In re B&M Hospitality LLC, 584 B.R. 88

Background

Debtor B & M Hospitality granted M & T Bank a security interest in its restaurant liquor license (PA License R-1140) via a September 10, 2014 security agreement that specifically listed the license as collateral; loan principal $85,000.
M & T filed a UCC-1 financing statement on September 25, 2014 describing collateral as “all assets of the debtor.”
Debtor filed Chapter 7 on July 28, 2017; Trustee sought to sell the liquor license free and clear, asserting no liens on the license.
The sale was approved with proceeds escrowed pending resolution of M & T’s asserted lien; M & T filed a secured proof of claim for the outstanding balance.
Disputes: (1) whether Pennsylvania law permits third-party security interests in liquor licenses after a 1987 statutory amendment; and (2) whether M & T’s UCC-1 sufficiently perfected a security interest given its generic “all assets” description.
Court held the 1987 amendment makes liquor licenses property as between licensee and third parties, and M & T’s security interest attached and was perfected by its UCC-1.

Issues

Issue	Trustee's Argument	M & T's Argument	Held
Can a third party hold a security interest in a PA liquor license?	1412 Spruce and §4-468(b.1) mean licenses are privileges, not property; 1987 amendment does not supersede that effect.	The 1987 amendment (47 P.S. §4-468(d)) makes a license property as between licensee and third parties, allowing security interests.	The 1987 amendment makes licenses property between licensee and third parties; security interests are permitted.
Did M & T create an enforceable security interest in the license?	(Implicit) Security agreement or attachment requirements not contested by Trustee.	Security agreement specifically listed the liquor license; value given and debtor had rights, so attachment occurred.	Security agreement expressly described the license; attachment requirements met.
Was M & T’s UCC‑1 sufficient to perfect the interest despite not naming the license?	The UCC‑1’s generic “all assets” description is insufficient under older case law.	Under revised Article 9 (post‑2001), “all assets” or “all personal property” is sufficient in a financing statement per §9‑504(2).	The UCC‑1’s “all assets” description complies with §9‑504(2); the security interest was perfected.
Do pre‑1987 cases (e.g., 1412 Spruce) control despite statutory amendment?	Precedent remains persuasive; 1412 Spruce has not been overruled by court.	The statutory scheme changed in 1987; post‑amendment authorities control.	The court follows the 1987 statutory amendment and post‑amendment authorities; 1412 Spruce is superseded by the statute.

Key Cases Cited

1412 Spruce Inc. v. Pennsylvania Liquor Control Board, 504 Pa. 394, 474 A.2d 280 (Pa. 1984) (held liquor licenses were a personal privilege pre‑1987 statute)
21 West Lancaster Corp. v. Main Line Restaurant, Inc., 790 F.2d 354 (3d Cir. 1986) (discussed liquor license treatment under pre‑1987 law)
Heights v. Citizens Nat. Bank, 463 Pa. 48, 342 A.2d 738 (Pa. 1975) (addressed sufficiency of collateral description under former Article 9)
In re Ciprian Ltd., 473 B.R. 669 (Bankr. W.D. Pa. 2012) (recognized post‑1987 that a liquor license can be a general intangible subject to a security interest)
In re Tam of Allegheny LLC, 575 B.R. 131 (Bankr. W.D. Pa. 2017) (held security interests can attach to liquor licenses and discussed perfection issues)
In re Submicron Systems, 432 F.3d 448 (3d Cir. 2006) (principle that state law defines property interests for bankruptcy purposes)