In the Second Circuit, using the words “all assets” in a financing statement saved the day for the secured creditor, even though the UCC-1 misidentified the location of the collateral.
In connection with a $1 million loan, the UCC financing statement described the collateral as “all asset of the Debtor, including, but not limited to, any and all equipment, fixtures, inventory . . . now owned or hereafter acquired by the Debtor and located at or relating to the operation of the premises at 100 River Rock Road . . . .” [Emphasis added.]
Seven years later, the borrower moved, and the financing statement was amended to note the borrower’s new address as 6030 N. Bailey Ave. However, the parties did not revise the description of the assets, which continued to say, “and located at or relating to the operation of the premises at 100 River Rock Road,” the old address.
Within 90 days of bankruptcy, the bank filed an amended financing statement describing the collateral as “and located at or relating to the operation of the premises at 6030 N. Bailey Ave,” the new address. The trustee sought to set aside the security interest as being unperfected after the debtor moved.
The parties agreed that the financing statement filed within 90 days of bankruptcy was useless for the bank because perfection of the security interest at that time would have been a voidable preference under Section 547. Consequently, the lender had a valid security interest only if the prior financing statements sufficiently described the collateral.
The bankruptcy judge ruled in favor of the bank, concluding that the prior financing statements sufficiently described the collateral. The district court affirmed, as did the Second Circuit in a non-precedential summary order on Dec. 22.
Even with the improper address, the circuit panel held that the collateral description was “sufficient because it unambiguously refers to ‘all assets of the Debtor’ irrespective of their location.” In substance, the word “and” was superfluous because it was preceded by “including, but not limited to.”
Citing authority, the appeals court said that using “including, but not limited to” made the detailed description “‘illustrative rather than exhaustive.’” Thus, the opinion says, “the geographic reference in the initial collateral indication was merely illustrative.”