In Re Inofin, Inc.
455 B.R. 19
Bankr. D. Mass.2011Background
- involuntary petition filed against Inofin on Feb 9, 2011; RC G sought relief from stay to obtain a portfolio of motor vehicle installment contracts
- RC G claimed a security interest in the portfolio secured by four promissory notes and a 1996 Security Agreement and later loan documents
- Allonges purport to assign Inofin’s right to specific contracts; later loan modification (Oct 1, 2010) altered collateral requirements
- Foreclosure sales were held Jan 18 and Jan 26, 2011; notices and process were contested and deemed not commercially reasonable
- Court analyzed attachment and perfection of security interests under Massachusetts UCC; concluded no enforceable security interest in the collateral and that the foreclosure sales were invalid; the portfolio remained property of the estate
- Ultimately, stay relief was denied; the portfolio is estate property and RCG has no colorable secured claim
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Allonges independently create security interests | RCG: Allonges create independent security interests in each contract | Trustee: Allonges do not expand the 1996 Security Agreement scope | No; Allonges do not create independent security interests |
| Whether the 1996 Security Agreement, loan docs, and modification attach/perfect | RCG: security interest attaches via modifications; tracing unnecessary | Trustee: attachment depends on 9-203 and proper linking to proceeds | No; no enforceable attachment or perfection in the collateral |
| Whether the October 1, 2010 Loan Modification expanded security | RCG: modification expanded collateral to cover more contracts | Trustee: modification did not expand security; only defered terms | No; modification did not perfect a security interest in post-October 2010 deliveries |
| Whether foreclosure sales were commercially reasonable | RCG: sales were commercially reasonable | Trustee: notices were defective; sales not commercially reasonable | No; sales were not commercially reasonable; thus void as to collateral |
| Whether RCG has a Purchase Money Security Interest over goods | RCG: dual-status PMSI applies to consumer goods via linked transactions | Trustee: PMSI inapplicable; no funding trace to original goods; not consumer goods secured by PMSI | No; PMSI arguments fail under the governing Massachusetts UCC concepts |
Key Cases Cited
- Grella v. Salem Five Cent Savs. Bank, 42 F.3d 26 (1st Cir. 1994) (motion to lift stay requires colorable claim, not merits)
- Pride Hyundai, Inc. v. Chrysler Fin. Co., L.L.C., 369 F.3d 603 (1st Cir. 2004) (Massachusetts UCC governs interpretation and integration)
- In re Levitz Ins. Agency, Inc., 152 B.R. 697 (Bankr.D. Mass. 1992) (security interest requires proper attachment and integration analysis)
- In re Nav. Technology Corp., 880 F.2d 1491 (1st Cir. 1989) (assignment vs. security interest—intent governs)
- Baystate Drywall, Inc. v. Chicopee Savings Bank, 385 Mass. 17, 429 N.E.2d 1138 (Mass. 1982) (security interest may be created by combination of writings)
- In re Jojo's 10 Restaurant, LLC, B.R. (Bankr. D. Mass. 2011) (security agreement may consist of multiple documents)