Lange v. Mutual of Omaha Bank (In re Negus-Sons, Inc.)

Summarized by Mark Bossi , Thompson Coburn LLP
14 years 2 months ago

Citation:

8th Circuit BAP, No. 11-6062 (December 22, 2011)

Tag(s):

Ruling:

The 8th Circuit BAP rules that an amendment to a UCC financing statement filed by a third-party was authorized and effective in terminating a lender's security interest in the debtor's personal property. In the alternative, the BAP rules that the lender's security interest was automatically extinguished when the lender's only secured loan at the time of the amendment was paid in full.

Procedural context:

Appeal from an order of the Bankruptcy Court for the District of Nebraska granting summary judgment in favor of the trustee and holding that a security interest in the Debtor's personal property had been terminated.

Facts:

In a payoff letter, Mutual of Omaha Bank ("Mutual") authorized the termination of "all liens" on the debtor's property. Mutual's loan was paid and the refinancing lender terminated all of Mutual's outstanding financing statements. Thereafter, Mutual made another loan to the debtor, but did not file a new financing statement. When the debtor filed bankruptcy, the trustee sought to avoid Mutual's alleged liens on the debtor's property. Mutual contended that the new lender was not authorized to terminate all of its liens, but rather that the attachment of a list of items of collateral to its release letter limited its authorization to a termination of liens against only the specific collateral listed. However, nothing in the text of the authorization letter conveyed such a limitation and an officer of Mutual testified that the authorization letter mistakenly gave the new lender authority to release all of its liens.

Judge(s):

KRESSEL, Chief Judge, SCHERMER, and VENTERS.

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