575 B.R. 131
Bankr. W.D. Pa.2017Background
- Debtor operated a tavern and held a liquor license; the license (personal property/general intangible) was sold in June 2014 for $66,000 in a chapter 7 case converted from chapter 11.
- California (2827 *133California Inc. and its president) claims it financed acquisition of the real property and obtained a security interest in the liquor license and other collateral in 2004.
- California filed a financing statement in Allegheny County as a fixture filing in 2004 but did not file with the Pennsylvania Secretary of the Commonwealth as required for general intangibles under Article 9.
- Trustee moved to disburse proceeds; California did not file a proof of claim by the bar date (or otherwise appear) and later learned of the bankruptcy in July 2015; it wrote to the trustee in August 2015 but did not file a proof of claim and first appeared in the case in March 2017.
- Trustee argued California’s interest was unperfected (no proper UCC filing) and that California’s failure to timely file a proof of claim barred distribution; court held an unperfected interest is subordinate to the chapter 7 trustee and an untimely, unfiled claim cannot share in distributions.
Issues
| Issue | Plaintiff's Argument (California) | Defendant's Argument (Trustee) | Held |
|---|---|---|---|
| Was California’s security interest in the liquor license attached? | Value given in 2004; executed security agreement; interest attached to the license. | N/A (trustee conceded attachment but disputed perfection). | Yes; security interest attached. |
| Was the security interest perfected under Article 9? | Allegheny County fixture filing listed the license; that sufficed to protect its interest. | Financing statement required filing with PA Secretary for general intangibles; county filing did not perfect the license. | Not perfected; county fixture filing did not perfect a general intangible like a liquor license. |
| Priority: does an unperfected secured creditor outrank the chapter 7 trustee? | Even if unperfected, California sought distribution from sale proceeds. | An unperfected interest is subordinate to a lien creditor; trustee is a hypothetical lien creditor as of petition date. | Unperfected interest is subordinate to the trustee; California cannot claim secured proceeds. |
| Can California recover as an unsecured creditor despite missing the claims bar date? | California lacked notice until July 2015 and thus could not timely file; sent a letter to trustee in August 2015. | California never filed a proof of claim or timely informal claim; failure to file by the bar date disqualifies distribution absent justification. | California failed to timely file; its August 2015 letter was not filed in court and did not qualify as an informal proof of claim before the bar date; no equitable relief granted. |
Key Cases Cited
- In re Ciprian, Ltd., 473 B.R. 669 (Bankr. W.D. Pa.) (liquor license is a general intangible under Pennsylvania law)
- In re Aleris Intern., Inc., 456 B.R. 35 (Bankr. D. Del.) (discussion of perfection and public notice purposes of filing)
- Hefta v. Official Comm. of Unsecured Creditors (In re Am. Classic Voyages Co.), 405 F.3d 127 (3d Cir.) (standards for an informal proof of claim)
- Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380 (U.S. 1993) (discusses excusable neglect standard; cited for context though Rule 9006(b)(1) excusable neglect typically does not apply in chapter 7 claim-bar contexts)