In Re Wood

67 B.R. 321 (1986)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

P and D are practicing attorneys. P loaned D the sum of $10,000.00. D executed a demand promissory note at that time including provision for the payment of interest. No payment was made on the note by D for a period of five years. By letter agreement dated on or about June 3, 1982, D agreed to pay to P the sum of $1,000.00 within ten days of May 28, 1982, to be applied towards the payment of accrued interest. Subsequent payments would also be applied first to interest and then to reduction of the principal balance. D also agreed to a limited assignment of the proceeds that might be due D from two litigations in which D was engaged. The litigations were contingent based. The assignment contained restrictions on the assignee's right to disclose the existence of the assignment to any third parties, including the clients, or to participate in the prosecution of the underlying litigations or any settlement negotiations. On September 9, 1983, D filed Chapter 11 and D seeks to avoid the security interest of P and the proceeds subsequently received by D from the settlement of the litigations. The Bankruptcy Court concluded that the appropriate standard to be applied in interpreting U.C.C. 9-309(2) is a combination of both the 'percentage test' and 'casual and isolated transaction test.' The court found for D in that P’s interest was not perfected and was not exempt from filing wherein filing a financing statement was not required in an assignment of accounts which does not transfer a significant part of the assignor’s outstanding accounts. P appealed.