## Facts

- E.A. Fretz Co., Inc. executed three security agreements (Apr. 3, 1971) granting Revlon a security interest in all existing and after-acquired equipment and inventory, and proceeds.
- The agreements stated they secured (1) debts owed to Revlon, (2) debts owed to Revlon’s present or future affiliates, and (3) debts Revlon might obtain “by assignment or otherwise.”
- Revlon filed a financing statement (Apr. 5, 1971) describing the collateral and naming only Revlon as the secured party.
- Fretz later granted Republic National Bank of Dallas a security interest in inventory and proceeds to secure present and future indebtedness (June 30, 1971); Republic filed its financing statement (Aug. 11, 1971).
- Before lending, Republic discovered Revlon’s filing and unsuccessfully sought Revlon’s subordination.
- Fretz filed for bankruptcy (Aug. 23, 1972).
- Revlon subsidiaries (RR and CC) assigned their claims against Fretz to Revlon (Sept. 19, 1972).
- After court-ordered sale of inventory and equipment, Revlon (including on affiliate/assigned claims) and Republic asserted competing rights in the sale proceeds.
- The bankruptcy court, affirmed by the district court, treated Revlon’s filing as perfecting security for the subsidiaries’ claims and their assignment, paid Revlon and related claimants from the proceeds, and left nothing for Republic.

## Issues

1. Whether a financing statement naming only one secured party can perfect a security interest securing debts owed to unidentified present or future affiliates and later-acquired claims by assignment, so as to take priority over a subsequent creditor who properly perfected its own interest.
2. Whether Article 9’s notice-filing system, interpreted in light of bankruptcy policies against hidden liens, permits “floating secured parties.”

## Decision

- The Fifth Circuit reversed and remanded.
- The court held that Article 9 does not permit “floating secured parties” on these facts.
- Revlon’s financing statement, which identified only Revlon as secured party, could not be used to perfect and prioritize security for affiliate debts or later-acquired assigned claims in a way that defeated Republic’s properly perfected interest.
- Republic’s actual knowledge of Revlon’s filing did not cure the filing’s failure to provide reliable notice of the secured party’s identity for the competing claims.

## Legal Principles

- Article 9’s filing system is “notice filing,” but the notice must meaningfully disclose the secured party’s identity so third parties and a bankruptcy trustee can evaluate existing encumbrances from the public record.
- Article 9 allows “floating liens” in after-acquired collateral (e.g., inventory and proceeds), but that concept does not extend to allowing the identity of the secured party to shift among unnamed affiliates or assignees without a corresponding filing that preserves the notice function.
- Bankruptcy policy favors transparency and predictability in lien status and disfavors arrangements that function as undisclosed or misleading priority claims against the estate.

## Conclusion

The Fifth Circuit concluded that a financing statement naming only Revlon could not perfect security interests for debts owed to unspecified affiliates or for claims later acquired by assignment in a manner that displaced a later creditor’s properly perfected security interest, and it reversed the lower courts’ distribution of sale proceeds.


Republic Nat’l Bank of Dall. v. Fitzgerald (In re E.A. Fretz Co.), 565 F.2d 366 (5th Cir. 1978)