Braunstein v. Gateway Mgmt. Servs. (In re Coldwave Sys., LLC) - 368 B.R. 91 (Bankr. D. Mass. 2007)

Rule:

Silence is not consent in the case of an acceptance of collateral in partial satisfaction of a debt. Cal. Com. Code § 9620, cmt. 3. 

Facts:

The debtor granted to the creditor a security interest in its assets, including a patent. The creditor recorded its interest with the U.S. Patent and Trademark Office (USPTO). Later, after the debtor was in default on its obligations to the creditor, the creditor filed a transfer statement with the USPTO and sent the debtor a letter offering to accept the patent in partial satisfaction of its claim. The debtor never accepted the offer. The creditor also filed two financing statements under the Uniform Commercial Code (UCC) within 90 days before the bankruptcy filing. 

Issue:

Did the debtor’s silence amount to consent in the case of an acceptance in partial satisfaction of a debt?

Answer:

No.

Conclusion:

The court held that the attempted strict foreclosure failed because silence was not consent in the case of an acceptance in partial satisfaction of a debt. The court also held that the recording with the USPTO did not obviate the need to perfect the security interest under the UCC. The court further held that the creditor did not obtain perfection by possession prior to the UCC filings because a patent right was incorporeal property, not susceptible of actual delivery or possession. The court concluded that the security interest was perfected within the 90-day preference period and could be avoided by the trustee.