## Facts

- Southern Illinois Rail Car Co. (Southern Rail) operated and leased large numbers of railcars and filed a Chapter 11 bankruptcy case in the U.S. Bankruptcy Court for the Southern District of Illinois.
- Wells Fargo Equipment Finance Company (Wells Fargo) made a loan to Southern Rail and claimed the loan was secured by certain railcars.
- The parties executed a security agreement stating that the collateral was “Equipment as more fully described on Schedule A.”
- In the bankruptcy case, the executed security agreement produced by Wells Fargo did not include an attached Schedule A, leaving unclear which railcars (if any) were intended to secure the loan.
- Wells Fargo pointed to other transaction documents connected to the loan (including riders and agreements addressing assignment and substitution of equipment) to show what equipment was covered.
- Southern Rail (or parties acting in connection with the transaction) had also made filings with the Surface Transportation Board (STB), the federal filing system used in practice for recording interests in railcars/rolling stock.
- Wells Fargo moved for relief from the automatic stay and requested adequate protection so it could pursue foreclosure or otherwise enforce its alleged lien against railcar collateral.
- Southern Rail objected, arguing that Wells Fargo could not show an enforceable (and therefore perfected) security interest in any identifiable railcars because the security agreement did not describe the collateral.

## Issues

1. Whether Wells Fargo had an enforceable security interest under UCC § 9-203 when the security agreement identified collateral only by reference to a Schedule A that was not attached.
2. Whether other loan documents and/or STB filings could supply the missing collateral identification needed for attachment and enforceability.
3. Whether, absent proof of an enforceable security interest in specific railcars, Wells Fargo was entitled to relief from the automatic stay or adequate protection based on secured-creditor status.

## Decision

- The court denied Wells Fargo’s requested stay relief (and related relief) to the extent it depended on a security interest in Southern Rail’s railcars.
- The court concluded Wells Fargo did not establish an enforceable security interest because the authenticated security agreement did not provide a description that reasonably identified any specific railcars, given the missing Schedule A.
- The court found that other documents and STB filings did not cure the failure of the security agreement itself to identify the collateral for purposes of attachment and enforceability.

## Legal Principles

- Under UCC § 9-203, a security interest is enforceable against the debtor and third parties only if value is given, the debtor has rights in the collateral, and the debtor authenticates a security agreement that provides a description of the collateral.
- A collateral description must “reasonably identify” what is covered; where the debtor owns a large pool of similar assets, an incomplete description that does not permit identification of the intended collateral is insufficient.
- When a security agreement describes collateral by reference to a schedule, the description requirement is not met if the schedule is missing and the agreement does not otherwise identify the collateral.
- Evidence outside the authenticated security agreement (including related documents or public filings) generally cannot substitute for the agreement’s failure to describe the collateral for attachment purposes, unless the agreement validly incorporates the identifying material.
- Perfection efforts (including filings in the applicable recording system for railcars) do not create a secured claim if the creditor cannot first show attachment and enforceability under § 9-203.
- A creditor seeking relief from the automatic stay or adequate protection as a secured creditor bears the burden to show a colorable, enforceable lien interest in identified property of the estate.

## Conclusion

Because Wells Fargo’s security agreement referenced a Schedule A that was not attached and did not otherwise identify which railcars were pledged, Wells Fargo failed to show an enforceable security interest under UCC § 9-203; related documents and STB filings did not supply the missing description for attachment, so the court denied stay relief and adequate protection based on the asserted railcar collateral.


In re Southern Illinois Rail Car Co., 301 Bank. 305, 2002 Bankr. LEXIS 1433 (2002)