## Facts

- S & J Holding Corporation (S & J) operated coin-operated video-game and vending machines that generated cash revenues from customer use.
- S & J entered into a security agreement granting A.M. June, Inc. (A.M. June) a security interest in certain identified video-game and vending machines (and related items described in the agreement).
- A.M. June filed a UCC financing statement that listed the machines as collateral.
- On the financing statement, A.M. June checked an option indicating that “products of collateral” were covered, but the filing did not clearly state that “proceeds” or cash receipts were part of the collateral description.
- S & J later filed a Chapter 11 bankruptcy case.
- After the bankruptcy filing, the machines continued to generate cash from customer coin deposits and similar receipts.
- A.M. June moved for relief from the automatic stay or, alternatively, for adequate protection, claiming the postpetition cash revenues were subject to its security interest and therefore were cash collateral.

## Issues

1. Whether a financing statement that lists coin-operated machines as collateral and indicates coverage of “products of collateral” sufficiently perfects a security interest in the cash revenues generated by operating those machines under Florida’s Article 9.
2. If the creditor lacked a perfected security interest in the machine revenues, whether those revenues constituted “cash collateral” so as to restrict the debtor’s use of the funds absent consent or court-ordered protection.

## Decision

- The court held that A.M. June’s financing statement did not perfect a security interest in the cash revenues generated by the debtor’s machines.
- Because the creditor did not have a perfected interest in the cash receipts, the revenues were not treated as the creditor’s cash collateral in the bankruptcy case.
- The court denied A.M. June’s request for relief from stay or adequate protection to the extent it was based on an asserted lien in the postpetition cash revenues (while leaving intact the creditor’s rights in the machines to the extent otherwise properly perfected).

## Legal Principles

- Article 9 uses a notice-filing system, but the financing statement must still describe the collateral in a way that reasonably alerts third parties to the secured party’s claimed interest.
- A description that is ambiguous or does not reasonably signal a claim to a category of property (such as ongoing cash receipts) is insufficient to perfect a security interest in that property against third parties, including a bankruptcy estate.
- “Products” of collateral is not automatically the same as cash generated from operating equipment; to perfect a lien in cash receipts, the filing must clearly cover proceeds or otherwise identify the claimed cash interest.
- In bankruptcy, funds are “cash collateral” only if a creditor holds a valid, perfected security interest (or other qualifying interest) in that cash; absent perfection under applicable nonbankruptcy law, the creditor is not entitled to cash-collateral restrictions, stay relief, or protection aimed at safeguarding a secured cash position.

## Conclusion

In re S & J Holding Corp. held that listing video-game and vending machines on a financing statement and checking “products of collateral” did not perfect a security interest in the coin revenues generated by operating those machines; as a result, the creditor could not treat the postpetition receipts as its cash collateral or obtain stay relief or adequate protection based on an asserted lien in that cash.


In re S & J Holding Corp., 42 B.R. 249 (1984)