15-4131-bk
In re: Sterling United, Inc.


                                UNITED STATES COURT OF APPEALS
                                    FOR THE SECOND CIRCUIT

                                       SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New
York, on the 22nd day of December, two thousand sixteen.

PRESENT: GUIDO CALABRESI,
         REENA RAGGI,
         GERARD E. LYNCH,
                   Circuit Judges.

----------------------------------------------------------------------
IN THE MATTER OF: STERLING UNITED, INC.
                                          Debtor.
----------------------------------------------------------------------
JOHN H. RING, III, Trustee of the Chapter 7 Bankruptcy
Estate of STERLING UNITED, INC.,
                                          Plaintiff-Appellant,

                               v.                                        No. 15-4131-bk

FIRST NIAGARA BANK, N.A.,
                                          Defendant-Appellee.
----------------------------------------------------------------------
APPEARING FOR APPELLANT:                          ARTHUR G. BAUMEISTER, JR., Amigone,
                                                  Sanchez & Mattrey, LLP, Buffalo, New York.

APPEARING FOR APPELLEE:                          GARRY M. GRABER, Hodgson Russ LLP,
                                                 Buffalo, New York.
 1          Appeal from a judgment of the United States District Court for the Western

 2   District of New York (William M. Skretny, Judge; Michael J. Kaplan, Bankruptcy

 3   Judge).

 4          UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

 5   AND DECREED that the judgment of the district court is AFFIRMED.

 6          Plaintiff John H. Ring, III, the Chapter 7 bankruptcy trustee for the estate of

 7   Sterling United, Inc., appeals from the affirmance of the bankruptcy court’s dismissal of

 8   his claims that defendant First Niagara Bank’s security interests in debtor’s assets were

 9   avoidable under 11 U.S.C. § 547. On plenary review of a decision of a district court

10   functioning as an intermediate appellate court in a bankruptcy case, we assess the

11   bankruptcy court’s legal conclusions de novo and its factual findings for clear error. See

12   In re Lehman Bros. Holdings Inc., 761 F.3d 303, 308 (2d Cir. 2014). In applying these

13   principles here, we assume the parties’ familiarity with the underlying facts, the

14   procedural history of the case, and the issues on appeal, which we reference only as

15   necessary to explain our decision to affirm.

16          Under 11 U.S.C. § 547(b)(4)(A), a bankruptcy trustee may avoid any “transfer of

17   an interest of the debtor in property . . . made . . . on or within 90 days before the date of

18   the filing of the petition” for bankruptcy, provided that those interests are not perfected

19   security interests. See id. § 547(c)(3). In New York, a financing statement perfects a

20   security interest if it (a) states the name of the debtor and the name of the secured party or



                                                    2
21   a representative of the secured party, and (b) “indicates the collateral covered by the

22   financing statement.”     N.Y. U.C.C. § 9-502.        The collateral requirement may be

23   satisfied by “an indication that the financing statement covers all assets or all personal

24   property,” id. § 9-504, which is the minimum necessary to “provide[] notice that a person

25   may have a security interest in the collateral claimed,” id. § 9-504 cmt. 2.

26          The trustee argues that First Niagara inadequately perfected its interests in

27   debtor’s assets under these provisions. He therefore maintains that, rather than dismiss

28   his claim, the bankruptcy court should have awarded the estate the value of any property

29   interests transferred to, or liquidation proceeds collected by, First Niagara within 90 days

30   of the May 17, 2013 bankruptcy petition date. We do not agree.

31          The parties do not dispute the underlying facts. First Niagara loaned over one

32   million dollars to the debtor and was granted a blanket security interest in all of debtor’s

33   assets. Between 2005 and 2007, First Niagara filed three financing statements, pursuant

34   to N.Y. U.C.C. § 9-502, to perfect those interests. The collateral indication in the initial

35   U.C.C. filings was as follows:

36          All assets of the Debtor including, but not limited to, any and all equipment,
37          fixtures, inventory, accounts, chattel paper, documents, instruments,
38          investment property, general intangibles, letter-of-credit rights and deposit
39          accounts now owned and hereafter acquired by Debtor and located at or
40          relating to the operation of the premises at 100 River Rock Drive, Suite
41          304, Buffalo, New York, together with any products and proceeds thereof
42          including, but not limited to, a certain Komori 628 P & L Ten Color Press
43          and Heidelberg B20 Folder and Prism Print Management System.
44



                                                   3
45   App’x 132 (emphasis added).        On October 19, 2012, the financial statements were

46   amended to indicate the debtor’s change of address to 6030 N. Bailey Avenue, Amherst,

47   N.Y. 14226. Id. at 195. Those amendments, however, did not update the description

48   of the collateral to reflect the debtor’s changed address; that was done by amendment on

49   February 19, 2013. The final collateral indication states as follows:

50          All assets of the Debtor including, but not limited to, any and all
51          equipment, fixtures, inventory, accounts, chattel paper, documents,
52          instruments, investment property, general intangibles, letter-of-credit rights
53          and deposit accounts now owned and hereafter acquired by Debtor,
54          including but not limited to those located at or used in connection with the
55          business premises at 6030 N. Bailey Avenue, Amherst, NY 14226, together
56          with any products and proceeds thereof.
57
58   Id. at 140 (emphasis added).

59          The parties agree that the February 2013 collateral amendments, which were filed

60   within 90 days of the bankruptcy petition, did not and could not have perfected First

61   Niagara’s security interests. The only dispute, therefore, is whether the initial collateral

62   description was sufficient to perfect First Niagara’s security interests, or whether, as the

63   trustee argues, the indication was restricted to property located at 100 River Rock Drive,

64   the initially stated address, and therefore a nullity with respect to debtor assets at the new

65   address.

66          We conclude that the description is sufficient because it unambiguously refers to

67   “[a]ll assets of the Debtor” irrespective of their location. The phrase “including, but not

68   limited to” introduces a subset of, and does not function as a limitation on, “[a]ll” of the



                                                   4
69   debtor’s assets. See, e.g., Bloate v. United States, 559 U.S. 196, 208 (2010) (construing

70   statutory phrase “including but not limited to” to introduce “list of categories” that was

71   “illustrative rather than exhaustive”); Federal Land Bank of St. Paul v. Bismarck Lumber

72   Co., 314 U.S. 95, 100 (1941) (“[T]he term ‘including’ is not one of all-embracing

73   definition, but connotes simply an illustrative application of the general principle.”);

74   United States v. Huber, 603 F.2d 387, 394 (2d Cir. 1979) (“[A] list beginning with the

75   word ‘includes’ . . . is not exhaustive but merely illustrative.”); Pierre v. Providence

76   Wash. Ins. Co., 99 N.Y.2d 222, 236, 754 N.Y.S.2d 179, 188 (2002) (describing phrase

77   “includes, but is not limited to,” as signifying “nonexclusive definition”).

78          The trustee offers no reason for departing from this general principle of

79   interpretation. Instead, he argues that the address modifies “[a]ll assets” or, at least,

80   makes the collateral indication “seriously misleading” under N.Y. U.C.C. § 9-506.

81   Neither argument persuades.       The textual argument founders because the location

82   restriction is the second half of a conjunctive phrase identifying assets included in but not

83   exhaustive of those covered by the collateral specification. See App’x 132 (“All assets of

84   the Debtor including, but not limited to, any and all [list of specific assets] . . . now

85   owned and hereafter acquired by Debtor and located at or relating to the operation of

86   the premises at 100 River Rock Drive, Suite 304, Buffalo, New York.” (emphasis added)).

87   The reading plaintiff urges—“All assets of the Debtor . . . and located at or relating to the

88   operation of the premises . . . .,” id. (emphasis added)—does not make sense.



                                                   5
 89         Nor do the cases cited by the trustee support his argument that the specific location

 90   here makes the collateral indication “seriously misleading.” N.Y. U.C.C. § 9-506. In

 91   none of those cases did the challenged collateral indication contain an explicit and

 92   unambiguously broad term (“all assets”) paired with language disclaiming any limitation

 93   on the contents of that category (“including, but not limited to”). For example, the

 94   financing statement in In re I.A. Durbin, Inc., 46 B.R. 595, 598 (Bankr. S.D. Fla. 1985),

 95   covered “[a]ll property rights of any kind whatsoever, whether real, personal, mixed or

 96   otherwise, and whether tangible or intangible, encumbered by the above-mentioned

 97   mortgage.”    The phrase “encumbered by the above-mentioned mortgage” plainly

 98   modified and limited “[a]ll property rights.” Id. The same conclusion applies to In re

 99   Freeman, 33 B.R. 234, 234 (Bankr. C.D. Cal. 1983) (“All furniture and fixtures and

100   inventory of the Gold Chain Supermarkets now or at any time located or installed on the

101   land or in the improvements at 813 State Street, Santa Barbara, California.” (emphasis

102   added)). In sum, because the geographic reference in the initial collateral indication was

103   merely illustrative and because the indication clearly reaches all assets of the debtor, we

104   conclude, as the bankruptcy and district courts did, that the trustee’s § 547 claim against

105   First Niagara is properly dismissed.

106         We have considered plaintiff’s remaining arguments and find them to be without

107   merit. Accordingly, we AFFIRM the judgment of the district court.

108                                            FOR THE COURT:
109                                            Catherine O’Hagan Wolfe, Clerk of Court


                                                  6
