## Facts

- Gamma Center, Inc. operated a medical practice performing nuclear heart-stress tests using a gamma camera.
- In 2004, Gamma borrowed $300,000 from Commercial Savings Bank to buy a gamma camera and related accessories.
- Gamma granted the Bank a security interest in the gamma camera and related equipment.
- The Bank filed a UCC-1 financing statement describing the collateral as the camera and certain related equipment, including references to “proceeds” and “products” of the collateral.
- The financing statement did not list “accounts,” “accounts receivable,” or general intangibles as original collateral.
- Gamma filed a Chapter 7 petition in 2010 and listed accounts receivable as assets.
- The Chapter 7 trustee filed an adversary proceeding seeking a declaration that the Bank did not have a perfected security interest in Gamma’s accounts receivable and collected funds.
- The trustee, the Bank, and an individual guarantor filed cross-motions for summary judgment.
- The Bank argued the receivables were “proceeds” or “products” of the gamma camera because the receivables derived from tests performed using the camera.
- The trustee argued the receivables were for medical services and did not arise from any disposition of the camera; other inputs beyond the camera contributed to generating the receivables.

## Issues

1. Whether Gamma’s accounts receivable and collected funds were “proceeds” or “products” of the gamma camera under Ohio UCC Article 9, such that the Bank’s lien in the equipment extended to the receivables.
2. Whether the Bank’s financing statement reasonably identified accounts receivable as collateral so as to perfect a security interest in them.

## Decision

- The court granted the trustee’s motion for summary judgment.
- The court denied the Bank’s and the guarantor’s motions for summary judgment.
- The court declared that the Bank did not hold a perfected security interest in Gamma’s accounts receivable or funds collected on those accounts.
- The accounts receivable and collected funds were assets of the Chapter 7 estate, available for administration for unsecured creditors.

## Legal Principles

- Under Article 9, “proceeds” generally require a disposition of collateral or a direct substitute for collateral, not ordinary income from using collateral in an ongoing service business.
- The phrase “collected on” or “distributed on account of” collateral does not convert revenues from services performed with equipment into proceeds of that equipment.
- A financing statement must reasonably identify the collateral to perfect a security interest and give notice to third parties; describing equipment and its “proceeds” and “products” does not, without more, reasonably identify a claim to all accounts receivable.
- When the material facts are undisputed and the dispute turns on statutory interpretation of Article 9 and collateral description, summary judgment is appropriate.

## Conclusion

The bankruptcy court held that receivables generated from medical services performed using the debtor’s gamma camera were not “proceeds” or “products” of the camera under Article 9, and that a financing statement limited to the equipment and its proceeds/products did not perfect any lien in the debtor’s accounts receivable or collected funds.


In re Gamma Center, Inc., 489 B.R. 688 (Bankr. N.D. Ohio 2013)