## Facts

- The debtor operated a miniature-golf facility and generated predominantly cash “green-fee” receipts from patrons who paid a flat fee to enter and use the course.
- The debtor granted a secured creditor a security interest in course equipment; the security agreement also covered “proceeds” of the collateral.
- Patrons generally used the debtor’s balls and putters without a separate charge; the debtor argued receipts stemmed from the overall operation and services rather than disposition of equipment.
- The debtor filed Chapter 11 and sought authority to use funds, asserting its course receipts were not the secured creditor’s cash collateral.
- The court set an evidentiary hearing to determine the secured creditor’s interest in the debtor’s miniature-golf receipts.

## Issues

1. Whether the debtor’s course receipts constituted “cash collateral” under 11 U.S.C. § 363(a), limiting use under § 363(c)(2).
2. Whether the receipts were “proceeds” of the secured creditor’s equipment collateral under Indiana Article 9.
3. If the receipts were proceeds, whether the creditor held a perfected security interest in the receipts given Indiana’s perfection rule for “money.”

## Decision

- The court held the on-hand course receipts did not constitute the secured creditor’s “cash collateral” under § 363(a).
- Even assuming the receipts could be treated as “proceeds” of the equipment, the receipts were “money” under Indiana Article 9.
- A security interest in “money” may be perfected only by possession under Indiana law; the creditor never possessed the cash receipts.
- Because the creditor’s security interest in the cash receipts was unperfected, the debtor could use those receipts without the creditor’s consent or cash-collateral protections under § 363(c)(2) as to those funds.

## Legal Principles

- “Cash collateral” under 11 U.S.C. § 363(a) includes cash and proceeds of encumbered property only to the extent another entity has an enforceable interest in the funds.
- Under Indiana Article 9, a security interest in “money” is perfected only by the secured party’s possession (Ind. Code § 26-1-9.1-312(b)(3)).
- A creditor’s filed security interest in equipment and “proceeds” may be insufficient to perfect an interest in cash receipts when the proceeds are “money” and the creditor lacks possession.
- In bankruptcy, an unperfected security interest in cash receipts will not support treating the receipts as the creditor’s cash collateral for § 363(c)(2) restrictions.

## Conclusion

The bankruptcy court determined that the debtor’s miniature-golf cash receipts were “money” and, because the secured creditor never took possession, the creditor’s claimed proceeds lien in the receipts was unperfected; therefore, the receipts were not the creditor’s cash collateral and could be used by the debtor without § 363(c)(2) constraints as to those funds.


In re Wright Group, Inc., 443 B.R. 795 (Bankr. N.D. Ind. 2011)