ProGrowth Bank, Inc. v. Wells Fargo Bank, N.A.
2009 WL 415249, 558 F.3d 809, 2009 U.S. App. LEXIS 5178 (2009)
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Rule of Law:
A UCC financing statement that includes a generic 'all assets' clause is sufficient to perfect a security interest, even if a more specific description of collateral within the same statement contains errors that, viewed in isolation, would be seriously misleading.
Facts:
- On September 8, 2005, Global One loaned one million dollars to the Christopher Hanson Insurance Agency, secured by two annuity contracts (L9E00015 and L9E00016) issued by Fidelity & Guaranty.
- That same day, Wells Fargo, as Global One's agent, filed a financing statement for annuity L9E00015 which included a clause covering 'All of Debtor’s... assets and rights of Debtor'.
- This financing statement contained errors, identifying the contract number as 'LE900015' and the issuer as 'Lincoln Benefit Life' instead of Fidelity & Guaranty.
- On September 16, 2005, Wells Fargo filed a second financing statement for annuity L9E00016, which also included the 'all assets' clause but mistakenly identified the issuer as 'Lincoln Benefit Life'.
- On February 9, 2006, ProGrowth Bank loaned money to Hanson.
- As security for its loan, Hanson assigned his interests in the same two Fidelity & Guaranty annuity contracts to ProGrowth.
- On February 14, 2006, ProGrowth filed two financing statements that correctly identified the annuity contracts by number and issuer.
Procedural Posture:
- ProGrowth Bank, Inc. filed a lawsuit in federal district court against Global One Financial, Inc. and Wells Fargo Bank, N.A.
- ProGrowth sought a declaratory judgment that its security interests in the annuity contracts were superior to any claimed by the Defendants.
- ProGrowth moved for summary judgment, which the district court granted, finding the Defendants' financing statements were seriously misleading.
- The Defendants filed a motion to alter or amend the judgment, which the district court denied.
- The Defendants (as appellants) appealed the district court's grant of summary judgment to the U.S. Court of Appeals for the Eighth Circuit.
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Issue:
Is a UCC financing statement that contains seriously misleading specific collateral descriptions rendered ineffective if it also includes a broad clause indicating coverage over 'all assets' of the debtor?
Opinions:
Majority - Bye, Circuit Judge
No. A financing statement containing a generic 'all assets' clause sufficiently perfects a security interest and is not rendered seriously misleading by errors in a separate, more specific collateral description. Under Missouri's UCC § 400.9-504, a financing statement can indicate collateral by either a specific description or a general indication of 'all assets or all personal property'. The court found that the Defendants' financing statements contained a valid 'all assets' clause, which was grammatically independent of the subsequent, erroneous description of the specific annuity contracts. This broad clause serves the UCC's purpose of notice filing by alerting subsequent creditors that a security interest may exist, which places the burden on them to make further inquiries. Because the 'all assets' language provided sufficient notice on its own, the inaccuracies in the specific description were immaterial and did not render the entire financing statement seriously misleading.
Analysis:
This decision reinforces the 'notice filing' theory of the UCC, prioritizing the function of alerting subsequent creditors over the perfect description of collateral. It establishes that a broad 'all assets' clause can effectively act as a savings clause, curing what would otherwise be seriously misleading errors in a more specific collateral description within the same financing statement. This places a significant burden on subsequent searchers; upon seeing an 'all assets' clause, they cannot rely on errors in specific descriptions to invalidate a prior claim but must conduct further due diligence to ascertain the scope of the existing security interest. The ruling provides secured parties with a powerful and simple method to ensure their financing statements are effective, even in the face of clerical errors.
