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In re Pembroke Development Corp.
Citations: 124 B.R. 396; 1991 Bankr. LEXIS 219; 1991 WL 26611Docket: Bankruptcy No. 90-26406-BKC-SMW
Court: United States Bankruptcy Court, S.D. Florida.; March 1, 1991; Us Bankruptcy; United States Bankruptcy Court
The Court granted the Motion for Approval of Stipulation for Release of Collateral between Pembroke Development Corporation (the debtor) and North Ridge Bank. In April 1990, the debtor borrowed $450,000 from North Ridge, secured by furniture, fixtures, equipment, and three certificates of deposit (CDs) belonging to Jeffrey Miller, Robert Miller, and Phyllis Miller, who guaranteed the loan. The loan's maturity was extended to February 16, 1991, through a renewal note, with the debtor added as a payee on the CDs. The debtor defaulted, leading to a Chapter 11 bankruptcy filing on September 12, 1990. North Ridge sought to exercise its right of setoff against the CDs, arguing this would benefit the bankruptcy estate by stopping interest accrual. The Resolution Trust Corporation, a secured creditor, objected, claiming the CDs became estate assets due to the debtor being added as a payee and alleging this constituted a voidable preference under 11 U.S.C. 547(b). The debtor countered that the CDs were not estate property, citing a prior ruling that collateral for non-debtor customers was not estate property. Under the Uniform Commercial Code, a secured party can perfect a security interest in instruments by taking possession, further complicating the ownership and rights surrounding the CDs. A security interest is perfected by possession from the moment possession is taken, as stated in Fla. Stat. Ann. 679.304, and remains perfected as long as possession is maintained. In this case, North Ridge Bank gained possession of the certificates of deposit when the original note was executed, with the certificates pledged by non-debtor individuals as collateral for the debtor's loan. Upon the renewal of the note on August 16, 1990, North Ridge filed a financing statement listing the debtor as a payee but did not relinquish possession of the certificates. Consequently, the court concluded that North Ridge Bank perfected its security interest upon taking possession, and the filing of the financing statement did not create a voidable preference under 11 U.S.C. 547(b). The court ordered the following: 1. Approval of the Motion for Stipulation for Release of Collateral is granted. 2. The objection from the Resolution Trust Corporation, acting as conservator for Commonwealth Savings and Loan Association, is overruled. 3. North Ridge Bank is allowed to exercise its right of set-off against the three certificates of deposit in its possession.