## Facts

- Andrew C. Brown signed a multi-year professional hockey contract with the Indianapolis Racers that included salary terms, an added “interest factor,” and a no-trade-without-consent clause.
- The Racers’ ownership entity borrowed heavily from Indiana National Bank (INB).
- INB took and perfected an Article 9 security interest in the Racers’ assets, including player contracts.
- After the Racers defaulted, INB declared the loans due, took possession of secured collateral (including Brown’s contract), and stated an intent to sell the collateral at a private sale.
- INB made at least two salary payments to Brown after taking possession of his contract.
- INB later transferred most team assets to a new acquiring entity in exchange for a limited partnership interest, but Brown’s contract was not purchased; INB returned the contract to the debtor while retaining its security interest.
- Brown received only part of the compensation he expected under the contract and sued INB for fraud and breach of a duty of good faith based on alleged failures to disclose the security interest, repossession, and intended disposition.

## Issues

1. Whether a secured lender owed an employee/player a duty to disclose its security interest in the player’s contract, repossession of that contract, or an intended private disposition of the collateral.
2. Whether a security interest in an employment/player contract should be treated as an “assignment” creating additional duties to the employee/player.
3. Whether the evidence was sufficient to submit claims for fraudulent nondisclosure and lack of good faith to the jury, or whether judgment on the evidence for the bank was proper.

## Decision

- The Indiana Court of Appeals affirmed judgment on the evidence for INB.
- INB owed Brown no duty to disclose the security interest, possession, or intended disposition.
- INB’s security interest did not make INB an assignee with direct contractual duties to Brown.
- Brown failed, as a matter of law, to prove essential elements of fraud or a good-faith violation sufficient to reach the jury.

## Legal Principles

- Fraud by nondisclosure requires proof of a duty to speak; the plaintiff bears the burden to establish that duty.
- A lender’s Article 9 security interest in a debtor’s contracts does not, without more, create an assignee relationship between lender and the contract’s non-debtor obligor.
- Article 9 notice obligations concerning disposition of collateral generally run to the debtor and other parties to the security agreement, not to third parties whose contracts are pledged as collateral.
- A secured creditor’s duties of good faith and commercially reasonable disposition are primarily owed within the secured transaction framework; absent a special relationship or statutory duty, they do not create a general disclosure obligation to a non-debtor employee.

## Conclusion

The court held that a secured lender enforcing its Article 9 rights against a debtor’s collateral, including player contracts, had no independent duty to inform the player of the security interest, repossession, or intended disposition, and the player’s fraud and good-faith claims failed for lack of a legally required duty and insufficient proof.


Brown v. Indiana Nat’l Bank, 476 N.E.2d 888 (Ind. Ct. App. 1985)