In re Weir-Penn, Inc.
United States Bankruptcy Court for the Northern District of West Virginia
344 B.R. 791 (2006)
Weir-Penn, Inc. (WPI) (debtor) operated a convenience store in West Virginia. On October 31, 1997, WPI borrowed money from United Bank, Inc. (United Bank) (creditor), which allegedly took a security interest in WPI’s assets, including equipment, inventory, and accounts. United Bank filed a financing statement the following week. WPI refinanced the loan in 1999. On September 9, 2002, United Bank filed a continuation statement. On September 10, 2002, WPI refinanced the loan a second time and executed a promissory note containing a security clause, which referenced previously executed security instruments or agreements, as well as the financing statement. On January 12, 2006, WPI defaulted on the note. On February 10, 2006, WPI filed its Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Northern District of West Virginia. United Bank filed a motion for relief from the automatic stay of the Bankruptcy Code to repossess convenience store property and enforce its security rights. However, United Bank could not produce a copy of the security agreement purportedly executed by WPI. United Bank’s market president signed an affidavit stating that the security agreement could not be located and that it had likely been destroyed in a flood. Thomas H. Fluharty, WPI’s Chapter 7 trustee (Trustee), opposed the motion on the basis that United Bank was not a secured creditor because it could not produce an authenticated security agreement. WPI joined in the Trustee’s objection. The Trustee sold the assets subject to United Bank’s alleged security interest and held those funds pending the determination of United Bank’s lien rights, if any, in the proceeds. United Bank argued that the absence of a separate written security agreement signed by WPI does not negate its security interest considering the financing statement signed by WPI listing the collateral and the associated documentary evidence.
Rule of Law
Holding and Reasoning (Flatley, J.)
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