing statement if it contains the above information and is signed by both parties.\u201d G.S. 25-9-402(1).\nThe Official Comment accompanying G.S. 25-9-402(1) explains that this section adopts a system of notice filing. \u201cWhat is required to be filed is not, as under chattel mortgage and conditional sales acts, the security agreement itself, but only a simple notice which may be filed before the security interest attaches or thereafter. The notice itself indicates merely that the secured party who has filed may have a security interest in the collateral described. Further inquiry from the parties concerned will be necessary to disclose the complete state of affairs. Section 9-208 provides a statutory procedure under which the secured party, at the debtor\u2019s request, may be required to make disclosure.\u201d (Emphasis added.)\nSubsection (3) of G.S. 25-9-402 sets out a form which, if substantially followed, will comply with the requirements for a financing statement. Here the parties used and substantially followed this form. They do not contend that the financing statement in suit fails to meet the requirements of the statute. It is defendants\u2019 contention that Everett signed no agreement which created or provided for a security interest in the collateral described in the financing statement, and that the financing statement cannot serve as a security agreement.\nThe Code distinguishes between a security agreement and a financing statement. The security agreement is a writing which (1) creates or provides for a security interest, (2) contains a description of the collateral, plus a description of the land involved \u201cwhen the security interest covers crops or oil, gas or minerals to be extracted or timber to be cut,\u201d and (3) is signed by the debtor. The financing statement is a writing which (1) contains the signature and addresses of both the debtor and creditor and (2) a description of the collateral plus a description of the land involved \u201cwhen the financing statement covers crops growing or to be grown or goods which are or are to become fixtures.\u201d The discrepancies between the formal requisites of a security agreement and a financing statement have been criticized as \u201cconfusing and unnecessary,\u201d and the failure of the two sections to mesh with respect to the description requirement called \u201cinexcusable.\u201d 1 Gilmore, Security Interests in Personal Property, \u00a7 11.4 (1965).\nAlthough the financing statement need only be \u201ca skeletonic statement\u201d that the parties intend to engage in future transactions, which may never be consummated, G.S. 25-9-402(1) specifically provides that \u201ca copy of the security agreement is sufficient as a financing statement\u201d if it contains the required information and is signed by both parties. We perceive no sound reason why a financing statement may not also serve as a security agreement if it meets the requirements of G.S. 25-9-105(1) (h) and G.S. 25-9-203(1) (b). This is the con-census of both opinion writers and commentators on the Code.\nAlthough the Code contemplates the execution of two separate writings, it does not prohibit the combination of a security agreement and financing statement. In American Card Company v. H. M. H. Company, 97 R.I. 59, 196 A. 2d 150, a case upon which both appellant and appellees rely, the court held that the financing statement in suit (not reproduced in the opinion) could not qualify as a security agreement. It said: \u201cIt is not possible for a financing statement which does not contain the debtor\u2019s grant of a security interest to serve as a security agreement.\u201d Id. at 62, 196 A. 2d at 152. (Emphasis added.)\nIt appears that the Rhode Island court was of the opinion that technical words of conveyance from the debtor to the secured party were required to create a security interest. In criticizing American Card, Gilmore, a former Official Comment writer for Article 9 of the Code, in his treatise on Security Interests in Personal Property said: \u201cCertainly, nothing in \u00a7 9-203 requires that the \u2018security agreement\u2019 contain a \u2018granting\u2019 clause. The \u00a7 9-402 financing statement contained all that was necessary to satisfy the \u00a7 9-203 statute of frauds as well as being sufficient evidence of the parties\u2019 intention to create a security interest in the tools and dies (the described collateral). No doubt the court would have upheld the security interest if the debtor had signed two pieces of paper instead of one. The \u00a7 9-402 provision that a short financing statement may be filed in place of the full security agreement was designed to simplify the operation. The Rhode Island court gives it an effect reminiscent of the worst formal requisites holding under the 19th century chattel mortgage acts.\u201d 1 Gilmore, Security Interests in Personal Property, \u00a7 11.4 at pp. 347-348 (1965).\nLong before the adoption of the Code, this Court held that no particular form of words was necessary to create a lien or to constitute a chattel mortgage, and that, as between the parties, an oral mortgage was as good \u201cas if it had been in writing, provided, if reduced to writing, it would have been valid.\u201d White Co. v. Carroll, 146 N.C. 230, 232-233, 59 S.E. 678, 679. Accord, Kearns v. Davis, 186 N.C. 522, 120 S.E. 52; 15 Am. Jur. 2d Chattel Mortgages \u00a7 38 (1964). In Brown v. Dail, 117 N.C. 41, 23 S.E. 45, it was held that a recorded \u201cagreement that all logs cut, all lumber sawed, and every product of this business shall stand as security for all and any advancements made under this agreement\u201d constituted a valid chattel mortgage. The Court said: \u201cWe think the agreement must be construed according to the manifest intent of the parties as a chattel mortgage. No particular form is essential, and the instrument has all of the constituents necessary to create a chattel mortgage.\u201d\nIn Grier v. Weldon, 205 N.C. 575, 578, 172 S.E. 200, 202, quoting Jones on Mortgages, \u00a7 24, it is said: \u201cIf a security for money is intended, that security is a mortgage, though not having on its face the form of a mortgage; it is the essence of a mortgage that it is a security.\u201d Thus, \u201c [w] ords of conveyance are not essential to a mortgage although the absence of such words may be important in determining whether or not a transaction is a mortgage.\u201d 14 C.J.S., Chattel Mortgages \u00a7 50 (1939). By the same token, any written agreement signed by a debtor which recites that certain personalty is being encumbered as security for a debt ought to operate as a security agreement under Code \u00a7 25-9-105(1) (h). 18 Ark. L. Rev. 30, 34.\nWhile there are no magic words which create a security interest there must be language in the instrument which \u201cleads to the logical conclusion that it was the intention of the parties that a security interest be created.\u201d In re Nottingham, 6 U.C.C. Rep. 1197, 1199 (U.S. D.C. Tenn. 1969).\nA financing statement which does no more than meet the requirements of Code \u00a7 25-9-402 will not create a security interest in the debtor\u2019s property. General Electric Credit Corporation v. Bankers Commercial Corporation, 244 Ark. 984, 429 S.W. 2d 60. As the Supreme Court of Iowa said in Kaiser Aluminum and Chemical Sales, Inc. v. Hurst, 176 N.W. 2d 166, 167 (Iowa 1970), \u201cThe cases uniformly hold that a financing statement does not ordinarily create a security interest. It merely gives notice that one is or may be claimed. These same authorities hold a financing statement may double as a security agreement if it contains appropriate language which grants a security interest.\u201d See Annot, 30 A.L.R. 3d 9, 42-44, 46-48.\nOur research has disclosed no case involving writings identical with the note and financing statement in this case. The opinions in the cases on which defendants rely do not reproduce the financing statements which the creditors contended could double as security agreements. These decisions, however, are based upon the premise that the financing statement involved contained no language which could be interpreted as granting, creating, or providing for a security interest. Mid-Eastern Electronics, Inc. v. First Nat. Bank of So. Md., 380 F. 2d 355 (4th Cir. 1967); Central Arkansas Milk Producers Ass\u2019n v. Arnold, 239 Ark. 799, 394 S.W. 2d 126. M. Rutkin Elect. Sup. Co., Inc. v. Burdette Elect., Inc., 98 N.J. Super. 378, 237 A. 2d 500; Safe Deposit Bank & Trust Company v. Berman, 393 F. 2d 401 (1st Cir. 1968) ; Kaiser Aluminum & Chemical Sales, Inc. v. Hurst, supra.\nIn this case the financing statement declares that it \u201ccovers the following type of collateral: (all crops now growing or to be planted on 5 specified farms) same securing note for advanced money to produce crops for the year 1969.\u201d The note contains the statement that it \u201cis secured by Uniform Commercial Code financing statement of North Carolina.\u201d (Emphasis added.)\nWe harbor no doubt that the instant financing statement and the note manifest defendant Everett\u2019s intent to create in plaintiff a security interest in the described collateral and that he did, in fact, provide for such interest when he stated that the crops described therein secure the note for money advanced to produce these crops.\nBlack\u2019s Law Dictionary 1521 (4th ed. 1951) defines secure as \u201cto give security; to assure payment, performance, or indemnity; to guaranty or make certain the payment of the debt or discharge of an obligation . . . one \u2018secures\u2019 his creditor by giving him a lien, mortgage, pledge or other security to be used in case the debtor fails to make payment.\u201d\nIn re Center Auto Parts, 6 U.C.C. Rep. 398 (U.S. D.C. Calif. 1968), was a case in which the bankrupt\u2019s note recited, \u201cThis note is secured by a certain financing statement.\u201d The financing statement is not set out in the opinion, but it was noted that only one financing statement had been filed with the Secretary of State. The District Court held \u201cthat the note together with the financing statement executed by the bankrupt creates in the respondent a valid security interest in the personal property (described in the statement).\u201d\nIn 2 Bender\u2019s Uniform Commercial Code Service (Hart & Willier) \u00a7 91A.13 (1970) it is said: \u201cClearly, if the financing statement contains the elements for a security agreement in addition to those for the financing statement, it would serve as the security agreement. The additional elements would be (1) Something to indicate agreement; (2) A statement of the obligation or obligations secured; (3) Provision for or creation of the security interest.\u201d\nThe financing statement in this case contains language clearly manifesting the debtor\u2019s intent to grant, create, and provide for a security interest. It bears his signature; it describes the obligation secured, the collateral subject to the security interest, and the land involved. We hold, therefore, that the financing statement in question meets the requirements of an enforceable security agreement and serves the double purpose. However, we emphasize that this financing statement meets the Code\u2019s minimum requirements. As this case demonstrates, it is an example of draftsmanship likely to produce litigation and not to be recommended.\nOne writer has suggested that a security agreement should contain at least \u201c(1) the names and addresses of both the secured party and the debtor; (2) a description of the collateral; (3) a description of the underlying obligation for which the security was given; (4) a recital of the rights and liabilities of each party on default; (5) the signature of each party; and (6) any other provisions necessary to meet the exigencies of the individual transaction.\u201d 25 U. Pitt. L. Rev. 619, 621 (1964).\nThe decision of the Court of Appeals is reversed with directions that it remand the cause to the Superior Court for the entry of judgment consistent with this opinion.\nReversed.",
        "type": "majority",
        "author": "SHARP, Justice."
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    ],
    "attorneys": [
      "Pritchett, Cooke & Burch for plaintiff appellant.",
      "Revelle and Burleson for Standard Brands, Inc., and National Peanut Corporation, a division of Standard Brands, original defendant appellees.",
      "White, Hall & Mullen for Early & Winborne, Inc., original defendant appellee."
    ],
    "corrections": "",
    "head_matter": "E. R. EVANS, Plaintiff v. W. B. EVERETT, EARLY & WINBORNE, INC., AND STANDARD BRANDS, INC., NATIONAL PEANUT CORPORATION, a division of STANDARD BRANDS, Original Defendants and SHIRLEY PIERCE, MARION ODOM AND LEBRON MORRIS, Owners of FARMERS TOBACCO WAREHOUSE, AND FARMERS COOPERATIVE EXCHANGE, Additional Defendants\nNo. 111\n(Filed 6 September 1971)\n1. Uniform Commercial Code \u00a7 71\u2014 security interest in farm crops \u2014 sufficiency of financial statement\nA financing statement which (1) contains the signatures and addresses of the debtor and the secured party, (2) asserts that the collateral for a 1969 crop loan consists of crops grown on five different farms during the year, (3) describes the land on which the crops are grown, and (4) concludes the description with the statement that \u201csame securing note for advanced money to produce crops for the year 1969,\u201d is held sufficient to constitute a security agreement and to give the secured party a security interest in the crops. G.S. 26-9-105(1) (h); G.S. 25-9-203(1) (b); G.S. 25-9-402(1).\n2. Uniform Commercial Code \u00a7 73\u2014 financing statement serving as security agreement\nA financing statement may serve as a security agreement if it meets the requirements of G.S. 25-9-105(1) (h) and G.S. 25-9-203(1) (b).\n3. Uniform Commercial Code \u00a7 73\u2014 creation of security interest \u2014 language of the instrument\nAn instrument purporting to create a security interest must contain language which leads to the logical conclusion that it was the intention of the parties that a security interest be created.\nOn certiorari to review the decision of the Court of Appeals (reported in 10 App. 435, 179 S.E. 2d 120) affirming the judgment of Copeland, S. July 1970 Civil Session of Hert-ford.\nAction to recover from the maker the balance due on a promissory note, and from purchasers the value of crops alleged to have been collateral securing the note.\nThe complaint and stipulations establish the following facts:\n(1) On 23 January 1969, defendant W. B. Everett, a resident of Hertford County, executed and delivered to plaintiff his promissory note under seal in the amount of $75,000.00, due 15 November 1969, with interest at six per cent per annum until paid. The note contained the following: \u201cThis note is secured by Uniform Commercial Code financing statement of North Carolina.\u201d\n(2) On the next day, 24 January 1969, there was filed in the office of the Register of Deeds in Hertford and Bertie Counties an identical financing statement. It contains the names and addresses of defendant Everett as the \u201cdebtor\u201d and plaintiff as the \u201csecured party.\u201d Both signed the statement. It asserts that the \u201cstatement covers the following types or items of collateral\u201d: The collateral is then described as all crops now growing or hereafter grown during 1969 on five certain farms in Bertie County, together with all farm machinery, implements, and equipment located on the described lands. The description of the collateral concluded with this statement: \u201csame securing note for advanced money to produce crops for the year 1969.\u201d (Emphasis added.) The note and financing statement were the only documents which defendant Everett signed in connection with plaintiff\u2019s loan to him.\n(3) Defendant Everett owes on the note in suit a balance of $24,418.57, with interest from 23 January 1969. Of the crops described in the financing statements defendants Early & Win-borne, Inc., Standard Brands, Inc., and National Peanut Corporation purchased from defendant Everett peanuts valued in excess of $25,000.00; additional defendants Shirley Pierce, Marion Odom and Lebr\u00f3n Morris, trading as Farmers Tobacco Warehouse, and Farmers Cooperative Exchange of Ahoskie, North Carolina, purchased crops, the nature and value of which the record does not disclose. At the time of these purchases plaintiff\u2019s debt had not been discharged.\nPlaintiff prays judgment against defendants for the sum of $24,418.57 together with interest, costs, and attorneys\u2019 fees.\nAll defendants except W. B. Everett and Farmers Cooperative Exchange moved to dismiss the action for the failure of the complaint to state a claim upon which relief can be granted. Copeland, J., allowed the motion and dismissed the action as to these movants. Plaintiff excepted to the judgment and appealed to the Court of Appeals, which affirmed the judgment. Upon plaintiff\u2019s petition we allowed certiorari.\nPritchett, Cooke & Burch for plaintiff appellant.\nRevelle and Burleson for Standard Brands, Inc., and National Peanut Corporation, a division of Standard Brands, original defendant appellees.\nWhite, Hall & Mullen for Early & Winborne, Inc., original defendant appellee."
  },
  "file_name": "0352-01",
  "first_page_order": 380,
  "last_page_order": 388
}
