## Facts

- Citizens Bank of Clovis loaned money to Lee Groff (and, in connection with the debt, obtained a security agreement covering cattle Groff then owned and “all cattle after acquired”).
- Without Citizens Bank’s knowledge, Groff entered into a joint cattle-feeding venture with Ed Pickering.
- The venture (Groff and Pickering) purchased cattle over time in the name of the joint venture (the “Groff-Pickering cattle”).
- Agri-Tech Services, Inc. sold cattle to the venture, and Morgan County Feeders, Inc. provided purchase-money financing and took purchase-money security interests in the cattle (with disputes about whether some interests were properly perfected).
- Lee and Gwen Groff later filed bankruptcy, and a dispute arose over whether the Groff-Pickering cattle were part of the Groffs’ bankruptcy estate and subject to Citizens Bank’s after-acquired property lien.
- The bankruptcy court found (1) Groff and Pickering were engaged in a joint venture, (2) the cattle were property of the joint venture, (3) New Mexico partnership law applies to joint ventures in this setting, and (4) Citizens Bank, as a creditor of the Groffs individually, had no interest in the Groff-Pickering cattle.
- The district court affirmed, and Citizens Bank appealed to the Tenth Circuit.

## Issues

1. Do the rules governing partners’ interests in partnership assets apply to joint ventures under New Mexico law for purposes of determining creditor rights in venture property?
2. If the cattle were joint-venture (partnership) property, could Citizens Bank’s after-acquired property security interest—granted by Groff in his individual capacity—attach to the Groff-Pickering cattle?

## Decision

- The Tenth Circuit affirmed the district court.
- The court held that, under New Mexico law, substantive partnership rules governing ownership and creditor access to partnership assets apply to joint ventures.
- Because the Groff-Pickering cattle were joint-venture property, Citizens Bank (a creditor of the Groffs in their individual capacities) had no security interest in the specific cattle acquired and held by the joint venture.
- The Groffs’ bankruptcy estate included only the debtors’ interest in the joint venture as defined by New Mexico partnership law, not the venture’s cattle themselves.
- Given this disposition, questions about whether Morgan County properly perfected certain purchase-money security interests were not material to Citizens Bank’s appeal.

## Legal Principles

- A joint venture is generally treated as a form of partnership; the main difference is that a joint venture is commonly limited to a single project or a related set of transactions.
- Under New Mexico’s Uniform Partnership Act framework, property acquired for and held by a partnership is partnership property, not the separate property of the individual partners.
- A partner’s individual creditor ordinarily cannot reach specific partnership property based solely on the partner’s separate debt; the creditor can reach only the debtor-partner’s transferable interest (the economic interest) in the partnership.
- A security agreement executed by an individual partner in an individual capacity cannot, by itself, grant a lien in specific partnership assets when the debtor does not own those assets individually and lacks authority to transfer an interest in them.
- In bankruptcy, the estate succeeds to the debtor’s partnership interest, but partnership property remains property of the partnership (or joint venture), not property of the individual debtor’s estate.

## Conclusion

The Tenth Circuit held that New Mexico partnership rules apply to joint ventures and, because the Groff-Pickering cattle were owned by the joint venture rather than by Groff individually, Citizens Bank’s after-acquired cattle clause did not attach to those cattle; the bankruptcy estate therefore included only the Groffs’ economic interest in the venture, not the venture’s cattle.


In re Groff, 898 F.2d 1475 (1990)