In Re West Coast Food Sales, Inc., Bankrupt. Edward E. Towers v. B. J. Holmes Sales Co., Inc.

B. J. Holmes Sales Company, Inc. appeals an Order of the bankruptcy court, affirmed by the District Court, denying priority of its lien against the accounts receivable of the debtor, West Coast Food Sales, Inc.

On January 9, 1973, John B. Granahan, doing business as West Coast Sales Company (the proprietorship), executed an agreement giving a creditor, B. J. Holmes Sales Company, Inc., a security interest in the firm’s accounts receivable. A financing statement listing the debtor as “West Coast Sales Company” was filed with the California Secretary of State. On April 1, 1973, a newly formed entity, West Coast Food Sales, Inc. (the corporation) succeeded to the assets and liabilities of West Coast Sales Company. Holmes continued to extend credit to West Coast Food Sales, Inc. until that corporation filed for voluntary bankruptcy on June 1, 1977.

Holmes has asserted a priority lien against the accounts receivable of the bankrupt corporation pursuant to the January 9, 1973 security agreement, which contained a “successors and assigns” clause purporting to bind “any corporation or other business entity to which the proprietorship’s business might be transferred.” The trustee has…