Trust Corp. v. Patterson (In re Copper King Inn, Inc.)
United States Court of Appeals for the Ninth Circuit
918 F.2d 1404 (1990)
Copper King Inn, Inc. (Copper King) (debtor) owned and operated a hotel in Montana. Copper King had trouble paying its debts. Accordingly, John T. Noonan and Robert C. Patterson, who were officers, directors, and shareholders of Copper King, extended loans of $62,500 each to Copper King in exchange for interest-bearing promissory notes. Copper King failed to pay the notes when they became due twice. Repayment was postponed indefinitely. Northwest Capital Management & Trust Company (Northwest) served as trustee for Noonan’s company, John T. Noonan Pension & Profit Sharing Plans. Noonan directed Northwest to loan Copper King $100,000 in exchange for an interest-bearing promissory note. Additionally, Noonan and Patterson had Copper King sign a security agreement in which Copper King pledged its furniture and equipment to secure both Northwest’s loan and Noonan and Pattersons’ earlier loans. A financing statement was filed, which listed Patterson and Noonan as secured creditors of Copper King in the total amount of $225,000 and made no mention of Northwest. Copper King filed a petition for Chapter 11 bankruptcy. Copper King’s reorganization plan listed Noonan, Patterson, and Trust Corporation of Montana (Trust Corporation) (creditors), Northwest’s successor in interest, as secured creditors in the amount of $225,000. Copper King’s dissenting shareholders objected to the plan and challenged the secured status of Noonan, Patterson, and Trust Corporation. The bankruptcy court and the district court recognized the $100,000 loan from Northwest constituted a security agreement but held that Northwest’s interest was not perfected because the financing statement failed to list Northwest as a creditor. Therefore, Trust Corporation inherited nothing. Trust Corporation appealed.
Rule of Law
Holding and Reasoning (Trott, J.)
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