In re Clark

In 1986, Dick Clark (debtor) entered into a loan transaction with Chrysler First Consumer Discount Company (Chrysler) (creditor). Clark used the loaned funds to purchase a restaurant. To secure Clark’s repayment obligation, Chrysler had Clark execute a first mortgage in favor of Chrysler covering the premises purchased, as well as a second instrument titled “Acknowledgement.” The Acknowledgement referred exclusively to a liquor license (License) and indicated Clark’s consent that the License could not be removed from the premises nor transferred without Chrysler’s prior written consent until the mortgage was fully paid. Clark also signed a financing statement listing the License as additional collateral to secure repayment of the loan. In 1987, the Pennsylvania Legislature amended the liquor code to provide that a liquor license was to be treated as personal property as between the licensee and third parties. In 1988, Clark filed a Petition for Relief in the United States Bankruptcy Court for the Western District of Pennsylvania, thereby staying the enforcement of Chrysler’s asserted security interest. Chrysler filed a Motion for Relief of the Automatic Stay and Adequate Protection seeking determinations of whether the Acknowledgement sufficiently satisfied the formal requirements of an enforceable security agreement and whether Chrysler’s security interest attached when the legislature amended the liquor code.