## Facts

- Inofin, a subprime auto finance company, purchased retail installment contracts (ICs) from used-car dealers; each IC evidenced the consumer’s payment obligation and granted a security interest in the vehicle.
- Dealers and Inofin also executed Partial Purchase and Assignment agreements (PPAs) for individual consumer contracts; PPAs allocated economic rights between dealer and Inofin and contained reversion terms.
- To fund IC purchases, Inofin borrowed from Raymond C. Green, Inc. (RCG) under loan and security documents stating advances were to be secured and perfected through receipt and possession of original ICs and PPAs.
- RCG took physical possession of original ICs but received only copies (not originals) of PPAs.
- After an involuntary Chapter 7 case commenced, the trustee brought an adversary proceeding asserting RCG’s security interest was unperfected because RCG did not possess original PPAs and seeking to avoid the lien under 11 U.S.C. § 544(a).

## Issues

1. Whether the PPAs, rather than the ICs, were the relevant “chattel paper” under UCC Article 9.
2. Whether possession of original ICs, without possession of original PPAs, perfected a security interest in chattel paper under Article 9.
3. Whether the loan documentation required possession of original PPAs as a condition of perfection such that the trustee could avoid RCG’s lien under § 544(a).

## Decision

- The court held the ICs were the relevant chattel paper because they evidenced both the consumer’s monetary obligation and the security interest in the vehicle.
- The court held the PPAs did not replace the ICs as chattel paper; they functioned as ancillary allocation/assignment documents between dealer and Inofin.
- The court held RCG perfected its security interest by possessing the original ICs; lack of original PPAs did not render the security interest unperfected.
- The court rejected the trustee’s argument that the loan agreement’s reference to possession of “ICs and PPAs” imposed an additional perfection prerequisite beyond Article 9.
- The trustee’s avoidance theory premised on “no original PPAs = no perfection” failed as to collateral covered by the security agreement and delivered to RCG.

## Legal Principles

- Under UCC Article 9, “chattel paper” is the record(s) evidencing both a monetary obligation and a security interest in specific goods; documents that merely allocate rights among non-obligor parties do not necessarily constitute chattel paper.
- A security interest in chattel paper may be perfected by possession of the chattel paper; the focus is possession of the authoritative instruments evidencing the obligation and collateral.
- Contract language describing a closing documentation package will not be treated as altering statutory perfection requirements absent clear intent to create an additional, enforceable perfection condition.
- A Chapter 7 trustee may avoid an unperfected security interest under 11 U.S.C. § 544(a), but cannot defeat a security interest that was perfected as of the petition date.

## Conclusion

The bankruptcy court concluded that the installment contracts were the operative chattel paper and that RCG’s possession of the original contracts perfected its security interest under Article 9, defeating the trustee’s attempt to avoid the lien based on the absence of original PPAs.


DeGiacomo v. Raymond C. Green, Inc. (In re Inofin, Inc.), 512 B.R. 19 (Bankr. D. Mass. 2014)