## Facts

- Tracy Broadcasting Corp., a Nebraska corporation, operated an FM radio station under an FCC license.
- Valley Bank & Trust Co. loaned Tracy about $1.6 million and took a security interest in substantially all assets, including “general intangibles” and “all proceeds,” and perfected by filing a UCC-1 financing statement.
- Spectrum Scan, LLC held an approximately $1.4 million federal judgment against Tracy.
- When Tracy filed for Chapter 11 in 2008, no contract existed to sell the FCC license and no FCC transfer application was pending.
- Postpetition, Tracy sold the station assets, including the FCC license, with FCC approval, generating proceeds.
- The dispute was whether Valley Bank’s prepetition security interest had priority in the FCC-license sale proceeds over Spectrum Scan’s judgment lien.

## Issues

1. Whether the debtor’s prepetition, contingent right to receive money from a possible future FCC-license sale is an “interest in property” under 11 U.S.C. § 541 sufficient to support a secured creditor’s lien.
2. Whether, under UCC Article 9, a security interest in “general intangibles” and “proceeds” can attach prepetition to the future proceeds of a later FCC-approved license transfer, despite federal limits on treating the license itself as private property.
3. Whether a perfected security interest in such proceeds has priority over a judgment creditor’s lien in bankruptcy.

## Decision

- The Tenth Circuit reversed the district court (and bankruptcy court) and remanded.
- The court held Tracy had a sufficient property interest, as of the petition date, in the future proceeds of an FCC-license sale for Valley Bank’s security interest to attach.
- The court held Valley Bank’s lien was properly perfected and had priority in the license-sale proceeds over Spectrum Scan’s judgment lien.
- The court distinguished an impermissible lien on the FCC license itself from a permissible lien on the proceeds realized from an FCC-approved sale.

## Legal Principles

- Property of the estate under 11 U.S.C. § 541(a)(1) includes contingent and unmatured legal or equitable interests existing at the commencement of the case.
- Under UCC Article 9, attachment requires the debtor to have rights in the collateral (or power to transfer rights) and permits security interests in after-acquired property and future proceeds.
- Federal communications law and FCC policy restrict encumbrances that would allow a creditor to foreclose on or transfer an FCC license without FCC approval, but do not bar security interests in the proceeds from an FCC-approved license transfer.
- A prepetition perfected security interest in collateral and its proceeds generally takes priority over a judgment lien in the same property.

## Conclusion

The court held that a debtor’s contingent, prepetition right to receive money from a later FCC-approved license sale is a sufficient property interest for a creditor’s perfected Article 9 lien in “general intangibles and proceeds” to attach and take priority over a judgment creditor’s claim to the sale proceeds.


In re Tracy Broad. Corp., 696 F.3d 1051 (10th Cir. 2012)