465 B.R. 359
Bankr. N.D.N.Y.2012Background
- Trustee seeks summary judgment to avoid Defendant's perfected security interest in proceeds from a pre-petition cow sale.
- Debtors filed Chapter 7 on November 12, 2008; they operated a dairy herd of about 90 cows.
- Defendant supplied cows in 2006 and, per a 2008 Bill of Sale, obtained a security interest in 58 cows via a 2008 Security Agreement and 2008 UCC-1.
- Before bankruptcy, Burton Livestock auctioned cows; Defendant received $27,764.20 representing proceeds from 22 cows.
- Partial agreement: sixteen cows are in dispute; ten had no ear tags and six had ear tags not matching the UCC-1; the parties stipulated certain facts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2008 UCC-1 collateral description sufficiently identified the cows | Trustee: description was misleading due to ear tags, undermining perfection | Defendant: description reasonably identified collateral under NY UCC 9-108 | Yes; description sufficient; UCC-1 effective to perfect |
| Whether a hypothetical lien creditor would be on inquiry notice given the collars’ identification | Trustee: mismatches rendered inquiry notice lacking | Defendant: industry custom allows ear tag-based identification; certificates corroborate | No; a hypothetical lien creditor would have notice of claimed security interest |
| Whether the security interest could be avoided under 11 U.S.C. §544(a)(1) or §547(b) | Trustee seeks avoidance due to flawed perfection | Perfection exists; no avoidance | Perfection valid; Trustee cannot avoid security interest |
Key Cases Cited
- In re Barrup, 37 B.R. 697 (Bankr. D. Vt. 1983) (courts recognize liberal ‘reasonably identified’ standard for livestock collateral)
- United States v. Fullpail Cattle Sales, Inc., 640 F. Supp. 976 (E.D. Wis. 1986) (ear tag descriptions can be reasonably identified in security interests)
- Allis-Chalmers Credit Corp. v. Bank of Utica, 110 Misc.2d 283, 441 N.Y.S.2d 852 (N.Y. Sup. Ct. 1981) (financing statement suffices if it provides notice and identification)