## Facts

- Kevin Mark Shirel signed a written application for a store credit card issued by Sight ’N Sound Appliance Centers, Inc.
- The application was a lengthy, small-print, multi-page form; the signature line was on the first page, while the security-interest language appeared mid-document.
- The application stated that Sight ’N Sound would have a security interest in “all merchandise” (or “all merchandise purchased on the account”) bought using the card.
- After the account was approved, the Shirels used the card to purchase a refrigerator from Sight ’N Sound; Kevin Shirel also signed the purchase receipt.
- The Shirels later filed a Chapter 7 bankruptcy case and scheduled the store-card balance as an unsecured claim.
- The Shirels claimed the refrigerator as exempt household goods under Oklahoma law.
- Sight ’N Sound asserted it held a purchase-money security interest in the refrigerator based on the store-card application and objected to the exemption claim (and, according to the record described in secondary summaries, did not timely object to the exemption).
- The debtors moved to avoid the asserted lien, and the bankruptcy court treated the matter as a request to determine the validity and extent of Sight ’N Sound’s claimed security interest.

## Issues

1. Whether a store-card application granting a security interest in “all merchandise” purchased with the card reasonably identifies a refrigerator as collateral under the Oklahoma UCC, creating an enforceable security interest.

## Decision

- The court held that Sight ’N Sound did not have a valid, enforceable security interest in the refrigerator.
- The phrase “all merchandise” (or “all merchandise purchased on the account”) was too vague and imprecise to reasonably identify the refrigerator as collateral for Article 9 purposes.
- Because the collateral description failed the UCC’s reasonable-identification requirement, the alleged security interest was not enforceable against the debtors as to the refrigerator.
- The court granted the debtors’ requested relief and treated Sight ’N Sound as unsecured with respect to the refrigerator.

## Legal Principles

- A security interest is enforceable against the debtor only if Article 9’s attachment requirements are satisfied, including an authenticated (signed) security agreement that describes the collateral.
- The collateral description must reasonably identify what property is subject to the security interest so that the encumbered items can be determined without guesswork.
- Although Article 9 permits general descriptions in some settings, a broad label such as “all merchandise,” used in a consumer retail credit-card application, may be insufficient if it does not meaningfully point to identifiable collateral like a specific household appliance.
- When a creditor relies on a dense, take-it-or-leave-it consumer form to claim a lien, unclear or overly general collateral language is construed against the creditor in deciding whether the debtor granted a security interest and what property it covers.

## Conclusion

In *In re Shirel*, the Bankruptcy Court for the Western District of Oklahoma ruled that Sight ’N Sound’s store-card application language claiming a security interest in “all merchandise” purchased on the account did not reasonably identify the Shirels’ refrigerator as collateral under the Oklahoma UCC. As a result, no enforceable Article 9 security interest attached to the refrigerator, and the creditor’s claim was treated as unsecured as to that item in the bankruptcy case.


In re Shirel, 251 B.R. 157 (2000)