## Facts

- Ripley Oil Company, Inc. operated as a rural retail distributor of petroleum products.
- The debtor placed approximately 520 oil tanks and pumps with farm customers to store fuel the debtor sold.
- Customers typically signed an equipment agreement stating the tanks were loaned, remained the debtor’s personal property, and could be removed by the debtor.
- A bank loaned the debtor $60,000 and took a security interest described as covering “all accounts receivable and inventory.”
- In the Chapter 7 case, the bank moved to compel abandonment of the tanks and pumps, asserting they were “inventory” subject to its lien and of no meaningful value to the estate.
- The Chapter 7 trustee objected, contending the tanks and pumps were “equipment,” outside the bank’s collateral description.

## Issues

1. Whether the tanks and pumps placed with customers were “inventory” or “equipment” under Ohio’s U.C.C. Article 9 classifications.
2. Whether the trustee could be compelled under 11 U.S.C. § 554 to abandon the tanks and pumps to the bank based on the bank’s asserted secured interest.

## Decision

- The court held the tanks and pumps were “equipment,” not “inventory.”
- The court concluded the bank’s security interest in “accounts receivable and inventory” did not attach to the tanks and pumps.
- The court denied the bank’s motion to compel abandonment under 11 U.S.C. § 554.

## Legal Principles

- Under U.C.C. Article 9 collateral classifications, “inventory” generally covers goods held for sale or lease (or to be furnished under service contracts), while “equipment” covers business goods not fitting other categories.
- Goods retained by a supplier and placed with customers to facilitate the supplier’s sales may be treated as a bailment for mutual benefit rather than goods held for sale or lease.
- A secured creditor seeking abandonment under 11 U.S.C. § 554 must first establish that the property is within its collateral and subject to its enforceable security interest; absent such rights, abandonment cannot be compelled on the creditor’s request.

## Conclusion

Because the debtor retained ownership of the loaned tanks and used them as business assets to facilitate fuel sales, the court classified them as equipment outside the bank’s “inventory” collateral, and it therefore denied the bank’s request to force abandonment.


Matter of Ripley Oil Co., 71 B.R. 631 (Bankr. S.D. Ohio 1987)