First Midwest Bank v. Reinbold (In re I80 Equip., LLC)
591 B.R. 353
Bankr. C.D. Ill.2018Background
- I80 Equipment, LLC granted First Midwest a security interest in substantially all personal property via a March 9, 2015 amended security agreement; First Midwest filed UCC-1 financing statements that described collateral as “All Collateral described in First Amended and Restated Security Agreement dated March 9, 2015.”
- Debtor filed Chapter 7 on December 6, 2017; Trustee Jeana Reinbold sought to avoid First Midwest’s lien under §544(a) asserting the financing statement failed to sufficiently describe collateral for perfection.
- First Midwest sought declaratory relief that its security interest was perfected; both parties moved for judgment on the pleadings (treated like summary judgment) after stipulating undisputed facts.
- Central legal question: whether a financing statement that merely refers to an unfiled security agreement for the collateral description satisfies Revised Article 9’s requirement that a financing statement “indicate the collateral.”
- The financing statement did not use a permitted supergeneric phrase (e.g., “all assets”); instead it attempted to incorporate the security agreement’s description by reference without filing that agreement.
- The court held that the financing statement’s reference to the unfiled security agreement did not constitute a sufficient collateral description, so the security interest was unperfected and avoidable by the Trustee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a financing statement that simply states collateral is described in an identified but unfiled security agreement "indicates the collateral" under Revised Article 9 | Such a cross-reference is sufficient under §9-108(b)(6): the collateral is objectively determinable from the security agreement; Article 9 is a notice-filing system so inquiry notice suffices | A financing statement must itself contain a description that reasonably identifies collateral; mere reference to an unfiled security agreement gives no particularized notice and fails §9-502/9-504/9-108 | Held for Trustee: cross-reference to an unfiled security agreement is insufficient; financing statement must contain a description or use a permitted supergeneric phrase (e.g., “all assets”) |
Key Cases Cited
- Alexander v. City of Chicago, 994 F.2d 333 (7th Cir. 1993) (standard for Rule 12(c) treated like summary judgment review)
- Flora v. Home Fed. Savings & Loan Ass'n, 685 F.2d 209 (7th Cir. 1982) (summary judgment standard authority)
- Helms v. Certified Packaging Corp., 551 F.3d 675 (7th Cir. 2008) (distinguishing evidentiary specificity required in security agreements from the notice function of financing statements)
- Matter of Martin Grinding & Mach. Works, Inc., 793 F.2d 592 (7th Cir. 1986) (financing statement cannot expand a security interest beyond the security agreement)
- In re Amex-Protein Dev. Corp., 504 F.2d 1056 (9th Cir. 1974) (composite-documents doctrine may bind as a security agreement, but does not permit a financing statement to rely on an unfiled document for its collateral description)