1. What does the court find about bringing a series of documents together for purposes of creating a security agreement?

2. What ultimately does the court find that is fatal to the creation of a security agreement?

Charles and Charity Cunningham (the Debtors) filed a joint Chapter 7 bankruptcy. The Debtors had purchased two iPods, a camera, a computer, and other items in 12 separate consumer transactions of consumer goods from Best Buy, N.A., a national retailer of consumer electronics and related products and services. Some of Debtors’ purchases were made on credit provided by Capital One. The Debtors signed a credit application, which states, “you grant the Bank a purchase money security interest in the goods purchased on your Account.” Furthermore, the application states in that same section that the cardholder, the Debtors, agree to the terms and conditions of the Cardholder Agreement.

The Application has this language buried in a 16-line paragraph in a small font. A magnifying glass is necessary to find and read the language. The language appears in the ninth and tenth lines of the paragraph. The Debtors agreed, in this fine print, to the terms and conditions of the Cardholder Agreement. The Application indicates that the Cardholder Agreement would be sent to the Debtors after the Application and initial purchase of consumer products on January 16, 2010. The Cardholder Agreement is not signed. Buried in 41 numbered paragraphs in small print in the Cardholder Agreement is language that refers to Debtors granting to Capital One “a purchase money security interest in the goods purchased with your Card.”

The cardholder agreement states in paragraph 17 entitled “Security,” “you grant us a purchase money security interest in the goods purchased with your Card.” The 12 Best Buy receipts for the purchases all were signed by one of the Debtors, except for one transaction. The receipts contain basic information, such as the location of the Best Buy store, a brief description of items purchased and the price of these items, and the date and time of the sale. The receipts also state “Payment Type: BBY CARD/HSBC.” The following language appears below the place of signature:

KEEP YOUR RECEIPT!

I HAVE READ AND AGREE TO ALL RETURN

AND REFUND POLICIES PRINTED ON THE

BACK OF THIS

RECEIPT AND POSTED IN THE STORE. I

HAVE RECEIVED GOODS AND/OR SERVICES

IN THE AMOUNT SHOWN ABOVE. BESTBUY.COM RETURN

AND EXCHANGE INFORMATION AND PRICE

MATCH POLICY

MAY VARY SLIGHTLY FROM IN–STORE POLICY. PLEASE LOG ONTO

WWW.BESTBUY.COM FOR COMPLETE DETAILS.

The court did not have copies of the reverse side of the receipts, which were not provided. Regardless, it appears that the reverse side of the receipts only contains language pertinent to the return and refund policies of Best Buy. There is no reference on the receipts to security interests, purchase money or otherwise, retained by anyone. The receipts also do not contain a reference to the Application or the Cardholder Agreement. The Debtors requested a determination by the Court that Capital One does not hold a security interest, purchase money or otherwise, in the goods they purchased at Best Buy.

JUDICIAL OPINION

BERGER, Bankruptcy Judge … Capital One argues that it does hold a purchase money security interest in the Consumer Goods and that the Consumer Goods have a value of $2,100. The Debtors assert that the balance on the Capital

One account is $1,556.49.

Revised Article 9 continues the requirement that a security agreement or financing statement contain a description of the collateral that reasonably identifies the collateral. The use of categories or types of collateral defined under the UCC (i.e., inventory) is still permitted. However, in consumer transactions and a limited number of other situations, a description by type or class of collateral is ineffective as to after-acquired property. Revised Article 9 permits “supergeneric” descriptions in the financing statement such as “all assets” or “all personal property” but not in the security agreement. ………………