Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-akd-3_16-cv-00125/USCOURTS-akd-3_16-cv-00125-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BA

---

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ALASKA

NACOLE M. JIPPING, TRUSTEE,

Appellant,

 v.

FIRST NATIONAL BANK ALASKA,

 Appellee.

 Case No. 3:16-cv-00125 -SLG

BK. A15-00076-HAR

ADV. No. A15-90018-HAR

BAP No. AK-16-1155

DECISION & ORDER ON APPEAL

Appellant Nacole M. Jipping, Trustee of the Chapter 7 bankruptcy estate of Omni 

Enterprises, Inc. (“Omni”), appeals the United States Bankruptcy Court for the District of 

Alaska’s order granting summary judgment to First National Bank Alaska (“FNBA”). The 

bankruptcy court determined that FNBA held a valid security interest in the bank account 

owned by Omni in the months preceding Omni’s filing a Chapter 7 bankruptcy petition, 

and therefore held that FNBA’s sweep of the account was supported by its lien rights and 

not avoidable under 11 U.S.C. § 550.

1 On January 25, 2017, the Court heard oral 

argument on the appeal. Having considered the documents filed with the Court, the 

applicable law, and the arguments of the parties, the bankruptcy court’s ruling granting 

summary judgment to FNBA and denying summary judgment to the Trustee is 

 1 Various provisions of the Bankruptcy Code grant a Chapter 7 trustee the power to avoid certain 

transfers of property for the benefit of the bankruptcy estate. See, e.g., 11 U.S.C. §§ 544, 545, 

547, 548, 549, 553(b), 724(a). Once a transfer has been deemed avoidable in a bankruptcy case, 

§ 550 is the vehicle a trustee uses to recover such property. The mechanics or proper application 

of these provisions are not at issue in this case.

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REVERSED and REMANDED with directions to enter summary judgment in favor of the 

Trustee. 

BACKGROUND/JURISDICTION

Before filing for bankruptcy, Omni operated retail stores in Bethel, Alaska.2 It 

maintained a bank account at FNBA from at least 2005 up to the date it filed for 

bankruptcy in 2015.3 Omni and FNBA also maintained a borrower-lender relationship at 

certain times during that period. In July 2009, Omni borrowed $1.3 million from FNBA

(the “2009 Loan”).4 The 2009 Loan was secured by a Commercial Security Agreement 

(the “2009 Security Agreement”), which included as collateral “Deposit Accounts.”5 The 

2009 Security Agreement contained a future advances clause as well as a crosscollateralization clause that provided that the 2009 Security Agreement secured “all 

obligations, debts and liabilities, plus interest thereon, of Grantor to Lender . . . whether 

now existing or hereafter arising.”6 The 2009 Security Agreement also contained a 

“Perfection of Security Interest” section stating: “This is a continuing Security Agreement 

and will continue in effect even though all or any part of the Indebtedness is paid in full 

 2 Docket 4-1 (Compl.) at 4.

3 Id. at 6.

4 Id. at 4.

5 Docket 4-9 (2009 Security Agreement) at 1. Article 9 of the Alaska Uniform Commercial Code 

(“UCC”) provides that “‘deposit account’ means a demand, time, savings, passbook, or similar 

account maintained with a bank except that the term does not include investment property or 

accounts evidenced by an instrument.” ALASKA STAT. § 45.29.102(a)(36). Omni’s FNBAmaintained bank account, which FNBA swept in 2015, was a Deposit Account. Docket 4-1 

(Compl.) at 6.

6 Docket 4-9 (2009 Security Agreement) at 1.

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and even though for a period of time Grantor may not be indebted to Lender.”7 Omni paid 

off the 2009 Loan in full in July 2011, and had no indebtedness to FNBA until August 

2013.8 

In August 2013, Omni borrowed $2.6 million from FNBA for equipment for a new 

grocery store (the “2013 Loan”).

9 The Commercial Security Agreement securing the 2013 

Loan (the “2013 Security Agreement”) granted FNBA a lien on a detailed list of specific 

items of equipment, but did not explicitly include “Deposit Accounts” or refer to the 2009 

Security Agreement.10 The 2013 Security Agreement contained an integration clause 

stating that “[t]his Agreement, together with the Related Documents, constitutes the entire 

understanding and agreement” between FNBA and Omni with respect to the 2013 loan.

11

In early 2015, Omni defaulted on the 2013 Loan. FNBA debited Omni’s FNBAmaintained bank account to satisfy the mortgage payments for January and February

2015.12 In March 2015, FNBA swept Omni’s account, seizing roughly $1.3 million, which 

it applied against the 2013 Loan.13 The Trustee then filed this adversary action in 

bankruptcy court to recover the seized funds.14 On cross-motions for summary judgment, 

 7 Docket 4-9 (2009 Security Agreement) at 1.

8 Docket 4-1 (Compl.) at 5.

9 Id.

10 Id. at 5.

11 Docket 4-9 (2013 Security Agreement) at 8.

12 Docket 4-1 (Compl.) at 6–7.

13 Id. at 7.

14 Id. at 1–2.

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the bankruptcy court entered summary judgment for FNBA, after finding that (1) FNBA’s 

security interest in the “Deposit Accounts” in the 2009 Security Agreement did not 

terminate when the 2009 Loan was paid off; and (2) the integration clause in the 2013 

Security Agreement did not exclude the 2009 Security Agreement from applying to the 

2013 loan.

15 Accordingly, the bankruptcy court concluded that the FNBA sweep was 

supported by its lien rights on Omni’s bank account, and the Trustee could not avoid it 

under the Bankruptcy Code.16

The Trustee filed a timely notice of appeal on June 1, 2016.17 FNBA then filed a 

notice of election to have the appeal decided by the district court,

18 to which the case was 

then transferred.

19 This Court has jurisdiction to review final orders of a bankruptcy court 

under 28 U.S.C. § 158(a)(1).

ISSUES PRESENTED/STANDARD OF REVIEW

 The parties agree that resolution of this appeal turns on whether FNBA held a 

valid security interest in Omni’s FNBA-maintained bank account when FNBA swept the 

account in early 2015.20 The Trustee challenges both of the findings of the bankruptcy 

 15 Docket 4-10 (Order Granting FNBA’s Mot. for Summ. J. and Final J. for Def.) at 1–2.

16 Docket 4-8 (Mem. Decision Regarding Cross-Mots. for Summ. J.) at 17–18.

17 Docket 3-1 (Transmittal Form) at 4–5.

18 Docket 3-2 (Appellant Statement of Election).

19 Docket 3 (Notice of Transfer of Appeal from Bankruptcy Court).

20 Docket 12 (Appellant’s Br.) at 8 n.6; Docket 14 (Appellee’s Br.) at 14. The parties agree that if 

FNBA had a valid lien in the bank account, it may retain the swept funds and, if it did not, it must 

return the swept funds to the Trustee. 

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court.21

“The issues raised here involve interpretation of a security agreement executed 

between [Omni and FNBA] and the scope of a claimed security interest. The Alaska 

Uniform Commercial Code and applicable state law regarding contract interpretation will 

govern their resolution.”22 Under Alaska law, “[t]he objective of contract interpretation is 

to determine and enforce the reasonable expectations of the parties.”23

This Court reviews de novo a bankruptcy court’s ruling on cross-motions for 

summary judgment, its interpretation of security agreements, and its interpretation of state 

law.24 Here, the parties agree that whether FNBA held a valid security interest in Omni’s 

bank account when FNBA performed the sweep in early 2015 should be reviewed de 

novo.

DISCUSSION

The Trustee seeks reversal of the bankruptcy court’s decision for two reasons. 

First, she argues that the 2009 Security Agreement, which provides that it terminates 

once the “Indebtedness” is paid in full, terminated in 2011 when Omni paid off the 2009 

 21 Docket 12 (Appellant’s Br.) at 6.

22 In re Alaska Fur Gallery, 457 B.R. 764, 765 (Bankr. D. Alaska 2011) (footnote omitted); see 

also Butner v. United States, 440 U.S. 48, 55 (1979) (finding that whether a security agreement 

creates a lien on particular assets is a question of state law).

23 Norvill v. Carr-Gottstein Foods Co., 84 P.3d 996, 1004 (Alaska 2004). 

24 See Trunk v. City of San Diego, 629 F.3d 1099, 1105 (9th Cir. 2011) (summary judgment); 

Conrad v. Ace Prop. & Cas. Ins. Co., 532 F.3d 1000, 1004 (9th Cir. 2008) (interpretation and 

meaning of contracts); see also Salve Regina Coll. v. Russell, 499 U.S. 225, 231 (1991) 

(interpretation of state law).

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Loan.25 FNBA responds that the 2009 Security Agreement defines “Indebtedness” to 

specifically include future advances26 and also includes a cross-collateralization clause.

27

Therefore, FNBA maintains that the 2009 agreement, which included Omni’s FNBAmaintained “Deposit Accounts” as collateral, was not terminated when the 2009 Loan was 

paid off.28 FNBA cites to a provision in the 2009 Security Agreement that it “is a continuing 

Security Agreement and will continue in effect even though all or any part of the 

Indebtedness is paid in full and even though for a period of time Grantor may not be 

 25 Docket 12 (Appellant’s Br.) at 16–30. The 2009 Security Agreement includes a “Survival of 

Representations and Warranties” clause that states:

All representations, warranties, and agreements made by Grantor in this Agreement shall 

survive the execution and delivery of this Agreement, shall be continuing in nature, and 

shall remain in full force and effect until such time as Grantor’s Indebtedness shall be paid 

in full.

Docket 4-9 (2009 Security Agreement) at 4.

26 The 2009 Security Agreement states, “In addition to the Note, this Agreement secures all future 

advances made by lender to Grantor regardless of whether the advances are made a) pursuant 

to a commitment or b) for the same purposes.” Docket 4-9 (Security Agreement) at 1.

27 The “Cross-Collateralization” clause in the 2009 Security Agreement provides:

In addition to the Note, this Agreement secures all obligations, debts and liabilities, plus 

interest thereon, of Grantor to Lender, or any one or more of them, as well as all claims 

by Lender against Grantor or anyone or more of them, whether now existing or hereafter 

arising, whether related or unrelated to the purpose of the Note, whether voluntary or 

otherwise, whether due or not due, direct or indirect, determined or undetermined, 

absolute or contingent, liquidated or unliquidated, whether Grantor may be liable 

individually or jointly with others, whether obligated as guarantor, surety, accommodation 

party or otherwise, and whether recovery upon such amounts may be or hereafter may 

become barred by any statute of limitations, and whether the obligation to repay such 

amounts may be or hereafter may become otherwise unenforceable.

Docket 4-9 (Security Agreement) at 1.

28 Docket 14 (Appellee’s Br.) at 24–33.

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indebted to Lender.”29

As discussed below, the Court has determined that the second issue raised in this 

appeal is dispositive. Therefore, the Court will assume, without deciding, that the 2009 

Security Agreement remained in effect after Omni paid off the 2009 Loan and turn to this 

second issue: whether the 2013 Security Agreement’s integration clause precludes 

FNBA’s reliance on the 2009 Security Agreement as security for the 2013 Loan. 

The 2013 Security Agreement contains the following integration clause:

Amendments. This Agreement, together with any Related Documents, 

constitutes the entire understanding and agreement of the parties as to the matters 

set forth in this Agreement. No alteration or amendment to this Agreement shall 

be effective unless given in writing and signed by the party or parties sought to be 

charged or bound by the alteration or amendment.30

FNBA maintains that the integration clause does not exclude the 2009 Security 

Agreement and instead argues that the 2009 Security Agreement is implicitly included as 

a “Related Document[]” referenced in the integration clause itself.31 The bankruptcy court 

agreed with FNBA, concluding, “The reference to the 2009 Security Agreement is not 

specific, and is in fact exceedingly obscure. But, in parsing the meaning of Related 

Documents, I conclude the 2009 Security Agreement is not excluded by the integration 

clause; it is in fact included.”32 The bankruptcy court reasoned:

The answer lies in the somewhat circular definitions of “Related Documents” and 

“Indebtedness” in the 2013 Security Agreement. It becomes a chicken-and-egg 

 29 Docket 4-9 (2009 Security Agreement) at 1.

30 Docket 4-9 (2013 Security Agreement) at 8.

31 Docket 14 (Appellee’s Br.) at 33–37.

32 Docket 4-8 (Mem. Decision Regarding Cross-Mots. for Summ. J.) at 18–19 (emphasis in 

original).

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question—does the integration clause exclude the 2009 Security Agreement or 

not? Despite this circularity, the Related Documents definition in the 2013 Security 

Agreement is sufficiently clear to mean, in this case [emphasis and bracket matter 

added]:

Related Documents. The words “Related Documents” mean all 

promissory notes, credit agreements, loan agreements, environmental 

agreements, guaranties, security agreements [such as the 2009 

Security Agreement], mortgages, deeds of trust, security deeds, collateral 

mortgages, and all other instruments, agreements and documents, whether 

now or hereafter existing [such as the 2009 Security Agreement], 

executed [by virtue of the Future Advances clause in the 2009 Security 

Agreement] in connection with the Indebtedness [such as the 2013 

loan].

33

The Court finds, however, that FNBA and the bankruptcy court’s interpretation 

constitutes a strained reading of the Related Documents clause, as perhaps best 

evidenced by the parentheticals added by the bankruptcy court. In this Court’s view, a 

more natural reading of the Related Documents clause favors the Trustee’s position. For 

the 2009 Security Agreement to secure payment for the 2013 Loan, the 2009 Security 

Agreement must be a “Related Document[],” meaning that it was “executed in connection 

with the Indebtedness.” The bankruptcy court concluded that the 2009 Security 

Agreement was “executed in connection with” the 2013 Loan because the definition of 

“Indebtedness”34 in the 2013 Security Agreement refers to “future advances,” which the 

 33 Id. at 18 (footnote omitted; emphasis in original); Docket 4-9 (2013 Security Agreement) at 9.

34 The 2013 Security Agreement states:

The word “Indebtedness” means the indebtedness evidenced by the Note or Related 

Documents, including all principal and interest together with all other indebtedness and 

costs and expenses for which Grantor is responsible under this Agreement or under any 

of the Related Documents. Specifically, without limitation, Indebtedness includes the 

future advances set forth in the Future Advances provision, together with all interest 

thereon and all amounts that may be indirectly secured by the Cross-Collateralization 

provision of this Agreement.

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bankruptcy court then interpreted to extend to the future advances clause of the 2009 

Security Agreement.35 But, as the bankruptcy court acknowledged, this interpretation of

the 2013 clause constitutes a “somewhat circular” construction of the relevant terms so 

as to result in an “exceedingly obscure” connection between the 2009 and 2013 Security 

Agreements.36

Giving ordinary words their ordinary meaning, as required by Alaska law,37 it is 

more logical to construe “in connection with the Indebtedness” in the 2013 Security 

Agreement to refer solely to those documents executed with respect to the 2013 Loan, 

thus excluding from “Related Documents” the 2009 Security Agreement, as that 

document was executed in connection with the 2009 Loan. And FNBA offers no evidence 

by way of conduct or independent contractual language that shows that FNBA or Omni 

intended to incorporate the 2009 Security Agreement into the 2013 Security Agreement. 

Moreover, the Alaska Supreme Court has articulated an objective standard to 

contract interpretation.38 A third party examining the 2013 Security Agreement would be 

unlikely to discern that the 2009 Security Agreement was incorporated into the 2013 

 

Docket 4-9 (2013 Security Agreement) at 9. 

35 The “Future Advances” provision in the 2009 Security Agreement states: “In addition to the 

Note, this Agreement secures all future advances made by Lender to Grantor regardless of 

whether the advances are made a) pursuant to a commitment or b) for the same purposes.” 

Docket 4-9 (2009 Security Agreement) at 1.

36 Docket 4-8 (Mem. Decision Regarding Cross-Mots. for Summ. J.) at 16–17.

37 Norville, 84 P.3d at 1001 n.3 (“In interpreting contracts, . . . unless otherwise defined, words will 

be interpreted as taking their ordinary, contemporary, common meaning.”) (quotation marks and 

citation omitted).

38 Martin v. Maldonado, 572 P.3d 763, 767 (Alaska 1977).

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Security Agreement. To do so would require the third party to have knowledge of the 

earlier-terminated loan and the 2009 Security Agreement, and to employ the circular 

interpretation used by the bankruptcy court. More to the point, it is unlikely that a potential 

creditor to Omni in 2012, after the 2009 loan had been paid in full, would have concluded 

that the 2009 Security Agreement would accord FNBA a continuing primary lien in the 

event that FNBA advanced future sums to Omni in 2013.

FNBA cites to an Alaska statute that provides that a security agreement may 

commit collateral to secure “future advances or other value.”39 But even if the parties had 

agreed in 2009 to include Omni’s “Deposit Accounts” as collateral for any future loans, 

such as the 2013 Loan, any such agreement would be vitiated by the integration clause 

in the 2013 Security Agreement, unless the 2009 Security Agreement is treated as a 

“Related Document” in the 2013 Security Agreement. But, as a matter of law, the Court 

holds that the 2009 Security Agreement was not a “Related Document[]” and therefore 

does not secure the 2013 Loan. 

FNBA also argues that “the 2009 Security Agreement constitutes a separate and 

distinct contract, capable of independent enforcement.”40 But as discussed above, the 

2013 Security Agreement provides that it, along with the “Related Documents” that this 

Court has already concluded excludes the 2009 Security Agreement, “constitutes the 

entire understanding and agreement of the parties as to the matters set forth in th[at] 

 39 Docket 14 (Appellee’s Br.) at 20–21 (quoting ALASKA STAT. § 45.29.204(c) (“A security 

agreement may provide that collateral secures . . . future advances or other value, whether or not 

the advances or value are given pursuant to a commitment.”)).

40 Docket 14 (Appellee’s Br.) at 21.

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Agreement.”41 Clearly, the scope of collateral securing the 2013 Loan is a “matter[] set 

forth in the [2013] Agreement.”42 Thus, the integration clause in the 2013 Security 

Agreement precludes independent enforcement of the 2009 Security Agreement with 

respect to the swept assets.

ORDER

For the foregoing reasons, the judgment of the bankruptcy court is REVERSED, 

and the case is REMANDED to the bankruptcy court with direction to enter summary 

judgment in favor of the Trustee. The Clerk of Court is directed to enter a final judgment 

accordingly.

DATED this 8th day of March, 2017 at Anchorage, Alaska.

/s/ Sharon L. Gleason

UNITED STATES DISTRICT JUDGE

 41 Docket 4-9 (2013 Security Agreement) at 8.

42 Id.

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