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In re I80 Equipment, LLC

United States Court of Appeals, Seventh Circuit

September 11, 2019

In Re: I80 Equipment, LLC, Debtor,
v.
Jeana K. Reinbold, not individually but solely in her capacity as Chapter 7 Trustee of the Estate of I80 Equipment, LLC, Defendant-Appellee. First Midwest Bank, Plaintiff-Appellant,

          Argued April 9, 2019

          Appeal from the United States Bankruptcy Court for the Central District of Illinois. Nos. 18-08003 & 17-81749 - Thomas L. Perkins, Chief Bankruptcy Judge.

          Before Kanne, Barrett, and Brennan, Circuit Judges.

          BRENNAN, CIRCUIT JUDGE.

         This interlocutory bankruptcy appeal presents a matter of first impression for our court: whether Illinois's version of Article 9 of the Uniform Commercial Code requires a financing statement to contain within its four corners a specific description of secured collateral, or if incorporating a description by reference to an unattached security agreement sufficiently "indicates" the collateral. The bankruptcy court ruled that a financing statement fails to perfect a security interest unless it "contains" a separate and additional description of the collateral. Given the plain and ordinary meaning of the Illinois statute, and how courts typically treat financing statements, we disagree and reverse.

         I

         The facts necessary to resolve this appeal are straightforward. The debtor, 180 Equipment, LLC, is a business in Illinois that purchased and refurbished trucks for resale. 180 Equipment obtained a commercial loan from First Midwest Bank. To ensure repayment, the parties executed an agreement on March 9, 2015, which granted First Midwest a security interest in substantially all of 180 Equipment's assets. These were described in twenty-six listed categories of collateral, such as accounts, cash, equipment, instruments, goods, inventory, and all proceeds of any assets.[1] To perfect its interest in 180 Equipment's assets, First Midwest timely filed a financing statement with the Illinois Secretary of State. The financing statement purported to cover "[a]ll Collateral described in First Amended and Restated Security Agreement dated March 9, 2015 between Debtor and Secured Party."

         Two years later, 180 Equipment defaulted on the loan and filed a voluntary bankruptcy petition under Chapter 7. The court appointed a trustee to manage the bankruptcy assets. First Midwest sued the trustee, seeking to recover $7.6 million on the loan. It also filed a declaration that its security interest in 180 Equipment's assets was properly perfected and senior to the interests of all other claimants, including the trustee. The trustee countered that First Midwest's security interest was not properly perfected because its financing statement did not independently describe the underlying collateral, but instead incorporated the list of assets by reference to the parties' security agreement. The trustee also asserted a counterclaim to avoid First Midwest's lien pursuant to § 544(a) of the Bankruptcy Code.[2] Both parties moved for judgment on the pleadings.

         The bankruptcy court agreed with the trustee and ruled that "[a] financing statement that fails to contain any description of collateral fails to give the particularized kind of notice" required by Article 9 of the UCC. With First Midwest's consent, the trustee sold the estate's assets for approximately $1.9 million and holds the net proceeds pending resolution of this dispute. The parties jointly certified under 28 U.S.C. § 158(d)(2)(A) that an immediate appeal of the bankruptcy court's decision to this court would materially advance the progress of the case, and this court granted the parties' petition.

         On appeal, neither the validity of the loan nor the legitimacy of First Midwest's security interest is in question. The trustee maintains only that First Midwest's lien is avoidable because the financing statement failed to properly indicate the secured collateral, and First Midwest disagrees.

         II

         We review de novo questions of statutory interpretation. In re Robinson, 811 F.3d 267, 269 (7th Cir. 2016); United States v. Webber, 536 F.3d 584, 593 (7th Cir. 2008). When answering a novel question of state law, we look to "relevant state precedents, analogous decisions, considered dicta, scholarly works, and any other reliable data tending convincingly to show how the highest court in the state would decide the issue at hand." Pisciotta v. Old Nat'l Bancorp, 499 F.3d 629, 635 (7th Cir. 2007). Here, we apply the UCC as interpreted by Illinois courts and governed by Illinois law. See In re Blanchard, 819 F.3d 981, 984 (7th Cir. 2016); see also Helms v. Certified Packaging Corp., 551 F.3d 675, 678 (7th Cir. 2008).

         In Illinois courts, statutory construction starts with the statutory language itself. People v. Grant, 52 N.E.3d 308, 313 (111. 2016). If that language-given its plain and ordinary meaning[3]-is clear and unambiguous, [4] "the court must give it effect and should not look to extrinsic aids for construction." In re Robinson, 811 F.3d at 269; see also Home Star Bank & Fin. Servs. v. Emergency Care & Health Org., 6 N.E.3d 128, 135 (111. 2014) (when construing a statute, "[i]t is improper for a court to depart from the plain statutory language by reading into the statute exceptions, limitations, or conditions that conflict" with the expressed text); LaSalle Bank Nat'l v. Cypress Creek 1, LP, 950 N.E.2d 1109, 1113 (111. 2011) (when plain language is "clear and unambiguous, we will apply it as written"); Webber, 536 F.3d at 593 ("When the plain wording of the statute is clear, that is the end of the matter.").

         We can give statutes their plain and ordinary meaning by applying contemporaneous dictionary definitions, Landis v. Marc Realty, LLC,919 N.E.2d 300, 304 (111. 2009), and by reading the statutes in their entirety. Home Star Bank, 6 N.E.3d at 135 (statutory "[w]ords and phrases should not be viewed in isolation, but should be considered in light of other relevant provisions of the statute"). As the Illinois Supreme Court has explained: "A court must view the statute as a whole, construing words and phrases in light of other relevant statutory provisions and not in isolation. Each word, clause, and sentence of a statute must be given a reasonable meaning, if possible, and should not be rendered superfluous." People v. Perez,18 N.E.3d 41, 44 (111. 2014) (citation omitted); see also In re Melching, 589 B.R. 846, 848-52 ...


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