## Facts

- CSY Yacht Corporation manufactured and sold yachts and later filed a Chapter 11 case after financial distress.
- The Jaegers contracted with CSY to build a yacht for $176,111 and paid deposits of $1,000, $4,000, and $35,000.
- The contract stated that materials and equipment “attached to the boat or designated for use on the boat” would become the purchasers’ property upon payment of the first installment.
- CSY halted starting new yacht construction, completed yachts already in progress, and never began the Jaegers’ yacht.
- CSY sold inventory it did not need, including items the Jaegers contended had been designated for their yacht.
- The Jaegers had no separate security agreement and did not file any financing statement to perfect an interest in inventory under UCC Article 9.
- After the inventory sale, the Jaegers asserted they held a “special property” interest under Florida Statutes § 672.501 (UCC § 2-501) and therefore should be treated as secured creditors.

## Issues

1. Whether the contract clause and Florida Statutes § 672.501 gave the buyers an enforceable secured interest in materials/equipment against the bankruptcy estate.
2. Whether, absent an Article 9 security agreement and perfection, the buyers could be treated as secured creditors in the Chapter 11 case.

## Decision

- The court sustained the debtor’s objection to the buyers’ claim being classified as secured.
- The court held the asserted Article 2 “special property” interest did not create or substitute for a perfected Article 9 security interest in the debtor’s inventory.
- The buyers were not secured creditors; their claim was treated as unsecured, subject to any applicable statutory priority for consumer deposits.

## Legal Principles

- A buyer’s “special property and insurable interest” under UCC Article 2 (Florida Statutes § 672.501) is not, by itself, a security interest effective against third parties.
- Secured status against other creditors and a bankruptcy estate generally requires compliance with UCC Article 9, including a security agreement and perfection (typically by filing).
- Contract language purporting to transfer “ownership” in future or undesignated goods does not, without Article 9 formalities, create a perfected lien in the seller’s inventory enforceable in bankruptcy.

## Conclusion

The bankruptcy court ruled that the purchasers’ contract-based Article 2 “special property” argument could not confer secured-creditor status without an Article 9 security agreement and perfection; the purchasers’ deposit claim was therefore not secured in the Chapter 11 case.


In re CSY Yacht Corp., 42 B.R. 619 (Bankr. M.D. Fla. 1984)