978-1285770178 Case Problem Case CPC-21-07

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Slip Copy, 2012 WL 32102 (Ohio App. 6 Dist.), 2012 -Ohio- 30

(Cite as: 2012 WL 32102 (Ohio App. 6 Dist.))

CHECK OHIO SUPREME COURT RULES FOR REPORTING OF OPINIONS AND WEIGHT OF LEGAL AU-

THORITY.

Court of Appeals of Ohio,

Sixth District, Sandusky County.

The UNION BANK COMPANY, Appellant

Kevin HEBAN, et al., Appellee.

No. S–11–005.

Decided Jan. 6, 2012.

such when determining matters of priority, and

(2) cross-collateralization language in various security agreements that purported to secure all obligations of note

maker to bank did not act to secure unsecured note.

Reversed.

349Ak92 Financing Statement

349Ak94 k. Description of Collateral. Most Cited Cases

Secured Transactions 349A 145.1

prudent prospective lender or buyer on notice that the collateral sought to be purchased or encumbered might be the

subject of a preexisting security interest, and to alert second bank that secured transactions had, or at least may have,

taken place and that the particulars of those transactions could have been obtained from first bank, and thus, first

bank’s four secured promissory notes became perfected security interests and should have been treated as such when

determining matters of priority, regardless of when first and second banks made advances on their respective notes,

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[2] Secured Transactions 349A 114

was unsecured rendered, at the very least, an exception to the more generally applicable cross-collateralization pro-

visions contained in first bank‘s various security agreements, and thus, cross-collateralization language that purport-

ed to secure all obligations of note maker to bank did not act to secure unsecured note.

Howard B. Hershman, for appellant.

ing proceeds obtained from the liquidation of certain equipment sold by defendant Kevin Heban, Administrator of

the Estate of Thomas J. Tille, deceased. For the reasons that follow, we reverse the judgment of the trial court.

{¶ 2} Decedent, Thomas Tille, operated an equipment rental business known as M.A.T.T. Equipment Company.

Over the years, Tille secured loans from various financial institutions in order to purchase equipment to operate the

business. Among the financial institutions from which Tille received loans were Union Bank and appellee, The Na-

{¶ 4} The evidence, which is undisputed, relevantly demonstrates the following:

{¶ 5} (1) June 27, 2003, Union Bank filed a financing statement covering all of Tille’s equipment, including any

after-acquired property.

{¶ 6} (2) On March 14, 2006, Tille executed a promissory note and commercial security agreement with Union

Bank (“PN1”). The commercial security agreement expressly mentions the June 27, 2003 financing statement in the

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{¶ 8} (4) On October 25, 2007, Union Bank filed a financing statement covering a certain truck crane belonging

to Tille, “whether * * * owned now or acquired later.”

{¶ 9} (5) On December 21, 2007, Tille executed a promissory note and commercial security agreement with

loan was $40,212.00.

{¶ 10} (6) On December 24, 2007, NBOH filed a financing statement covering all of Tille’s equipment, includ-

ing any after-acquired property.

{¶ 11} (7) On May 9, 2008, Tille executed another promissory note and commercial security agreement with

Union Bank (“PN4”). The commercial security agreement expressly mentions a certain Bobcat mini excavator in the

ERAL DESCRIPTION,” the truck crane and the attendant financing statement filed on October 25, 2007. The bal-

ance due on PN5 is approximately $14,947.42.

{¶ 14} The trial court, in its January 11, 2011 judgment entry relevantly concluded as follows:

{¶ 15} (1) Rejecting Union Bank’s claim that the PN 1 was perfected by the June 27, 2003 financing statement,

the trial court held that because Union Bank failed to show that the June 27, 2003 financing statement perfected an

ter.

{¶ 18} (4) The trial court found that PN4, executed on May 9, 2008, was properly perfected by the financing

statement that was filed by Union Bank on the same day and would be the second to be paid, should there be funds

remaining after payment of PN3.

{¶ 19} (5) Finally, rejecting Union Bank’s claim that PN5 was perfected by the October 25, 2007 financing

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the unsecured creditors, and that if funds remained available after payment of PN3 and PN4, the remaining notes

would be on equal footing with the remainder of the unsecured creditors.

{¶ 21} Union Bank appealed the trial court‘s January 11, 2011 judgment entry, raising the following sole as-

signment of error:

{¶ 22} I. “The trial court erred in its determination of the priority of the lien claimants against the fund of mon-

ey held by Kevin Heban as Administrator of the Estate of Thomas J. Tille, deceased.”

{¶ 23} The purpose of a security agreement is to specify the necessary terms and conditions of an agreement be–

tween parties as to the existence of a security interest in collateral. Saba v. Fifth Third Bank of NW Ohio, 6th Dist.

No. L–01–1284, 2002–Ohio–4658, ¶ 39. Pursuant to R.C. 1309.201(A), a security agreement is effective according

(3) the debtor has authenticated a security agreement that provides a description of the collateral. R.C. 1309.203(B).

{¶ 25} A security interest is perfected if it has attached and all of the applicable requirements for perfection

have been satisfied. R.C. 1309.308(A). A security interest can be perfected at the time it attaches if the applicable

requirements for perfection are satisfied before the security interest attaches. See id.

{¶ 26} In general, a financing statement must be filed in order to perfect a security interest. See R.C. 1309.310.

see, also, Saba, supra, at ¶ 39.

{¶ 27} To be sufficient, a financing statement must provide the name of the debtor and the name of the secured

party or a representative of the secured party, and must indicate the collateral covered by the financing statement.

R.C. 1309.502(A). Further, regarding the indication of covered collateral, a financing statement need only contain a

description “ ‘that would put a reasonably prudent prospective lender or buyer on notice that the collateral sought to

of the information he needs to understand the secured transaction, but only with the information that such a transac-

tion has taken place and that the particulars thereof may be obtained from the named secured party at the address

shown.’ “ Id.

{¶ 29} R.C. 1309.322 governs priorities among conflicting security interests in the same collateral. R.C.

1309.322(A)(1) provides:

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{¶ 30} “Conflicting perfected security interests and agricultural liens rank according to priority in time of filing

or perfection. Priority dates from the earlier of the time a filing covering the collateral is first made or the security

interest or agricultural lien is first perfected, if there is no period thereafter when there is neither filing nor perfec-

tion.”

{¶ 33} “On February 1, A files a financing statement covering a certain item of Debtor’s equipment. On March

1, B files a financing statement covering the same equipment. On April 1, B makes a loan to Debtor and obtains a

security interest in the equipment. On May 1, A makes a loan to Debtor and obtains a security interest in the same

collateral. A has priority even though B’s loan was made earlier and was perfected when it was made. It makes no

[1] {¶ 35} In the instant case, Union Bank argues that the trial court erred in concluding that a financing state-

ment, in order to be effective, must relate to a particular note, loan, or indebtedness. We agree. Ohio law simply has

no such requirement.

{¶ 36} Here, all of Union Bank’s financing statements are sufficient under the applicable law. That is, they pro–

vide the name of the debtor (Tille), the name of the secured party (Union Bank), and they each indicate the collateral

or at least may have, taken place and that the particulars of those transactions could be obtained from Union Bank.

See id. Accordingly, we conclude that not only PN3 and PN4, but also PN1 and PN5, are all perfected security in-

terests, and should be treated that way when determining matters of priority.

{¶ 37} For the foregoing reasons, we find Union Bank’s assignment of error to be well-taken as to PN1 and

PN5.

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{¶ 39} Attempting to avoid this conclusion, Union Bank argues that language contained in all of its security

agreements with Tille independently operate to secure the February 2, 2007 promissory note. The paragraph that

Union Bank quotes, which is found under the heading “Cross Collateralization,” relevantly provides as follows:

{¶ 40} “In addition to the Note, this Agreement secures all obligations, debts and liabilities, plus interest there-

on, of either Grantor or Borrower to Lender, or any one or more of them, as well as all claims by Lender against

Borrower or Grantor or any one or more of them, whether now existing or hereafter arising, whether related or unre-

lated to the purpose of the Note, whether voluntary or otherwise, whether due or not due, direct or indirect, deter-

mined or undetermined, absolute or contingent, liquidated or unliquidated, whether Borrower or Grantor may be

tained in PN2 stating that it is unsecured—language that was drafted by Union Bank—renders PN2, at the very

least, an exception to the more generally applicable cross-collateralization provision that is contained in the various

security agreements. Accordingly, we conclude that the trial court correctly determined that PN2 is unsecured.

{¶ 42} For all of the foregoing reasons, the judgment of the Sandusky County Court of Common Pleas, Probate

Division, is reversed as to PN1 and PN5 and is remanded to the trial court for additional proceedings consistent with

Ohio App. 6 Dist.,2012.

Union Bank Co. v. Heban

Slip Copy, 2012 WL 32102 (Ohio App. 6 Dist.), 2012 -Ohio- 30

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