## Facts

- John Counceller, president and majority shareholder of First Metals and Plastics Technologies, Inc. (First Metals), personally loaned the company more than $200,000.
- In 2002, Counceller filed a UCC financing statement naming First Metals as debtor and describing collateral broadly to include all present and after-acquired assets, expressly including deposit accounts and proceeds.
- First Metals maintained its own bank deposit accounts and retained authority over those accounts; there was no arrangement giving Counceller the bank’s agreement to follow his instructions regarding the accounts.
- In 2004, Ecenbarger, Inc., doing business as Applied Metal and Machine Works (Applied Metal), obtained a default judgment against First Metals.
- Applied Metal pursued collection against First Metals’ assets, including its bank deposit accounts.
- Counceller intervened in the collection proceedings, asserting a perfected security interest in the deposit accounts based on his earlier financing statement filing.
- The trial court ruled that Counceller lacked the “control” required to perfect a security interest in deposit accounts and held Applied Metal’s judgment lien had priority.
- Counceller appealed.

## Issues

1. Under Indiana’s enactment of Revised UCC Article 9, can a security interest in deposit accounts as original collateral be perfected by filing a financing statement, or is perfection limited to control?
2. If the secured party lacks control, does a judgment lien creditor have priority over the secured party’s claimed interest in the deposit accounts?

## Decision

- The Indiana Court of Appeals affirmed.
- The court held that a security interest in deposit accounts as original collateral is perfected only by control, not by filing a financing statement.
- Because Counceller did not have control over First Metals’ deposit accounts, he did not have a perfected security interest in those accounts.
- Applied Metal’s judgment lien therefore had priority over Counceller’s unperfected claim to the deposit accounts.

## Legal Principles

- For deposit accounts as original collateral, Revised Article 9 provides perfection exclusively by control; financing statement filing is not a valid method of perfection for that collateral.
- “Control” generally requires that the secured party be the depository bank, become the bank’s customer for the account, or obtain an agreement under which the bank will comply with the secured party’s instructions without further consent by the debtor.
- A creditor with an unperfected security interest is subordinate to a lien creditor whose rights arise before the security interest becomes perfected.
- A collateral description in a financing statement cannot expand statutory perfection methods where Article 9 specifies a different exclusive method.

## Conclusion

The court affirmed priority for the judgment creditor because deposit accounts must be perfected by control, and a financing statement—without control—does not perfect a security interest in a debtor’s bank accounts under Indiana’s Revised Article 9.


Counceller v. Ecenbarger, Inc., 834 N.E.2d 1018 (Ind. Ct. App. 2005)