A recent case by the U.S. Court of Appeals for the Second Circuit underscores the desirability of an "all assets" collateral description in UCC financing statements.
In Ring v. First Niagara Bank, NS (In re Sterling United, Inc.), a Bank had made a secured loan, and filed a UCC-1 financing statement describing the collateral as "all assets of the debtor, including but not limited to, any and all equipment, fixtures, inventory . . . now owned or hereafter acquired by the Debtor and located at or relating to the operation of the premises at [old address]. . ."
Seven years after the financing statement was filed, the debtor moved and changed addresses. Within 90 days of the Debtor's bankruptcy, however, the Bank filed an amended financing statement describing the collateral as before, but with reference to the new address instead of the old address. The Debtor's bankruptcy trustee sought to set aside the Bank's security interest as being unperfected as a result of the Debtor's change of location. The Bank and the Trustee agreed that the financing statement filed within 90 days of the bankruptcy was ineffective because perfection would have been a voidable preference under 11 USC Section 547.
The Bank, however, argued that it still had a valid security interest before the amendment, since the original collateral description referred to "all assets, including but not limited to, . ." those assets located at the old address. The bankruptcy court ruled in favor of the Bank, the District Court affirmed, as did the Second Circuit. The Court of Appeals ruled in a summary order (alas, without precedential authority), that the financing statement's collateral description referenced "all assets" of the debtor, wherever they might be located, and were not limited by language from referring to the old address. The "geographic reference to the initial collateral indication was merely illustrative", the court observed.
The take-away is that a broad description of collateral in the financing statement is preferred to one that is too narrow and that can be tied to a particular business location or classification of collateral. In this case, the secured creditor’s perfection was saved by the use of the broad filing language, notwithstanding a description tied to an outdated address.