refuse court william account for first midwest bank are issued this morning is real different issue than what you've been hearing all along it's does a financing statement adequately indicate to use words  revised article nine book collateral when it incorporates by reference a detailed collateral description from an unattached nonpublic security agreement now we think the resolution of that question depends upon understanding changes from the old article nine to the new article mine which became effective in illinois in two thousand and one or article nine nine four zero two one is the section that governed the adequacy of your collateral description and what it said was a financing statement is sufficient if it cantin a statement indicating the types and describing the items of collateral now let's go to the revised code nine by go to the financing statement is sufficient only if it indicates the collateral covered by the state so what's new what they've dropped is first of all we're containers gone and second of all what's going on is indicate t or describe the items of collateral and this isn't happenstance will in any way it was there is a real change comment to official comment to the nine bible for says the follow up and indication may satisfied the requirements of nine bible two a even if it would not have satisfied the requirements of former section nine four zero two one so if there are they're anticipating that they have liberalized the description of collateral in this revision to the code now nine five o two points us to nine five zero four nine five zero four in the amended code again tells us that a financing statement submission really indicates the collateral if the financing statement provides a description of the collateral pursuant to section nine it i yes i understand that and you know this super general description can work in the financing context and not the secret context but otherwise the definitions for describe including the objectively determin lights apply to both that's right could a security agreement cooperate by reference from another document if it could and is that clear i think there's no doubt that there's many cases even pre code that have allowed a security agreement to incorporate by reference from another specifically identified document in fact the first circuits opinion in the financial oversight case which is completely irrelevant to this case because it was decided under nine four zero two the old to wait do not want to wait has a completely different approach it says it's sufficient if it reasonably identifies what was described and then it goes into how do you do that here's a safe harbor there are six categories in that safe harbor one is indicate the type just like in one throw to me it's no longer mandatory it's now permissible another is list the items again just like in four zero two except no longer mandatory just permissive and i will skip to six number six any other method so long as the collateral is objectively determinable and your honor here's where the error of the bankruptcy court buys it doesn't incorporate by reference that that's really that's really her point she may not be right about that but well i do think the directors of the code would think differently and i say that because of the difference in language between the first in the second and we submitted to the court some supplemental authority last week which in my mind closest thing that i have found to any sort of legislative history of nine one zero eight it's an appendix to the auckland u hoffman and it page twenty three which we pointed out in our letter to the court it says the revised tax conveys a strong message that collateral descriptions in financing statements should be deemed suspici for a moment tonight i want to wait till i meet i do want to you know talk a little bit about if collateral as objective we determinable i don't think there should be any question that it is here because all you have to do is look at the security agre creditor would have gotten a copy of the security agreement to make sure that what was in the financing statement really was properly done in the security agreement as well so it's not an astounding comment and it's not difficult either you could pick up the phone and you could call the creditor and ask the creditor for a copy of the security agreement if a critter said oh gee i don't have it you've got nine to ten now to man to tennessee is a method under the code that specifically permits a third party who had any interest in the scope of collateral security to use a doubter to contact a creditor and it requires that within fourteen days that the secure party the celebs are asked to provide an authenticated list of all of the collateral and you know it just because it's nonpublic and you can you would have to use nine to ten there's absolutely nothing in the language of a revised article nine or in the notes the official comments that requires that you on the face of the financing statement describe the collateral in fact what the comments do say is this comment two to section nine want to wait says the test of sufficiency under that under the revised code is to make possible the identification of the collateral so why would you write the code to say any other method if the collateral is subjectively determinable using that word terminable which implies further inquiry further work or why would you say in the comments that the task is to make possible the identification of the collateral and then as the bankruptcy court decide say no but it's no good if you don't have complete self contained sufficient description so the the powers see behind the revisions to article mine is to take the needle which was already moving toward a notice system under the last major revision and push it even further our brief quoted at length those official comments but those official comments really contemplate that further inquiry will be required mr mccann give us some context here because yes at the bankruptcy court citing all of these different opinions yes obviously both parties here are citing opinions all over the map from different jurisdictions federal and state i guess i'm surprised why there isn't a more cept protocol as to the relationship between these documents is it because the facts circumstances of this particular case place us outside the norm as to how financing statements of security agreements usually relate i would say not exactly your honor here's what i would say it goes back to my canon about the changes the profession is really still coming to grips even though this all happened in two thousand and one two revised u c c article lack guy in the past our case would have been difficult if not impossible because nine four o two said you have to have in the statement it has to con tanzanian indication of the type or a description of the item yes that's out that's gone so the parties did cite a ton of cases to your honor and i've got to say the vast majority of these cases are just irrelevant because they were mostly decided under the old article nine there's a handful of cases that were decided under the new article nine and not one of them involves this kind of specific incorporation by reference all of the collateral description in a security agreement you've got two cases of all the cases that were cite factually right on point ok but they're both irrelevant because they're decided under nine four zero two of the old code you've got each other bennett case from the third circuit which was almost on all fours they incorporated by reference an unattached nonpublic security agreement the court said hey under nine four zero two you have to indicate the type or describe the items you're out ok and then you have the puerto rico case which was just cited in january very big case involved over a billion dollars was swizz at issue there and for rico i didn't get around to amending their article nine until twenty thirty and the financing statement issued there was filed in twenty away so it was again a nine four zero two case in that case they incorporated by reference a security agreement attached it but the security agreement itself describe the collateral by further reference to an unattached resolution and that was a public document but unattached and again the court said well one four zero two your statement your financing statement must con mean either an indication of the type or a description of the items of collateral so really those two cases are the two most factually similar but they're legally irrelevant to this matter and to your honor's question there really is nothing even close under the new u c c there is one case called duster house that was cited by the trustee that involved this post revision but in that case what happened was the secured party tried to incorporate by reference from a prior financing statement that had lapsed and the illinois secretary of state's office where it had been filed only kept them for one year so the concern by the court there was we really haven't identified anything because you refer back to a lapsed financing statement where's the difference here is we made a very specific reference are our financing statements collateral all collateral as described in that security agreement between debtor blank and we think right there all you got to do is call the debtor get the security agreement if you won't give it to you make the debtor invoke rights under nine to ten and get the authenticated list of collateral is a great more basic what is it what's the reason for this and then mean for the moment yet to to bring the article line into more of a modern era and as i was saying one of their goals was to move the needle even further toward a true notice system they wanted to simplify financing spiny asking statements so that they really did nine bible for to allow you to either describe the collateral pursuant to nine want to eight or say all assets but you might say to me will why why didn't you guys just spew all assets wealth the promise all assets is the de language that this final statement was not sufficient to perfect the bank security interest the nine five zero two eight three requires a financial statement to indicate the collateral it covers this financial statement indicates absolutely no property no one looking at this financial statement would have any idea what the collateral was collateral is defined as property no idea whatsoever so this financial statement is no better than a blank blank screen all that's not true because i think if it has the inquiry notices the point you see that there is a financing statement you asked the debtor to provide the financing statement and the code provides a way of doing that and then the finding since statement indicates the collateral exactly copy of that security agreement and then treaty with creditors any creditors not have a right to see this i thought there was an well first of all if a debtor wants me to lend money and i say well i want to see if his is being clear but i thought that there was a request under nine to ten thousand to turn the debtor sends a list to the creditor of what he thinks the collateral is and the creditor the lender then has fourteen days to respond to say yes that's correct no it's not correct here's what the collateral is or we don't have any incorporates a reference a security agreement alerting you to the fact that there that it is there is some collateral there and you ask them don't ask the debtor for it and then a debtor doesn't use this mechanism the creditor would just walk away right credit has no duty to provide and you want to call this bank and say can we see your security agreement no obviously that that's an absurd nonsense nonsensical result because how can you meet a duty by referring to something that you don't have to provide type we don't have any color because we're no longer on any money or whatever but there is no right to to obtain the security would it be your position that there was an adequate indication or description of the collateral if the financing statement attached the security  and that's that's the other problem with this if we look at if you think it's ambiguous or possibly this is this is ok to do with the bank that in this case you need to look at what the purpose of the statute is the purpose of having a description of the collateral in the financing statement is to save time and the first save costs and reduce the cost of secure transactions well that's not quite right because that description can be pretty broad i mean it would still be anybody noticed means there might be a need from what i mean where you know it's not just notice of a possible lien it's notice of the property that might be subject to the link because if the financing statement describes the collateral the creditor may be done he doesn't need to contact with the security creditor and obtain a copy of the security agreement and if it's seventy three pages long and have to go through all that doesn't he need to do a nine to ten request as soon as he looks at that finances statement and he sees that his collateral is not covered he can go on with his transaction he doesn't care with a complete state of affairs is he need to call the grettir get a copy of security agreement you don't need to do the nine to ten request you're done because nobody can possibly come ahead those three those three finances creditors cannot possibly come ahead of you you go ahead with your transaction you've just saved time statement describes the collateral the search might end they are now used to save yourself all that time and effort you don't have to look at the security agreement you don't have to do them one to ten you're done other than that there is no case that supports the bank's position which referred to a what was required to describe the real estate because it was a lien on crops that find his statement said see security agreement for the real estate description the court in a very short opinion said the secured creditors that wasn't good enough in the very short opinion and it must be presumed that when the illinois legislature adopted the revised u c c in two thousand one that it was aware of that decision which which is directly against the bank the only difference is that that involved the real estate description not a personal property description but why would there be any difference that we should be treated there's no reason to treat one differently than the other if the legislature in one when it inactive nine five  two had intended to change overrule the scott state bank case it would have said so expressly that's what the presumption is under illinois law it didn't say anything this would be a if the legislature intended to do away with the requirement that a financial statement contain a description of the collateral and therefore reduce the cost of security and actually that's a fundamental change and they would have said something they wouldn't have done it impl in the old code there was a section one one zero four the said there is no there is no repeal by implication where it can be reasonably avoided there can you can the requirement of a financing description should not be overturned by implication if they had intended to do even if you i mean you're right that that provision does not provide a mechanism where it says in so many words you have to have the security agreement but you do have to get the security agreement and ate reasonable description of the nature of the transaction that gave rise to the potential interest on the part of the creditor that says about you you need to be no notified of the nature of the transaction but doesn't say you need to your title can i understand and i agree with you it doesn't say that you actually get the agreement but if the financing statement says all collateral listed in such and such a security agreement and the debtor wanting to get credit then goes to the prior creditor and says i want to know what collateral this is so that you can provide notice to those who are asking about it he still can get a list of the collateral that was the subject of that transaction and provide that collateral to the inquiry in part that's correct but but the bank's financial statement doesn't say this covers all collateral that could be a pain from pursuant to nine to ten it says this this collateral of the club was described in the security agreement has no duty to provide that security right but it has a duty to provide a list of the collateral that the security agreement but after a time five o two doesn't say that a financi that it would substantially increase the cabman's case said that it would impose a ridiculous and how much some burden on commerce if every time they're going to have to do more searching than just look at the five statement that's the whole purpose of the financing statement is to shorten shorten the time it takes to do a secure a transaction you might be done with walls you have to do is look at the financing statement and there are other cases which of hell the secu cannot refer to a security agreement in the the one case cited in the brief referred to that said the collateral was the debt the general business security agreement and that that case was held to be not good not a sufficient description because it doesn't tell you what's in the security agreement the lexington hospitality case described to date and and that gave the title the security agreement that was no good it simply is to the finance the same as got to tell you what the property is not tell you where you this you know we don't have it here you can go get it somewhere else no it has to be in the financing statement this financial statement that the bank file gives a supplement search or no more information than you go back to my example then a blank does when you see a blank line statement you know the creditor you know the debtor you know it's probably a security agreement out there and you know how to get it that's exactly what this tells you you know the better you know the creditor you know there's a security agreement you know how to get it but you don't know what it is and that's the whole point of a financi that is the shortness also the the bankruptcy court relied on the adjustment generis doctrine which should apply in this case nine want to wait be one through be five describe five different ways that collateral can be can be described in a financi do subsequent searches the type as far as the change in the word contains the title of ninety five and two is contents of financing statement i e what is a financial statement have to contain that's what i understand contents to me be the title of the statute indicates that a description is required far as the comment goes the one comment to nine five zero four two does say certain methods under the new statute may not have been acceptable under the old well yes the new statute added description by quantity description by category description by computation or allocation a formula or procedure those are all new  and added the object should be determinable but that doesn't mean that it that the comments authorised incorporation by reference from a private document that the subsequent creditor have no right to see  you know when you look at the plain language of the statute the the tools of construction if you think it's in big us the fact that there is not a single case that supports that that the banks position there are many cases which support the trust supports the trustees position both under the notes i'll give you another thirty seconds so thank your honor i'll try to stay within a minute the main comment i want to make is i listened extremely carefully to counsel and all his arguments and and he's done a great job obviously but when you really listen to counsel's argument he wants nine four zero to one back that's what he wants he wants the financing statement to be required to con tain a statement either indicating the types or describing the item that's every one of his arguments and the cases he cites scott it's scott state bank pre code revision irrelevant also has a very specific a very specific clause that says where you have crop security interest you must in the statement describe the real estate so that's irrelevant i think counsel also talked about the case which is a post revision case that's a case about  completely misleading that financing statement in other words somebody had a financing interest in crops being grown on a least farm and instead of saying crops or you know see the lease agreement between so and so and so and so on as of this date it said farm leaps in the collateral description very misleading so really i concede there is no case that controls in fact the bankruptcy court said in its opinion this is a question of first impression and i would urge the court to think about the changes that the drafters of article nine and that's not the illinois legislature they adopted article mine wholesale with no changes whatsoever what did the