## Facts

- Before the bankruptcy filing, an individual secured creditor loaned the debtors $10,000.
- The loan was documented by a promissory note and a written security agreement.
- The debtors pledged certain coins as collateral for the loan.
- At the time of the loan, the secured creditor immediately took physical possession of the coins.
- The secured creditor maintained continuous possession of the coins through the bankruptcy petition date.
- The security agreement included a clause allowing the secured creditor to require the debtors’ cooperation in executing a financing statement, but the secured creditor never requested such cooperation.
- No financing statement (UCC-1) was filed covering the coins.
- On the petition date, the debtors still owed the full $10,000 principal amount.
- The Chapter 7 trustee filed an adversary proceeding seeking to avoid the secured creditor’s interest under 11 U.S.C. § 544(a), arguing the interest was unperfected because there was no filed financing statement.
- The secured creditor moved for summary judgment, relying on Ohio’s enactment of UCC Article 9, which allows perfection of certain collateral by possession.
- The trustee also raised a preference theory under 11 U.S.C. § 547, but the dispute centered on whether the security interest was perfected as of the petition date.

## Issues

1. Whether, under Ohio Rev. Code § 1309.313(A) (UCC § 9-313), a secured creditor perfects a security interest in pledged coins by taking and retaining possession, without filing a financing statement.
2. Whether the Chapter 7 trustee may avoid the creditor’s security interest under 11 U.S.C. § 544(a) if the creditor perfected by possession rather than filing.
3. Whether summary judgment was proper when the facts regarding the creditor’s possession and the absence of any UCC filing were not genuinely disputed.
4. Whether the trustee could avoid the lien as a preferential transfer under 11 U.S.C. § 547 given the timing of attachment and perfection by possession.

## Decision

- The court granted the secured creditor’s motion for summary judgment.
- The court held that the secured creditor’s security interest in the coins was perfected by possession under Ohio Rev. Code § 1309.313(A).
- Because the security interest was perfected as of the petition date, the trustee could not avoid it using the strong-arm power in 11 U.S.C. § 544(a).
- The court rejected the trustee’s preference theory under 11 U.S.C. § 547 on the record presented, since the security interest was perfected when the creditor took possession contemporaneously with the loan and remained perfected.

## Legal Principles

- Under Ohio Rev. Code § 1309.313(A) (UCC § 9-313), a secured party may perfect a security interest in certain types of collateral, including goods (and potentially money), by taking possession of the collateral.
- When Article 9 authorizes perfection by possession for the collateral at issue, filing a financing statement is not required to perfect the security interest.
- A clause in a security agreement that permits the secured party to request execution or filing of a financing statement does not make filing mandatory when the secured party has already perfected by a method authorized by Article 9.
- Under 11 U.S.C. § 544(a), a bankruptcy trustee has the rights of a hypothetical judicial lien creditor as of the petition date and may avoid security interests that are unperfected under applicable nonbankruptcy law; the trustee cannot avoid a security interest that was properly perfected before bankruptcy.
- Summary judgment is appropriate when the material facts (such as continuous possession and nonfiling) are undisputed and the outcome turns on the legal effect of those facts under state perfection rules and federal avoidance provisions.
- A preference claim under 11 U.S.C. § 547 generally requires a transfer on account of an antecedent debt within the preference period; where attachment and perfection occur contemporaneously with the loan through possession and remain continuous, the trustee lacks a basis to treat the lien as a later avoidable transfer.

## Conclusion

In re Phillips-Camper held that a secured creditor who loaned the debtors $10,000 and immediately took and continuously retained possession of pledged coins perfected its security interest under Ohio Rev. Code § 1309.313(A) without filing a financing statement; therefore, the Chapter 7 trustee could not avoid the lien under § 544(a), and summary judgment was entered for the secured creditor.


In re Phillips-Camper, 359 B.R. 659 (2007)