## Facts

- Gibson Lumber Co. granted Citizens Bank & Trust Co. a security interest in its property by a security agreement dated December 31, 1982, and Citizens perfected by filing on January 3, 1983.
- The collateral description covered “all inventory of lumber and logs, accounts receivable, all saw mill equipment and all rolling stock, including, but not limited to” an attached itemized list of about twenty-one specific pieces of equipment.
- The list included entries such as a “Fulghum debarker” and “Lumber grading shed, rips, gangs, saws, decks & misc. equipment,” but did not specifically list a Corley gang saw, a Delta feeder mechanism, or a Detroit Allison diesel generator.
- Gibson later entered bankruptcy; the trustee sold the gang saw, feeder, and generator at auction on October 16, 1985, and held the proceeds.
- Citizens claimed a senior security interest in the sold items and sought the sale proceeds, relying on the general language “all saw mill equipment” and the list’s reference to “saws.”
- The bankruptcy court ruled Citizens lacked a perfected security interest in the three sold items because the security agreement did not describe them with sufficient specificity; Citizens appealed to the district court.

## Issues

1. Whether Kentucky law permits omnibus collateral descriptions in security agreements (e.g., “all saw mill equipment”) to satisfy the collateral-description requirement.
2. If omnibus clauses may be effective, whether an omnibus clause remains effective as to major, unlisted machinery when the same agreement contains a detailed schedule of specific items.

## Decision

- The district court affirmed the bankruptcy court.
- The court accepted that omnibus descriptions can be valid under Kentucky’s Article 9, but held that this agreement’s description did not reasonably identify the Corley gang saw, Delta feeder mechanism, or Detroit Allison diesel generator.
- Because Citizens did not have a perfected security interest in those items, it was not entitled to the trustee’s sale proceeds.

## Legal Principles

- Under Kentucky’s UCC collateral-description standard, a security agreement sufficiently describes collateral if it “reasonably identifies” it and provides notice adequate to trigger further inquiry by later creditors.
- Broad, category-based descriptions (omnibus clauses) may be permissible, but their effect depends on the agreement read as a whole.
- When an agreement pairs broad language with a relatively detailed schedule of specific equipment, omission of large, distinct items may lead reasonable subsequent creditors to treat the schedule as defining the covered machinery.
- A secured party bears the risk that a mixed description (general clause plus itemized list) will be read to exclude substantial unlisted equipment, defeating perfection as to those omitted items.

## Conclusion

The court held that, although Kentucky recognizes general collateral descriptions, the security agreement’s combination of an omnibus clause and a detailed equipment schedule failed to give reasonable notice that major, separately identifiable unlisted machinery was encumbered, so the creditor had no perfected interest in the auctioned items or their proceeds.


Citizens Bank & Tr. Co. v. Gibson Lumber Co., 96 B.R. 751 (W.D. Ky. 1989)