In re Pfautz
United States Bankruptcy Court for the Western District of Missouri
264 B.R. 551 (2001)
Jerry and Suzanne Pfautz (debtors) (plaintiffs) granted a security interest in uncertificated securities to Liberty Bank in January 1998. In May 2008, Liberty Bank and the debtors established a separate loan collateral account with State Street Bank and Trust Company (State Street) and placed the uncertificated securities in that account. The debtors, Liberty Bank, and State Street entered into an agreement to establish the separate account, in which the debtors granted Liberty Bank the right to dispose of the uncertificated securities upon default. The agreement did not explicitly state that Liberty Bank could sell the shares without the consent of the debtors. The debtors filed a petition for bankruptcy, and Liberty Bank filed a motion to request relief from the automatic stay in order to sell the collateral. The bankruptcy trustee opposed the motion, claiming that the security interest in the uncertificated securities was not perfected.
Rule of Law
Holding and Reasoning (Federman, J.)
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