## Facts

- Plant Reclamation sold industrial equipment to Amex-Protein Development Corporation on open account.
- The parties later restructured the debt by substituting a promissory note for the open-account obligation and having a financing statement signed and filed (Oct. 16, 1972).
- The promissory note stated: “This note is secured by a Security Interest in subject personal property as per invoices,” with handwritten words added to connect the security interest to the equipment previously sold.
- A financing statement named Plant Reclamation as secured party and listed specific items of equipment as collateral.
- Amex-Protein entered bankruptcy; Plant Reclamation asserted a secured claim in the listed equipment, and the trustee challenged enforceability.

## Issues

1. Whether the debtor-signed promissory note language stating the debt “is secured by a Security Interest,” combined with a filed financing statement identifying the equipment, satisfied California Commercial Code requirements for a signed security agreement that “creates or provides for” a security interest.
2. Whether the bankruptcy referee erred by requiring explicit “granting” language (e.g., “hereby grants”) to form an enforceable security agreement under Article 9.

## Decision

- The district court reversed the bankruptcy referee and held that Plant Reclamation had a valid, enforceable Article 9 security interest in the specified equipment.
- The Ninth Circuit affirmed per curiam, adopting the district court’s opinion.
- The courts rejected the referee’s view that the note’s wording was too “passive” to create a security interest.
- The note and financing statement were read together to satisfy the signed-writing and collateral-description requirements.
- Plant Reclamation’s security interest was enforceable against the debtor and the bankruptcy trustee.

## Legal Principles

- Under Article 9, a “security agreement” is an agreement that “creates or provides for” a security interest; enforceability generally requires a debtor-signed writing that contains a description of the collateral.
- Article 9 does not require specific “magic words” (such as “grant”) so long as the signed writing, in context, provides that an obligation is secured.
- Multiple writings may be considered together to determine whether the debtor signed a security agreement containing an adequate collateral description, including a promissory note referencing secured status and a financing statement listing the collateral.
- Where facts are undisputed, a reviewing court may reject a bankruptcy referee’s legal conclusions while accepting factual findings.

## Conclusion

A debtor-signed promissory note stating the debt “is secured by a Security Interest,” when linked to identified property and accompanied by a filed financing statement describing the collateral, can constitute an enforceable security agreement under California Article 9, without formal granting language, and is effective against a bankruptcy trustee.


In re Amex-Protein Dev. Corp., 504 F.2d 1056 (9th Cir. 1974)