In re Ocean

MEMORANDUM OF OPINION

This is an appeal from the bankruptcy judge’s decision in Case No. 77-00406-K, declaring a security interest claimed by the Small Business Administration in proceeds from the sale of certain’ equipment owned by the debtor, Ocean Electronics Corporation, invalid and unenforceable against the debtor as debtor-in-possession. The appeal has been timely perfected, and jurisdiction is proper, pursuant to 28 U.S.C. § 1834 .

The facts are not in dispute. In February 1973, San Diego Trust and Savings Bank (hereinafter “Bank”) advanced a loan in the principal sum of $22,000 to Steven L. Milis, doing business as The Photo Shoppe, secured by a perfected security interest in all furniture, fixtures, machinery and equipment. This loan was made in participation with the Small Business Administration (hereinafter “SBA”) and was made subject to a 90 percent guaranty by SBA. Thereafter, in August 1973, Mr. Milis conveyed his interest in the property subject to the bank’s and SBA’s security interest to his wholly owned corporation, Photo Shoppe, Inc. (hereinafter “Photo Shoppe”). The bank timely filed an amendment to its original Financing Statement Form UCC-1 naming Photo…