FILED OCT 15 2013 1 SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. OR-12-1483-JuTaPa ) 6 CHARLES A. GROGAN, d/b/a ) Bk. No. 11-65409-TMR Silver Bells Tree Farm and ) 7 SARAH A. GROGAN, ) Adv. No. 11-06276-TMR ) 8 Debtors. ) ______________________________) 9 CHARLES A. GROGAN; ) SARAH A. GROGAN, ) 10 ) Appellants, ) 11 ) v. ) M E M O R A N D U M* 12 ) HARVEST CAPITAL COMPANY; ) 13 DEMETER AG, LLC, ) ) 14 Appellees. ) ______________________________) 15 Argued and Submitted on July 25, 2013 16 at Butte, Montana 17 Filed - October 15, 2013 18 Appeal from the United States Bankruptcy Court for the District of Oregon 19 Honorable Thomas M. Renn, Bankruptcy Judge, Presiding 20 _______________________ 21 Appearances: Laura J. Walker, Esq., of Cable Huston Benedict Haagensen & Lloyd LLP, argued for appellants, 22 Charges A. Grogan and Sarah A. Grogan; Todd L. Friedman, Esq., of Stoel Rives LLP, argued for 23 appellee Harvest Capital Company; Aaron J. Bell, Esq., of Bell Law Firm, PC appeared for appellee 24 Demeter Ag, LLC. _________________________ 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1.
-1- 1 Before: JURY, TAYLOR, and PAPPAS, Bankruptcy Judges. 2 Chapter 111 debtors, Charles A. Grogan and Sarah A. Grogan, 3 own and operate a Christmas tree farm. Debtors commenced an 4 adversary proceeding against appellees, Harvest Capital Company 5 (Harvest) and Demeter Ag, LLC (Demeter) (collectively, Harvest 6 and Demeter are referred to as Defendants), asserting that: 7 (1) the collateral description in Defendants’ security 8 agreements did not include Christmas trees or, if they did, 9 (2) the collateral description in Defendants’ financing 10 statements did not include Christmas trees and, therefore, their 11 liens were not perfected and avoidable under § 544. Debtors 12 filed a motion for summary judgment (MSJ) on these issues, and 13 Defendants filed cross-motions for summary judgment. 14 The bankruptcy court denied debtors’ MSJ and granted 15 Defendants’ cross-motions finding that, as a matter of law, the 16 collateral description reasonably identified the Christmas trees 17 as Defendants’ collateral under Oregon’s version of the Uniform 18 Commercial Code (UCC). As a result, the court concluded that 19 Defendants’ notes were secured by properly perfected unavoidable 20 security interests in debtors’ Christmas trees and their 21 proceeds. This appeal followed. We AFFIRM. 22 /// 23 /// 24 /// 25 1 26 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 27 “Rule” references are to the Federal Rules of Bankruptcy Procedure and “Civil Rule” references are to the Federal Rules of 28 Civil Procedure.
-2- 1 I. FACTS2 2 Debtors own and operate, as a sole proprietorship, Silver 3 Bells Tree Farm, located in Marion County, Oregon, where they 4 plant and grow Christmas trees. Approximately twelve years 5 after being planted, the Christmas trees are harvested for sale. 6 At various times, debtors took out secured loans with 7 Defendants. 8 A. The Harvest Loans 9 In September 2006, debtors borrowed $7 million from Harvest 10 as evidenced by two promissory notes: one for $5,500,000 11 (Note A) and the other for $1,500,000 (Note B). Both notes were 12 secured by a combined mortgage/security agreement (Harvest 13 Security Agreement), which was recorded in the Marion County 14 real property records. 15 The Harvest Security Agreement provides in relevant part: 16 To secure payment of the Indebtedness and performance of all obligations of mortgagor under this Mortgage, 17 mortgagor mortgages and conveys to Lender the following: 18 . . . 19 (4) All trees, bushes, vines and other permanent 20 plantings now or hereafter located on the real property (the “Plantings”); 21 (5) All intellectual property rights now or hereafter 22 held by Mortgagor with respect to Plantings now or hereafter growing on the Real Property, including, 23 without limitation, the SILVER BELLS BLUE™ NOBLE FIR trademark and other labels, logos, patents or patent 24 licenses and trademark rights (the “Intellectual Property Rights”); . . . . 25 . . . . 26 27 2 Many of the facts are taken from the bankruptcy court’s 28 published opinion at 476 B.R. 270 (Bankr. D. Or. 2012).
-3- 1 Mortgagor presently assigns to Lender all of Mortgagor’s right, title and interest in and to all 2 rents, revenues, income, issues and profits (the “Income”) from the Real Property, the Plantings, the 3 Personal Property . . ., whether now or hereafter due. 4 Mortgagor grants Lender a security interest in the Income, Plantings, the Water Rights, the Personal 5 Property, . . . . 6 Section 8 of the agreement, entitled “Security Agreement, 7 Security Interest” further provides: 8 8.1 Security Agreement. This instrument shall constitute a security agreement with respect to the 9 Income, Plantings, Water Rights, Personal property, . . . . 10 11 On September 20, 2006, and September 2, 2009, respectively, 12 Harvest filed an original and amended UCC financing statement 13 with the Oregon Secretary of State (Harvest Financing 14 Statements). Exhibit B to each of the Harvest Financing 15 Statements stated that the collateral included, among other 16 things: 17 2. All improvements, fixtures, equipment, construction materials, and other articles of personal property now 18 owned or hereafter acquired by the Debtor that now or hereafter are located on, affixed or attached to, or 19 incorporated in the Land, including all irrigation pumps, motors, pipes, sprinklers and other irrigation 20 equipment. 21 3. All trees, bushes, vines and other permanent plantings now or hereafter located on the Land.3 22 4. All intellectual property rights of Debtor with 23 respect to Christmas trees, vines or other permanent plantings now or hereafter growing on the Land, 24 25 3 As discussed below, debtors placed at issue in their MSJ 26 the description of collateral contained in § 4 of the security agreement and § 3 of the financing statement which were virtually 27 identical; i.e., “[a]ll trees, bushes, vines and other permanent plantings . . . .” Debtors maintained that this description 28 could not include Christmas trees.
-4- 1 including, without limitation, the SILVER BELLS BLUE™ NOBLE FIR trademark and all patents, trademarks and 2 patent licenses and trademark rights. 3 The Harvest Financing Statements were timely continued by a 4 continuation statement filed on August 4, 2011. 5 B. The Demeter Loan 6 In March 2008, the Grogans borrowed $225,000 from Demeter 7 evidenced by a promissory note and secured by a combined 8 mortgage, assignment of rents and security agreement and fixture 9 filing. In February 2010, the original note was replaced by a 10 $400,000 note (Demeter Note). The original mortgage/security 11 agreement was also replaced by an amended and restated agreement 12 (Demeter Security Agreement). The Demeter Security Agreement 13 stated that to secure payment of the indebtedness, debtors 14 conveyed a security interest to Lender in, among other things, 15 “(4) All Christmas trees, trees, and timber now or hereafter 16 grown, growing or to be grown on the Real Property (the 17 “Trees”).”4 The Demeter Security Agreement was duly recorded in 18 the Marion County real property records on February 19, 2010.5 19 Demeter filed a UCC financing statement with the Oregon 20 Secretary of State on March 18, 2008 (Demeter Financing 21 Statement). Exhibit B to the Demeter Financing Statement stated 22 that the collateral covered included, among other things: 23 24 4 The Demeter Security Agreement also contained another paragraph similar to that in the Harvest Security Agreement: 25 “(5) All trees, bushes, vines and other permanent plantings now 26 or hereafter located on the Real Property (the “Plantings”).” 5 27 Demeter was also assigned rights under loans made to the Grogans by Heinze Investments, LLC. Demeter’s rights under those 28 loans are not at issue in this appeal.
-5- 1 2. All improvements, fixtures, equipment, construction material, and other articles of personal 2 property now owned and hereafter acquired by the Debtor that now or hereafter are located on, affixed 3 or attached to, or incorporated in the Land, including all irrigation pumps, motors, pipes, sprinklers and 4 other irrigation equipment. 5 3. All trees, bushes, vines and other permanent plantings now or hereafter located on the Land; 6 4. All intellectual property rights of Debtor with 7 respect to Christmas trees, vines or other permanent plantings now or hereafter growing on the Land, 8 including, without limitation, the SILVER BELLS BLUE™ NOBLE FIR trademark and all patents, trademarks and 9 patent licenses and trademark rights. 10 C. Bankruptcy Proceedings 11 On October 31, 2011, debtors filed a voluntary chapter 11 12 petition. 13 On December 15, 2011, debtors commenced an adversary 14 proceeding against Defendants, seeking a declaration that 15 Defendants did not have an enforceable and perfected security 16 interest in the Christmas trees because the collateral 17 description in Defendants’ security agreements and financing 18 statements was inadequate. Debtors also sought attorneys’ fees 19 and costs. 20 On January 17, 2012, Harvest filed an answer, counterclaim 21 and third-party complaint. Harvest’s counterclaim was for 22 attorneys’ fees and costs. The third-party complaint asserted a 23 claim for conversion against the law firm which had received 24 $180,000 from debtors as a retainer for legal services. Harvest 25 alleged that this amount was subject to its security interest in 26 the proceeds from the sale of Christmas trees. In a stipulated 27 order filed February 15, 2012, the parties agreed to bifurcate 28 and abate the third-party complaint until the bankruptcy court
-6- 1 entered a judgment in the adversary proceeding.6 2 On March 29, 2012, debtors filed their MSJ, seeking a 3 declaration that Defendants did not have a valid, perfected lien 4 on the Christmas trees or other crops, or their proceeds. 5 Debtors asserted that the phrase “[a]ll trees, bushes, vines and 6 other permanent plantings . . .” did not reasonably identify 7 Christmas trees because the term “trees” was modified by the 8 word “permanent,” and Christmas trees are “crops” and “crops” by 9 definition are not “permanent” under the holding of Rainier 10 Nat’l Bank v. Sec. State Bank, 796 P.2d 443, 445 (Wash. 1990). 11 On April 3, 2012, debtors filed their second amended 12 complaint (SAC). The SAC contained two claims: the first was 13 again for a declaration that Defendants did not have enforceable 14 and perfected security interests in debtors’ Christmas trees and 15 other crops or their proceeds; alternatively, assuming such 16 liens exist, the second claim sought to avoid the liens under 17 § 5447 because they were not properly perfected liens in the 18 Christmas trees due to the inadequate collateral description in 19 Defendants’ financing statements. 20 On April 17, 2012, Demeter answered the SAC and 21 counterclaimed for its attorneys’ fees and costs. 22 On April 20, 2012, Harvest filed its amended answer, 23 counterclaim, and third-party complaint. 24 6 This matter was later reinstated after the bankruptcy 25 court entered judgment on the cross motions for summary judgment. 26 7 Generally, under § 544(a), a debtor in possession can 27 avoid prepetition security interests that have not been properly perfected. See NetBank, FSB v. Kipperman (In re Commercial Money 28 Ctr., Inc.), 350 B.R. 465, 474 (9th Cir. BAP 2006).
-7- 1 On April 23, 2012, Harvest filed its cross-MSJ and response 2 to debtors’ MSJ. On the same date, Demeter filed its cross-MSJ 3 and response to debtors’ MSJ. 4 On June 21, 2012, the bankruptcy court heard the matter and 5 took it under advisement. 6 On July 26, 2012, the bankruptcy court issued its 7 Memorandum Opinion concluding that, as a matter of law, 8 Defendants’ security agreements and financing statements 9 reasonably identified Christmas trees as collateral subject to 10 their security interests. In reaching this conclusion, the 11 bankruptcy court examined the relevant sections of Oregon’s 12 version of the revised UCC for collateral descriptions, 13 considered whether the doctrine of the last antecedent (DOTLA) 14 applied, found debtors’ reliance on Rainier unpersuasive, and 15 used common law contract principles to objectively determine 16 whether Christmas trees were included in the collateral 17 description. 18 In considering the phrase “[a]ll trees, bushes, vines and 19 other permanent plantings . . . ,” the bankruptcy court found 20 that application of the DOTLA was inconclusive on whether 21 “permanent” modified “trees” and “bushes” as well as “vines.” 22 As a result, the court concluded that “such ambiguity alone 23 would cause a reasonable party to inquire further.” 24 Under a contract analysis, the court dispelled debtors’ 25 theory that the collateral description “[a]ll trees, bushes, 26 vines and other permanent plantings”, defined together as 27 “Plantings,” could not include Christmas trees. The bankruptcy 28 court reasoned that the use of the word “Plantings” to define
-8- 1 the group of plants which are collateral “itself connotes 2 something planted as opposed to growing naturally.” The court 3 examined the dictionary definition of “planting” - “an area 4 where plants are grown for commercial or decorative purposes; 5 also: the plants grown in such an area,” and concluded from this 6 definition a reasonable third party examining Harvest’s Security 7 Agreement would know that the only (or at least the vast 8 majority of) crops debtors planted consisted of Christmas trees. 9 Finally, the bankruptcy court noted that the phrase “permanent 10 crops” is commonly used in many statutory schemes, typically to 11 distinguish them from “annual” crops. Because of this usage, 12 the court was not convinced by debtors’ reliance on Rainier for 13 their argument that the words “permanent” and “crops” were 14 mutually exclusive. 15 Moving beyond the phrase at issue, and construing 16 Harvest’s Security Agreement as a whole, the bankruptcy court 17 concluded that any reasonable person’s doubt as to what “all 18 permanent trees” means in § 4 of Harvest’s Security Agreement 19 would be resolved by reading § 5, which granted Harvest a 20 security interest in all intellectual property . . . “with 21 respect to Plantings” and included the SILVER BELLS BLUE™ NOBLE 22 FIR trademark. The court reasoned that because the intellectual 23 property was “with respect to Plantings,” the trademark on 24 Christmas trees “related to” or “refers to” “Plantings,” and as 25 a consequence, “Plantings” by necessity included Christmas 26 trees. 27 Last, the bankruptcy court noted that §§ 4 and 5 of 28 Harvest’s Security Agreement would at least lead a reasonable
-9- 1 inquirer to identify Christmas trees as collateral. In that 2 regard, the court observed that a reasonable person could 3 objectively determine that money was loaned to debtors, debtors 4 owned a Christmas tree farm with approximately one million 5 Christmas trees on their property, and their primary, if not 6 sole, source of income to repay the loan was generated by those 7 trees. Under these circumstances, the bankruptcy court 8 concluded that there would need to be “crystal clear” 9 exclusionary language in the collateral description to stop 10 further inquiry, which there was not. 11 The court also found that a reasonable inquirer would 12 examine Note B, which the Harvest Security Agreement referenced, 13 and which specifically referenced Christmas trees as 14 “collateral.”8 15 8 16 Exhibit A to Note B provides in relevant part:
17 (j) Borrower shall provide Lender by March 1 of each year with a certified tree inventory (the “Certificate 18 of Inventory”) which will include a current Christmas 19 tree count for all land described in the Mortgage, categorized by land tract, year planted and tree size. 20 The Certification of Inventory shall also include a two-year projected harvest and planting schedule 21 identifying number of trees, variety and location. Borrower shall certify that the Certificate of 22 Inventory as being true, correct and complete to 23 Borrower’s best knowledge.
24 (k) Borrower shall provide Lender complete access to the property encumbered by the Mortgage within 25 reasonable time after request for such access in order 26 to permit Lender to verify the information contained in the Certification of Inventory or otherwise to confirm 27 the collateral value of the Christmas trees (the “Tree Collateral Value”) and the total collateral value of 28 (continued...)
-10- 1 Although the description of the collateral used in the 2 Harvest Financing Statements was slightly different than that 3 used in Harvest’s Security Agreement, the bankruptcy court 4 concluded that the financing statements’ description of 5 collateral included Christmas trees for essentially the same 6 reasons as the security agreement. 7 Finally, with respect to Demeter, its security agreement 8 specifically referenced “[a]ll Christmas trees” as part of the 9 collateral. Therefore, the bankruptcy court found that it 10 clearly met the reasonable identification test under the UCC. 11 Since Demeter’s Financing Statement had the exact same language 12 as Harvest’s Financing Statements, the court found that it too 13 sufficiently indicated the collateral as required under the UCC. 14 In sum, the court found Defendants’ notes were secured by 15 properly perfected unavoidable security interests in debtors’ 16 Christmas trees and their proceeds. The court concluded that 17 Defendants’ entitlement to attorneys’ fees and costs would be 18 determined at a subsequent hearing.9 19 On September 10, 2012, the bankruptcy court entered an 20 order denying debtors’ MSJ and granting Defendants’ 21 8 22 (...continued) all property encumbered by the Mortgage (the “Total 23 Collateral Value”). 9 24 The Defendants’ entitlement to attorneys’ fees and costs was to be determined in a supplemental proceeding pursuant to 25 Rule 7054 and Local Bankr. Rules 7054-1 and 9021-1(c). The 26 latter rule states that the time deadlines which related to the filing or objecting to a cost bill also applied to filing or 27 objecting to a request for attorney fees in a contested matter or adversary proceeding in which judgment is sought for the 28 prevailing party’s attorney fees.
-11- 1 cross-motions. On the same day, the court entered a partial 2 judgment10 denying debtors’ MSJ and granting Defendants’ 3 cross-motions. 4 On September 20, 2012, debtors filed a timely notice of 5 appeal from the partial judgment. 6 II. JURISDICTION 7 The bankruptcy court had jurisdiction over this proceeding 8 under 28 U.S.C. §§ 1334 and 157(b)(2)(O). We have jurisdiction 9 under 28 U.S.C. § 158. 10 III. ISSUES 11 A. Whether the collateral description in Demeter’s 12 Security Agreement and Financing Statement was sufficient to 13 give it a properly perfected unavoidable security interest in 14 debtors’ Christmas trees; and 15 B. Whether the collateral description in Harvest’s 16 Security Agreement and Financing Statements was sufficient to 17 give it a properly perfected unavoidable security interest in 18 debtors’ Christmas trees. 19 IV. STANDARD OF REVIEW 20 We review de novo the bankruptcy court’s ruling on 21 cross-motions for summary judgment, its interpretation of 22 security agreements, and its interpretation of state law. Trunk 23 v. City of San Diego, 629 F.3d 1099, 1105 (9th Cir. 2011) 24 (summary judgment); Conrad v. Ace Prop. & Cas. Ins. Co., 25 10 26 In its partial judgment, the bankruptcy court certified the judgment as appealable under Civil Rule 54(b), incorporated 27 by Rule 7054, finding there was no just reason for delay. As a result, we consider the partial judgment final for purposes of 28 appeal.
-12- 1 532 F.3d 1000, 1004 (9th Cir. 2008) (interpretation and meaning 2 of contracts); Salve Regina Coll. v. Russell, 499 U.S. 225, 231 3 (1991) (interpretation of state law). 4 V. DISCUSSION 5 On a motion for summary judgment, the moving party has the 6 burden to show that there is no genuine dispute as to any 7 material fact and that it is entitled to judgment as a matter of 8 law. Civil Rule 56(a) (made applicable by Rule 7056). Material 9 facts are such facts as may affect the outcome of the case. 10 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 11 Summary judgment is appropriate when neither party contests the 12 facts relevant to a legal determination. 13 Here, whether the collateral description contained in 14 referenced documents is legally sufficient is reviewed de novo 15 because the parties have conceded that the question can be 16 answered by referring to the law. Neither party has contested 17 any material facts that are relevant to this legal determination 18 in this appeal nor have debtors put their subjective intent to 19 grant Defendants a security interest in their Christmas trees at 20 issue.11 21 A. Collateral Descriptions: Legal Standards 22 The parties agree that the nature and extent of Defendants’ 23 24 25 11 26 Debtors did not dispute that they executed the security agreements with Defendants or that they granted some security 27 interest in collateral related to their Christmas tree farm. They also did not dispute that Defendants had properly filed 28 their financing statements with the Oregon Secretary of State.
-13- 1 security interests are determined under Oregon’s UCC law.12 See 2 Butner v. United States, 440 U.S. 48, 55 (1979); In re S. Cal. 3 Plastics, 165 F.3d 1243, 1248 (9th Cir. 1999) (to determine the 4 validity, nature and effect of a lien courts must look to state 5 law). Under Oregon law, “two steps are required to create an 6 enforceable security interest: attachment and perfection.” 7 In re Stein, 261 B.R. 680, 688 (Bankr. D. Or. 2001). The 8 requirements for attachment and perfection are found in Oregon’s 9 version of the UCC, Oregon Revised Statutes (ORS) at Chapters 71 10 through 79.13 11 The collateral description requirement for security 12 agreements is governed by ORS 79.0108 which sets forth a 13 reasonable identification test. Under ORS 79.0504, “[a] 14 financing statement sufficiently indicates the collateral that 15 it covers if the financing statement provides: (1) A description 16 17 12 In approximately 2001, all fifty states adopted Revised Article 9. Therefore, in all material respects the law is 18 uniform after that date. 19 13 Generally, provisions of the UCC must be “liberally 20 construed and applied to promote its underlying purposes and policies, which are: (a) To simplify, clarify and modernize the 21 law governing commercial transactions; (b) To permit the continued expansion of commercial practices through custom, usage 22 and agreement of the parties; and (c) To make uniform the law 23 among the various jurisdictions.” ORS 71.1030(1). Although we look first to Oregon law, this last directive of making uniform 24 law among the various jurisdictions “anticipates reference to judicial decisions of other jurisdictions construing the common 25 text of the UCC.” In re Walter B. Scott & Sons, Inc., 436 B.R. 26 582, 596 n.20 (Bankr. D. Idaho 2010) (citing Hopkins v. Lojek (In re Scheu), 356 B.R. 751, 755 & n.11 (Bankr. D. Idaho 2006) 27 (citing with approval the Ninth Circuit Bankruptcy Appellate Panel’s interpretation of a provision of the California UCC 28 identical to Idaho’s version)).
-14- 1 of the collateral pursuant to ORS 79.0108; or (2) An indication 2 that the financing statement covers all assets or all personal 3 property.” 4 1. The Reasonable Identification Test 5 A security interest cannot be perfected until it attaches 6 and a security interest cannot attach until the requirements of 7 ORS 79.0203 are met. ORS 79.0203 provides that one of the 8 prerequisites for the creation of a valid security interest is 9 that “[t]he debtor has authenticated a security agreement that 10 provides a description of the collateral and, if the security 11 interest covers timber to be cut, a description of the land 12 concerned[.]”14 ORS 79.0203(2)(c)(A). “The primary function of 13 9–203 is that of a statute of frauds; it is designed mainly to 14 minimize disputes over whether there was an agreement and over 15 what collateral it could have covered.” Nw. Acceptance Corp., 16 841 F.2d at 921. A description of collateral in the security 17 agreement is sufficient if it “reasonably identifies what is 18 described” or is otherwise “objectively determinable.” 19 ORS 79.0108(1)(a) and (2)(f). 20 Under ORS 79.0502(1)(c), a financing statement must 21 “indicate” the collateral it covers. Under ORS 79.0504(1), a 22 financing statement sufficiently “indicates” the collateral if 23 it contains a description of the collateral pursuant to 24 ORS 79.0108. As noted, ORS 79.0108 sets forth a “reasonable 25 26 14 Even if the Christmas trees are considered standing 27 timber, they were covered under the description of collateral. Because the mortgage was filed in the real property records 28 Harvest was properly perfected. See ORS 79.502(c)(2)(B) and (3).
-15- 1 identification test” for collateral descriptions: “[A] 2 description of personal or real property is sufficient, whether 3 or not it is specific, if it reasonably identifies what is 4 described . . . .” ORS 79.0108(1)(a). The statute gives 5 examples of reasonable identification of collateral by a 6 “[s]pecific listing . . . or . . . any other method, if the 7 identity of the collateral is objectively determinable.” 8 ORS 79.0108(2)(a) and (f). 9 The Oregon Supreme Court has rejected a reasonable 10 identification test that “requires exactitude and excessive 11 detail.” Cmty. Bank v. Jones, 566 P.2d 470, 481 (Or. 1977). 12 Official Comment 2 to UCC 9-108 also “rejects any requirement 13 that a description is insufficient unless it is exact and 14 detailed (the so-called ‘serial number’ test).” See 15 In re Commercial Money Ctr., Inc.), 350 B.R. at 475 (noting the 16 usefulness of the Official Comments in interpreting the UCC). 17 One treatise explains: UCC 9-108(a) “requires only that the 18 description ‘reasonably identify’ the collateral, leaving 19 considerable slack.” 4 White, Summers, & Hillman, Uniform 20 Commercial Code § 31-3 (6th ed.). 21 Finally, the reasonable identification test is satisfied if 22 the description in the security agreement or financing statement 23 provides enough information to enable third parties to identify 24 the collateral upon reasonable inquiry. See Willamette Prod. 25 Credit Ass’n v. Lovelady (In re Lovelady), 21 B.R. 182, 184 26 (Bankr. D. Or. 1982) (construing ORS 79.1100, predecessor to 27 ORS 79.0108 in connection with collateral description in 28 security agreement and financing statement); Appleway Leasing,
-16- 1 Inc. v. Wilken, 591 P.2d 382, 384 (Or. 1979) (construing former 2 ORS 79.1100 in connection with collateral description in 3 financing statement); see also In re Brown, 479 B.R. 112 (Bankr. 4 D. Kan. 2012) (“In order for collateral to be ‘reasonably 5 identified’ in security agreement, so as to allow security 6 interest to attach, description in security agreement must be 7 such that it allows third persons, aided by reasonable inquiries 8 which the instrument itself suggests, to identify the property; 9 if document gives clues sufficient that third persons by 10 reasonable care and diligence may ascertain the property 11 covered, then it is adequate under Kansas law.”); Rice v. 12 Miller, 864 N.Y.S.2d 255, 258 (N.Y. Sup. Ct. 2008) (applying New 13 York law, UCC 9-108(b)(6)’s standard is met “if a third party 14 could determine what items of the debtor’s collateral are 15 subject to the creditor’s security interest”). 16 2. Rules Unique to Security Agreements 17 Oregon courts recognize that security agreements are 18 contracts. Community Bank, 566 P.2d at 478; Matter of Hill’s 19 Estate, 557 P.2d 1367, 1374 (Or. Ct. App. 1976). As such, 20 Oregon courts construe security agreements by applying common 21 law contract principles. Oregon follows an objective theory of 22 contracts which requires that contracts be construed in 23 accordance with the parties’ objective manifestations of intent; 24 i.e., as a reasonable third party would understand the intent of 25 the parties. Harty v. Bye, 483 P.2d 458, 461 (Or. 1971). In 26 determining objective intent, the court examines the text and 27 context of the disputed provision, considering the contract as a 28 whole, to determine whether the disputed provision is ambiguous.
-17- 1 See ORS 42.230; Yogman v. Parrott, 937 P.2d 1019, 1021 (Or. 2 1997). Dictionary definitions may be used to determine whether 3 a provision is ambiguous. Yogman, 937 P.2d at 1021. 4 With these guidelines in mind, we consider the merits. 5 B. Demeter’s Security Agreement and Financing Statement 6 We note that unlike Harvest’s Security Agreement, 7 Demeter’s Security Agreement at § 4 specifically references 8 “[a]ll Christmas trees” as part of the collateral. Therefore, 9 there is no question that this collateral description meets 10 ORS 79.0108(2)’s standard. 11 We also conclude that the Demeter Financing Statement 12 reasonably indicated that it covered the Christmas trees by 13 stating that the collateral covered, among other things: 14 “other articles of personal property that now or hereafter are 15 located on, affixed or attached to, or incorporated in the Land 16 . . . .” See Exhibit B to the Demeter Financing Statement, ¶ 2. 17 This description meets the statutory requirements for collateral 18 descriptions in financing statements. See ORS 79.0504(2) (“[a] 19 financing statement sufficiently indicates the collateral that 20 it covers if the financing statement provides . . . [a]n 21 indication that the financing statement covers . . . all 22 personal property.”). 23 C. Harvest’s Security Agreement and Financing Statement 24 With respect to Harvest, debtors reiterate most of the 25 arguments made in the bankruptcy court. They again place at 26 issue the phrase in § 4 of the security agreement, “[a]ll trees, 27 bushes, vines and other permanent plantings . . . .” contending 28 this plain and simple language does not include Christmas trees.
-18- 1 Debtors seize on the word “permanent” in the clause “other 2 permanent plantings,” maintaining that it is as applicable to 3 the first listed words “[a]ll trees, bushes, vines” as to the 4 last word, “plantings.” Under debtors’ view, the phrase should 5 be read as meaning “[a]ll permanent trees, permanent bushes, 6 permanent vines and other permanent plantings.” Debtors then 7 contend that Christmas trees do not fall within the class of 8 “permanent” trees relying on the dictionary definition of 9 “permanent” and Rainier, a Washington case, which found that 10 Christmas trees were “crops” and “crops” by definition are not 11 permanent. According to this argument, § 4’s collateral 12 description is unambiguous and described with such particularity 13 that no further inquiry would have been required of a third 14 party. We are not convinced. 15 First, the language in § 4 of Harvest’s Security Agreement 16 “[a]ll trees, bushes, vines and other permanent plantings” is 17 broad enough to include Christmas trees as either “trees” or 18 “permanent” trees for purposes of the UCC reasonable 19 identification test. 20 Second, we cannot say that “permanent” modifies “all trees” 21 by examining the clause in isolation like debtors do. Contract 22 principles dictate that we examine the text and context of 23 Harvest’s Security Agreement as a whole. Further, although the 24 missing comma between “vines” and the conjunction “and” may pose 25 a grammatical problem for some, “[p]unctuation or the absence of 26 punctuation in a contract is ineffectual to control its 27 construction. . . .” 17A Am. Jur. 2d Contracts § 366. As an 28
-19- 1 interpretative tool, the DOTLA15 is equally unreliable because 2 the rule is not an absolute and can be overcome by other indicia 3 of meaning. Barnhart v. Thomas, 540 U.S. 20, 26 (2003). 4 Indeed, the bankruptcy court found the DOTLA’s application did 5 not resolve the interpretative problem before it. 6 Construing the security agreement as a whole, § 4 of the 7 Harvest Security Agreement defined “[a]ll trees, bushes, vines 8 and other permanent plantings” as the “Plantings.” We agree 9 with the bankruptcy court’s reasoning that the dictionary 10 definition of “Plantings,” in conjunction with use of the 11 defined term “Plantings” in § 5, provides a textual clue to a 12 reasonable third party that the meaning of “[a]ll trees, bushes, 13 vines and other permanent plantings” could include Christmas 14 trees. 15 Regardless, other provisions in the security agreement 16 contain language that expressly grant Harvest a security in the 17 “Plantings” which includes trees whether they are permanent or 18 not and consistent with this assigns the rights to income from 19 the Plantings. The agreement provides under § 6: “Mortgagor 20 presently assigns to Lender all of Mortgagor’s right, title and 21 22 15 Under the DOTLA, “[r]eferential and qualifying words and 23 phrases, where no contrary intention appears, refer solely to the last antecedent.” See 2A N. Singer, Sutherland on Statutory 24 Construction § 47.33 (7th ed. 2012). Applying the rule here would mean that “and other permanent plantings” referred only to 25 “vines” and not “[a]ll trees, bushes.” However, this left the 26 phrase without a coordinating conjunction which was inconsistent with other granting provisions in the security agreement. As a 27 result, the bankruptcy court did not rely on the doctrine to ascertain the meaning of § 4. Hence, debtors’ assertion that the 28 bankruptcy court gave the DOTLA undue weight is without merit.
-20- 1 interest in and to all rents, revenues, income, issues and 2 profits (the “Income”) from . . . the Plantings, the Personal 3 Property . . ., whether now or hereafter due.” The agreement 4 continues “Mortgagor grants Lender a security interest in the 5 Income, Plantings, . . ., the Personal Property, . . . .” 6 Taken together, these provisions evidence the UCC’s broad 7 policy of leniency for collateral descriptions. Indeed, the 8 Ninth Circuit in Biggins v. Sw. Bank, 490 F.2d 1304, 1308 (9th 9 Cir. 1974) previously rejected an argument similar to debtors’ 10 because such “extensive textual analysis” is inconsistent with 11 the overall purpose of the UCC. Under the rules of construction 12 expressly provided, even those descriptions that are unclear or 13 susceptible to more than one distinct meaning may be sufficient 14 in circumstances in which the description would allow a third 15 person, aided by reasonable inquiries which the instrument 16 itself suggests, to identify the collateral. 17 In short, at minimum, a third party would have been able to 18 determine whether Harvest claimed a security interest in “trees” 19 upon further inquiry. The collateral, Christmas trees, was 20 objectively determinable: upon inquiry, a reasonable third 21 person could determine that money was loaned to debtors (the 22 security agreement says so), debtors owned a Christmas tree farm 23 with approximately 1 million Christmas trees on their property, 24 and their primary, if not sole, source of income to repay the 25 loan was generated by those trees.16 26 16 27 Because we find Harvest’s security included the Christmas trees based on the provisions cited above, it is unnecessary for 28 (continued...)
-21- 1 Finally, if there are any lingering doubts, Harvest’s UCC-1 2 perfects an interest in all personal property located on the 3 real property at issue. The Revised Article 9 in Oregon and 4 elsewhere allows perfection pursuant to a UCC-1 that states “all 5 personal property.” Therefore, debtors’ reliance on Matter of 6 H.L. Bennett Co., 588 F.2d 389 (3d Cir. 1988) is misplaced since 7 that case is out-dated. 8 In sum, we agree with the bankruptcy court’s conclusion 9 that Defendants’ notes were secured by a perfected unavoidable 10 security interest in debtors’ Christmas trees. That security 11 also “attaches to any identifiable proceeds of collateral.” 12 ORS 79.0315(1)(b). Therefore, Defendants have a perfected 13 security interest in the proceeds from the sale of debtors’ 14 Christmas trees as well. 15 VI. CONCLUSION 16 For the reasons stated, we AFFIRM. 17 18 19 20 21 22 23 24 25 26 27 16 (...continued) 28 us to rely on the language in the Note B.
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