## Facts

- Michael Leon Howard obtained a loan from Whitesville Community Credit Union (Whitesville Credit Union) on May 29, 1998 to finance a 1998 Ford XLT pickup truck (1998 Ford).
- Howard signed a promissory note and security agreement granting the Credit Union a security interest in the 1998 Ford, and the Credit Union perfected its lien by notation on the vehicle’s title.
- The 1998 security agreement included future-advances/cross-collateral language stating that collateral securing other loans with the Credit Union “may also secure this loan,” and it also stated the Credit Union could repossess and sell the collateral and apply proceeds to the note balance and “any other debt” owed to the Credit Union.
- On May 3, 2001, Michael and Tammy Renee Howard obtained a second loan from the Credit Union to finance a 1999 Pontiac Transport Montana (1999 Pontiac).
- The Howards signed a second promissory note and security agreement pledging the 1999 Pontiac as collateral; the 2001 agreement contained the same future-advances/cross-collateral language as the 1998 agreement.
- Howard paid the 1998 loan in full on August 31, 2001, but the Credit Union did not release its lien on the 1998 Ford, asserting that the lien remained in place because the 2001 loan (with the future-advances clause) was executed while the 1998 loan was still outstanding.
- After the Howards later defaulted on the 2001 loan, the Credit Union repossessed both the 1998 Ford and the 1999 Pontiac.
- The Howards filed Chapter 7 bankruptcy and commenced an adversary proceeding seeking, among other relief, an order requiring the Credit Union to release the lien on the 1998 Ford.
- Both parties filed cross-motions for summary judgment, and the material facts were not disputed.

## Issues

1. Whether the future-advances/cross-collateral provisions in the parties’ notes and security agreements made the 1998 Ford collateral for the Howards’ obligations under the 2001 note.
2. Whether payment in full of the 1998 note required the Credit Union to release its lien on the 1998 Ford even though the Howards still owed debt under the 2001 note.
3. Whether either side was entitled to summary judgment under Fed. R. Civ. P. 56 (as incorporated by Fed. R. Bankr. P. 7056).

## Decision

- The court interpreted the cross-collateral/future-advances language in the notes and security agreements and enforced it according to its terms.
- The court held that, because the Howards entered the 2001 loan while the 1998 loan and its collateral lien were still in place, the contractual language allowed the 1998 Ford to serve as collateral securing the later indebtedness.
- The court rejected the Howards’ position that payoff of the 1998 note automatically required a lien release as to the later obligation, given the agreements’ language extending the collateral to other debt owed to the Credit Union.
- The court resolved the cross-motions for summary judgment consistent with its ruling that the Credit Union’s lien on the 1998 Ford continued as security for the 2001 debt.

## Legal Principles

- Summary judgment is appropriate when there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law. (Fed. R. Civ. P. 56; Fed. R. Bankr. P. 7056.)
- Notes and security agreements are interpreted under ordinary contract rules; when the language is clear, courts apply it as written.
- A security agreement may provide that collateral secures not only the identified note but also other obligations to the same creditor, including later advances, when the agreement’s terms so state.
- Payment of one note does not end a perfected lien in the collateral if the parties’ contract makes that collateral security for other outstanding indebtedness to the creditor.

## Conclusion

In *In re Howard v. Whitesville Credit Union*, the bankruptcy court held that the future-advances/cross-collateral language in the Howards’ vehicle loan documents allowed the Credit Union to continue treating the 1998 Ford pickup as collateral for the later 2001 auto loan, so the lien did not have to be released merely because the 1998 note was paid off while the 2001 obligation remained unpaid.


In re Howard v. Whitesville Credit Union, 312 B.R. 840 (2004)