Court Opinion

ID: 1085398
Source: CourtListenerOpinion
Date Created: 2013-10-15 23:52:11.755168+00
Date Added: 2024-06-11T13:10:42.786528
License: Public Domain

FILED
                                                            OCT 15 2013
 1
                                                        SUSAN M. SPRAUL, CLERK
 2                                                        U.S. BKCY. APP. PANEL
                                                          OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )         BAP No.   OR-12-1483-JuTaPa
                                   )
 6   CHARLES A. GROGAN, d/b/a      )         Bk. No.   11-65409-TMR
     Silver Bells Tree Farm and    )
 7   SARAH A. GROGAN,              )         Adv. No. 11-06276-TMR
                                   )
 8                  Debtors.       )
     ______________________________)
 9   CHARLES A. GROGAN;            )
     SARAH A. GROGAN,              )
10                                 )
                    Appellants,    )
11                                 )
     v.                            )         M E M O R A N D U M*
12                                 )
     HARVEST CAPITAL COMPANY;      )
13   DEMETER AG, LLC,              )
                                   )
14                  Appellees.     )
     ______________________________)
15
                      Argued and Submitted on July 25, 2013
16                              at Butte, Montana
17                          Filed - October 15, 2013
18               Appeal from the United States Bankruptcy Court
                           for the District of Oregon
19
              Honorable Thomas M. Renn, Bankruptcy Judge, Presiding
20                           _______________________
21   Appearances:      Laura J. Walker, Esq., of Cable Huston Benedict
                       Haagensen & Lloyd LLP, argued for appellants,
22                     Charges A. Grogan and Sarah A. Grogan; Todd L.
                       Friedman, Esq., of Stoel Rives LLP, argued for
23                     appellee Harvest Capital Company; Aaron J. Bell,
                       Esq., of Bell Law Firm, PC appeared for appellee
24                     Demeter Ag, LLC.
                            _________________________
25
26        *
            This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8013-1.

                                       -1-
 1   Before:       JURY, TAYLOR, and PAPPAS, Bankruptcy Judges.
 2             Chapter 111 debtors, Charles A. Grogan and Sarah A. Grogan,
 3   own and operate a Christmas tree farm.        Debtors commenced an
 4   adversary proceeding against appellees, Harvest Capital Company
 5   (Harvest) and Demeter Ag, LLC (Demeter) (collectively, Harvest
 6   and Demeter are referred to as Defendants), asserting that:
 7   (1) the collateral description in Defendants’ security
 8   agreements did not include Christmas trees or, if they did,
 9   (2) the collateral description in Defendants’ financing
10   statements did not include Christmas trees and, therefore, their
11   liens were not perfected and avoidable under § 544.       Debtors
12   filed a motion for summary judgment (MSJ) on these issues, and
13   Defendants filed cross-motions for summary judgment.
14             The bankruptcy court denied debtors’ MSJ and granted
15   Defendants’ cross-motions finding that, as a matter of law, the
16   collateral description reasonably identified the Christmas trees
17   as Defendants’ collateral under Oregon’s version of the Uniform
18   Commercial Code (UCC).       As a result, the court concluded that
19   Defendants’ notes were secured by properly perfected unavoidable
20   security interests in debtors’ Christmas trees and their
21   proceeds.       This appeal followed.    We AFFIRM.
22   ///
23   ///
24   ///
25
           1
26          Unless otherwise indicated, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
27   “Rule” references are to the Federal Rules of Bankruptcy
     Procedure and “Civil Rule” references are to the Federal Rules of
28   Civil Procedure.

                                        -2-
 1                                  I.   FACTS2
 2            Debtors own and operate, as a sole proprietorship, Silver
 3   Bells Tree Farm, located in Marion County, Oregon, where they
 4   plant and grow Christmas trees.       Approximately twelve years
 5   after being planted, the Christmas trees are harvested for sale.
 6   At various times, debtors took out secured loans with
 7   Defendants.
 8   A.       The Harvest Loans
 9            In September 2006, debtors borrowed $7 million from Harvest
10   as evidenced by two promissory notes:        one for $5,500,000
11   (Note A) and the other for $1,500,000 (Note B).       Both notes were
12   secured by a combined mortgage/security agreement (Harvest
13   Security Agreement), which was recorded in the Marion County
14   real property records.
15            The Harvest Security Agreement provides in relevant part:
16            To secure payment of the Indebtedness and performance
              of all obligations of mortgagor under this Mortgage,
17            mortgagor mortgages and conveys to Lender the
              following:
18
              . . .
19
              (4) All trees, bushes, vines and other permanent
20            plantings now or hereafter located on the real
              property (the “Plantings”);
21
              (5) All intellectual property rights now or hereafter
22            held by Mortgagor with respect to Plantings now or
              hereafter growing on the Real Property, including,
23            without limitation, the SILVER BELLS BLUE™ NOBLE FIR
              trademark and other labels, logos, patents or patent
24            licenses and trademark rights (the “Intellectual
              Property Rights”); . . . .
25
              . . . .
26
27
          2
            Many of the facts are taken from the bankruptcy court’s
28   published opinion at 476 B.R. 270 (Bankr. D. Or. 2012).

                                         -3-
 1            Mortgagor presently assigns to Lender all of
              Mortgagor’s right, title and interest in and to all
 2            rents, revenues, income, issues and profits (the
              “Income”) from the Real Property, the Plantings, the
 3            Personal Property . . ., whether now or hereafter due.
 4            Mortgagor grants Lender a security interest in the
              Income, Plantings, the Water Rights, the Personal
 5            Property, . . . .
 6            Section 8 of the agreement, entitled “Security Agreement,
 7   Security Interest” further provides:
 8            8.1 Security Agreement. This instrument shall
              constitute a security agreement with respect to the
 9            Income, Plantings, Water Rights, Personal property,
              . . . .
10
11            On September 20, 2006, and September 2, 2009, respectively,
12   Harvest filed an original and amended UCC financing statement
13   with the Oregon Secretary of State (Harvest Financing
14   Statements).     Exhibit B to each of the Harvest Financing
15   Statements stated that the collateral included, among other
16   things:
17            2. All improvements, fixtures, equipment, construction
              materials, and other articles of personal property now
18            owned or hereafter acquired by the Debtor that now or
              hereafter are located on, affixed or attached to, or
19            incorporated in the Land, including all irrigation
              pumps, motors, pipes, sprinklers and other irrigation
20            equipment.
21            3. All trees, bushes, vines and other permanent
              plantings now or hereafter located on the Land.3
22
              4. All intellectual property rights of Debtor with
23            respect to Christmas trees, vines or other permanent
              plantings now or hereafter growing on the Land,
24
25        3
            As discussed below, debtors placed at issue in their MSJ
26   the description of collateral contained in § 4 of the security
     agreement and § 3 of the financing statement which were virtually
27   identical; i.e., “[a]ll trees, bushes, vines and other permanent
     plantings . . . .” Debtors maintained that this description
28   could not include Christmas trees.

                                       -4-
 1            including, without limitation, the SILVER BELLS BLUE™
              NOBLE FIR trademark and all patents, trademarks and
 2            patent licenses and trademark rights.
 3   The Harvest Financing Statements were timely continued by a
 4   continuation statement filed on August 4, 2011.
 5   B.       The Demeter Loan
 6            In March 2008, the Grogans borrowed $225,000 from Demeter
 7   evidenced by a promissory note and secured by a combined
 8   mortgage, assignment of rents and security agreement and fixture
 9   filing.     In February 2010, the original note was replaced by a
10   $400,000 note (Demeter Note).     The original mortgage/security
11   agreement was also replaced by an amended and restated agreement
12   (Demeter Security Agreement).     The Demeter Security Agreement
13   stated that to secure payment of the indebtedness, debtors
14   conveyed a security interest to Lender in, among other things,
15   “(4) All Christmas trees, trees, and timber now or hereafter
16   grown, growing or to be grown on the Real Property (the
17   “Trees”).”4     The Demeter Security Agreement was duly recorded in
18   the Marion County real property records on February 19, 2010.5
19            Demeter filed a UCC financing statement with the Oregon
20   Secretary of State on March 18, 2008 (Demeter Financing
21   Statement).     Exhibit B to the Demeter Financing Statement stated
22   that the collateral covered included, among other things:
23
24        4
            The Demeter Security Agreement also contained another
     paragraph similar to that in the Harvest Security Agreement:
25
     “(5) All trees, bushes, vines and other permanent plantings now
26   or hereafter located on the Real Property (the “Plantings”).”
          5
27          Demeter was also assigned rights under loans made to the
     Grogans by Heinze Investments, LLC. Demeter’s rights under those
28   loans are not at issue in this appeal.

                                       -5-
 1        2. All improvements, fixtures, equipment,
          construction material, and other articles of personal
 2        property now owned and hereafter acquired by the
          Debtor that now or hereafter are located on, affixed
 3        or attached to, or incorporated in the Land, including
          all irrigation pumps, motors, pipes, sprinklers and
 4        other irrigation equipment.
 5        3. All trees, bushes, vines and other permanent
          plantings now or hereafter located on the Land;
 6
          4. All intellectual property rights of Debtor with
 7        respect to Christmas trees, vines or other permanent
          plantings now or hereafter growing on the Land,
 8        including, without limitation, the SILVER BELLS BLUE™
          NOBLE FIR trademark and all patents, trademarks and
 9        patent licenses and trademark rights.
10   C.   Bankruptcy Proceedings
11        On October 31, 2011, debtors filed a voluntary chapter 11
12   petition.
13        On December 15, 2011, debtors commenced an adversary
14   proceeding against Defendants, seeking a declaration that
15   Defendants did not have an enforceable and perfected security
16   interest in the Christmas trees because the collateral
17   description in Defendants’ security agreements and financing
18   statements was inadequate.    Debtors also sought attorneys’ fees
19   and costs.
20        On January 17, 2012, Harvest filed an answer, counterclaim
21   and third-party complaint.    Harvest’s counterclaim was for
22   attorneys’ fees and costs.    The third-party complaint asserted a
23   claim for conversion against the law firm which had received
24   $180,000 from debtors as a retainer for legal services.   Harvest
25   alleged that this amount was subject to its security interest in
26   the proceeds from the sale of Christmas trees.   In a stipulated
27   order filed February 15, 2012, the parties agreed to bifurcate
28   and abate the third-party complaint until the bankruptcy court

                                     -6-
 1   entered a judgment in the adversary proceeding.6
 2            On March 29, 2012, debtors filed their MSJ, seeking a
 3   declaration that Defendants did not have a valid, perfected lien
 4   on the Christmas trees or other crops, or their proceeds.
 5   Debtors asserted that the phrase “[a]ll trees, bushes, vines and
 6   other permanent plantings . . .” did not reasonably identify
 7   Christmas trees because the term “trees” was modified by the
 8   word “permanent,” and Christmas trees are “crops” and “crops” by
 9   definition are not “permanent” under the holding of Rainier
10   Nat’l Bank v. Sec. State Bank, 796 P.2d 443, 445 (Wash. 1990).
11            On April 3, 2012, debtors filed their second amended
12   complaint (SAC).     The SAC contained two claims:   the first was
13   again for a declaration that Defendants did not have enforceable
14   and perfected security interests in debtors’ Christmas trees and
15   other crops or their proceeds; alternatively, assuming such
16   liens exist, the second claim sought to avoid the liens under
17   § 5447 because they were not properly perfected liens in the
18   Christmas trees due to the inadequate collateral description in
19   Defendants’ financing statements.
20            On April 17, 2012, Demeter answered the SAC and
21   counterclaimed for its attorneys’ fees and costs.
22            On April 20, 2012, Harvest filed its amended answer,
23   counterclaim, and third-party complaint.
24
          6
            This matter was later reinstated after the bankruptcy
25   court entered judgment on the cross motions for summary judgment.
26        7
            Generally, under § 544(a), a debtor in possession can
27   avoid prepetition security interests that have not been properly
     perfected. See NetBank, FSB v. Kipperman (In re Commercial Money
28   Ctr., Inc.), 350 B.R. 465, 474 (9th Cir. BAP 2006).

                                       -7-
 1        On April 23, 2012, Harvest filed its cross-MSJ and response
 2   to debtors’ MSJ.   On the same date, Demeter filed its cross-MSJ
 3   and response to debtors’ MSJ.
 4        On June 21, 2012, the bankruptcy court heard the matter and
 5   took it under advisement.
 6        On July 26, 2012, the bankruptcy court issued its
 7   Memorandum Opinion concluding that, as a matter of law,
 8   Defendants’ security agreements and financing statements
 9   reasonably identified Christmas trees as collateral subject to
10   their security interests.   In reaching this conclusion, the
11   bankruptcy court examined the relevant sections of Oregon’s
12   version of the revised UCC for collateral descriptions,
13   considered whether the doctrine of the last antecedent (DOTLA)
14   applied, found debtors’ reliance on Rainier unpersuasive, and
15   used common law contract principles to objectively determine
16   whether Christmas trees were included in the collateral
17   description.
18        In considering the phrase “[a]ll trees, bushes, vines and
19   other permanent plantings . . . ,” the bankruptcy court found
20   that application of the DOTLA was inconclusive on whether
21   “permanent” modified “trees” and “bushes” as well as “vines.”
22   As a result, the court concluded that “such ambiguity alone
23   would cause a reasonable party to inquire further.”
24        Under a contract analysis, the court dispelled debtors’
25   theory that the collateral description “[a]ll trees, bushes,
26   vines and other permanent plantings”, defined together as
27   “Plantings,” could not include Christmas trees.   The bankruptcy
28   court reasoned that the use of the word “Plantings” to define

                                     -8-
 1   the group of plants which are collateral “itself connotes
 2   something planted as opposed to growing naturally.”   The court
 3   examined the dictionary definition of “planting” - “an area
 4   where plants are grown for commercial or decorative purposes;
 5   also: the plants grown in such an area,” and concluded from this
 6   definition a reasonable third party examining Harvest’s Security
 7   Agreement would know that the only (or at least the vast
 8   majority of) crops debtors planted consisted of Christmas trees.
 9   Finally, the bankruptcy court noted that the phrase “permanent
10   crops” is commonly used in many statutory schemes, typically to
11   distinguish them from “annual” crops.   Because of this usage,
12   the court was not convinced by debtors’ reliance on Rainier for
13   their argument that the words “permanent” and “crops” were
14   mutually exclusive.
15        Moving beyond the phrase at issue, and construing
16   Harvest’s Security Agreement as a whole, the bankruptcy court
17   concluded that any reasonable person’s doubt as to what “all
18   permanent trees” means in § 4 of Harvest’s Security Agreement
19   would be resolved by reading § 5, which granted Harvest a
20   security interest in all intellectual property . . . “with
21   respect to Plantings” and included the SILVER BELLS BLUE™ NOBLE
22   FIR trademark.   The court reasoned that because the intellectual
23   property was “with respect to Plantings,” the trademark on
24   Christmas trees “related to” or “refers to” “Plantings,” and as
25   a consequence, “Plantings” by necessity included Christmas
26   trees.
27        Last, the bankruptcy court noted that §§ 4 and 5 of
28   Harvest’s Security Agreement would at least lead a reasonable

                                    -9-
 1   inquirer to identify Christmas trees as collateral.      In that
 2   regard, the court observed that a reasonable person could
 3   objectively determine that money was loaned to debtors, debtors
 4   owned a Christmas tree farm with approximately one million
 5   Christmas trees on their property, and their primary, if not
 6   sole, source of income to repay the loan was generated by those
 7   trees.    Under these circumstances, the bankruptcy court
 8   concluded that there would need to be “crystal clear”
 9   exclusionary language in the collateral description to stop
10   further inquiry, which there was not.
11           The court also found that a reasonable inquirer would
12   examine Note B, which the Harvest Security Agreement referenced,
13   and which specifically referenced Christmas trees as
14   “collateral.”8
15
         8
16           Exhibit A to Note B provides in relevant part:

17       (j) Borrower shall provide Lender by March 1 of each
         year with a certified tree inventory (the “Certificate
18       of Inventory”) which will include a current Christmas
19       tree count for all land described in the Mortgage,
         categorized by land tract, year planted and tree size.
20       The Certification of Inventory shall also include a
         two-year projected harvest and planting schedule
21       identifying number of trees, variety and location.
         Borrower shall certify that the Certificate of
22
         Inventory as being true, correct and complete to
23       Borrower’s best knowledge.

24       (k) Borrower shall provide Lender complete access to
         the property encumbered by the Mortgage within
25       reasonable time after request for such access in order
26       to permit Lender to verify the information contained in
         the Certification of Inventory or otherwise to confirm
27       the collateral value of the Christmas trees (the “Tree
         Collateral Value”) and the total collateral value of
28                                                      (continued...)

                                      -10-
 1            Although the description of the collateral used in the
 2   Harvest Financing Statements was slightly different than that
 3   used in Harvest’s Security Agreement, the bankruptcy court
 4   concluded that the financing statements’ description of
 5   collateral included Christmas trees for essentially the same
 6   reasons as the security agreement.
 7            Finally, with respect to Demeter, its security agreement
 8   specifically referenced “[a]ll Christmas trees” as part of the
 9   collateral.     Therefore, the bankruptcy court found that it
10   clearly met the reasonable identification test under the UCC.
11   Since Demeter’s Financing Statement had the exact same language
12   as Harvest’s Financing Statements, the court found that it too
13   sufficiently indicated the collateral as required under the UCC.
14            In sum, the court found Defendants’ notes were secured by
15   properly perfected unavoidable security interests in debtors’
16   Christmas trees and their proceeds.      The court concluded that
17   Defendants’ entitlement to attorneys’ fees and costs would be
18   determined at a subsequent hearing.9
19            On September 10, 2012, the bankruptcy court entered an
20   order denying debtors’ MSJ and granting Defendants’
21
              8
22         (...continued)
          all property encumbered by the Mortgage (the “Total
23        Collateral Value”).
          9
24          The Defendants’ entitlement to attorneys’ fees and costs
     was to be determined in a supplemental proceeding pursuant to
25   Rule 7054 and Local Bankr. Rules 7054-1 and 9021-1(c). The
26   latter rule states that the time deadlines which related to the
     filing or objecting to a cost bill also applied to filing or
27   objecting to a request for attorney fees in a contested matter or
     adversary proceeding in which judgment is sought for the
28   prevailing party’s attorney fees.

                                       -11-
 1   cross-motions.   On the same day, the court entered a partial
 2   judgment10 denying debtors’ MSJ and granting Defendants’
 3   cross-motions.
 4         On September 20, 2012, debtors filed a timely notice of
 5   appeal from the partial judgment.
 6                              II.   JURISDICTION
 7         The bankruptcy court had jurisdiction over this proceeding
 8   under 28 U.S.C. §§ 1334 and 157(b)(2)(O).       We have jurisdiction
 9   under 28 U.S.C. § 158.
10                                III.    ISSUES
11         A.   Whether the collateral description in Demeter’s
12   Security Agreement and Financing Statement was sufficient to
13   give it a properly perfected unavoidable security interest in
14   debtors’ Christmas trees; and
15         B.   Whether the collateral description in Harvest’s
16   Security Agreement and Financing Statements was sufficient to
17   give it a properly perfected unavoidable security interest in
18   debtors’ Christmas trees.
19                        IV.    STANDARD OF REVIEW
20         We review de novo the bankruptcy court’s ruling on
21   cross-motions for summary judgment, its interpretation of
22   security agreements, and its interpretation of state law.      Trunk
23   v. City of San Diego, 629 F.3d 1099, 1105 (9th Cir. 2011)
24   (summary judgment); Conrad v. Ace Prop. & Cas. Ins. Co.,
25
          10
26           In its partial judgment, the bankruptcy court certified
     the judgment as appealable under Civil Rule 54(b), incorporated
27   by Rule 7054, finding there was no just reason for delay. As a
     result, we consider the partial judgment final for purposes of
28   appeal.

                                         -12-
 1   532 F.3d 1000, 1004 (9th Cir. 2008) (interpretation and meaning
 2   of contracts); Salve Regina Coll. v. Russell, 499 U.S. 225, 231
 3   (1991) (interpretation of state law).
 4                                  V.   DISCUSSION
 5           On a motion for summary judgment, the moving party has the
 6   burden to show that there is no genuine dispute as to any
 7   material fact and that it is entitled to judgment as a matter of
 8   law.        Civil Rule 56(a) (made applicable by Rule 7056).    Material
 9   facts are such facts as may affect the outcome of the case.
10   Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
11   Summary judgment is appropriate when neither party contests the
12   facts relevant to a legal determination.
13           Here, whether the collateral description contained in
14   referenced documents is legally sufficient is reviewed de novo
15   because the parties have conceded that the question can be
16   answered by referring to the law.           Neither party has contested
17   any material facts that are relevant to this legal determination
18   in this appeal nor have debtors put their subjective intent to
19   grant Defendants a security interest in their Christmas trees at
20   issue.11
21   A.      Collateral Descriptions:     Legal Standards
22           The parties agree that the nature and extent of Defendants’
23
24
25
            11
26          Debtors did not dispute that they executed the security
     agreements with Defendants or that they granted some security
27   interest in collateral related to their Christmas tree farm.
     They also did not dispute that Defendants had properly filed
28   their financing statements with the Oregon Secretary of State.

                                          -13-
 1   security interests are determined under Oregon’s UCC law.12     See
 2   Butner v. United States, 440 U.S. 48, 55 (1979); In re S. Cal.
 3   Plastics, 165 F.3d 1243, 1248 (9th Cir. 1999) (to determine the
 4   validity, nature and effect of a lien courts must look to state
 5   law).     Under Oregon law, “two steps are required to create an
 6   enforceable security interest: attachment and perfection.”
 7   In re Stein, 261 B.R. 680, 688 (Bankr. D. Or. 2001).      The
 8   requirements for attachment and perfection are found in Oregon’s
 9   version of the UCC, Oregon Revised Statutes (ORS) at Chapters 71
10   through 79.13
11             The collateral description requirement for security
12   agreements is governed by ORS 79.0108 which sets forth a
13   reasonable identification test.     Under ORS 79.0504, “[a]
14   financing statement sufficiently indicates the collateral that
15   it covers if the financing statement provides: (1) A description
16
17        12
            In approximately 2001, all fifty states adopted Revised
     Article 9. Therefore, in all material respects the law is
18
     uniform after that date.
19        13
            Generally, provisions of the UCC must be “liberally
20   construed and applied to promote its underlying purposes and
     policies, which are: (a) To simplify, clarify and modernize the
21   law governing commercial transactions; (b) To permit the
     continued expansion of commercial practices through custom, usage
22
     and agreement of the parties; and (c) To make uniform the law
23   among the various jurisdictions.” ORS 71.1030(1). Although we
     look first to Oregon law, this last directive of making uniform
24   law among the various jurisdictions “anticipates reference to
     judicial decisions of other jurisdictions construing the common
25   text of the UCC.” In re Walter B. Scott & Sons, Inc., 436 B.R.
26   582, 596 n.20 (Bankr. D. Idaho 2010) (citing Hopkins v. Lojek
     (In re Scheu), 356 B.R. 751, 755 & n.11 (Bankr. D. Idaho 2006)
27   (citing with approval the Ninth Circuit Bankruptcy Appellate
     Panel’s interpretation of a provision of the California UCC
28   identical to Idaho’s version)).

                                       -14-
 1   of the collateral pursuant to ORS 79.0108; or (2) An indication
 2   that the financing statement covers all assets or all personal
 3   property.”
 4        1.      The Reasonable Identification Test
 5        A security interest cannot be perfected until it attaches
 6   and a security interest cannot attach until the requirements of
 7   ORS 79.0203 are met.    ORS 79.0203 provides that one of the
 8   prerequisites for the creation of a valid security interest is
 9   that “[t]he debtor has authenticated a security agreement that
10   provides a description of the collateral and, if the security
11   interest covers timber to be cut, a description of the land
12   concerned[.]”14    ORS 79.0203(2)(c)(A).    “The primary function of
13   9–203 is that of a statute of frauds; it is designed mainly to
14   minimize disputes over whether there was an agreement and over
15   what collateral it could have covered.”      Nw. Acceptance Corp.,
16   841 F.2d at 921.    A description of collateral in the security
17   agreement is sufficient if it “reasonably identifies what is
18   described” or is otherwise “objectively determinable.”
19   ORS 79.0108(1)(a) and (2)(f).
20        Under ORS 79.0502(1)(c), a financing statement must
21   “indicate” the collateral it covers.       Under ORS 79.0504(1), a
22   financing statement sufficiently “indicates” the collateral if
23   it contains a description of the collateral pursuant to
24   ORS 79.0108.    As noted, ORS 79.0108 sets forth a “reasonable
25
26       14
            Even if the Christmas trees are considered standing
27   timber, they were covered under the description of collateral.
     Because the mortgage was filed in the real property records
28   Harvest was properly perfected. See ORS 79.502(c)(2)(B) and (3).

                                      -15-
 1   identification test” for collateral descriptions:   “[A]
 2   description of personal or real property is sufficient, whether
 3   or not it is specific, if it reasonably identifies what is
 4   described . . . .”   ORS 79.0108(1)(a).   The statute gives
 5   examples of reasonable identification of collateral by a
 6   “[s]pecific listing . . . or . . . any other method, if the
 7   identity of the collateral is objectively determinable.”
 8   ORS 79.0108(2)(a) and (f).
 9        The Oregon Supreme Court has rejected a reasonable
10   identification test that “requires exactitude and excessive
11   detail.”   Cmty. Bank v. Jones, 566 P.2d 470, 481 (Or. 1977).
12   Official Comment 2 to UCC 9-108 also “rejects any requirement
13   that a description is insufficient unless it is exact and
14   detailed (the so-called ‘serial number’ test).”   See
15   In re Commercial Money Ctr., Inc.), 350 B.R. at 475 (noting the
16   usefulness of the Official Comments in interpreting the UCC).
17   One treatise explains:   UCC 9-108(a) “requires only that the
18   description ‘reasonably identify’ the collateral, leaving
19   considerable slack.”   4 White, Summers, & Hillman, Uniform
20   Commercial Code § 31-3 (6th ed.).
21        Finally, the reasonable identification test is satisfied if
22   the description in the security agreement or financing statement
23   provides enough information to enable third parties to identify
24   the collateral upon reasonable inquiry.   See Willamette Prod.
25   Credit Ass’n v. Lovelady (In re Lovelady), 21 B.R. 182, 184
26   (Bankr. D. Or. 1982) (construing ORS 79.1100, predecessor to
27   ORS 79.0108 in connection with collateral description in
28   security agreement and financing statement); Appleway Leasing,

                                    -16-
 1   Inc. v. Wilken, 591 P.2d 382, 384 (Or. 1979) (construing former
 2   ORS 79.1100 in connection with collateral description in
 3   financing statement); see also In re Brown, 479 B.R. 112 (Bankr.
 4   D. Kan. 2012) (“In order for collateral to be ‘reasonably
 5   identified’ in security agreement, so as to allow security
 6   interest to attach, description in security agreement must be
 7   such that it allows third persons, aided by reasonable inquiries
 8   which the instrument itself suggests, to identify the property;
 9   if document gives clues sufficient that third persons by
10   reasonable care and diligence may ascertain the property
11   covered, then it is adequate under Kansas law.”); Rice v.
12   Miller, 864 N.Y.S.2d 255, 258 (N.Y. Sup. Ct. 2008) (applying New
13   York law, UCC 9-108(b)(6)’s standard is met “if a third party
14   could determine what items of the debtor’s collateral are
15   subject to the creditor’s security interest”).
16        2.      Rules Unique to Security Agreements
17        Oregon courts recognize that security agreements are
18   contracts.    Community Bank, 566 P.2d at 478; Matter of Hill’s
19   Estate, 557 P.2d 1367, 1374 (Or. Ct. App. 1976).    As such,
20   Oregon courts construe security agreements by applying common
21   law contract principles.    Oregon follows an objective theory of
22   contracts which requires that contracts be construed in
23   accordance with the parties’ objective manifestations of intent;
24   i.e., as a reasonable third party would understand the intent of
25   the parties.    Harty v. Bye, 483 P.2d 458, 461 (Or. 1971).    In
26   determining objective intent, the court examines the text and
27   context of the disputed provision, considering the contract as a
28   whole, to determine whether the disputed provision is ambiguous.

                                      -17-
 1   See ORS 42.230; Yogman v. Parrott, 937 P.2d 1019, 1021 (Or.
 2   1997).   Dictionary definitions may be used to determine whether
 3   a provision is ambiguous.    Yogman, 937 P.2d at 1021.
 4        With these guidelines in mind, we consider the merits.
 5   B.   Demeter’s Security Agreement and Financing Statement
 6        We note that unlike Harvest’s Security Agreement,
 7   Demeter’s Security Agreement at § 4 specifically references
 8   “[a]ll Christmas trees” as part of the collateral.   Therefore,
 9   there is no question that this collateral description meets
10   ORS 79.0108(2)’s standard.
11        We also conclude that the Demeter Financing Statement
12   reasonably indicated that it covered the Christmas trees by
13   stating that the collateral covered, among other things:
14   “other articles of personal property that now or hereafter are
15   located on, affixed or attached to, or incorporated in the Land
16   . . . .”   See Exhibit B to the Demeter Financing Statement, ¶ 2.
17   This description meets the statutory requirements for collateral
18   descriptions in financing statements.   See ORS 79.0504(2) (“[a]
19   financing statement sufficiently indicates the collateral that
20   it covers if the financing statement provides . . . [a]n
21   indication that the financing statement covers . . . all
22   personal property.”).
23   C.   Harvest’s Security Agreement and Financing Statement
24        With respect to Harvest, debtors reiterate most of the
25   arguments made in the bankruptcy court.   They again place at
26   issue the phrase in § 4 of the security agreement, “[a]ll trees,
27   bushes, vines and other permanent plantings . . . .” contending
28   this plain and simple language does not include Christmas trees.

                                     -18-
 1   Debtors seize on the word “permanent” in the clause “other
 2   permanent plantings,” maintaining that it is as applicable to
 3   the first listed words “[a]ll trees, bushes, vines” as to the
 4   last word, “plantings.”   Under debtors’ view, the phrase should
 5   be read as meaning “[a]ll permanent trees, permanent bushes,
 6   permanent vines and other permanent plantings.”   Debtors then
 7   contend that Christmas trees do not fall within the class of
 8   “permanent” trees relying on the dictionary definition of
 9   “permanent” and Rainier, a Washington case, which found that
10   Christmas trees were “crops” and “crops” by definition are not
11   permanent.   According to this argument, § 4’s collateral
12   description is unambiguous and described with such particularity
13   that no further inquiry would have been required of a third
14   party.   We are not convinced.
15        First, the language in § 4 of Harvest’s Security Agreement
16   “[a]ll trees, bushes, vines and other permanent plantings” is
17   broad enough to include Christmas trees as either “trees” or
18   “permanent” trees for purposes of the UCC reasonable
19   identification test.
20        Second, we cannot say that “permanent” modifies “all trees”
21   by examining the clause in isolation like debtors do.     Contract
22   principles dictate that we examine the text and context of
23   Harvest’s Security Agreement as a whole.   Further, although the
24   missing comma between “vines” and the conjunction “and” may pose
25   a grammatical problem for some, “[p]unctuation or the absence of
26   punctuation in a contract is ineffectual to control its
27   construction. . . .”   17A Am. Jur. 2d Contracts § 366.     As an
28

                                      -19-
 1   interpretative tool, the DOTLA15 is equally unreliable because
 2   the rule is not an absolute and can be overcome by other indicia
 3   of meaning.   Barnhart v. Thomas, 540 U.S. 20, 26 (2003).
 4   Indeed, the bankruptcy court found the DOTLA’s application did
 5   not resolve the interpretative problem before it.
 6         Construing the security agreement as a whole, § 4 of the
 7   Harvest Security Agreement defined “[a]ll trees, bushes, vines
 8   and other permanent plantings” as the “Plantings.”   We agree
 9   with the bankruptcy court’s reasoning that the dictionary
10   definition of “Plantings,” in conjunction with use of the
11   defined term “Plantings” in § 5, provides a textual clue to a
12   reasonable third party that the meaning of “[a]ll trees, bushes,
13   vines and other permanent plantings” could include Christmas
14   trees.
15         Regardless, other provisions in the security agreement
16   contain language that expressly grant Harvest a security in the
17   “Plantings” which includes trees whether they are permanent or
18   not and consistent with this assigns the rights to income from
19   the Plantings.   The agreement provides under § 6:   “Mortgagor
20   presently assigns to Lender all of Mortgagor’s right, title and
21
22        15
            Under the DOTLA, “[r]eferential and qualifying words and
23   phrases, where no contrary intention appears, refer solely to the
     last antecedent.” See 2A N. Singer, Sutherland on Statutory
24   Construction § 47.33 (7th ed. 2012). Applying the rule here
     would mean that “and other permanent plantings” referred only to
25   “vines” and not “[a]ll trees, bushes.” However, this left the
26   phrase without a coordinating conjunction which was inconsistent
     with other granting provisions in the security agreement. As a
27   result, the bankruptcy court did not rely on the doctrine to
     ascertain the meaning of § 4. Hence, debtors’ assertion that the
28   bankruptcy court gave the DOTLA undue weight is without merit.

                                    -20-
 1   interest in and to all rents, revenues, income, issues and
 2   profits (the “Income”) from . . . the Plantings, the Personal
 3   Property . . ., whether now or hereafter due.”    The agreement
 4   continues “Mortgagor grants Lender a security interest in the
 5   Income, Plantings, . . ., the Personal Property, . . . .”
 6         Taken together, these provisions evidence the UCC’s broad
 7   policy of leniency for collateral descriptions.   Indeed, the
 8   Ninth Circuit in Biggins v. Sw. Bank, 490 F.2d 1304, 1308 (9th
 9   Cir. 1974) previously rejected an argument similar to debtors’
10   because such “extensive textual analysis” is inconsistent with
11   the overall purpose of the UCC.   Under the rules of construction
12   expressly provided, even those descriptions that are unclear or
13   susceptible to more than one distinct meaning may be sufficient
14   in circumstances in which the description would allow a third
15   person, aided by reasonable inquiries which the instrument
16   itself suggests, to identify the collateral.
17         In short, at minimum, a third party would have been able to
18   determine whether Harvest claimed a security interest in “trees”
19   upon further inquiry.   The collateral, Christmas trees, was
20   objectively determinable:   upon inquiry, a reasonable third
21   person could determine that money was loaned to debtors (the
22   security agreement says so), debtors owned a Christmas tree farm
23   with approximately 1 million Christmas trees on their property,
24   and their primary, if not sole, source of income to repay the
25   loan was generated by those trees.16
26
          16
27          Because we find Harvest’s security included the Christmas
     trees based on the provisions cited above, it is unnecessary for
28                                                      (continued...)

                                    -21-
 1        Finally, if there are any lingering doubts, Harvest’s UCC-1
 2   perfects an interest in all personal property located on the
 3   real property at issue.    The Revised Article 9 in Oregon and
 4   elsewhere allows perfection pursuant to a UCC-1 that states “all
 5   personal property.”   Therefore, debtors’ reliance on Matter of
 6   H.L. Bennett Co., 588 F.2d 389 (3d Cir. 1988) is misplaced since
 7   that case is out-dated.
 8        In sum, we agree with the bankruptcy court’s conclusion
 9   that Defendants’ notes were secured by a perfected unavoidable
10   security interest in debtors’ Christmas trees.   That security
11   also “attaches to any identifiable proceeds of collateral.”
12   ORS 79.0315(1)(b).    Therefore, Defendants have a perfected
13   security interest in the proceeds from the sale of debtors’
14   Christmas trees as well.
15                              VI.   CONCLUSION
16        For the reasons stated, we AFFIRM.
17
18
19
20
21
22
23
24
25
26
27
          16
            (...continued)
28   us to rely on the language in the Note B.

                                      -22-