In re Yantz - No. 04-10370, 2004 Bankr. LEXIS 2279 (Bankr. D. Vt. Sep. 22, 2004)

Rule:

Under Vt. Stat. Ann. tit. 9A, § 9-203(b)(3)(A), in order to establish a security interest, there must be an authenticated security agreement that provides a description of the collateral. In order to be enforceable, a security agreement must contain the elements set forth in the definition of a "security interest." Under Vt. Stat. Ann. tit. 9A, § 1-201(37), a "security interest" is defined as an interest in personal property or fixtures which secures payment or performance of an obligation. Neither Vt. Stat. Ann. tit. 9A, § 1-201(37) nor Vt. Stat. Ann. tit. 9A, § 9-203(b)(3)(A) specifically requires a writing, but § 9-203(b)(3)(A) does require that the security agreement be authenticated. "Authenticated" means to sign or affix a symbol with the present intent of the authenticating person to identify the person and adopt or accept a record. Vt. Stat. Ann. tit. 9A, § 9-102(7)(A)(B). This implies that some sort of writing with a signature or symbol is required in order to enforce a security interest.

Facts:

The Court considers unique circumstances in this case. Attorney McKnight represented the Debtor in connection with a mortgage foreclosure action prior to his filing a chapter 13 case. Attorney McKnight filed a proof of claim in the chapter 13 case, asserting secured status for a portion of the claim. She also filed an Objection to the Confirmation of the Plan objecting to the amount of money to be distributed to unsecured creditors. She challenged the figures presented in Schedule J of the Plan that alleged that the Debtor only had an estimated annual income of $ 82,000. She asserted that the Debtor, during oral representations to her, had stated that he made gross income in excess of $100,000 per year. The Debtor filed an Objection to Claim challenging Attorney McKnight's claim on three bases: (1) Attorney McKnight had not been retained to represent the Debtor, referring to the Debtor's testimony to this effect at the § 341 (a) meeting of creditors; (2) the documents attached to the proof of claim were insufficient to support the charges asserted to be due to Attorney McKnight for services rendered; and (3) Attorney McKnight had not provided documents evidencing a security interest in the 1999 Polaris snowmobile. The Debtor and Attorney McKnight each filed a memorandum of law setting forth their respective arguments as to whether an enforceable security interest existed between the parties. The Court overruled Attorney McKnight's objection to confirmation and confirmed the plan subject to a later determination of the status of Attorney McKnight's claim 

Issue:

Did an enforceable security interest exist between the parties?

Answer:

No

Conclusion:

The court rejected these arguments. Under Vt. Stat. Ann. tit. 9A, § 9-203, to establish an enforceable security interest, the creditor had to show that value had been given, that the debtor had rights in the collateral, and that the debtor had authenticated a security agreement containing a description of the collateral. To use multiple documents, the creditor also had to show a meeting of the minds. A ratified retainer letter did not contain a description of the collateral or articulate the creation of a security interest. Notes from the creditor's paralegal based on a conversation with the debtor and a letter following a telephone conversation also did not provide a description of the collateral or contain the debtor's signature. Testimonial evidence failed to show a meeting of the minds to create a security interest in the snowmobile. Evidence of intentional misstatements regarding the original retainer agreement did not establish an enforceable security interest.