Motors Liquidation Company Avoidance Action Trust v. JPMorgan Chase Bank, N.A. et al

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK

Inte: ; Chapter 11 Case
MOTORS LIQUIDATION COMPANY, f/k/a GENERAL : Case No. 09-50026 (REG)
MOTORS CORPORATION, et al., :
(Jointly Administered)
Debtors.
OFFICIAL COMMITTEE OF UNSECURED
CREDITORS OF MOTORS LIQUIDATION COMPANY,
Plaintiff,
Adversary Proceeding

against
Case No. 09-00504. (REG)
JPMORGAN CHASE BANK, N.A., etal.,

Defendants.

DECISION ON CROSS-MOTIONS
FOR SUMMARY JUDGMENT

APPEARANCES:

DICKSTEIN SHAPIRO LLP
Counsel for the Official Committee of
Unsecured Creditors of Motors Liquidation Company
1633 Broadway
New Y ork, New Y ork 10019-6708
By: Barry N. Seidel, Esq.
Enc B. Fisher, Esq. (argued)
Katie L. Cooperman, Esq.

KELLEY DRY E & WARREN LLP
Counsel for Defendant J PMorgan Chase Bank, N.A.
101 Park Avenue
New Y ork, New Y ork 10178
By: JohnM. Callagy, Esq. (argued)
Nicholas J. Panarella, Esq.
Martin A. Krolewski, Esq.

Table of Contents
Introduction ..................................................................................................................................... 1
Facts ................................................................................................................................................ 6
A. Synthetic Lease Origination ................................................................................................... 6
B. Term Loan Origination........................................................................................................... 7
C. Synthetic Lease Termination.................................................................................................. 8
1. The Synthetic Lease Termination Agreement .................................................................... 9
2. The Synthetic Lease Closing Checklist ............................................................................ 12
3. The Unrelated UCC-3 ....................................................................................................... 14
4. The Synthetic Lease Escrow Agreement .......................................................................... 16
5. The Synthetic Lease Transaction Payoff .......................................................................... 20
6. GM’s Understanding......................................................................................................... 20
D. Subsequent Events ............................................................................................................... 21
Discussion ..................................................................................................................................... 22
I. Summary Judgment Standards ................................................................................................. 22
II. Choice of Law ......................................................................................................................... 23
III. Effectiveness of the Unrelated UCC-3 .................................................................................. 24
A. The Requirement for Authorization .................................................................................... 26
B. Was Authorization Granted? ............................................................................................... 30
1. Actual Authority .............................................................................................................. 31
2. Apparent Authority ........................................................................................................... 53
3. Ratification........................................................................................................................ 55
C. The Committee’s Other Arguments .................................................................................... 57
1. 	Implied Authority.......................................................................................................... 57
2. 	“UCC Filings that Mistakenly Terminate a Security Interest Are Legally Effective.” 59
IV. Certification to Circuit ........................................................................................................... 72
Conclusion .................................................................................................................................... 74
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ROBERT E. GERBER
UNITED STATES BANKRUPTCY JUDGE:
In this adversary proceeding under the umbrella of the chapter 11 case of Motors
Liquidation Company, formerly known as General Motors Corporation (“GM”), plaintiff
Official Committee of Unsecured Creditors (the “Committee”)1 seeks a determination that the
principal lien securing a syndicated $1.5 billion term loan (the “Term Loan”) that had been
made to GM in November 2006 was terminated in October 2008, before the filing of GM’s
chapter 11 case—thereby making most of the $1.5 billion in indebtedness under the Term Loan
unsecured. The defendants are the syndicate members who together made the Term Loan (the
“Lenders”) and JPMorgan Chase Bank, N.A. (“JPMorgan”), the agent under the facility.2
The action presents issues as to Uniform Commercial Code (“UCC”) filings that are
commonly used in secured financings: a UCC-1 initial financing statement (“UCC-1”), with
which a security interest can be perfected, and a UCC-3 financing statement amendment
(“UCC-3”), with which, among other things,3 the effectiveness of an earlier UCC-1 may be
1 	When GM’s Plan of Reorganization (the “Plan”) was confirmed, after this adversary proceeding was
commenced, the Committee’s right to pursue this litigation devolved to one of several trusts created under
the Plan—the “Avoidance Action Trust.” For simplicity, the Court continues to refer to the plaintiff here as
the Committee.
While the Committee continues as plaintiff, there is a controversy, not yet resolved, as to the rights to any
proceeds of this litigation. Although the United States Treasury (“Treasury”) disclaimed a lien on the
litigation proceeds when it extended its DIP financing, Treasury later contended that it could nevertheless
reach those proceeds ahead of GM’s unsecured creditors by reason of Treasury’s rights to a “superpriority”
claim. This Court’s determination in favor of the Committee as to that contention, on cross-motions for
summary judgment in a separate adversary proceeding (brought by the Committee to address unsecured
creditors’ tax needs at the time, and to avoid prosecuting an action that if successful but benefitting
someone else would be contrary to unsecured creditor interests), was later vacated on ripeness grounds by a
judge of the district court. See Official Comm. of Unsecured Creditors v. U.S. Dept. of the Treasury (In re
Motors Liquidation Co.), 460 B.R. 603 (Bankr. S.D.N.Y. 2011), vacated on ripeness grounds, 475 B.R.
347 (S.D.N.Y. 2012). But unless this Court’s determinations with respect to the present controversy,
discussed below, are later reversed, neither Treasury nor GM’s unsecured creditors will have litigation
proceeds to claim, and that controversy will now turn out to be moot.
2 	Appearances by the Lenders in this adversary proceeding were deferred while threshold issues, addressed
in this decision, were addressed.
3 	Other things can include the continuation of an earlier initial financing statement, the assignment of a
security interest, or the deletion of identified collateral. But one of the boxes that can be checked on a
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brought to an end. Here, in connection with the payoff of a GM “synthetic lease” (the
“Synthetic Lease”), which was one-tenth of the size of the Term Loan and wholly unrelated to
it,4 the batch of several UCC-3s to be filed to terminate liens on Synthetic Lease collateral (and
which thereafter were filed) mistakenly included one UCC-3 (the “Unrelated UCC-3”) which
would terminate a UCC-1—referenced only by its 8-digit filing number—that did not have any
connection to the Synthetic Lease.5 The UCC-1 was instead the principal UCC-1 securing the
Term Loan (the “Main Term Loan UCC-1”).6
Without dispute, all of GM and its counsel (who drafted and caused to be filed the
Unrelated UCC-3) and JPMorgan and its counsel (who were provided draft documents before the
Unrelated UCC-3 was filed) were aware of the UCC-1 filing numbers shown on the various draft
UCC-3s in connection with the Synthetic Lease payoff (including the Unrelated UCC-3). But
none were aware of their potential significance. None of the counsel on the Synthetic Lease
UCC-3 (Box 2, “Termination”) can provide for the effectiveness of an initial financing statement to be
wholly brought to an end. When UCC-3 filings so provide, they are normally referred to as “termination
statements.” See n.72 below.
4 	Neither the terms of the Synthetic Lease, nor the nature of synthetic leases generally, is relevant to the
controversy here—except insofar as it is important to recognize, and agreed by the parties, that the
Synthetic Lease financing was wholly unrelated to the Term Loan, and that the only thing they had in
common was that UCC-1s were filed with respect to each.
By way of background only, a synthetic lease is a financing transaction under which an asset (most
commonly real property) is acquired not by its user but a by a separate entity (often a special purpose
vehicle) which then leases the asset to the ultimate user. A synthetic lease has been described as:
A lease which is arranged so that it is not shown as a liability on a
company's balance sheet but as an expense on the income statement.
The item or asset being leased is owned by a special purpose vehicle
(SPV) which then leases it to the company. The SPV is usually owned
by the company.
Reuters Financial Glossary, available at http://glossary.reuters.com/index.php?title=Synthetic_Lease (last
viewed 2/28/2013).
5 	An image of the Unrelated UCC-3 is attached to this decision as Appendix A.
6 	The Main Term Loan UCC-1 was not the only initial financing statement that had been filed when the
Term Loan was put in place. The Term Loan documentation also included UCC-1 filings relating to
fixtures, and one relating to assets of one-time GM subsidiary, Saturn. But the Main Term Loan UCC-1,
which covered, among other things, all of the equipment and fixtures at 42 GM facilities, was by far the
most important of them.
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financing, or the counsel on the Term Loan (which at least for JPMorgan was different), or their
respective clients, knew that the UCC-1 filing number shown on the Unrelated UCC-3 was
actually that of a UCC-1 for the Term Loan. And without dispute, neither the borrower nor the
lenders on the Synthetic Lease financing, nor the borrower nor the Lenders on the Term Loan,
intended to affect the Term Loan in any way.
But because the UCC-1 whose filing number was referenced in the Unrelated UCC-3
related to the Term Loan, and not the Synthetic Lease, the Court must decide, notwithstanding
the absence of anyone’s intention to affect the Term Loan, whether the perfection of the principal
lien securing the Term Loan nevertheless came to an end.
Both sides move for summary judgment, in whole or in part.7 Arguing that UCC filings
are effective even when mistaken (and that a secured party’s acquiescence in the filing of a
UCC-3 making reference to a specified initial financing statement by file number alone,
irrespective of intent, is sufficient to constitute any necessary authority), the Committee moves
for summary judgment in part,8 seeking a ruling that the Unrelated UCC-3, notwithstanding the
parties’ intentions, brought the Main Term Loan UCC-1 to an end. JPMorgan moves for
summary judgment in full, seeking a ruling to the opposite effect—that JPMorgan’s
authorization to terminate the Main Term Loan UCC-1 was required under the UCC; that
JPMorgan did not provide the required authorization; and thus that the Main Term Loan UCC-1,
and JPMorgan’s resulting lien, remained in place.
7 	References to the briefs on the Committee’s motion appear here as Comm. Partial SJ Br.__; JPMorgan
Partial SJ Opp.__; and Comm. Partial SJ Reply __ (ECF ## 26, 48, and 55, respectively). References to the
briefs on JPMorgan’s motion appear here as JPMorgan SJ Br.__; Comm. SJ Opp.__; and JPMorgan SJ
Reply __ (ECF ## 29, 45, and 56, respectively).
8 	The Committee moves for partial summary judgment only, recognizing that other UCC-1s with respect to
the Term Loan remained in place, covering some other collateral as to which JPMorgan and the Lenders
would remain secured. But while the value of the other collateral would need to be determined at a later
time, the consequences of invalidation of the Main Term Loan UCC-1 are enormous, and the Committee’s
desire to secure even partial summary judgment under the present circumstances is understandable.
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* * *
It is initially tempting to regard the consequences of all UCC filings the same and as
absolute (or, as one court put it, though under an earlier statutory regime, “dramatic and final”),9
or to speak, in general terms, of parties living with their mistakes—with the result that JPMorgan
and the Lenders would suffer the consequences of this extraordinary set of events. But having
focused on the changes in UCC Article 9 that were put in place in 2001, and the more thoughtful
caselaw and commentary, the Court believes that it cannot view the matter in such simplistic
terms. The issues instead turn on the UCC’s express requirement for authorization to terminate
an initial financing statement, and on what is required to constitute the requisite authorization.
Under the present Article 9, a UCC termination statement is not necessarily “dramatic and final.”
And all mistakes are not the same. That a termination statement filing was made is only the
start—and not the end—of the judicial inquiry.
Under Article 9 of the UCC as it was amended in 2001, the termination of a UCC-1 is
ineffective unless it has been authorized. The issue here presented—which the UCC then leaves
to caselaw—is what is required to constitute “authorization” for the filing of a termination
statement when someone other than the secured party files the termination statement on the
secured party’s behalf.10
9 	Crestar Bank v. Neal (In re Kitchin Equip. Co. of Virginia, Inc.), 960 F.2d 1242, 1247 (4th Cir. 1992)
(“Kitchin Equipment”). While the holding in Kitchin Equipment (a 2-1 decision) was not necessarily
incorrect (since Kitchin Equipment involved action by the secured creditor itself, and did not involve a
secured creditor’s authorization of acts by another), Kitchin Equipment’s very general statements can no
longer be regarded as applicable to situations requiring secured creditor authorization after the 2001
amendments to UCC Article 9. Similarly, statements in later caselaw that quoted Kitchin Equipment
without considering the effect of the 2001 amendments are of questionable reliability. See discussion
beginning at page 60 below.
10 	In much of its argument, the Committee states the issue differently—speaking in terms of the effects of
mistakes and contending that UCC filings that mistakenly terminate security interests are legally effective.
See Comm. Partial SJ Br. 11-14; Comm. SJ Opp. 4; Comm. Partial SJ Reply 15-16. For reasons addressed
below, the Court believes that under the UCC as amended in 2001, that misstates the issue.
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As principles underlying the determination of the motions here, the Court concludes, for
reasons set forth below:
(1) When an agent acts on behalf of a secured lender principal to terminate
an initial financing statement with respect to a financing, to be effective the
termination must be authorized by the secured lender principal; and
(2) to determine whether authorization has been granted, the court must
consider indicia identified in non-UCC agency law—including (importantly here)
that to be so authorized, the agent must believe (and though the distinction does
not matter under the facts here, reasonably believe) that the principal intended for
the agent to terminate the initial financing statement for that particular financing.
A matching of file numbers by itself is not enough when other indicia lead to a contrary
conclusion. And when the agent knows that the secured creditor principal does not intend to
bring an initial financing statement to an end (by reason of one or more of the documents that
embody the authorization, or by other means), and the agent itself believes that it was not so
authorized, the requisite authorization cannot be found.
Applying those principles to the undisputed facts here, the lack of the requisite belief on
the part of GM that it was authorized to terminate the Main Term Loan UCC-1 is ultimately
conclusive—though the remaining indicia lead to the same conclusion. The undisputed facts
here (including, most significantly, the statements in the document the parties used to embody
the nature and scope of JPMorgan’s authorization, and the consistent testimony of all of the
personnel acting for JPMorgan and GM) conclusively establish that JPMorgan intended to grant,
and granted, authority to GM to terminate UCC-1s only with respect to the Synthetic Lease. As
importantly or more so, this was GM’s belief as well. While it is undisputed that JPMorgan
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knew in advance of GM’s counsel’s intent to file a UCC-3 which showed the “Initial Financing
Statement File #” of a UCC-1 that in fact was the initial financing statement on the Term Loan
(and JPMorgan at least arguably consented to the filing), in the absence of belief by GM that
actions to terminate the Main Term Loan UCC-1 were authorized, the Court cannot find that
JPMorgan authorized the termination of the initial financing statement for that unrelated facility.
Accordingly, JPMorgan’s motion for summary judgment must be granted, and the
Committee’s motion for partial summary judgment must be denied. The bases for the Court’s
decision follow.
Facts11
Though the parties advance diametrically opposed legal conclusions, the material facts
are not in dispute.12
A. Synthetic Lease Origination
In October 2001, GM entered into the Synthetic Lease, by which GM obtained up to
approximately $300 million in financing from a syndicate of financial institutions. The proceeds
were used for the acquisition of (and construction on) several pieces of real estate. The Synthetic
Lease was documented by, among other things, a Participation Agreement dated as of October
31, 2001 (the “Participation Agreement”).13
11 	To avoid further lengthening this decision, record citations are limited to quotations and the most
significant matters. The parties’ very detailed and often very technical presentations of the facts in their
affidavits and Rule 7056-1 Statements have been compressed and restated to more clearly tell the story.
12 	Being mindful of the Second Circuit’s admonitions that summary judgment should be awarded sparingly
when matters involving state of mind are involved, see, e.g., Patrick v. LeFevre, 745 F.2d 153, 159 (2d Cir.
1984), the Court considered whether it should deny summary judgment in favor of each side for that
reason. Neither side contended that such was necessary or even appropriate here, and ultimately the Court
agrees. Here, there is no issue as to the principal’s and agent’s states of mind. The beliefs of all of the
participants involved on behalf of both sides to the transaction at the time—each of JPMorgan and GM—
were confirmed by affidavit, deposition testimony, or both. There was nothing in the record to support a
contrary conclusion.
13 	Parties to the Participation Agreement were GM, as Lessee (and Construction Agent); Auto Facilities Real
Estate Trust 2001-1 (the “Trust”), as Lessor; Wilmington Trust Company (“Wilmington Trust”), as
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GM’s obligations under the Synthetic Lease were secured by liens on an original
12 pieces of real estate (the “Properties”) identified in the Synthetic Lease documentation. To
perfect security interests in the Properties, UCC-1s were filed in the counties in which such
Properties were located. UCC-1s were also filed with the Delaware Secretary of State.
JPMorgan was one of the backup facility banks, and, as noted (and more importantly for
the purposes of this controversy), the administrative agent for the Synthetic Lease. JPMorgan’s
Richard W. Duker (“Duker”) acted on behalf of JPMorgan with respect to it.
In connection with the Synthetic Lease, GM was represented by the law firm of Mayer
Brown LLP (“Mayer Brown”), and JPMorgan was represented by the law firm of Simpson
Thacher & Bartlett LLP (“Simpson Thacher”).
B. Term Loan Origination
About five years later, in November 2006, GM and its then-subsidiary Saturn
Corporation (“Saturn”) entered into a 7-year senior secured term loan facility—the Term
Loan—from a different syndicate of financial institutions. Once more, JPMorgan was
administrative agent.
The Term Loan provided GM with approximately $1.5 billion in financing. It was a
transaction wholly unrelated to the Synthetic Lease.
In connection with the Term Loan, JPMorgan was represented by law firms different
from that which had acted for JPMorgan in connection with the Synthetic Lease. This time,
JPMorgan was represented by Cravath Swaine & Moore and, later, Morgan, Lewis & Bockius
(“Morgan Lewis”).
Trustee; certain named entities, as “Investors”; other named entities, as “Backup Facility Banks”; an entity
called “Relationship Funding Company, LLC”; and Chase Manhattan Bank (to which JPMorgan was
successor), as Administrative Agent.
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Documents executed in connection with the Term Loan included a “Term Loan
Agreement” and a “Collateral Agreement.” Duker, who was also involved in the Synthetic
Lease transaction, was a signatory to the Term Loan Agreement on behalf of JPMorgan as
administrative agent.
Under the Collateral Agreement, the Lenders took security interests in a massive amount
of collateral (“Term Loan Collateral”)—including, among other things, all of GM’s equipment
and fixtures at 42 facilities throughout the United States. Upon the closing of the Term Loan,
JPMorgan caused the filing of a total of 28 UCC-1 initial financing statements to perfect the
Lenders’ security interests in the Term Loan Collateral—two of which (one for GM and one for
Saturn)14 were filed with the Delaware Secretary of State. The one filed in Delaware for GM—
i.e., the Main Term Loan UCC-1—bore filing number “6416808 4.”
C. Synthetic Lease Termination
The Synthetic Lease would mature on October 31, 2008, approximately seven years after
it was put in place.
In an email dated September 30, 2008, a GM representative informed Robert Gordon
(“Gordon”), a real estate partner at Mayer Brown, GM’s counsel, who was then responsible for
the Synthetic Lease, that GM planned to repay the amount due under the Synthetic Lease. GM
requested that Mayer Brown “prepare the documents necessary for [JPMorgan and the Lenders]
to be paid off for the obligations on that synthetic lease and to release their interest in those
properties.”15 Gordon assigned this work to Ryan Green (“Green”), a Mayer Brown real estate
associate. 	Green was to draft the documents necessary for “the termination and payoff of the
14 	The other 26 were localized fixture filings, in the various counties in the United States where fixture
collateral was located.
15 	Gordon Dep. 6 (Callagy Decl. Exh. 4); 9/30/08 Sundaram Email (Callagy Decl. Exh. 12).
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synthetic lease.”16 Gordon also asked Green to “put together [a] checklist draft”—referring to a
checklist of the required documents for the release and transfer of the Synthetic Lease Properties,
including “an initial draft of a brief checklist of required documents for the release and
transfer.”17
The documents prepared by Green included three documents and one batch of UCC-3s:
(1) an agreement with respect to the termination of Synthetic Lease
obligations and related documentation (the “Synthetic Lease Termination
Agreement”);
(2) a closing checklist (the “Synthetic Lease Closing Checklist”);
(3) UCC-3s, and
(4) a letter agreement embodying instructions to an escrow agent with
respect to the Synthetic Lease termination (the “Synthetic Lease Escrow
Agreement”).
The next day, October 1, GM likewise informed JPMorgan’s Duker of GM’s intent to
pay off the amounts due under the Synthetic Lease. As of that time, the balance to be repaid on
the Synthetic Lease was about $150 million.
1. The Synthetic Lease Termination Agreement
Two weeks later, on October 15, 2008, Green circulated the Synthetic Lease Termination
Agreement to Simpson Thacher, among others, in draft form.
The Synthetic Lease Termination Agreement stated, among other things (as circulated on
October 15, and also in its final form), that the Administrative Agent (JPMorgan) and Lessor (the
Trust) were thereby releasing all of their liens against the “Properties” that had been created by
16 	Gordon Dep. 12.
17 	10/1/08 Gordon Email (Callagy Decl. Exh. 12).
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the operative agreements which were coming to an end, and that they acknowledged that such
liens were released. The Synthetic Lease Termination Agreement then went on to provide, as
relevant here:
(ii) [T]he Administrative Agent and the Lessor do hereby
…
(x) [sic.; seemingly should be z] authorize
Lessee to file a termination of any existing
Financing Statement relating to the Properties.18
Importantly, the words “Financing Statement” and “Properties” as used in the quoted
language were capitalized defined terms. The next paragraph of the Synthetic Lease Termination
Agreement told the reader where to look for definitions of capitalized terms that did not
otherwise appear. It referred the reader to an earlier document, defined as the “Participation
Agreement,” that had been entered into back in October 2001 when the Synthetic Lease was put
into place.
The Participation Agreement, in turn, listed the 12 particular pieces of real property that
originally were collateral under the Synthetic Lease.19 Annex A to the Participation Agreement
18 	Synthetic Lease Termination Agreement (Duker Aff. Exh. L) (reformatted for readability). The second
paragraph of the Synthetic Lease Termination Agreement, which was paraphrased in the preceding
paragraph, and from which the quoted language was taken, stated in full:
In consideration of ONE DOLLAR ($1.00) and other good and
valuable consideration, the receipt and sufficiency of which is hereby
confessed and acknowledged, the undersigned, each of which is a party
to one or more of the agreements identified as the Operative
Agreements, hereby agree that (i) each of such Operative Agreements
and any Commitment thereunder is hereby terminated and is discharged
and of no further force or effect as of the date hereof, and (ii) the
Administrative Agent and the Lessor do hereby (x) release all of their
Liens and Lessor Liens against the Properties created by the Operative
Agreements, (y) acknowledge that such Liens and Lessor Liens are
forever released, satisfied and discharged and (x) [sic.; seemingly
should be z] authorize Lessee to file a termination of any existing
Financing Statements relating to the Properties.
Id. (emphasis added).
19 	See 1/6/2003 Participation Agreement First Amendment (Duker Aff. Exh. E) at JPMCB-STB-00000918-
920 exh. A (six warehouses in Bolingbrook, IL; Reno, NV; Denver, CO; Ontario, CA; Brandon, MS; and
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(captioned “Rules of Usage and Definitions”) provided definitions for the key words “Financing
Statements”20 and “Properties”21—later referred to as the “Financing Statements” and
“Properties” in the Synthetic Lease Termination Agreement’s second subparagraph (x).
Charlotte, NC, respectively; a transmission parts distribution center in Indianapolis, IN; two parking decks
in Detroit, MI; an engine plant in Flint, MI; an office building in Grand Blanc, MI; and a vacant parcel of
land in Detroit, MI).
20 	Annex A provided:
“Financing Statements” means, collectively, the Lessor Financing
Statements and the Lessee Financing Statements.
Participation Agreement Annex A (Duker Aff. Exh. B) at 17 (emphasis by italics added; underlining, to
signify defined terms that would thereafter be used, in original). It additionally provided definitions for the
two terms used there:
“Lessor Financing Statements” means UCC financing statements made
by Lessor, as debtor, and Administrative Agent, as secured party,
appropriately completed and executed for filing in the appropriate state
and county offices in the State where the applicable Property is located
and the State of Delaware.
Id. at 26 (underlining, to signify defined terms that would thereafter be used, in original).
“Lessee Financing Statements” means UCC financing statements made
by Lessee, as debtor, and Lessor, as secured party, appropriately
completed and executed for filing in the appropriate state and county
offices in the State in which each Property is located and the State of
Delaware, as the same shall be assigned to the Administrative Agent on
behalf of the Secured Parties pursuant to such Lessee Financing
Statements.
Id. (underlining, to signify defined terms that would thereafter be used, in original). It should be recalled
that as used in the Participation Agreement, the “Lessor” was Auto Facilities Real Estate Trust 2001-1; the
“Lessee” was GM, and the Administrative Agent was Chase, the predecessor to JPMorgan. Id. at 3, 26.
21 	Annex A provided:
“Property” or “Properties” means either individually or collectively, as
the case may be, each parcel of Land (including all Appurtenant Rights
attached thereto) or, in the case of Land subject to a Ground Lease, the
ground leasehold estate to be acquired by the Lessor pursuant to the
provisions of the Participation Agreement, as more particularly
described in the Requisition and the Memorandum of Lease and
Supplement with respect to such Land, together with all of the
Improvements at any time located on or under such Land, or multiple
parcels of Land with Improvements, as the context may require.
Id. at 35 (emphasis by italics added; underlining, to signify defined terms that would thereafter be used, in
original).
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The Synthetic Lease Termination Agreement was later executed by GM, JPMorgan and
the other parties to the Synthetic Lease termination on or about October 30, 2008, the effective
date of the closing of the payoff.
2. The Synthetic Lease Closing Checklist
With assistance from his colleagues at Mayer Brown, Green drafted a closing checklist.
It was entitled:
CLOSING CHECKLIST
General Motors: Release of Properties from JPMorgan
Chase Synthetic Lease
CLOSING DATE: October 31, 2008.22
The word “Properties” as used in the Closing Checklist title was capitalized, but because it was
part of a title, it is unclear whether “Properties” as used there was intended to be as defined in the
Participation Agreement, which was the underlying source for definitions in the Synthetic Lease
Termination Agreement. But whether or not it was so intended, it still specified what
“Properties” were covered: properties from “JPMorgan Chase Synthetic Lease,” as contrasted to
any others.
In order to determine what types of documents should be included on the Synthetic Lease
Closing Checklist, Green “looked through a copy of the participation agreement. That’s the
main document for the [Synthetic Lease] and it contained a description of how to unwind and the
relevant documents.”23 The record indicates, without dispute, that Green’s intent—and only
intent—was to list the documents that would release Synthetic Lease facility collateral.
22 	Synthetic Lease Closing Checklist, 10/15/08 Green Email Attachment (Callagy Decl. Exh. 15).
23 	Green Dep. 8 (Callagy Decl. Exh. 2).
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The Synthetic Lease Closing Checklist listed several dozen closing documents relating to
the Properties, including various UCC-1s that needed to be terminated for each property.24
Under Section 5 of the Synthetic Lease Closing Checklist, entitled “General Documentation,”
three UCC-1s that had been filed in Delaware were listed for termination:
Termination of UCCs (central, DE filings) Blanket-type
financing statements as to real Property and related
collateral located in Marion County, Indiana (file number
2092532 5, file date 4/12/02 and file number 2092526 7,
file date 4/12/02)) financing statement as to equipment,
fixtures and related collateral located at certain U.S.
manufacturing facilities (file number 6416808 4, file date
11/30/06).25
The three UCC-1 filing numbers listed on the Synthetic Lease Closing Checklist were
derived from a UCC search Green had requested that a Mayer Brown paralegal, Michael
Perlowski, perform. Working from a prior search for UCC-1 financing statements recorded
against GM (and without knowledge of the underlying transactions that had involved those
filings, or, for that matter, the purpose of his undertaking),26 Perlowski identified several UCC-1
financing statements in response to Green’s request. Perlowski was not aware of the specific
transaction on which Green was working.27 Two of the UCC-1 financing statements Green
listed on the Synthetic Lease Closing Checklist had been filed in connection with the Synthetic
Lease. But the third UCC-1 financing statement he listed, with filing number 6416808 4, did not
relate to the Synthetic Lease transaction. Instead, this third UCC-1 financing statement, bearing
file number 6416808 4, was the Main Term Loan UCC-1.
24 	Synthetic Lease Closing Checklist.
25 	Id. at 4.
26 	Perlowski Dep. 10-11, 40-41 (Callagy Decl. Exh. 1).
27 	Id.
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Green circulated a draft of the Synthetic Lease Closing Checklist to GM as well as
Simpson Thacher, counsel for JPMorgan, on October 15, 2008. That same day, Duker of
JPMorgan received drafts of the Synthetic Lease Closing Checklist from GM and Simpson
Thacher. Green circulated updated, but largely similar, drafts of the Synthetic Lease Closing
Checklist to Simpson Thacher, among others, later on October 15, and again on October 21,
2008. The subject lines for each of Green’s e-mails attaching the drafts of the Synthetic Lease
Closing Checklist stated that they related to the “GM/JPMorgan Chase - Synthetic Lease.”28
The drafts of the Synthetic Lease Closing Checklist identified the Main Term Loan
UCC-1 as a “financing statement as to equipment, fixtures and related collateral located at
certain U.S. manufacturing facilities (file number 6416808 4, file date 11/30/06).” They made
no mention of the words “Term Loan.” The “file date 11/30/06” appearing adjacent to “file
number 6416808 4” on the Synthetic Lease Closing Checklist substantially corresponds to the
November 29, 2006 date of the Term Loan Agreement, though no one involved recognized that
at the time, because everyone believed they were working on the Synthetic Lease transaction.
No one at Mayer Brown involved in drafting the Synthetic Lease Closing Checklist and no one at
Simpson Thacher or JPMorgan who reviewed and/or received the Synthetic Lease Closing
Checklist recognized that “file number 6416808 4, file date 11/30/06” was unrelated to the
Synthetic Lease.
3. The Unrelated UCC-3
Another Mayer Brown paralegal, Stewart Gonshorek (“Gonshorek”), was tasked with
drafting the UCC-3 termination statements for the unwinding of the Synthetic Lease. One of the
UCC-3s that he drafted was the Unrelated UCC-3.
28 	10/15/2008 Sundaram Email (Callagy Decl. Exh. 13); 10/15/2008 Merjian Email (Callagy Decl. Exh. 15);
10/15/2008 Merjian Ledyard Email (Callagy Decl. Exh. 16); 10/21/2008 Merjian Ledyard Email (Callagy
Decl. Exh. 17).
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Under section 10 of a draft of the Unrelated UCC-3, a section entitled “OPTIONAL
FILER REFERENCE DATA”, Gonshorek typed in “Matter No. 00652500.”29 “Matter No.
00652500” was an internal Mayer Brown client-matter number, relating exclusively to Mayer
Brown’s representation of GM in connection with the Synthetic Lease and its repayment.
Gonshorek prepared the Unrelated UCC-3 to “terminate the UCC in connection with the
synthetic lease becoming unwound.”30 But the Unrelated UCC-3 showed, on its Line 1a, under
“INITIAL F INANCING S TATEMENT F ILE #,” “6416808 4 on 11.30.06.”31 The “Initial Financing
Statement File #” was that of the Main Term Loan UCC-1.
But the Unrelated UCC-3 never used the words “Term Loan,” or any synonym for such.
Further down on the Unrelated UCC-3, it had a Line 9, “NAME OF S ECURED P ARTY OF
R ECORD AUTHORIZING THIS AMENDMENT,”32 on which “JPMORGAN CHASE BANK, AS
ADMINISTRATIVE AGENT,” was typed in. But the Unrelated UCC-3 did not have a granting
clause—i.e., a clause by which authorization was granted—nor did it have a place for signature
by JPMorgan, the party said to have authorized the amendment.
While the UCC-3 Gonshorek prepared referenced the Main Term Loan UCC-1 by its
filing number and date (6416808 4 on 11.30.06), Gonshorek intended to terminate only a UCC
financing statement related to the Synthetic Lease.33 The Committee does not contend (nor did it
introduce evidence) to the contrary.
29 	Draft Unrelated UCC-3 Email Attachment (Callagy Decl. Exh. 16) at JPMCB-STB-00000206.
30 	Gonshorek Dep. 20.
31 	Unrelated UCC-3 (Fisher Decl. Exh. X).
32 	Id. The remainder of Line 9 continued: “(name of assignor, if this is an Assignment). If this is an
Amendment authorized by a Debtor which adds collateral or adds the authorizing Debtor, or if this is a
Termination authorized by a Debtor, check here [ ] and enter name of DEBTOR authorizing this
Amendment.”
33 	Gonshorek Dep. 20.
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On Wednesday, October 15, 2008, Green circulated by email to Simpson Thacher’s
Merjian and counsel for Wilmington Trust, among others (and along with an updated checklist
and drafts of most of the other closing documents), the draft UCC-3 termination statements that
had been prepared by Gonshorek—including the draft Unrelated UCC-3.
The subject line of Green’s e-mail enclosing the draft documents was “GM/JPMorgan
Chase - Synthetic Lease (Auto Facilities Real Estate Trust 2001-1)”;34 the documents attached to
Green’s email included nearly a hundred pages of draft documents, including ten draft UCC-3
termination statements. But Green did not attach copies of any of the UCC-1 initial financing
statements whose file numbers corresponded to the file numbers referenced on the ten draft
UCC-3s that were circulated. Nor, once again, did anything in Green’s email or enclosures
mention the words “Term Loan.”
Green had concluded his October 15 email with a line “Please contact me with any
questions or comments you may have.” On Friday, October 17, 2008, Simpson Thacher’s
Merjian responded, also by email, stating “Nice job on the documents” before continuing with
“[m]y only comment,” and going on to state what that comment (which did not relate to the
UCC-3s) was.35
4. The Synthetic Lease Escrow Agreement
Incident to the Synthetic Lease repayment, the parties utilized LandAmerica (the “Title
Company”) to serve as an escrow agent, recording agent and title insurance issuer. As a general
matter, the Title Company would receive payment from GM and documents executed by the
various parties, after which the Title Company would act in accordance with written instructions
34 	10/15/2008 Merjian Ledyard Email.
35 	10/17/2008 Merjian Email (Fisher Decl. Exh. T).
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(executed by counsel for GM, JPMorgan, and the Trust)36 calling for the Title Company to close
the transaction, cause the documents it had received to be recorded and delivered, and disburse
the funds in accordance with the instructions it had received.
The instructions were embodied in the Synthetic Lease Escrow Agreement, which in each
of its draft and final form37 was an 8-page letter agreement addressed to LandAmerica, which
was likewise referred to as “the Title Company,” as a defined term, in the Synthetic Lease
Escrow Agreement.
On October 24, 2008, by email addressed to the Title Company’s William Wineman;
Simpson Thacher’s Mardi Merjian, and counsel for Wilmington Trust (the trustee for the Trust),
Green circulated a draft of the Synthetic Lease Escrow Agreement, seeking review and any
comments.38 The subject line of that email stated: “RE: GM/JPMorgan Chase - Synthetic Lease
(Auto Facilities Real Estate Trust 2001-1).”39 As Mayer Brown’s Gordon testified, the purpose
of the Synthetic Lease Escrow Agreement was to arrange for the payoff of the Synthetic Lease.40
Again as a general matter, the Synthetic Lease Escrow Agreement listed 47 different
documents that would be delivered to the Title Company (defined in that letter as “Escrow
Documents”), which, after conditions precedent to closing were satisfied, would be delivered,
36 	Signatures by counsel for GM, JPMorgan and the Trust were followed by a signature block for the Title
Company, in a different form. It said:
The undersigned acknowledges receipt of these recording instructions
and agrees to proceed in strict accordance therewith.
(block caps in original converted to ordinary text for readability).
37 	So far as the Court can tell, there were no material differences in the Synthetic Lease Escrow Agreement as
between its draft as initially circulated by GM counsel Mayer Brown and its execution version. If there
were any changes at all, in fact, neither the Committee nor JPMorgan has called the Court’s attention to
them.
38 	Synthetic Lease Escrow Agreement, 10/24/2008 Wineman Email Attachment (Callagy Decl. Exh. 18).
39 	Id.
40 	Gordon Dep. 20.
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recorded or otherwise handled by the Title Company in accordance with the instructions set forth
in the Synthetic Lease Escrow Agreement.
The “Re” line of the Synthetic Lease Escrow Agreement was very lengthy, running on
for 15 lines. It described the Synthetic Lease Escrow Agreement’s subject as:
Termination of that certain Participation Agreement dated
as of October 31, 2001, among General Motors Corporation
(“GM”), as Lessee and Construction Agent, Auto Facilities
Real Estate Trust 2001-1 (“Trust”), as Lessor, Wilmington
Trust Company (“Trustee”), as Trustee, the Persons named
therein as Investors, the Persons named therein as Backup
Facility Banks, Relationship Funding Company, LLC, and
JPMorgan Chase Bank (“Agent”), as Administrative
Agent, as amended (the “Participation Agreement”) and
release of all liens related thereto including liens relating
to the following properties: (i) the SPO Headquarters
Building located in Grand Blanc, Michigan (the “Grand
Blanc Property”); (ii) the GM Powertrain L6 Engine Plant
in Flint, Michigan (the “Flint Property”); (iii) the Franklin
Deck in Detroit, Michigan (the “Franklin Deck”); (iv) the
River East Parking Deck in Detroit, Michigan (the “River
East Deck”); and (v) Parcel 6/C in Detroit, Michigan
(“Parcel 6/C”) (the Grand Blanc Property, the Flint
Property, the Franklin Deck, the River East Deck and
Parcel 6/C herein are each a “Property” and, collectively,
the “Properties”).41
Specifically, it provided that its undersigned attorneys represented GM, the Agent,
JPMorgan, and the Trustee in connection with that transaction, and that the Title Company had
agreed to issue title insurance policies with respect to the Properties. It further stated that “[t]his
letter constitutes escrow and recording instructions in connection with the Transaction.”42
It then listed the 47 documents or categories of documents that were being delivered to
the Title Company, of which the second was “Termination of UCC Financing Statements (File
41 	Synthetic Lease Escrow Agreement at 1 (bold face, for defined terms, in original; emphasis by italics
added).
42 	Id.
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Numbers 2092532 5, 2092526 7, and 6416808 4) (the “General UCC Terminations”).”43 The
Synthetic Lease Escrow Agreement then continued:
When all of the conditions precedent to closing set forth in
Section A below have been met, you are instructed to close
this transaction and disburse the Funds (as defined below)
as directed in Section B below and to release from escrow
and deliver, record or to otherwise handle the Escrow
Documents in accordance with Section C below.44
The third of the General UCC Terminations (relating to UCC financing statement
6416808 4) was the Unrelated UCC-3, which referenced the Main Term Loan UCC-1. But while
the Unrelated UCC-3 was listed as one of the documents to be delivered to the Title Company, it
was not listed as one of the documents to be recorded.45 Rather, the Title Company was
instructed to deliver it (along with others) to GM’s counsel, Mayer Brown. 46
When asked if he had any comments to the draft Synthetic Lease Escrow Agreement
circulated on October 24, 2008, Simpson Thacher’s Merjian replied “it was fine.”47
43 	Id. (bold face, for defined term, in original).
44 	Id. at 4.
45 	See id. at 5-6. Section C began:
As soon as possible after the release of the Funds pursuant to Section B
above, you are instructed to record (or file, as applicable) the
documents below (the “Recording Documents”) with the appropriate
recording office in the applicable state in the following order as to each
Property:
Id. at 5 (bold face, for defined term, in original). It then listed the Recording Documents, which were 23 of
the 47 documents that were to be delivered to the Title Company. Neither the Unrelated UCC-3, nor any of
the other General UCC Terminations, was one of those Recording Documents.
46 	Id. at 6 (as set forth at the beginning of Section D, “Immediately following closing, any extra original
documents and copies of all Escrow Documents shall be forward to the counsel for GM, except for those
documents which have been forwarded to the recorder’s office (in which case certified copies of the
foregoing shall be forwarded to the counsel for GM).”).
47 	10/27/2008 Merjian Email (Fisher Decl. Exh. V).
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5. The Synthetic Lease Transaction Payoff
GM repaid the amount due on the Synthetic Lease transaction on October 30, 2008.
Thereafter, but on the same day, Mayer Brown transmitted the Unrelated UCC-3 to a third-party
vendor to cause the filing of the Unrelated UCC-3 with the Delaware Secretary of State. The
Unrelated UCC-3 had no place for a signature by JPMorgan, and it was not signed by
JPMorgan.48
6. GM’s Understanding
Each of the participants on the GM side understood that he was acting only with respect
to the Synthetic Lease. None had the understanding that he or she was acting with respect to the
Term Loan, or was authorized to do so. Gordon stated, in a declaration, that “GM was not
authorized by the Termination Agreement to terminate any financing statement related to the
Term Loan Agreement,”49 and testified to the same effect at his deposition.50 Gordon’s more
junior colleague at Mayer Brown, Green, had the same belief.51
Similarly, GM’s Debra Homic Hoge (the GM business person with responsibility for the
Synthetic Lease), stated that GM was not authorized by the Synthetic Lease Termination
Agreement, nor did GM believe it had any authority, to terminate any UCC-1 related to the Term
Loan. She further stated that GM had not granted Mayer Brown authority to do so.52
Every deponent in this adversary proceeding (on the JPMorgan side or the GM side) first
learned that the Unrelated UCC-3 actually related to the Term Loan only in June 2009, after GM
48 	See Appendix A.
49 	Gordon Aff., 6/19/09 Email Attachment (Callagy Decl. Exh. 11).
50 	See Gordon Dep. 66.
51 	See Green Dep. 99.
52 	Hoge Aff. ¶ 11.
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had filed its chapter 11 petition. Before that time, none of them even realized that they had a
filed a UCC-3 relating to the Term Loan.53
D. Subsequent Events
GM filed its chapter 11 case on June 1, 2009. Approximately two weeks later, Morgan
Lewis (which by this time was acting for JPMorgan in connection with the Term Loan and the
GM bankruptcy) discovered that Mayer Brown had caused a UCC-3 termination statement to be
filed in October 2008 related to the Term Loan.
About three weeks after GM’s chapter 11 case was filed, this Court gave final approval to
GM’s preliminarily approved postpetition financing, commonly referred to in the bankruptcy
community as “DIP Financing.” The approval was documented in a lengthy order, dated June
25, 2009 (the “DIP Financing Order”). Among many other things, the DIP Financing Order
authorized the repayment of the Term Loan.
On June 30, 2009, as authorized under the DIP Financing Order, the amount then
outstanding under the Term Loan (just under $1.5 billion, viz., $1,481,656,507.70) was repaid
out of the proceeds of the $33 billion in DIP financing.54 After the repayment, JPMorgan
authorized the filing of UCC-3s with respect to the Term Loan, including one with respect to the
Main Term Loan UCC-1.
One month later, the Committee filed its complaint in this adversary proceeding.
53 	See Green Dep. 88-89; Perlowski Dep. 40-41; Gonshorek Dep. 47-48; Hoge Aff. ¶ 12.
54 	To the extent that the Committee might be successful in this adversary proceeding, the amount paid to
JPMorgan and the Lenders would be subject to recapture, as provided in the final DIP Financing Order
when the payoff of the Term Loan was authorized. In that event, after the return of the amount previously
paid on what was thought to be a duly secured claim, the Lenders would still have a claim for the Term
Loan debt, but would have only an unsecured claim, sharing pari passu with the many billions of dollars of
other unsecured claims in GM’s chapter 11 case.
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Discussion
I.
Summary Judgment Standards
Summary judgment is appropriate “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.”55 The moving
party bears the initial burden of showing that the undisputed facts entitle it to judgment as a
matter of law.56 Then, if the movant carries this initial burden, the non-moving party must set
forth specific facts to show that there are triable issues of fact, and cannot rely on pleadings
containing mere allegations or denials.57
In determining a summary judgment motion, it is well settled that the court should not
weigh the evidence or determine the truth of any matter, and must resolve all ambiguities and
draw all reasonable inferences against the moving party.58 A fact is material if it “might affect
the outcome of the suit under the governing law.”59 An issue of fact is genuine if “the evidence
55 	FED. R. C IV. P. 56(a), made applicable to this adversary proceeding by FED. R. B ANKR . P. 7056; see also
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). The Court notes that Rule 56 was amended in
December 2010. By order of the Supreme Court, the amendment governs “insofar as just and practicable,
[in] all proceedings . . . pending.” Supreme Court Order of April 28, 2010. The amended Rule applies to
this motion, but the Court also notes that the substantive standard for summary judgment has not been
altered. Advisory Committee Notes to December 2010 Amendment to Rule 56 (“The standard for granting
summary judgment remains unchanged.”).
56 	See Rodriguez v. City of New York, 72 F.3d 1051, 1060-61 (2d Cir. 1995); Ferrostaal, Inc. v. Union Pacific
R.R. Co., 109 F. Supp. 2d 146, 148 (S.D.N.Y. 2000) (“The initial burden rests on the moving party to
demonstrate the absence of a genuine issue of material fact . . . .”).
57 	See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Celotex Corp. v.
Catrett, 477 U.S. 317, 324 (1986); Kittay v. Peter D. Leibowits Co., Inc. (In re Duke & Benedict, Inc.), 265
B.R. 524, 529 (Bankr. S.D.N.Y. 2001) (“[T]he nonmoving party must set forth specific facts that show
triable issues, and cannot rely on pleadings containing mere allegations or denials.”).
58 	See Matsushita, 475 U.S. at 587 (summary judgment is appropriate “[w]here the record taken as a whole
could not lead a rational trier of fact to find for the nonmoving party”); Virgin Atlantic Airways Ltd. v.
British Airways PLC, 257 F.3d 256, 262 (2d Cir. 2001); Lovejoy-Wilson v. NOCO Motor Fuel, Inc.,
263 F.3d 208, 212 (2d Cir. 2001) (“We . . . constru[e] the evidence in the light most favorable to the non-
moving party.”).
59 	See Anderson, 477 U.S. at 248, 1 S.Ct. 2505.
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is such that a reasonable jury could return a verdict for the nonmoving party.”60 The standards
for determining a summary judgment motion apply equally to cases, like the instant one, in
which each side moves for summary judgment.61
II.
Choice of Law
Choice of law is not a material concern here.
The issues here are governed, at least in the first instance, by the Uniform Commercial
Code, which does not differ in its content as between Delaware and New York—the two states
whose law JPMorgan and the Committee have principally addressed.62 Under UCC
§ 1-102(2)(c) (as enacted in each state), one of the “[u]nderlying purposes” of the UCC is to
“make uniform the law among the various jurisdictions.” Thus both sides agree, as does the
Court, that while strictly speaking, it is the Delaware version63 of the UCC that applies here, the
Court can (and should) look to decisions from any state or federal courts considering comparable
provisions, without regard to the jurisdictions in which those courts sit.
60 	Id.
61 	Bronx Household of Faith v. Board of Educ. Of City of New York, 492 F.3d 89, 96 (2d Cir. 2007) (citing
Morales v. Quintel Entm’t, Inc., 249 F.3d 115, 121 (2d Cir. 2001)); In re Magnesium Corp. of America,
460 B.R. 360, 364-66 (Bankr. S.D.N.Y. 2011) (also considering cross-motions for summary judgment).
62 	The Main Term Loan UCC-1 and the Unrelated UCC-3 were each filed in Delaware, as was required
because GM was a Delaware corporation, which thus was deemed to be “located” in Delaware by reason of
its organization there under UCC §§ 9-301 and 9-307. Thus, strictly speaking, Delaware law governs the
perfection of JPMorgan’ security interest, the effect of perfection or nonperfection, and the priority of
JPMorgan’s security interest in collateral. See UCC § 9-301(1).
The Term Loan documentation had a New York choice of law provision. But while it would govern
matters of enforcement or interpretation of that agreement as between JPMorgan and GM, it would not
govern the matters just described.
63 	6 Del. C. § 9-101 et seq. It became effective in Delaware on July 1, 2001, the day that had been
recommended as the effective date by the National Conference of Commissioners on Uniform State Laws,
which was also the day (presumably for that reason) that the revised Article 9 became effective in New
York.
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Similarly, as intended by the UCC’s drafters,64 law other than UCC Article 9—here,
principles of agency—must be applied interstitially to fill gaps in the statute. Once again, the
Court believes that strictly speaking, the law of Delaware is the most appropriate to use to fill
gaps in the Delaware UCC—particularly since the purpose of that use is to determine the
effectiveness of termination statements, and continuing validity of initial financing statements,
filed in Delaware. But the two sides here have relied principally on cases decided under New
York law and on discussion of generally accepted legal principles, such as those in various
versions of the Restatement of Agency. More importantly, they have not identified any respects
in which the Delaware law of agency differs from that of any other jurisdiction in which a court
considered similar issues. Thus the Court considers whatever caselaw is available—from a
variety of jurisdictions around the country—from any courts that have addressed similar issues,
or are asserted to have done so.
III.
Effectiveness of the Unrelated UCC-3
It is undisputed that JPMorgan, on behalf of its lending syndicate, at least initially had a
duly perfected security interest with respect to its collateral—including, as relevant here, all of
the equipment and fixtures at the 42 GM properties covered under the Main Term Loan UCC-1.
Thus, if that duly perfected security interest did not come to an end, JPMorgan and the Lenders
continued to have a security interest in all of those assets as of the time GM filed its chapter 11
case—the time at which the Lenders’ continued rights to their secured status is measured.65 The
64 	See n.83 below.
65 	The Committee properly notes (Comm. Partial SJ Br. 10) that if a security interest is unperfected as of the
time of the petition, it will be trumped by the statutory lien of a trustee or debtor in possession under
section 544 of the Bankruptcy Code. But that is not debated by JPMorgan. The issue here is rather
whether or not the Lenders’ previously perfected lien remained so.
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Court here must decide whether the perfection of JPMorgan’s Term Loan security interest came
to an end before that time.
In that connection, JPMorgan does not dispute that a termination statement that referred
to the Main Term Loan UCC-1 by number was filed. JPMorgan also recognizes that each of GM
and JPMorgan knew or was on notice of the initial financing statement filing number to which
the Unrelated UCC-3 referred, though neither was aware that it actually related to the Main Term
Loan UCC-1.
But conversely, the Committee does not dispute that neither of the counsel for GM or
JPMorgan, nor either of their respective clients, intended to terminate the Main Term Loan
UCC-1, or would have filed (or permitted to be filed) the Unrelated UCC-3 if they had known
that the filing of that document would have any effect on the Main Term Loan UCC-1.66 The
Committee effectively bases its argument on the contention (one of law) that JPMorgan’s and
GM’s undisputed intent does not matter.
Determination of the issues here starts with interpretation of the Uniform Commercial
Code, whose Article 9 governs security interests. Article 9 was amended in 2001, in respects
highly relevant here. Since its 2001 amendment, Article 9 no longer requires the execution of a
UCC-3 termination statement by the secured party. Instead, such a filing may be made without
any signature, and by anyone, provided that the filing has been authorized by the secured party.
Importantly, there now is no automatic consequence by reason of the filing of a termination
statement. The fact that a termination statement has been filed does not by itself mean that the
initial statement came to an end. It all depends on whether the termination of the underlying
66 	See Comm. SJ Opp. 12 (“Of course, if JPMorgan had analyzed and appreciated the consequences of the
UCC filing, it never would have permitted Old GM’s counsel to cause the Term Loan Termination
Statement to be filed.”).
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initial financing statement was authorized. If the requisite authorization was lacking, the
termination was ineffective.
Since the termination statement here was filed not by JPMorgan, but by GM on
JPMorgan’s behalf, the resolution of this controversy turns on whether GM was authorized, as
part of the payoff of the Synthetic Lease, to terminate JPMorgan’s security interest on the
unrelated Term Loan. On the undisputed facts, the Court concludes that GM’s authority to
terminate initial financing statements was limited to the measures that related to the paid off
Synthetic Lease, and that JPMorgan did not authorize the release of its security interest on the
wholly unrelated Term Loan.
A. The Requirement for Authorization
After the 2001 amendments to the Uniform Commercial Code, three sections of UCC
Article 9, which came into being in 2001,67 are particularly relevant. The first,
UCC § 9-509(d),68 provides, in relevant part:
(d) Person entitled to file certain amendments. — A person
may file an amendment other than an amendment that adds
collateral covered by a financing statement or an
amendment that adds a debtor to a financing statement only
if:
(1) the secured party of record authorizes the
filing; or
(2) [inapplicable under the facts here].
The second, UCC § 9-510(a),69 provides:
67 	See Harry C. Sigman, The Filing System Under Revised Article 9, 73 Am. Bankr. L.J. 61, 70-71 (1999)
(“Sigman”).
68 	6 Del. C. § 9-509(d).
69 	6 Del. C. § 9-510(a).
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(a) Filed record effective if authorized. — A filed record is
effective only to the extent that it was filed by a person that
may file it under Section 9-509.
The third, UCC § 9-513(d),70 provides in relevant part:
(d) Effect of filing termination statement. — Except as
otherwise provided in Section 9-510, upon the filing of a
termination statement with the filing office, the financing
statement to which the termination statement relates ceases
to be effective.71
Thus, under UCC § 9-513(d), the filing of a termination statement generally causes the
initial financing statement to which the termination statement relates to no longer be effective.
But because UCC § 9-513’s effect is “except as otherwise provided in [UCC §] 9-510,” one must
then look to UCC § 9-510, which requires one to look to § 9-509 to ascertain whether there has
been authorization.
A termination statement (filed by means of a UCC-3) is one kind of financing
statement—one that is an amendment to an initial financing statement (filed by UCC-1).72
70 	6 Del. C. § 9-513(d).
71 	(emphasis added).
72 	UCC § 9-102(39) (6 Del. C. § 9-102(39)), one of UCC Article 9’s many definitions, defines a “financing
statement.” That section provides:
“Financing statement” means a record or records composed of an initial
financing statement and any filed record relating to the initial
financing statement.
(emphasis added). Similarly, UCC § 9-102(79) (6 Del. C. § 9-102(79)), another of UCC Article 9’s
definitions, defines a “termination statement.” That section provides:
“Termination statement” means an amendment of a financing statement
which:
(A) identifies, by its file number, the initial financing
statement to which it relates; and
(B) indicates either that it is a termination statement or that
the identified financing statement is no longer effective.
Failures to focus on the distinction between an “initial financing statement” and a “financing statement,”
and on the fact that a “termination statement” is one kind of a “financing statement,” have introduced error
into the caselaw, most significantly in one of the cases relied upon by the Committee, Roswell Capital
Partners LLC v. Alternative Construction Technologies, 2010 U.S. Dist. LEXIS 90695, 2010 WL 3452378
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UCC §§ 9-509(d), 9-510(a) and 9-513(d) thus collectively provide that a termination statement is
effective only to the extent that the secured party of record authorizes it—and that if the
termination statement has not been duly authorized, it is ineffective.73 And that is so irrespective
of the extent to which the public records tell the world that the initial financing statement is no
longer in effect.74
As Harry Sigman, one of the members of the drafting committee for Revised Article 9,
explained:
Revised Article 9 makes explicit another concept that is
implicit under current law—the fact that a filing is on the
public record doesn’t guarantee that it is effective. For
example, … a termination statement that bears a forged
(S.D.N.Y. Sep. 1, 2010), aff’d by summary order on other grounds, 436 Fed. Appx. 34 (2d Cir. 2011)
(“Roswell”). See discussion at page 69 below.
73 	See, in addition to UCC §§ 9-509 and 9-510, Official Comment 3 to UCC § 9-502, as enacted in Delaware
and elsewhere. It provides, in relevant part:
The fact that this Article does not require that an authenticating symbol
be contained in the public record does not mean that all filings are
authorized. Rather, Section 9-509(a) entitles a person to file an initial
financing statement, an amendment that adds collateral, or an
amendment that adds a debtor only if the debtor authorizes the filing,
and Section 9-509(d) entitles a person other than the debtor [sic.; query
whether it should say “secured party of record”] to file a termination
statement only if the secured party of record authorizes the filing. Of
course, a filing has legal effect only to the extent it is authorized. See
Section 9-510.
6 Del. C. § 9-502 cmt 3 (emphasis added).
74 	In its opening brief on its motion for partial summary judgment, the Committee argues that “the filing of a
termination statement renders ineffective the financing statement to which the termination relates and
causes the subject lien to become unperfected.” Comm. Partial SJ Br. 9. For its failure to address the
critical requirement of authorization, and the exception expressly articulated in UCC § 9-513(d), that
statement is an overly general, and consequentially inaccurate, statement of the present law. See discussion
at page 60 below.
Pre-2001 caselaw that the Committee argues supports such a generalization, see, e.g., In re Silvernail
Mirror & Glass, Inc., 142 B.R. 987 (Bankr. M.D. Fla. 1992) (“Silvernail”), analyzed the issues under a
different statutory scheme, and cannot be relied on in instances where the changes in the UCC matter.
Language in other post-2001 decisions upon which the Committee relies, Peoples Bank of Kentucky, Inc. v.
U.S. Bank, N.A. (In re S.J.. Cox Enterprises, Inc.), 2009 Bankr. LEXIS 4573, 2009 WL 939573 (Bankr.
E.D. Ky. Mar. 4, 2009) (“S.J. Cox”), and Roswell, each of which quoted or cited the pre-2001 decisions
while failing to consider their continuing vitality in light of the 2001 changes in the UCC, suffer from the
same deficiency. For further discussion of the Court’s belief that it should not rely on these cases, see page
60 et seq. below.
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secured party signature is not effective simply because it
gets onto the public record. Revised Article 9 states that a
filed record is “effective” only to the extent that its filing is
authorized.75
Similarly, as stated in a treatise on the UCC:
A filed record, whether it is an initial financing statement
or an amendment, is effective only if it is filed by a person
who may file it under the rules of revised Section 9-509
[Rev]. Except in the case of agricultural liens, only a filer
who is authorized by the right party may file a record. In
the case of an initial financing statement or an amendment
adding collateral or adding a debtor, the authorization
(actual or deemed) must come from the debtor. In the case
of other amendments, authorization must come from the
secured party of record.
The fate of a record filed by someone other than a person
given the power to do so under revised Section 9-509 [Rev]
is quite clear. Such a filing is ineffective. Thus, if a
secured party files an initial financing statement without
actual or deemed authorization of the debtor, that financing
statement is ineffective. The same is true for a termination
statement not authorized by the secured party of record.76
After the Uniform Law Commissioners and the American Law Institute (“ALI”)
promulgated the revised Article 9 of the UCC that was enacted in 2001, they formed a review
committee in 2008 to consider whether further changes or clarifications should be made.77 In
connection with proposed further amendments to UCC Article 9 (one of which, by means of
amendment to UCC § 9-518, would allow secured parties to file an optional, and non-binding,
“information statement” providing notice that one who filed a termination statement or other
financing statement lacked authority to do so), the Uniform Law Commissioners and ALI noted,
75 	Sigman, n.67 above, 73 Am. Bankr. L.J. at 71.
76 	Hawkland’s Uniform Commercial Code Series (“Hawkland”) § 9-510:2 [Rev] (2012) (emphasis added).
Roswell has language, arguably dictum, to the contrary. For a discussion of this Court’s inability to agree
with Roswell in this and other respects, see the discussion beginning at page 64 below.
77 	See their report, reprinted in Hawkland Art. 9 [Rev.] App. C.
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in a proposed addition to the Official Comment to UCC § 9-518, that it would have “no legal
effect.” “Its sole purpose [was] to provide some limited public notice that the efficacy of a filed
record is disputed.”78 They observed that because it would have “no legal effect, a secured party
of record—even one who is aware of the unauthorized filing of a record—[had] no duty to file
one.” They went on to say:
If the person that filed the record was not entitled to do so,
the filed record is ineffective, regardless of whether the
secured party of record files an information statement.
Likewise, if the person that filed the record was entitled to
do so, the filed record is effective, even if the secured party
of record files an information statement.79
And they concluded:
Just as searchers bear the burden of determining whether
the filing of [an] initial financing statement was authorized,
searchers bear the burden of determining whether the filing
of every subsequent record was authorized.80
B. Was Authorization Granted?
It is clear, then, that a filed record is effective only to the extent its filing is authorized.
But the critical term “authorizes” is not defined in the UCC—in the “Definitions and Index of
Definitions” section of Article 9 (UCC § 9-102),81 the “General Definitions” at the beginning of
the UCC (UCC § 1-201)82 which generally apply to all of the UCC’s Articles, or anywhere else.
That was not inadvertent. The drafters were aware that the Revised Article 9 would be silent
with respect to what constitutes the required authorization (and any standards for determining
78 	Id.
79 	Id. (italics in original, used to indicate an addition, deleted).
80 	Id. (italics in original, used to indicate an addition, deleted; apparent omitted text added in brackets).
81 	6 Del. C. § 9-102.
82 	6 Del. C. § 1-201.
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that issue), and contemplated that law outside UCC Article 9 would decide it.83 Thus textual
analysis, with which the Court normally begins any matter of statutory construction, is of limited
utility here.
With “authorizes” not having been statutorily defined, the Court turns, as the drafters of
the UCC contemplated, to the principal area of the law addressing situations where one is
authorized to act on behalf of another—the law of agency.84 Analysis of authority to act in
agency law has traditionally involved consideration of “actual” authority; “apparent” authority;85
and “ratification” of the agent’s acts. Though under the facts here, the latter two of those
doctrines are inapplicable, the Court considers them in turn.
1. Actual Authority
As articulated in caselaw, “[a]ctual authority exists when an agent has the power ‘to do
an act or to conduct a transaction on account of the principal which, with respect to the principal,
83 	See Official Comment 3 to UCC § 9-509 (6 Del. C. § 9-509 cmt 3) (“Law other than this Article, including
the law with respect to ratification of past acts, generally determines whether a person has the requisite
authority to file a record under this section.”); accord UCC § 9-502 cmt 3 (6 Del. C. § 9-502 cmt 3) (same).
In that connection, a third provision of the UCC—one of its “General Provisions,” which did not come into
place in 2001, but rather has been in place since its inception—is consistent with the consideration of
agency law to decide when appropriate authority has been granted. That provision, UCC § 1-103(b) (6 Del.
C. § 1-103(b)) provides, in relevant part:
Unless displaced by the particular provisions of the Uniform
Commercial Code, the principles of law and equity, including the law
merchant and the law relative to capacity to contract, principal and
agent, estoppel, fraud, misrepresentation, duress, coercion, mistake,
bankruptcy, or other validating or invalidating cause supplement its
provisions.
(emphasis added).
84 	Neither the Committee nor JPMorgan suggests that there is any relevant statutory law in this regard. The
principles emerge from caselaw, and caselaw-driven authorities such as the Restatement of Agency.
85 	Another type, “implied” authority, which is a species of actual authority, is discussed at page 58 below.
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he is privileged to do because of the principal’s manifestation to him.’”86 Likewise, as set forth
in the current Restatement:
An agent acts with actual authority when, at the time of
taking action that has legal consequences for the principal,
the agent reasonably believes, in accordance with the
principal's manifestations to the agent, that the principal
wishes the agent so to act.87
Actual authority is created by “direct manifestations” of that grant of authority which
come from the principal to the agent.88 “[T]he extent of the agent's actual authority is interpreted
in the light of all the circumstances attending these manifestations, including the customs of
business, the subject matter, any formal agreement between the parties, and the facts of which
both parties are aware.”89
86 	Hidden Brook Air, Inc. v. Thabet Aviation Intern., Inc., 241 F. Supp. 2d. 246, 260 (S.D.N.Y. 2002)
(“Hidden Brook Air”) (under New York law) (quoting Minskoff v. American Exp. Travel Related Servs.
Co., 98 F.3d 703, 708 (2d Cir. 1996) (making reference to the 1958 Restatement (Second) of Agency (the
“Restatement Second”), and thus general principles of law)).
87 	Restatement (Third) of Agency (“Restatement”) § 2.01 (2006); see also id. § 3.01 (“Actual authority, as
defined in § 2.01, is created by a principal's manifestation to an agent that, as reasonably understood by the
agent, expresses the principal's assent that the agent take action on the principal's behalf.”).
88 	Demarco v. Edens, 390 F.2d 836, 844 (2d Cir. 1968) (“Demarco”); Peltz v. SHB Commodities, Inc.,
115 F.3d 1082, 1088 (2d Cir. 1997) (“Peltz”) (quoting Demarco); Highland Capital Management LP v.
Schneider, 607 F.3d 322, 327 (2d Cir. 2010) (“Highland Capital Management”) (quoting Peltz). Though
Demarco and the approximately ten other decisions with identical language all appear to have been decided
under New York law, the Court has no reason to believe that Delaware law would be any different in this
respect.
See also Restatement Second § 7 (cited by Demarco court) (“Authority is the power of the agent to affect
the legal relations of the principal by acts done in accordance with the principal’s manifestations of consent
to him.”) (emphasis added); Restatement § 1.03 (“A person manifests assent or intention through written or
spoken words or other conduct.”); id. cmt a (“Actual authority as defined in § 2.01 requires a manifestation
from the principal to the agent. The scope of actual authority, addressed in § 2.02, is based upon, although
not wholly defined by, the principal’s manifestation to the agent. A manifestation of assent by the principal
is requisite to creating actual authority under § 3.01.”).
89 	Demarco, 390 F.2d at 844; Peltz, 115 F.3d at 1088 (quoting Demarco); Highland Capital Management,
607 F.3d at 327 (quoting Peltz).
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Importantly for reasons that follow, “[t]he focal point for determining whether an agent
acted with actual authority is the agent’s reasonable understanding at the time the agent takes
action.”90 As stated in the current Restatement:
An agent does not have actual authority to do an act if the
agent does not reasonably believe that the principal has
consented to its commission. … Lack of actual authority
is established by showing either that the agent did not
believe, or could not reasonably have believed, that the
principal's grant of actual authority encompassed the act in
question. This standard requires that the agent's belief be
reasonable, an objective standard, and that the agent
actually hold the belief, a subjective standard.91
Thus (presumably because of the requirement that the agent actually hold the belief, a
subjective standard),92 testimony of the alleged agent concerning the agent’s belief as to his or
her authority is a common means to prove or disprove the existence and scope of authority.
Cases in this district and elsewhere have repeatedly considered the agent’s testimony as to his
understanding of his authority in determining whether actual authority existed.93
90 	Restatement, § 2.01 cmt c.
91 	Restatement, § 2.02 cmt e.
92 	Id.
93 	See Merex A.G. v. Fairchild Weston Systems, Inc., 810 F.Supp. 1356, 1369 (S.D.N.Y. 1993), aff’d by
summary order, 54 F.3d 765 (2d Cir.), cert. denied, 516 U.S. 915 (1995) (court relied on testimony of
alleged agent, a market manager, when he stated that he informed the plaintiff Merex that he had no
authority to bind the defendant Fairchild); Playboy Enterprises, Inc. v. Dumas, 960 F.Supp. 710, 721
(S.D.N.Y. 1997) (“There is no evidence suggesting that any of the [accountant agents alleged to have been
authorized in the transaction in question] believed that it had the authority to bind Nagel to a work for hire
agreement. In fact, what evidence there is shows that the agents believed that such action was outside of
the limited scope of their agency.”); Yolton v. El Paso Tennessee Pipeline Co., 668 F.Supp.2d 1023, 1041
(E.D. Mich. 2009) (relying on testimony by union representative that he knew that the union lacked the
authority to modify employees’ vested retirement benefits); Big Bear Import Brokers, Inc. v. LAI Games
Sales, Inc., 2010 U.S. Dist. LEXIS 18604, at *12, 2010 WL 729208, at *4 (D. Ariz. Mar. 2, 2010)
(defendant LAI introduced undisputed evidence that agent Hughes did not have authority to enter into
purchase agreement, and that at the time he signed it, he knew he did not have such authority, based on
Hughes’ admission that “he had a feeling that he was not allowed to enter the purchase agreement”); Lone
Star Heat Treating Co. v. Liberty Mutual Fire Insurance Co., 233 S.W.3d 524, 531 (Tex. Civ. App. 14th
Dist. 2007) (on summary judgment motion, relying on uncontroverted affidavit of employee when he swore
that nobody had told him that he was authorized to take actions in question).
In another case, Opp v. Wheaton Van Lines, Inc., 231 F.3d 1060 (7th Cir. 2000), where there was an issue
as to whether one Richard Opp had authority to act as an agent, the Seventh Circuit found significant the
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Here the Committee argues that JPMorgan (through its counsel, Simpson Thacher)
granted actual authority to GM (through GM’s counsel, Mayer Brown) to terminate the Main
Term Loan UCC-1, as a consequence of JPMorgan’s alleged authorization to file the Unrelated
UCC-3. The Committee bases its actual authority arguments, in substance, on the
communications between JPMorgan and its counsel, on the one hand, and GM and its counsel,
on the other, that took place before the Unrelated UCC-3 was filed. Upon consideration of those
communications, however—with a focus on the manifestations of the authority JPMorgan
granted to GM (and, in particular, “the customs of business, the subject matter, any formal
agreement between the parties, and the facts of which both parties are aware”),94 and, to a lesser
extent, on the caselaw—the Court concludes that JPMorgan did not grant actual authority to
terminate the Main Term Loan UCC-1.
(a) The Authority Indicia
The underlying facts—as contrasted to conclusions that flow from them—are not in
dispute. The parties agree, as does the Court, that the documents that are most significant in
analyzing JPMorgan’s manifestations of the authority it gave to GM are four particular
documents:
absence of any testimony from Mr. Opp. See id. at 1064-65 (“And the record contains no testimony from
Mr. Opp. Because the record provides no counter-affidavits that establish an explicit agency relationship
between Ms. and Mr. Opp, we must accept Ms. Opp’s affidavit as true and conclude that she never
explicitly granted Mr. Opp the authority to limit the carriers’ liability.”).
Thus the Court must overrule the Committee’s objection to the statements in affidavits and deposition
testimony of Mayer Brown and GM personnel that they were not authorized to terminate the Main Term
Loan UCC-1. The Committee’s objection, premised on the contention that each was expressing an
impermissible legal conclusion, mischaracterizes the statements’ substance. Though the Mayer Brown and
GM personnel sometimes spoke in conclusory terms, each was in substance expressing his or her
understanding or belief that Mayer Brown and GM personnel had not been so authorized. That is exactly
what the Restatement says should be the factual predicate for the “subjective standard” prong of the legal
conclusion. See page 33 & n.91 above (“Lack of actual authority is established by showing … that the
agent did not believe … that the principal's grant of actual authority encompassed the act in question. This
standard requires that … the agent actually hold the belief, a subjective standard.”). With the witnesses
providing their understandings and beliefs, the Court can draw its own legal conclusions.
94 	See page 32 & nn. 88-89 above.
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(1) the Synthetic Lease Termination Agreement;
(2) the Synthetic Lease Closing Checklist;
(3) the Unrelated UCC-3; and
(4) the Synthetic Lease Escrow Agreement.
With respect to each of these documents, the Court considers it appropriate to ask two
questions: was it an authorization, and, if so, an authorization of what? With respect to the first
and fourth of those documents (the Synthetic Lease Termination Agreement and the Synthetic
Lease Escrow Agreement), the Court finds a grant of authorization to do something.95 But with
respect to each of the four documents (including the first and the fourth), the Court finds no grant
of authority to terminate the Main Term Loan UCC-1 (nor does it find a failure to object to any
such document to be an authorization), and the Court finds the lack of the requisite authority to
be particularly clear when the totality of the surrounding circumstances is considered.
(1) The Synthetic Lease Termination Agreement
Of the four key documents, the Synthetic Lease Termination Agreement was by far the
most specific in defining the nature of GM’s authority to file termination statements. That
agreement, which is quoted in full above,96 stated, in its most significant part:
the Administrative Agent and the Lessor do hereby . . .
authorize Lessee to file a termination of any existing
Financing Statements relating to the Properties.
That plainly is an authorization. It also tells the reader exactly what has been authorized.
The key words “Financing Statements” and “Properties” in the preceding quoted
language were capitalized and defined terms. They took their meaning from the Participation
95 	With respect to the other two documents (the Synthetic Lease Closing Checklist and the Unrelated UCC-3),
the Court cannot even find that.
96 	See n.18 above.
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Agreement, entered into back in October 2001, which had listed the particular pieces of real
property that originally were collateral under the Synthetic Lease.
“Properties” as there used thus meant the Properties (as defined in the Participation
Agreement) that were still collateral under the Synthetic Lease.97 “Properties” as there used did
not include the very different collateral for the Term Loan. Similarly, “Financing Statements,”
by reason of the defined terms in the Participation Agreement, referred to the “Lessor Financing
Statements” and “Lessee Financing Statements” that had been filed in connection with the
Synthetic Lease, which had been executed by the “Lessor” (the Auto Facilities Real Estate Trust
2001-1); the “Lessee” (GM); and the “Administrative Agent” (JPMorgan).98 Once again, they
did not include unrelated initial financing statements (most significantly, the Main Term Loan
UCC-1) with respect to the Term Loan, nor any that had been filed with respect to any other
financing.
The Synthetic Lease Termination Agreement can be read in only one way: that
Administrative Agent JPMorgan authorized Lessee GM to file terminations of existing financing
statements only with respect to the specific properties that were the subject of the Synthetic
Lease. The Synthetic Lease Termination Agreement plainly was an authorization to terminate
initial financing statements—but only those that it specified. It was not an authorization to bring
the Main Term Loan UCC-1 to an end.
(2) The Synthetic Lease Closing Checklist
The second of the four potentially relevant documents is the Synthetic Lease Closing
Checklist—a six-page listing of several dozen documents, prepared by GM’s counsel Mayer
Brown, that would be executed in connection with the payoff of the Synthetic Lease, some of
97 	See n.21 above.
98 	See n.20 above, quoting the original definitions.
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which would also be filed. The Court is satisfied that personnel from Simpson Thacher and
JPMorgan received and reviewed the Synthetic Lease Closing Checklist, and voiced no objection
to it. But the Court cannot find an authorization on the part of JPMorgan, by reason of that
receipt, review, or failure to protest, to file or terminate anything, and especially cannot find an
authorization to terminate the Main Term Loan UCC-1.
Preliminarily, the Synthetic Lease Closing Checklist did not say that it was, nor was it, an
authorization to do anything. It did not by its terms invite or call for (or even mention) an
authorization from JPMorgan with respect to the documents that were listed upon it, and
JPMorgan did not execute it. In each of these respects, it was quite different than the Synthetic
Lease Termination Agreement discussed above. Plainly, the Synthetic Lease Closing Checklist
was sent to Simpson Thacher and JPMorgan for comment. And one can infer that if Simpson
Thacher or JPMorgan had any objection or protest (or even comments), Mayer Brown would
refrain from action, at least pending further discussion. But the Synthetic Lease Closing
Checklist did not purport to be, nor was it, an authorization of any kind.
Because the Court cannot find the Synthetic Lease Closing Checklist to be an
authorization at all, the Court need not address the second question that must be asked: “an
authorization of what?” If the Court were required to answer that question, however, it would
answer it in the same way that it answered that question for the Synthetic Lease Termination
Agreement, as discussed above.
The Synthetic Lease Closing Checklist identified itself as relating to the “Release of
Properties from JPMorgan Chase Synthetic Lease.” It made no mention of the Term Loan, nor
of any financing other than the Synthetic Lease. Assuming, arguendo, that failure to protest to
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the filing of the listed documents could be deemed to be an authorization, it could only be read as
an authorization for what it described—the properties remaining under the Synthetic Lease.
For those same reasons, the Court is unpersuaded that Simpson Thacher’s Merjian’s
statement, “Nice job on the documents,” preceding the one comment he had relating to Synthetic
Lease matters, should be deemed to be an authorization of any kind, or, if one reaches the issue,
an authorization to terminate the Main Term Loan UCC-1.
It is true, of course, that embodied in the Synthetic Lease Closing Checklist was the
number of a UCC-1 which those involved with this case now know to be the Main Term Loan
UCC-1. But nobody knew that at the time. Nobody knew that the Main Term Loan UCC-1
would be affected in any way—or more importantly, intended by the Synthetic Lease Closing
Checklist to achieve such an end.
It also is true, of course, that by reference to each UCC-1 filing number that was
mentioned in the Synthetic Lease Closing Checklist, one could find the original UCC-1 to which
the checklist referred; then discern to what the UCC-1 related; and then decide whether or not to
authorize the termination of that UCC-1, even if it related to a wholly unrelated transaction. But
the failure to have engaged in such an exercise cannot be found to be an authorization.
(3) The Unrelated UCC-3 Itself
The third of the four documents potentially relevant to this inquiry is the draft of the
UCC-3 itself. Based on the content of the draft Unrelated UCC-3; its delivery to Simpson
Thacher and JPMorgan before its filing; and Simpson Thacher’s asserted approval of it (or at
least Simpson Thacher’s failure to object to its filing), the Committee contends that the
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Unrelated UCC-3 itself constitutes authorization for the termination of the Main Term Loan
UCC-1.99
Once again, however, the Court cannot find an authorization here, or conclude, assuming
arguendo that the draft UCC-3 was an authorization, that it was an authorization to terminate the
Main Term Loan UCC-1. With respect to the first of those issues, the UCC-3 did not call for the
signature of the secured party principal. Nor did it have a granting clause or use granting
language—such as the “hereby … authorize” which appears in the Synthetic Lease Termination
Agreement. GM’s filling in of a box listing JPMorgan as “Secured Party of Record Authorizing
this Amendment” could not reasonably be regarded as a substitute for this. Nor could the
UCC-3, executed solely by GM, reasonably be deemed to be a grant of authority by JPMorgan.
Then, assuming arguendo that the draft UCC-3 could be deemed to be an authorization of
something, it cannot be found to be an authorization to terminate the Main Term Loan UCC-1.
The Unrelated UCC-3 did not, as the Committee argues, “indicate[]that the effectiveness of the
Term Loan Financing Statement is terminated….”100 It made no reference to the Term Loan
other than as might be ascertained by looking at the number listed under “Initial Financing
Statement File #” and then following through on an inquiry to discern the file number’s
significance.101
99 	See Comm. Partial SJ Br. 14 (“The draft of the Term Loan Termination Statement [i.e., the Unrelated
UCC-3] indicated that the effectiveness of the Term Loan Financing Statement is terminated and identified
JPMorgan as the secured party of record authorizing the termination.”).
100 	See n.99 above.
101 	Addressing one of the important premises for its arguments here, the Committee argues that:
In this case, the Term Loan Termination Statement [i.e., the Unrelated
UCC-3] stated unambiguously that the Term Loan Financing Statement
was terminated with respect to the security interest of JPMorgan, the
secured party of record authorizing its filing.
See Comm. Partial SJ Br. 13. But that is not quite correct. The words “Term Loan Financing Statement”
or “Term Loan” never appeared on the Unrelated UCC-3. The Committee’s argument rests on what might
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Since a draft of the Unrelated UCC-3 was included amongst the documents that were sent
to Simpson Thacher, the Court is inclined to agree with the Committee that when Simpson
Thacher’s Merjian stated, “Nice job on the documents,” just preceding the one comment he had
relating to Synthetic Lease matters, the Unrelated UCC-3 was covered under that remark to no
lesser degree than the other documents in the pile. But for the reasons above, that generalized
remark still cannot be deemed to be an authorization of any kind, or, if one reaches the issue, an
authorization to terminate the Main Term Loan UCC-1. In the absence of an indication that
Merjian knew that there was a document that could affect the Main Term Loan UCC-1 in the
batch he received, or that Merjian intended that a UCC-3 in that batch terminate the Main Term
Loan UCC-1—and, of course, when neither JPMorgan nor GM had the belief that the Main
Term Loan UCC-1 would be affected in any way—the Court cannot find Merjian’s comment to
constitute an authorization to terminate that wholly unrelated document.
(4) The Synthetic Lease Escrow Agreement
The fourth and last of the documents that are asserted to have potential relevance is the
Synthetic Lease Escrow Agreement. As with the Synthetic Lease Termination Agreement, the
Synthetic Lease Closing Checklist, and the Unrelated UCC-3, the Court considers this document
at two levels: again, whether was it an authorization at all, and, if so, an authorization of what.
At the first level, the Court concludes that the Synthetic Lease Escrow Agreement was
indeed an authorization—to authorize the Title Company to act to implement the letter’s joint
directions. But the Synthetic Lease Escrow Agreement was not a grant of an authorization to file
UCC-3s. The Court so concludes because (1) the UCC-3s were not amongst the documents that
were to be recorded or filed under that agreement, and (2) it was the intention of JPMorgan, GM,
have been learned in the multi-step inquiry process if any of Simpson Thacher, JPMorgan, Mayer Brown or
GM had engaged in one.
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and the other parties to the Synthetic Lease Termination Agreement to embody any authorization
JPMorgan might grant within that document instead.
At the second level, the Court concludes, once again, that assuming, arguendo, that the
Synthetic Lease Escrow Agreement was intended to constitute a second (and seemingly
redundant) basis for authority to terminate UCC-1s, the Synthetic Lease Escrow Agreement was
an authorization to terminate UCC-1s only with respect to the Synthetic Lease. It still could not
be regarded as an authorization to terminate the Main Term Loan UCC-1.
Here, with respect to whether the Synthetic Lease Escrow Agreement was an
authorization at all, the Court concludes that it was—though to the Title Company, not to GM or
Mayer Brown. In fact, Mayer Brown, on behalf of GM, was one of the three entities granting the
authorization—not the entity being authorized.
With respect to what the Synthetic Lease Escrow Agreement authorized, it authorized the
Title Company to record or file specified documents (i.e., the 23 Recording Documents),102 but
not all of the 47 Escrow Documents.103 The remainder (which included the Unrelated UCC-3)
were simply to be returned to Mayer Brown.104
Significantly, the Synthetic Lease Escrow Agreement, which by its terms gave
instructions to the Title Company, did not give Mayer Brown instructions or authority to do
anything. Nor, especially, did it give Mayer Brown any instructions concerning what Mayer
Brown should do with the Escrow Documents that the Title Company would not file, but instead
would only forward to Mayer Brown—including, as relevant here, the Unrelated UCC-3.105
102 	See n.45 above.
103 	See page 19 above.
104 	See n.46 above.
105 	In its briefing and at oral argument on these motions, see Comm. SJ Opp. 6 n.6, Comm. Partial SJ Reply
11, and Arg. Tr. at 31-32 (ECF #63), the Committee asked rhetorically, in substance, if the remainder of the
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Finally, the Synthetic Lease Escrow Agreement described itself as relating to the
Participation Agreement, i.e., to the Synthetic Lease.106 It made no mention of the Term Loan.
For all of these reasons, the Court cannot find the Synthetic Lease Escrow Agreement to
be a source of authority for GM or Mayer Brown to have filed anything, including, especially,
anything affecting the Term Loan.
(5) “All Circumstances Attending [Principal’s] Manifestations” to Agent
As noted above,107 actual authority is created by “direct manifestations” coming from the
principal to the agent. “[T]he extent of the agent’s actual authority is interpreted in the light of
all the circumstances attending these manifestations, including the customs of business, the
subject matter, any formal agreement between the parties, and the facts of which both parties are
aware.”108 The direct manifestations, and all of the circumstances attending them, likewise cause
this Court to conclude that termination of the Main Term Loan UCC-1 was not authorized.
When the Unrelated UCC-3 was filed, there was one, and only one, “direct
manifestation[]” of the authority granted to GM by JPMorgan here. That was the Synthetic
Lease Termination Agreement, the only document embodying a grant of authority to GM. The
“direct manifestation[]” of GM’s authority to terminate initial financing statements (which
granted authority with respect to the “Financing Statements” relating to the “Properties,” each of
which was a defined term in the Synthetic Lease Termination Agreement), came from the
Escrow Documents were not being returned for filing, what were they returned for? Certainly the filing of
at least some of them was foreseeable—though many more documents were to be returned than were, or
could be, filed. But the fact remains that the Synthetic Lease Escrow Agreement embodied no authority for
GM to do anything with respect to documents so returned, whether the filing of any of them was
foreseeable or not.
106 	See nn. 38 and 39 above.
107 	See page 32, above.
108 	Demarco, 390 F.2d at 844; accord Peltz, 115 F.3d at 1088; Highland Capital Management, 607 F.3d at
327.
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Synthetic Lease Termination Agreement, and nowhere else. Having provided the necessary
grant of authority in one place (in very express terms), there was no need to express it again, and
the Court can find no evidence of an intent to say it again, either in the same terms or different
ones. The other asserted manifestations of authority to GM, as argued by the Committee, were
not at all “direct,” if they could be regarded as manifestations at all.
The Court then considers “the customs of business, the subject matter, any formal
agreement between the parties, and the facts of which both parties were aware.” No expert
testimony, or other evidence, was offered as to the “customs of business,” so the Court lacks
evidence of that character upon which to rely. But there is a fair amount of evidence in the
record as to the remaining factors, as to which there are no disputed issues of fact, and it all
points the same way.
The “subject matter” of the transaction was, as nearly every relevant document expressly
stated, the termination of the Synthetic Lease. In all of the emails and underlying documents,
there was no mention, before the filing of the Unrelated UCC-3, of the Term Loan or of any
intent to affect the Term Loan in any way. The affidavits and deposition testimony were wholly
consistent. Nobody at GM, JPMorgan, Mayer Brown or Simpson Thacher ever regarded the
subject matter of the transaction as anything other than the Synthetic Lease. The Committee
effectively asks the Court to conclude that JPMorgan granted authorization to GM to take action
with respect to a wholly different subject matter—a wholly unrelated $1.5 billion loan—without
any of the participants in the Synthetic Lease payoff ever mentioning that along the way.
Looking at any “formal agreement between the parties,” the Court comes to the same
conclusion. The only formal agreement between the parties with respect to authority to file the
Unrelated UCC-3, as discussed above in the Court’s discussion of direct manifestations from
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principal to agent, was the Synthetic Lease Termination Agreement—with respect to which the
grant of authority was explicit, and equally explicit with respect to what it covered. Other
documents relied upon by the Committee as sources of authorization here were not agreements.
They provide no basis for the Court to conclude that JPMorgan and GM agreed to trump or
supplement the one formal agreement between the parties that expressly addressed the matter of
authority.109
Other, earlier, formal agreements between the parties reinforce that conclusion. When
the Term Loan was put into place in 2006, its documentation had provisions to protect the liens
securing the Term Loan. Under one such provision, the Term Loan Collateral could not be
eliminated unless the Term Loan was fully paid off.110 Under another, GM covenanted to
maintain the perfection of the security interests in the Term Loan Collateral.111 And under
another, the Term Loan Lenders’ perfected security interests could not be released “without the
written consent of each Lender.”112 These too were elements of formal agreements between the
parties that must be considered when determining whether JPMorgan authorized the termination
109 	The Committee asserts that the Synthetic Lease Termination Agreement does not say that it is the sole
source of authority to GM, and that it lacked an integration clause—and thus that the Committee is not
foreclosed from relying on other documents as sources of authority. Comm. SJ Opp. 9 n.9; Comm. Partial
SJ Reply 14-15. The Court agrees with the Committee that it is not so foreclosed, and has assumed,
consistent with Demarco, Peltz and similar cases, that if there were any other formal agreements likewise
speaking to a grant of authority, the Court should consider them as well. For these reasons, the Court has
reviewed, with some care, what the Synthetic Lease Closing Checklist, the Unrelated UCC-3, and the
Synthetic Lease Escrow Agreement said (even though not all of them were agreements between JPMorgan
and GM), along with earlier formal agreements between JPMorgan and GM. Ultimately, however, the
documents that the Committee wishes the Court to consider fall considerably short of granting additional or
different authority, especially when two of the three of them are not agreements at all. Also, when
considering the circumstances in the aggregate, it is appropriate to give the most specific document the
greatest weight.
110 	Collateral Agreement § 7.13 (Duker Aff. Exh. H).
111 	Collateral Agreement § 4.03.
112 	Term Loan Agreement § 10.01 (Duker Aff. Exh. G).
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of the Lenders’ Term Loan liens as a consequence of the inferences the Committee asks the
Court to draw here.
Consideration of “the facts of which both parties are aware” likewise supports
JPMorgan’s contention that it did not grant authority to terminate the Main Term Loan UCC-1.
Here neither principal (JPMorgan) nor agent (GM) believed or understood that JPMorgan
authorized GM to terminate the Main Term Loan UCC-1. Their understandings were to the
contrary. Nor were they even aware that a UCC-3 referencing an initial financing statement for
the Term Loan had been filed until long after the Unrelated UCC-3’s filing, or of any extrinsic
facts that would cause either to believe that GM should be terminating the Main Term Loan
UCC-1. As an additional one of the factors to be considered under Demarco, Peltz, and similar
cases, “the facts of which both parties were aware” require the Court to conclude that no
authorization was given.
Finally consideration of all of the circumstances in the aggregate compels a finding that
authority to terminate the Main Term Loan UCC-1 was not granted. Stepping back from the
more detailed analysis above, the Court sees the transaction as the payoff of a real estate
financing under which the parties intended to bring the real estate financing liens to an end,
without any intention to affect anything else. Neither GM nor JPMorgan intended, or believed,
that their documents would affect anything else—and, more to the point, thought JPMorgan had
authorized GM to affect anything else. A document now known to have related to the unrelated
Term Loan was mistakenly filed by Mayer Brown. Even with delivery of a draft of that
document to Simpson Thacher in advance, and Simpson Thacher’s failure to protest, the
mistaken filing by Mayer Brown of that document—in the absence of recognition by either
Mayer Brown or Simpson Thacher that the initial financing statement filing number appearing
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on it would, upon further investigation, lead to a reference to the Term Loan—does not equate to
an authorization by JPMorgan or Simpson Thacher for the termination of JPMorgan’s Term
Loan liens. This too compels a ruling by this Court that when authorizing termination of
UCC-1s with respect to the Synthetic Lease, JPMorgan did not give actual authority to GM to
terminate the Main Term Loan UCC-1.
(6) Understanding of the Agent
There is, in addition, one more reason why the Court cannot find termination of the Main
Term Loan UCC-1 to have been authorized. That is the understanding of the agent.
As discussed above,113 an agent does not have actual authority to do an act if the agent
does not reasonably believe that the principal has consented to its commission. Here no one on
the GM side had any belief, reasonable or otherwise, that GM had been authorized to terminate
JPMorgan’s security interests with respect to the Term Loan.
If Mayer Brown or GM had actually believed that either had been authorized by
JPMorgan to terminate a wholly unrelated $1.5 billion financing, this would be a different case,
requiring the Court to then consider whether such a belief was reasonable.114 But that is not an
issue here, because every individual on the GM side unequivocally expressed his or her belief
that GM had not been so authorized. And because, as the Restatement makes clear, a belief (and
indeed, a reasonable belief) by the agent that he or she has been authorized is essential to a
finding of actual authority—and that is lacking here—the Court cannot find that GM or Mayer
113 	See page 33 & n.91 above.
114 	See Restatement § 2.02 cmt e. Though under the facts here, any such belief, if it existed, would be absurd,
the Court is uncertain whether the absurdity of the agent’s belief can be decided on a summary judgment
motion when reasonableness is at issue. That issue need not be decided here, of course, because those on
the GM side did not have a belief that JPMorgan had authorized the termination of its security interest on
the unrelated Term Loan, reasonable or otherwise.
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Brown had actual authorization. Quite apart from the conclusion that flows from the multi-
indicia analysis dictated by Demarco, Peltz and similar cases, that is ultimately conclusive.115
* * *
For all of these reasons, the Court concludes that GM and Mayer Brown lacked actual
authority to cause JPMorgan’s Main Term Loan UCC-1 to come to an end.116
(b) Helpful Caselaw
Because the consideration of indicia of a grant of authority is fact-driven, caselaw dealing
with grants of authority in connection with the filing of other UCC-3s is not as helpful as it
otherwise might be. But there are a few cases worthy of consideration.
In the Negus-Sons bankruptcy case,117 the bankruptcy court held that secured party
authorization was required to file a UCC-3, and that this authorization had been provided. The
Eight Circuit Bankruptcy Appellate Panel, and then the Eighth Circuit, affirmed—finding that
the bankruptcy court’s decision was “supported by the record,” though “the strongest basis for
affirming” was an alternate one, that the secured party was paid off with respect to the remainder
of its collateral.
115 	Here the “actual authority” that the Committee asks the Court to find is ultimately based on the results of an
investigative process that never happened. It is not based on anything JPMorgan said or signed, or that GM
believed. It rather is the result of a logical syllogism resulting from Simpson Thacher’s failure to protest
when it saw GM’s draft UCC-3 listing a particular initial financing statement filing number, when if
Simpson Thacher, Mayer Brown, or either of their clients had investigated and tracked down the referenced
UCC-1, and then investigated further to ascertain the financing to which that UCC-1 related, they would
have discovered that the UCC-1 in question related not to the Synthetic Lease but rather to the Term Loan.
That is not a proxy for actual authority, which requires the reasonable belief by the agent that it has been
authorized to act in the respect at issue.
116 	The Committee also relies on “implied authority,” which is a species of actual authority. Because the
Committee asserts this as a separate contention, the Court considers it as such, and deals with it below. See
page 58 below.
117 	See Lange v. Mutual of Omaha Bank (In re Negus-Sons, Inc.), 2011 Bankr. LEXIS 2378, 2011 WL
2470478 (Bankr. D. Neb. June 20, 2011) (“Negus-Sons-Bankruptcy”), aff'd, 460 B.R. 754 (B.A.P. 8th Cir.
2011) (“Negus-Sons-BAP”), aff’d on opinion of BAP, 701 F.3d 534 (8th Cir. 2012) (per curiam).
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There a secured party, Mutual of Omaha Bank (the “Bank”), had liens on a variety of
collateral, some of which the Bank intended to keep and some of which it intended to release.
But a Bank employee carelessly placed language in a loan payoff letter provided to a new lender,
Wells Fargo Equipment Finance, stating that “[u]pon receipt of payoff all liens will be
released.”118 Based on this language, and its earlier request for authorization for a release of the
security interest “in all the collateral,” Wells Fargo Equipment Finance filed a termination
statement on the Bank’s behalf. While the Bank claimed that it intended only to release its
security interest in the collateral for which payment was received, the bankruptcy court ruled that
the broad language in the Bank’s responding letter authorized the filing of the termination
statement.119
The bankruptcy court’s decision in Negus-Sons-Bankruptcy, which the BAP implicitly
found not to be clearly erroneous,120 is in any event easily distinguishable. The bankruptcy court
118 	Negus-Sons-Bankruptcy, 2011 Bankr. LEXIS 2378, at *12, 2011 WL 2470478, at *5 (emphasis added).
119 	The Bank contended that its authorization was more limited, referring only to its equipment collateral and
not its entire security interest. See 2011 Bankr. LEXIS 2378, at *9-10, 2011 WL 2470478, at *4. The
Negus-Sons-Bankruptcy court found that contention inconsistent with the request from Wells Fargo
Finance to which the Bank was responding. The request provided, in relevant part:
This letter is to confirm that upon receipt of funds from Wells Fargo
Equipment Finance, Inc. for the entire payoff of all accounts that you
agree to terminate your security interest in all the collateral with all
the companies listed above and forward all titles to the following
address:
...
We have prepared an amendment to your UCC filing(s) to effectuate
these terminations. Please indicate your consent to the filing of these
amendments, and your authorization for us to file them on your behalf,
by signing in the space provided below....
Id. (emphasis added).
120 	The BAP stated that “[t]he record supports the bankruptcy court’s determination that Wells Fargo had the
authority to terminate [the] financing statements.” Negus-Sons-BAP, 460 B.R. at 757. But it went on to
say that it could affirm on the basis that the termination of the financing statements was unnecessary,
because of payment in full of the remaining indebtedness before the bankruptcy, taking pains to say “we
can affirm on any ground supported by the record.” Id. at 757 n.9. And it later found that the alternative
ground was “the strongest basis for affirming the bankruptcy court’s determination that Mutual of Omaha
no longer has a security interest in the Property.” Id. at 758. It is fair to infer that the B.A.P. found the
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found that authorization to terminate the liens with respect “to all of the collateral with all the
companies listed above” was sought, and that authorization for the release of “all liens” was
expressly granted by the Bank. The Bank did not limit its release of liens to those on particular
assets.121
But while not fully on point as a factual matter (and while they engage in a factual
analysis somewhat less structured than the one this Court has undertaken, pursuant to Demarco,
Peltz and similar cases) the decisions by the bankruptcy and district courts in the A.F. Evans
bankruptcy122 are nevertheless instructive. The bankruptcy court in A.F. Evans-Bankruptcy
understandably started with the statutory scheme of UCC §§ 9-509(d), 9-510 and 9-513. It then
engaged in a fact-driven analysis to ascertain whether the requisite authority had been granted—
ultimately concluding that authority to terminate the liens on two items of collateral did not
extend to a third, even though a termination statement that covered the third as well had been
filed. The A.F. Evans-District court affirmed.
The A.F. Evans cases involved a situation, like this one, in which a creditors’ committee,
on behalf of the debtor’s unsecured creditor community, was jousting with a secured lender over
the validity of the secured lender’s lien. As here, the secured creditor City National Bank (“City
bankruptcy court’s factual finding of authority not to be clearly erroneous, but not to have been strongly
supported.
The BAP also stated that in light of its rulings, it did “not need to address the more general question of
whether unauthorized termination statements are effective,” id. at 757, though it went on to say that it was
hesitant to endorse the holding in Roswell, which “appears to be contrary to the plain language of the
Uniform Commercial Code.” Id. at 757 n.10; see also this Court’s discussion of Roswell, beginning at page
64 below.
121 	Other cases involving termination of UCC-1s by entities acting (albeit without authority) on behalf of
secured lenders, S.J. Cox and Roswell, are in this Court’s view erroneously decided, and thus are
inappropriate for discussion in this context. The Court addresses them below, in the context in which the
Committee relies upon them, beginning at pages 61 and 64, respectively.
122 	See Official Committee of Unsecured Creditors v. City National Bank, N.A. (In re A.F. Evans Co.), 2009
Bankr. LEXIS 2473, 2009 WL 2821510 (Bankr. N.D. Cal. July 14, 2009) (“A.F. Evans-Bankruptcy”),
aff’d 2011 U.S. Dist. LEXIS 51628, 2011 WL 1832963 (N.D. Cal. May 13, 2011) (“A.F. Evans-District”).
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Bank”) originally had a lien on the debtor’s interests in three partnerships. When interests in
two of the partnerships were sold, the debtor had asked City Bank to release its liens on those
two partnership interests (in exchange for a cash payment to City Bank), leaving only the third
under City Bank’s original lien. City Bank agreed. To facilitate the closing of the sale of those
two partnerships, the debtor there (analogous to GM here) sent City Bank (analogous to
JPMorgan here) proposed escrow instructions directed to the debtor and to a title company, First
American Title Insurance Co. (“First American”), along with two proposed UCC-3s checking
the box for deletion of collateral (the two partnerships being sold) but not the box for
termination. The proposed instructions (analogous in many respects to the Synthetic Lease
Termination Agreement here) included an exhibit containing a description of the collateral to be
released upon payment to City Bank. The descriptions were limited to the two partnerships
being sold, and did not include any reference to the third.123
City Bank then caused the instructions to be sent to First American, accompanied by
those two UCC-3s, which, again, would release collateral from the scope of the original UCC-1
but not terminate it. But thereafter, someone (presumably at First American, though no finding
was made as to who the “someone” was) mistakenly checked an additional box on the UCC-3s,
this time the box providing for termination,124 and caused the UCC-3s to be filed. The A.F.
Evans creditors’ committee then argued, as here, that the filing of the UCC-3s with their
“termination” box checked caused City Bank to lose its priority as a secured lender.
123 	See 2009 Bankr. LEXIS 2473, at *2-3, 2009 WL 2821510, at *1.
124 	See 2009 Bankr. LEXIS 2473, at *5, 2009 WL 2821510, at *2.
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The A.F. Evans-Bankruptcy court rejected that contention. After going through
California’s versions of UCC §§ 9-509(d), 9-510(a) and 9-513(d),125 it recognized that the
termination of City Bank’s security interest would be effective only to the extent such had been
authorized. It then recognized, as this Court has, that in “determining what a secured party did or
did not authorize” within the meaning of UCC 9-509(d), “law other than the Commercial Code
may determine the issue.”126 And it did not quarrel with the general agency principle that
principals are bound by the acts of their agents acting within the scope of their authority, and that
First American had the authority to act with respect to the two partnerships with respect to which
City Bank had agreed to release its liens. But the A.F. Evans-Bankruptcy court found that
terminating City Bank’s lien on the third partnership was beyond the scope of the authority City
Bank had granted. It followed from this that City Bank “was not bound by First American’s
unauthorized modification to the UCC-3, if indeed the modification was by First American.”127
As the Committee here correctly observes, A.F. Evans-Bankruptcy is not the same as this
case in the respect that the documents City Bank reviewed and approved in that case showed
nothing wrong, and were changed thereafter. But in a key respect, it is highly relevant to what
we have here. The A.F. Evans-Bankruptcy court did not equate the authority City Bank had
granted to file UCC-3s with respect to identified collateral (two of the three partnerships) to
authority to make filings generally. Rather, it measured the agent First American’s authority by
looking at the exact authority that City Bank had granted, and found authority to that extent and
125 	See 2009 Bankr. LEXIS 2473, at *6, 2009 WL 2821510, at *3. The California versions of those
provisions, Cal. Comm. Code §§ 9509(d), 9510(a), and 9513(d), were the standard uniform provisions,
identical except in numbering to those in Delaware.
126 	2009 Bankr. LEXIS 2473, at *8, 2009 WL 2821510, at *3, citing the Official Comment to UCC § 9-509,
quoted above at n.83.
127 	2009 Bankr. LEXIS 2473, at *10, 2009 WL 2821510, at *4.
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nothing more. As the A.F. Evans-Bankruptcy court explained (referring to City Bank by the
acronym “CNB”):
Therefore, First American was not CNB’s agent, except for
the limited purpose of handling the closing of the escrow
for the debtor's sale to the buyer of the Westgate and
Greenery partnership interests. And First American was
not acting within the scope of its very limited authority
from CNB when it recorded a UCC–3 Amendment
statement in a form other than that which CNB had
authorized.128
The decision in A.F. Evans-District, which expressly dealt with this contention on appeal,
and affirmed the bankruptcy court with respect to it, was to the same effect. On appeal, the A.F.
Evans creditors’ committee argued that City Bank gave First American broad authorization to
file any ‘appropriate amendments’ to City Bank’s UCC-1, and that First American was acting as
City Bank’s agent in all matters relating to City Bank’s security interest in the debtor’s
property.129 But the A.F. Evans-District court looked at the context in which the grant of
authority had been given, and in particular, City Bank’s release with respect to those two
particular partnerships.130 It concluded that “[t]he bankruptcy court reasonably construed such
instruction to mean that the only “appropriate amendments” authorized by CNB were
amendments that relinquished CNB’s interest in the two properties identified therein.”131
128 	Id. (emphasis added).
129 	A.F. Evans-District, 2011 U.S. Dist. LEXIS 51628, at *13-14, 2011 WL 1832963, at *5.
130 	Id. (“City National Bank hereby releases all of its right, title and interest in [Westgate and Greenery] and
authorizes the filing of appropriate amendments to [the] UCC Financing Statement….”).
131 	Id. (emphasis added).
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As applied to this case, each of A.F. Evans-Bankruptcy and A.F. Evans-District support
finding authority for GM to terminate UCC-1s with respect to the “Properties”—i.e. the
“Properties” that were the subject of the Synthetic Lease—but not for anything else.132
2. Apparent Authority
Apparent authority is different from actual authority. Apparent authority arises from the
written or spoken words or other conduct which, reasonably interpreted, cause a third party to
believe that the principal consents to have an act done on the principal’s behalf by the person
purporting to act for him.133 As stated in the Restatement:
Apparent authority is the power held by an agent or other
actor to affect a principal's legal relations with third parties
when a third party reasonably believes the actor has
authority to act on behalf of the principal and that belief is
traceable to the principal's manifestations.134
Apparent authority does not in itself carry the consequences of actual authority with respect to
the rights and duties that apply to the relationship between agent and principal.135
Unlike actual authority, which considers manifestations from the principal to the agent
from the perspective of the agent, apparent authority considers the conduct of the principal, and
132 	A.F. Evans-Bankruptcy is also noteworthy for its view that it should not rely on two decisions upon which
the Committee relies here, by the Ninth Circuit BAP and Ninth Circuit, respectively, in Koehring Co. v.
Nolden (In re Pacific Trencher & Equipment, Inc.), 27 B.R. 167 (B.A.P. 9th Cir. 1983) (“Pacific
Trencher”), aff’d 735 F.2d 362 (9th Cir. 1984). While the A.F. Evans-Bankruptcy court found the Pacific
Trencher decisions distinguishable because in A.F. Evans, boxes that had been checked on the UCC-3s sent
mixed signals, the A.F. Evans-Bankruptcy court also found the Pacific Trencher decisions distinguishable
(consistent with this Court’s views as to those cases, see page 61 below) that the mistake in Pacific
Trencher was made by the secured party itself (and did not involve an unauthorized act by an agent), and
that the Pacific Trencher cases were decided prior to the 2001 UCC amendments’ enactment of UCC
§§ 9-509 and 9-510, which specifically address the effect of an unauthorized filing. See A.F. Evans-
Bankruptcy, 2009 Bankr. LEXIS 2473, at *11-13, 2009 WL 2821510, at *5.
133 	Hidden Brook Air, 241 F. Supp. 2d. at 261.
134 	Restatement § 2.03.
135 	Id. cmt a.
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as the principal’s conduct is interpreted by a third party.136 “Essential to the creation of apparent
authority are words or conduct of the principal, communicated to a third party, that give rise to
the appearance and belief that the agent possesses authority to enter into a transaction.”137 The
agent cannot by his own acts imbue himself with apparent authority.138
As with manifestations of actual authority made to agents,139 a principal’s manifestations
of apparent authority made to third parties must be understood in context.140 Apparent authority
may result under any set of circumstances under which it is reasonable for a third party to believe
that an agent has authority, so long as the belief is traceable to manifestations of the principal.141
Importantly, the inquiry requires the belief of an actual third party, who has acted in
reasonable reliance on the principal’s representations as to the agent’s authority.142
Here the Court finds the doctrine of apparent authority simply to be inapplicable. There
here were no statements to third parties with respect to the Term Loan upon which a finding of
apparent authority could be made.
136 	Minskoff v. American Exp. Travel Related Services Co., Inc., 98 F.3d 703, 708 (2d Cir. 1996) (“Apparent
authority, then, is normally created through the words and conduct of the principal as they are interpreted
by a third party, and cannot be established by the actions or representations of the agent.”).
137 	Hallock v. State of New York, 64 N.Y.2d 224, 231, 474 N.E.2d 1178 (1984) (“Hallock”); FDIC v.
Providence College, 115 F.3d 136, 140 (2d Cir. 1997) (“Providence College”) (quoting Hallock).
138 	Hallock, 64 N.Y.2d at 231.
139 	See page 32 & n.89 above.
140 	Restatement § 2.03 cmt c (“A principal’s conduct does not occur in a vacuum. A third party’s reasonable
understanding of the principal’s conduct will reflect general business custom as well as usage that is
particular to the principal’s industry and prior dealings between the parties.”).
141 	Restatement § 2.03 cmt c.
142 	See Providence College, 115 F.3d at 140 (“The inquiry therefore centers on the ‘words or conduct of the
principal … communicated to a third party … that give rise to the appearance and belief that the agent …
possesses authority to enter into a transaction ….’”) (quoting Hallock); In re Kollel Mateh Efraim, LLC,
334 B.R. 554, 560 (Bankr. S.D.N.Y. 2005) (“Apparent authority consists of two elements: (1) a
manifestation by the principal that the agent has authority and (2) reasonable reliance on that manifestation
by the person dealing with the agent.”).
Though the distinction ultimately does not matter here, it also is the case that the third party must rely on
manifestations as to the existence of authority from the principal—not the agent. See Hallock, 64 N.Y.2d at
230 (“The agent cannot by his own acts imbue himself with apparent authority.”).
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3. Ratification
The Committee further contends that the filing of the Unrelated UCC-3 was ratified by
JPMorgan,143 and hence that the termination of the Main Term Loan UCC-1 should be held to
have been valid under the agency doctrine of ratification. Once more, however, the Court is
unable to agree.
As set forth in the Restatement, “ratification is the affirmance of a prior act done by
another, whereby the act is given effect as if done by an agent acting with actual authority.”144 A
person ratifies an act by (a) manifesting assent that the act shall affect the person's legal relations,
or (b) conduct that justifies a reasonable assumption that the person so consents.145 While
silence may, in some circumstances, act as the ratification of a prior act, “[t]he intent required for
ratification ‘must be clearly established and may not be inferred from doubtful or equivocal acts
or language.’”146
Additionally, an important prerequisite to a finding of ratification is full knowledge by
the principal of the facts relevant to whether the transaction should be ratified. As stated in the
Restatement, “[a] person is not bound by a ratification made without knowledge of material facts
involved in the original act when the person was unaware of such lack of knowledge.”147
Ratification requires that the principal have actual knowledge of material facts.148 As stated by
143 	Comm. SJ Opp. 18-19; Comm. Partial SJ Reply 13.
144 	Restatement § 4.01(1); see also Holm v. C.M.P. Sheet Metal, Inc., 89 A.D.2d 229, 232, 455 N.Y.S.2d 429,
432 (4th Dept. 1982) (“Holm”) (“Ratification is the express or implied adoption of the acts of another by
one for whom the other assumes to be acting, but without authority.”).
145 	Restatement § 4.01(2).
146 	Adelphia Recovery Trust v. HSBC Bank USA, 634 F.3d 678, 693-94 (2d Cir. 2011) (under New York law)
(citing Chemical Bank, 169 F.3d at 128) (under New York law).
147 	Restatement § 4.06
148 	Id. cmt b. This actual knowledge is in contrast to “notice” as used in the Restatement, which includes not
just knowledge of a fact, but also reason to know the fact, having received an effective notification of the
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New York’s Appellate Division, Fourth Department, “[t]he act of ratification, whether express or
implied, must be performed with full knowledge of the material facts relating to the transaction,
and the assent must be clearly established and may not be inferred from doubtful or equivocal
acts or language.”149 Many federal court decisions in this circuit and district, some applying
New York law and others applying general principles of common law, similarly note the
knowledge requirement, with some affirmatively emphasizing it.150
Then, the Second Circuit has required the acceptance of the benefits of a transaction as an
additional element beyond the requisite knowledge.151
Here three elements necessary to establish a ratification by JPMorgan are missing. First,
since ratification requires affirmance of a “prior act,”152 no facts here establish that JPMorgan
did anything to affirm any of the key prior acts (most significantly, the filing of the Unrelated
UCC-3, and any termination of the Main Term Loan UCC-1) after such acts took place.
fact, or there existing circumstances under which a person “should know” the fact to fulfill a duty owed to
another person. See Restatement § 1.04(4).
149 	Holm, 89 A.D.2d at 233, 455 N.Y.S.2d at 432.
150 	See, e.g., Rodonich v. House Wreckers Union Local 95, 817 F.2d 967, 973 (2d Cir. 1987) (“Under general
principles of common law, “ratification can only occur when the principal, having knowledge of the
material facts involved in a transaction, evidences an intention to ratify it.”) (emphasis added); Banque
Arabe Et Internationale D’Investissement v. Maryland Nat. Bank, 850 F.Supp. 1199, 1213 (S.D.N.Y. 1994)
(“To ratify the unauthorized act of an agent, a principal must have full and complete knowledge of all the
material facts of the transaction.”) (emphasis added); Prisco v. State of New York, 804 F.Supp. 518, 523
(S.D.N.Y. 1992) (“Ratification of the acts of an agent only occurs where the principal has full knowledge of
all material facts and takes some action to affirm the agent's actions.”) (emphasis added); Cooperative
Agricole Groupement De Producteurs Bovins De L’ouest v. Banesto Banking Corp., 1989 U.S. Dist.
LEXIS 8368, at *50, 1989 WL 82454, at *16 (S.D.N.Y. July 19, 1989) (“Cooperative Agricole”)
(“Ratification requires knowledge by the principal of the material facts of a transaction, coupled with the
retention of benefits. … In other words, ratification requires acceptance by the principal of the benefits of
an agent's acts, with full knowledge of the facts, in circumstances indicating an intention to adopt the
unauthorized arrangement.”) (emphasis added), aff'd without opinion, 904 F.2d 35 (2d Cir. 1990); Orix
Credit Alliance v. Phillips-Mahnen, Inc., 1993 U.S. Dist. LEXIS 7071, at *73, 1993 WL 183766, at *4
(S.D.N.Y. May 26, 1993) (“Orix”) (“[R]atification occurs when a principal, having knowledge of the
material facts in a transaction, evidences an intention to affirm or adopt the transaction of his agent
through his acts or words.”) (emphasis added).
151 	See Monarch Insurance Co. of Ohio v. Insurance Corp. of Ireland Ltd., 835 F.2d 32, 36 (2d Cir. 1987); see
also Cooperative Agricole, 1989 U.S. Dist. LEXIS, at * 50, 1989 WL 82454, at *16.
152 	Restatement § 4.01(1).
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Secondly, the knowledge requirement here has not been satisfied. Assuming, arguendo,
that JPMorgan engaged in the necessary affirmance, it did so without knowledge of what it had
done, and even without knowledge that it “was unaware of such lack of knowledge.”153 As of
the time of the filing of GM’s chapter 11 case, nobody at Simpson Thacher or JPMorgan (or
though it does not matter with respect to this requirement, Mayer Brown or GM) knew that a
termination statement with respect to the Term Loan had been filed. In fact, lacking such
knowledge, JPMorgan and GM acted thereafter (including, most significantly, by effecting the
paydown of the Term Loan, which was appropriate if, but only if, the Term Loan was then
secured) believing that the Term Loan was fully secured.
Third, the acceptance of benefits requirement also has not been satisfied here. While
JPMorgan benefitted from GM’s fulfillment of its duties under the Synthetic Lease, there was no
comparable benefit at the time with respect to the Term Loan.
Thus the Court is unable to find a ratification here.
C. The Committee’s Other Arguments
The Court then considers other arguments put forward by the Committee to the extent
they have not been addressed above.
1. 	Implied Authority
In one of its briefs,154 the Committee further argues that GM “implicitly” authorized the
filing of the Unrelated UCC-3, and thus that GM had “implied” authority to terminate the Main
Term Loan UCC-1. The Court is unable to agree.
Implied authority is a species of actual authority, the latter of which can be express or
implied.155 Express authority is “[a]uthority delegated to [an] agent by words which expressly
153 	Restatement § 4.06.
154 	See Comm. SJ Opp. 11.
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authorize him to do a delegable act.”156 It is “authority distinctly, plainly expressed, orally or in
writing.”157 Implied authority, by contrast, is not expressly granted. Rather, it exists when
necessary or appropriate to accomplish the agent’s express responsibilities, or when the agent
reasonably believes that the action in question is required to accomplish the principal’s
objectives. As explained in the Restatement:
“Implied authority” is often used to mean actual authority
either (1) to do what is necessary, usual, and proper to
accomplish or perform an agent’s express responsibilities
or (2) to act in a manner in which an agent believes the
principal wishes the agent to act based on the agent’s
reasonable interpretation of the principal’s manifestation in
light of the principal’s objectives and other facts known to
the agent.158
Here, by way of example, after JPMorgan had authorized GM to file UCC-3s with
respect to the Synthetic Lease Properties, GM or its counsel had implied authority to retain and
direct a UCC filing service to file the Synthetic Lease Properties’ UCC-3s. But GM did not have
implied authority to do tasks other than those that were appropriate to accomplish the tasks, with
155 	See Nationwide Life Ins. Co. v. Hearst/ABC-Viacom Entertainment Services, 1996 U.S. Dist. LEXIS 6729,
at *22, 1996 WL 263008, at *8 (S.D.N.Y. May 17, 1996) (“Nationwide”); Hidden Brook Air, 241
F.Supp.2d at 260.
156 	Nationwide, 1996 U.S. Dist. LEXIS 6729, at *22, 1996 WL 263008, at *8.
157 	Id. (quoting 1979 version of Black’s Law Dictionary); Hidden Brook Air, 241 F.Supp.2d at 261 (same,
quoting Nationwide).
158 	Restatement § 2.01 cmt b. The two circumstances are not mutually exclusive. Id.; see also Vig v. Deka
Realty Corp., 143 A.D.2d 185, 187, 531 N.Y.S.2d 633, 634 (2d Dept. 1988), leave to appeal denied, 73
N.Y.2d 708, 540 N.Y.S.2d 1003 (1989) (“While the president of a corporation may have implied authority
to do necessary acts within the scope of his usual and ordinary duties, he does not possess such authority as
to unusual or extraordinary events.”) (emphasis added).
A few decisions, sometimes relying on the 1958 Restatement Second, which preceded the present
Restatement, describe implied authority as existing “where the acts or representations of a principal lend
the appearance of authority to the agent.” See Nationwide, 1996 U.S. Dist. LEXIS 6729, at *22-23, 1996
WL 263008, at *8. That definition, in the Court’s view, is imprecise and overly broad, inappropriately
blending separate concepts that (coupled with other factors, most significantly instilling a belief in a third
party) define implied authority, on the one hand, and apparent authority, on the other. Particularly since the
issuance of the present Restatement, “implied authority,” as the quotations from the present Restatement
make clear, is better thought of as the additional authority necessary to implement actual authority
otherwise granted, or that the agent reasonably believes to exist.
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respect to the Synthetic Lease Properties, for which GM had been expressly authorized—i.e., to
implement the authority GM had otherwise been granted. GM was not authorized to act except
with respect to the Synthetic Lease Properties, and filing the Unrelated UCC-3 was not
“necessary,” “usual” or “proper” to bring the UCC-1s with respect to the Synthetic Lease
Properties to an end.159
Similarly, if GM had reasonably believed that it was expressly authorized to bring the
Main Term Loan UCC-1 to an end, GM likely, if not plainly, would have had implied authority
to take measures to accomplish that end. But again, GM did not have such a belief. There was
no actual authority—even authority that GM perceived to exist—to terminate the Main Term
Loan UCC-1. 	For these reasons, the Court cannot find the implied authority doctrine to be
applicable here.
2. 	“UCC Filings that Mistakenly Terminate a Security Interest Are Legally Effective.”
Recurring themes in the Committee’s briefs are very broad statements (in one instance, as
a topic heading)160 that “the filing of a termination statement renders ineffective the financing
statement to which the termination relates and causes the subject lien to become unperfected,”161
and, especially, that “UCC filings that mistakenly terminate a security interest are legally
159 	At the end of its implied authority argument, the Committee states that “this case concerns an uncontested
agency relationship between JPMorgan and Old GM, pursuant to which Old GM was authorized to make
UCC filings on behalf of JPMorgan.” Comm. SJ Opp. 15 n.12. That statement, while technically true,
suffers from its excessive breadth, and a failure to state other uncontested, and critical, facts. GM was
authorized “to make UCC filings” only with respect to the “Financing Statements” relating to the
“Properties”—which, as discussed above, were those with respect to the Synthetic Lease alone. See the
Synthetic Lease Termination Agreement and its definitional cross-references, quoted at nn.18-21 above.
160 	See Comm. Partial SJ Br. 11-14 (“Even If Mistaken, The Term Loan Termination Statement is Legally
Effective”); see also Comm. SJ Opp. 4 (“JPMorgan acknowledges, as it must, the consistent authority
holding that UCC filings that mistakenly terminate a security interest are legally effective.”); Comm.
Partial SJ Reply 15-16 (“[A] termination statement that is filed by mistake, like the Term Loan Termination
Statement at issue in this case, is legally effective.”).
161 	Comm. Partial SJ Br. at 9.
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effective.”162 Broad statements of that character are unhelpful, and by their excessive breadth
unsatisfactorily describe the applicable law.
Because the Committee’s contentions rest on (1) cases involving entities that made the
UCC filings themselves; (2) cases that predated the 2001 amendments to UCC Article 9; and
(3) cases that while decided after the 2001 amendments to the UCC, relied on the earlier
authority without focusing on the fact that the UCC had changed (or some combination of those
deficiencies), the Court is not in a position to accept the Committee’s broad statements as
properly descriptive of the law, or to consider the underlying cases as relevant to the controversy
here.
In the first category are the cases relied upon by the Committee involving erroneous
filings by the secured party itself—the Fourth Circuit’s decision in Kitchin Equipment;163 the
Ninth Circuit BAP’s and Ninth Circuit’s decisions in Pacific Trencher;164 the bankruptcy court
decisions in Silvernail,165 York Chemical,166 and Hampton;167 and the decision of the Kansas
Court of Appeals in J.I. Case.168 In each of these, under the UCC’s pre-2001 statutory scheme,
the secured party had itself signed the termination statement and caused it to be filed.169
162 	See n.160 above.
163 	See n.9 above.
164 	See n.132 above.
165 	See n.74 above.
166 	Rock Hill National Bank v. York Chemical Industries, Inc. (In re York Chemical Industries, Inc.), 30 B.R.
583 (Bankr. D. S.C. 1983) (“York Chemical”).
167 	In re Hampton, 2001 Bankr. LEXIS 2060, 2001 WL 1860362 (Bankr. M.D. Ga. Jan. 2, 2001)
(“Hampton”).
168 	J.I. Case Credit Corp. v. Foos, 11 Kan. App. 2d 185, 717 P.2d 1064 (1986) (“J.I. Case”).
169 	See Kitchin Equipment, 960 F.2d at 1244-46; Pacific Trencher, 27 B.R. at 168; Silvernail, 142 B.R. at 988-
90; York Chemical, 30 B.R. at 585; Hampton, 2001 Bankr. LEXIS 2060, at *2 & n.1, 2001 WL 1860362, at
*1 & n.1; J.I. Case, 11 Kan. App. 2d at 186, 717 P.2d at 1065-66.
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In the second category—cases that predated the 2001 amendments—are each of the
above as well. Because they were decided under the pre-2001 statutory scheme (and also
because the termination statements were filed by the secured parties themselves), none had
occasion to consider the authorization requirement.
In the third category are Roswell and S.J. Cox.170 The events they addressed took place
after the 2001 amendments to the UCC, but they quoted language from the earlier cases in the
first two categories without addressing the changes in the UCC. Though they involved the filing
of termination statements by agents, they decided those cases as if they were governed by the
former statutory scheme, and this Court respectfully must decline to follow them.
S.J. Cox, a 2009 bankruptcy court decision, involved an adversary proceeding for
wrongful termination of an initial financing statement, under the post-2001 statutory scheme.
Here, unlike the earlier cases discussed above (where the termination statement had been filed by
the secured party), a termination statement potentially ending an entity’s security interest in the
debtor’s farm equipment was filed by someone else—by an employee of “Kentucky Bank”
(previously known as “Peoples Bank of Sandy Hook, Kentucky”) with respect to the plaintiff
Peoples Bank of Kentucky, Inc., a different entity.171 The plaintiff Peoples Bank of Kentucky
sued Kentucky Bank for wrongfully terminating the former’s initial financing statement, and the
S.J. Cox court ruled in the plaintiff’s favor172—seemingly accepting defendant Kentucky Bank’s
first argument that “priority among the Movants must be determined before its liability can be
170 	See n.74 above.
171 	2009 Bankr. LEXIS 4573, at *1-2, 2009 WL 939573, at *1.
172 	2009 Bankr. LEXIS 4573, at *15, 2009 WL 939573, at *6.
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established,” but then rejecting Kentucky Bank’s second argument that Peoples Bank’s first
priority status was unaffected by the supposed “‘release’ of the [initial] Financing Statement.”173
This Court agrees with the S.J. Cox court that the filing of a termination statement there
was unauthorized. And this Court also agrees that priority among the respective secured
creditors had to be determined before deciding whether one of them was civilly liable for
wrongful termination of another’s security interest—and thus that it was necessary to determine
whether the plaintiff Peoples Bank’s first priority interest was affected at all. But this Court
cannot agree with the remainder of the S.J. Cox conclusions, and especially its analysis.
Puzzlingly, the S.J. Cox court, when first considering the “Effect of termination of the
Financing Statement,”174 quoted and considered the Kentucky equivalents of UCC §§ 9-
509(a)175 (a provision that addresses who may file an initial financing statement, an amendment
that adds collateral, and an amendment that adds a debtor, but which does not involve
terminations of initial financing statements at all); 9-511 (addressing who is a secured party of
record); and 9-513 (addressing a secured party’s duty to cause a termination statement to be filed
after no obligations from the debtor to the secured party remain)—and those alone. Oddly, the
S.J. Cox court never mentioned the Kentucky equivalents of UCC §§ 9-509(d) and 9-510(a),176
quoted and addressed at length starting at page 26 above, two of the three provisions that address
the requirement for authorization for financing statement amendments177—and that provide,
expressly, that amendments may be filed only when the secured party of record authorizes them,
173 	2009 Bankr. LEXIS 4573, at *13-14, 2009 WL 939573, at *5 (quotation marks surrounding “release” in
original).
174 	2009 Bankr. LEXIS 4573, at *8, 2009 WL 939573 at *3.
175 	Ky. Rev. Stat. § 355.9-509(1).
176 	Ky. Rev. Stat. §§ 355.9-509(4) and 355.9-510, respectively.
177 	It did quote UCC § 9-513, Ky. Rev. Stat. § 355.9-513, in part, including quotation of UCC § 9-513(d), Ky.
Rev. Stat. § 355.9-513(4), but failed to take note of the clause at the beginning of that subsection, “[e]xcept
as otherwise provided in KRS 355.9-510 [UCC§ 9-510].”
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and that amendments are effective only to the extent that they have been filed by a person who
has been so authorized.
Additionally (perhaps by reason of its failure to consider UCC §§ 9-509(d) and 9-510),
the S.J. Cox court incorrectly stated that “these provisions” (presumably the provisions of the
UCC that it had quoted) “make it clear that the only party authorized to file a termination
statement is the secured party of record.”178 And the S.J. Cox court went on with a broad
statement, in reliance on Silvernail and Kitchin, that “[t]he termination of a financing statement,
even if mistaken, releases the secured creditor’s lien against the debtor’s property”179—without
noting that each of Silvernail and Kitchin involved a termination by the secured creditor itself
(and not a third party); that the UCC had been amended in 2001 after Silvernail and Kitchin; and
that UCC §§ 9-509(d) and 9-510 made authorization a sine qua non to a valid termination. The
S.J. Cox court proceeded to reach the conclusions it did by reliance on the very different
Silvernail and Kitchin, including Kitchin’s broad (and now overly broad) statement that a
termination statement’s “effect on a security interest is dramatic and final.”
The S.J. Cox court concluded that a cause of action had been established for unauthorized
termination of a UCC-1 when, because the termination was unauthorized, it should have held
that there was no termination at all.180
Puzzlingly, the Committee here contends that S.J. Cox is “on point” and relies on it.181
But for the reasons stated above, the Court does not believe that it should do so.
178 	S.J. Cox, 2009 Bankr. LEXIS 4573, at *10-11, 2009 WL 939573, at *4.
179 	2009 Bankr. LEXIS 4573, at *11, 2009 WL 939573 at *4.
180 	Likewise, a UCC treatise has observed that S.J. Cox was incorrectly decided. See Hawkland § 9-509:4
[Rev] n0.50 (“court seems to hold, incorrectly, that the filing actually terminated the financing statement”).
181 	See Comm. Partial SJ Reply 17-18.
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Roswell, in contrast, plainly reached the right bottom line, and indeed was affirmed (on
the first of its two rationales) by the Second Circuit.182 But in articulating a second rationale for
its decision, the Roswell court expressed thoughts with which this Court, once again, cannot
agree.
Roswell involved an action by several secured lenders, for whom Roswell Capital
Partners was collateral agent (the “Roswell Lenders”), to foreclose on the assets of their
borrower Alternative Construction Technology, Inc. (referred to in the decision by the acronym
“ACT”). The Roswell Lenders’ effort to foreclose was opposed not by their borrower ACT, but
rather by assertedly secured competing lenders—an individual, James Beshara, and his sole
proprietorship, JMB Associates (referred to in the decision by the acronym “JMB,” but here, for
greater clarity, as the “JMB Lenders”).183
The JMB Lenders extended secured credit to ACT, with respect to which they had duly
filed UCC-1s, but thereafter (in June 2006) they exercised a contractual right to convert their
debt into equity, and took equity in their borrower ACT instead.184 After the value of the equity
had gone down, in July 2008, the JMB Lenders exercised another contractual right they had, to
return their shares and reinstate the debt obligation. But in the meantime (in July 2007), one or
more UCC-3s were filed by ACT185 to terminate the JMB Lenders’ earlier security interest, and
the Roswell Lenders extended their secured credit and filed UCC-1s after the filing of those
UCC-3s.
182 	Though the second rationale was addressed by each side in its briefing to the Second Circuit, the Circuit did
not speak to the second rationale, upon which the Committee here relies.
183 	Roswell, 2010 U.S. Dist. LEXIS 90695, at *1, 2010 WL 3452378, at *1.
184 	2010 U.S. Dist. LEXIS 90695, at *5-8, 2010 WL 3452378, at *2-3.
185 	2010 U.S. Dist. LEXIS 90695, at *21, 2010 WL 3452378, at *7.
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The Roswell court ruled that the equity conversion extinguished the JMB Lenders’
security interest, and with it, the JMB Lenders’ lien.186 When the JMB Lenders’ debt was
extinguished after the conversion to equity, there was no longer an obligation to secure. And a
“security interest [could not] exist without a debt.”187 That conclusion was affirmed by a
summary order of the Second Circuit, which stated, in its succinct decision, that “because the
equity conversion extinguished the debt obligation, and a security interest cannot survive the
debt's extinguishment, when JMB converted its debt to equity shares in ACT, any security
interest it had in the collateral was also extinguished.”188
But in a portion of its decision that was not endorsed by the Circuit on appeal, the
Roswell court went on to set forth a second rationale for its conclusion, which was unnecessary
to support Roswell’s plainly correct result.189 The Committee relies on that second rationale.
But that rationale included several elements with which this Court cannot agree.
In the second part of its legal analysis, captioned “JMB’s UCC-1 Financing Statement is
Ineffective,” the Roswell court considered an additional contention by the Roswell Lenders: that
ACT’s filing of a UCC-3 termination statement had canceled the JMB Lenders’ previously filed
UCC-1s. Deciding the matter with reference to the Florida UCC (which conformed to the UCC
186 	2010 U.S. Dist. LEXIS 90695, at *18-19, 2010 WL 3452378, at *6.
187 	2010 U.S. Dist. LEXIS 90695, at *18, 2010 WL 3452378, at *6.
188 	Roswell Capital Partners LLC. v. Beshara, 436 Fed. Appx. 34, 35-36 (2d Cir. 2011).
189 	The discussion of the second rationale began “[w]hile JMB’s failure to show that it had any enforceable
security interest in the Collateral at the time the Plaintiffs filed their UCC-1 financing statements in July
2007 permits summary judgment to be awarded to the Plaintiffs, the parties dispute as well the validity and
effect of ACT’s filing … of the UCC-3.” Roswell, 2010 U.S. Dist. LEXIS 90695, at *21, 2010 WL
3452378, at *7. That would at least arguably suggest that the second rationale was dictum. See Willis
Management (Vermont), Ltd. v. United States, 652 F.3d 236, 243 (2d Cir. 2011) (a statement in a footnote
in an earlier Second Circuit opinion “was not essential to the Court’s holding because it was offered in the
alternative and therefore it is dictum that is not binding on us”).
Roswell’s second rationale has been described in a UCC treatise as “troubling dictum.” Hawkland
§ 9-510:2 [Rev] at n.1.50. But the Court does not need to decide whether or not it was dictum, because
district court decisions are not binding on bankruptcy courts, except with respect to any district court
mandate pursuant to an appeal.
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generally), the Roswell court rejected the JMB Lenders’ contention “that the termination
statement was ineffective because [the JMB Lenders] did not authorize ACT to file it.”190 The
Roswell court stated, in that connection:
Even if the termination statement was not authorized by
JMB, it nonetheless extinguished any perfected security
interest JMB had in the Collateral.191
And it declined to consider a factual argument with respect to whether authorization was lacking,
stating that:
This argument need not be considered given that even if the
UCC-3 termination statement was unauthorized, it
nonetheless extinguished any perfected security interest
JMB held in the Collateral after the conversion.192
Unlike the court in S.J. Cox, the Roswell court made reference to the proper statutory
provisions, including the Florida equivalents of UCC §§ 9-509 and 9-510,193 discussed at length
above. But it then proceeded with a caselaw-driven analysis without reference to what textual
analysis of those two provisions (along with UCC § 9-513, which the Roswell court did not
address) would require. In that connection, it relied on S.J. Cox (which had been issued in
reliance on the wrong provisions of the UCC, and which had ignored UCC §§ 9-509(d) and
9-510), and on Kitchin Equipment, Silvernail and Pacific Trencher (each of which, as noted
above, involved filings by the secured party itself, and was decided under the pre-2001 statutory
scheme).
More specifically, the Roswell court repeated S.J. Cox’s statements (each based on pre-
2001 law) that “[t]he termination of a financing statement, even if mistaken, releases the secured
190 	Roswell, 2010 U.S. Dist. LEXIS 90695, at *21, 2010 WL 3452378, at *7.
191 	2010 U.S. Dist. LEXIS 90695, at *25, 2010 WL 3452378, at *8.
192 	2010 U.S. Dist. LEXIS 90695, at *25 n.15, 2010 WL 3452378, at *8 n.15.
193 	Fla. Stat. §§ 679.509 and 679.510, respectively.
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creditor’s lien against the debtor’s property,”194 and that a “termination statement’s effect on a
security interest is dramatic and final.” And it went on to say that:
This clear rule accords with the policy of the UCC.
Potential creditors must be able to rely on termination
statements filed in the public record, even if they were filed
in error or without authorization.195
It thereafter continued with the statements quoted above to the effect that even if the UCC-3
termination statement was unauthorized, it nonetheless extinguished any perfected security
interest the JMB Lenders had in their collateral.
Like others,196 this Court is unable to agree. These conclusions cannot be squared with
the provisions of UCC §§ 9-509(d), 9-510 and 9-513(d), and UCC § 9-502’s Official Comment
3, which provides that a “filing has legal effect only to the extent it is authorized.”
The Roswell court further stated that “[t]he UCC therefore places the burden of
monitoring for potentially erroneous UCC–3 filings on existing creditors, who are aware of the
true state of affairs as to their security interests, rather than potential creditors who will not be in
a position know whether a termination statement was authorized or not.”197 And it rejected, in a
footnote, the JMB Lenders’ argument that because the UCC adopted “notice filing”—a system
contemplating further inquiry to determine the scope of a security agreement—subsequent
194 	2010 U.S. Dist. LEXIS 90695, at *22-23, 2010 WL 3452378, at *7 (emphasis in original).
195 	Id. (emphasis added).
196 	See Negus-Sons-BAP, 460 B.R. 754, 757 n.10 (“We are also hesitant to endorse the holding in [Roswell],
relied on by the Trustee, that a termination statement filed by a third party is effective regardless of whether
it was authorized. … Roswell’s holding appears to be contrary to the plain language of the Uniform
Commercial Code.”); AEG Liquidation Trust v. Toobro N.Y. LLC, 32 Misc. 3d 1202(A), 2011 N.Y. Misc.
LEXIS 3041, at *27 n.1, 2011 WL 2535035, at *9 n.1 (Sup. Ct. N.Y. Co. Commer. Div. Jun. 24, 2011)
(“Toobro”) (“For these reasons [which are discussed beginning at page 70 below], the court declines to
follow the SDNY Court’s analysis in Roswell Capital.”); Hawkland § 9-510:2 [Rev] at n.1.50 (describing
Roswell conclusions as “troubling,” though regarding them as dictum).
197 	2010 U.S. Dist. LEXIS 90695, at *23-24, 2010 WL 3452378, at *7.
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lenders like the Roswell Lenders would have to further investigate the filing of the UCC-3
termination statement to determine the true status of the JMB Lenders’ security interests.
However in this respect also, the Court cannot agree. “Notice filing” is indeed the regime
under the UCC, as recognized in the UCC’s Official Comments,198 and less directly by the
Second Circuit in its Credit Bancorp decision.199 As Official Comment 2 makes clear,
documents of record may be insufficient to ascertain “the complete state of affairs,” but UCC
Article 9 only requires information sufficient to engage in further inquiry. When the
authorization underlying a previously filed termination statement matters to a subsequent lender
(as it usually will), the lender can simply include any necessary further inquiry as part of its due
diligence.200
198 	As stated in Official Comment 2 to UCC § 9-502, which addresses the sufficiency of a financing statement:
This section adopts the system of “notice filing.” …
The notice itself indicates merely that a person may have a security
interest in the collateral indicated. Further inquiry from the parties
concerned will be necessary to disclose the complete state of affairs.
199 	SEC v. Credit Bancorp, Ltd., 386 F.3d 438, 454 (2d Cir. 2004) (“Credit Bancorp”).
200 	Roswell was cited approvingly with respect to “notice filing” in a recent North Carolina case, Ward v. Bank
of Granite (In re Hickory Printing Group, Inc., 479 B.R. 388 (Bankr. W.D. N.C. 2012) (“Hickory
Printing”). This Court would not differ with the Hickory Printing result that is most relevant here (i.e., that
the filing of a UCC-3 by the secured lender’s employee was authorized, and thus that it terminated the
bank’s security interest in debtor collateral) since the Hickory Printing court considered UCC §§ 9-509(d),
9-510(a), and 9-513(d) as part of its analysis; the UCC-3 was filed by an employee of the secured creditor
itself; and the secured creditor admitted that the UCC-3 filing was authorized. See 479 B.R. at 396-97
(bank’s employee “filed hundreds of termination statements, followed her normal (and apparently
approved) procedures when filing the Termination Statement, and intended to terminate the Original
Financing Statement”; “by the summary judgment hearing, the Bank was willing to concede that, while it
was a mistake, the Termination Statement was authorized”). However, the Court cannot concur with
Hickory Printing’s endorsement of Roswell’s “notice filing” analysis, see id. at 398, and its endorsement of
Roswell’s statements as to burdens on the part of secured creditors to maintain their perfected liens, see id.
at 404, for the reasons stated above. Nor can the Court agree with the overly broad language in Hickory
Printing based on Kitchin Equipment, Pacific Trencher, York Chemical, and Silvernail.
In cases like Hickory Printing (but unlike the one here) where the UCC-3 is filed by the secured party
itself, and not by a debtor or other third party (and thus where authorization is not at issue), pre-2001 cases
may still have vitality. But they do not support the “notice filing” conclusions the Roswell court reached,
and the Hickory Printing court endorsed.
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Then, the Roswell court believed, erroneously in this Court’s view, that notice filing
applies only to UCC-1s. Rejecting the JMB Lenders’ contentions (based on the UCC’s Official
Comments and Credit Bancorp), that because the UCC had adopted notice filing, the Roswell
Lenders were required to further investigate the filing of the UCC-3, the Roswell court stated:
The problem with JMB's argument is that Credit Bancorp
and the Official Comments refer only to “financing
statements,” and not to termination statements.201
But the Court believes the Roswell conclusion that flowed from that to be incorrect. As noted
above,202 a “termination statement ” is one kind of a “financing statement.” The term “financing
statement,” as defined in UCC § 9-102(39), includes not just an “initial financing statement”203
(which may be what the Roswell court had in mind), but also “any filed record relating to the
initial financing statement.”
Finally, if there were a duty on the part of secured lenders to monitor their UCC filings to
protect them from improper termination, one must ask what would a secured lender do if it
discovered anything? By then, under the Roswell rationale, termination of the secured lender’s
security interest—which by Roswell’s reasoning would have taken place even if unauthorized—
would already have transpired.204
201 	2010 U.S. Dist. LEXIS 90695, at *24 n.14, 2010 WL 3452378, at *7 n.14.
202 	See page 28 & n.72 above.
203 	Emphasis added.
204 	The Roswell court seemed to believe that a provision of the UCC imposing civil liability for unauthorized
filings, see UCC § 9-625, Fla. Stat. § 679.625, would provide a satisfactory remedy for unauthorized
termination. See 2010 U.S. Dist. LEXIS 90695, at *22, 2010 WL 3452378, at *7. This is in substance a
policy view rather than an element of statutory interpretation or application, but to the extent it is relevant,
the Court is reluctant to agree with it. More than a few of the disputes in federal district courts and the
commercial divisions of state courts, and a huge number of the disputes in bankruptcy courts, are disputes
between creditors jousting for priority. Each of Roswell, Toobro, Negus-Sons and this case is a good
example. In many cases, the debtor or other unauthorized filer would be unable to make the secured lender
whole for the resulting damages if an unauthorized filing were deemed to be effective, leaving the secured
lender without an effective remedy. Each of Roswell, Negus-Sons and this case is a good example of that
as well.
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The concerns this Court voiced with respect to Roswell’s second rationale were shared in
Toobro. In relevant part, in the context of a New York CPLR 3211 motion to dismiss, Toobro
too involved a need to determine the relative priority of two competing secured lenders, there
American Equities Group Inc. (referred to in the decision as “AEG,” but referred to here, for
greater clarity, as “American Equities”) and Signature Bank—each of which had extended
credit to Ahava Diary Products Corp. (“Ahava Dairy”), initially in 1996 (under a secured
factoring agreement) in the case of American Equities,205 and in 2005 in the case of Signature
Bank.206 Each lender had duly filed UCC-1s. But in between those two dates, in 2002, an
“unknown party,”207 allegedly without authorization and knowledge of American Equities, had
filed UCC-3s purporting to terminate the first lender American Equities’ liens. The Toobro court
was required to determine the lenders’ respective priorities.
The Toobro court did so by reference to UCC §§ 9-509(d) and 9-510.208 It ruled, based
on the allegation that “AEG as the secured party did not authorize the filing of the termination
statements,”209 that “the termination statements … were ineffective under Section 9-510.”210
Thus the financing statements to which they related remained in effect.211
The Toobro court then addressed Roswell, in a lengthy footnote, disagreeing with Roswell
for much the same reasons this Court has done so.212 The Toobro court noted that the cases
205 	2011 N.Y. Misc. LEXIS 3041, at *3-4, 2011 WL 2535035, at *1.
206 	2011 N.Y. Misc. LEXIS 3041, at *4, 2011 WL 2535035, at *3.
207 	2011 N.Y. Misc. LEXIS 3041, at *5, 2011 WL 2535035, at *2.
208 	2011 N.Y. Misc. LEXIS 3041, at *19-27, 2011 WL 2535035, at *8-9.
209 	2011 N.Y. Misc. LEXIS 3041, at *19-27, 2011 WL 2535035, at *9.
210 	2011 N.Y. Misc. LEXIS 3041, at *24, 2011 WL 2535035, at *9.
211 	2011 N.Y. Misc. LEXIS 3041, at *24, 2011 WL 2535035, at *9.
212 	2011 N.Y. Misc. LEXIS 3041, at *25 n.1, 2011 WL 2535035, at *9 n.1.
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Roswell cited in support of its analysis were interpreting earlier versions of Article 9.213 It also
differed with Roswell’s “notice filing” analysis, for the same reasons this Court does.214 It then
closed this element of its discussion by saying that for these reasons, it “declines to follow” the
Roswell analysis.215
* * *
For these reasons, the Court is unable to agree that there is a general principle of law that
“UCC Filings that Mistakenly Terminate a Security Interest Are Legally Effective.” The
question is rather whether they have been authorized. That issue must be addressed in the
manner this Court addressed it above. For the reasons there set forth, the requisite authority was
lacking.216
213 	Id.
214 	The Toobro court stated, in this connection:
In Roswell Capital, the SDNY court considered but distinguished the
“notice filing” comment of UCC § 9–502 stating that it “refer[s] only to
financing statements,’ and not to termination statements.” See 2010
LEXIS 90695 *24, n. 14. This distinction is inconsistent with the
definitions of “financing statement” and “termination statement” under
Article 9. See UCC §§ 9–102(39), (79). … Since a termination
statement is a record “relating to the initial financing statement,” it is
part of a “financing statement” as this term is defined by the UCC. See
UCC § 9–102(39). Consequently, the “notice filing” comment of UCC
§ 9–502 applies to termination statements.
Id.
215 	Id. Toobro’s holding was approved in a UCC treatise. See Hawkland § 9-510:2 at n.1.50 (“court correctly
held that termination statement filed by a person not authorized to do so by secured party was ineffective to
terminate financing statement even though it might mislead searchers; court declined to follow troubling
dictum to the contrary in [Roswell]”).
216 	The Court need not lengthen this decision further by specifically addressing any of the other contentions
raised by the Committee on these motions. The Court has canvassed them and satisfied itself that no
material points other than those it has specifically addressed were raised and require discussion. To the
extent those points were not expressly addressed in this decision, they must be rejected.
Similarly, in light of its conclusions, the Court does not need to address JPMorgan’s constructive trust
argument, or any of the other bases upon which JPMorgan asserted that it should prevail.
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IV.
Certification to Circuit
On rare occasions, a direct appeal from a bankruptcy court to the court of appeals makes
sense. In the Court’s view, this is one of those occasions where the Circuit might want to
consider that as an option.
In that connection, 28 U.S.C. § 158 grants a court of appeals jurisdiction to hear appeals
from final judgments of the bankruptcy court under certain circumstances. First the bankruptcy
court (acting on its own motion or on the request of a party to the judgment), or all the appellants
and appellees acting jointly, must certify that—
(i) the judgment, order, or decree involves a
question of law as to which there is no controlling
decision of the court of appeals for the circuit or of
the Supreme Court of the United States, or involves
a matter of public importance;
(ii) the judgment, order, or decree involves a
question of law requiring resolution of conflicting
decisions; or
(iii) an immediate appeal from the judgment,
order, or decree may materially advance the
progress of the case or proceeding in which the
appeal is taken….217
Then the court of appeals decides whether it wishes to hear the direct appeal.218
In this case, the Court considers each of the three bases for a certification to be present.
With respect to the first prong, the decision here is one of law based on undisputed facts,
presented to the Court on cross motions for summary judgment, as to which there is no
217 	28 U.S.C. § 158(d).
218 	Id.; see also In re General Motors Corp., 409 B.R. 24, 27 (Bankr. S.D.N.Y. 2009) (the “Sale Appeal
Certification Decision”) (“The Circuit does not have to take the appeal, however, and can decide whether
or not to do so in the exercise of its discretion.”).
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controlling decision by the Second Circuit (or any Circuit), the Delaware Supreme Court, the
New York Court of Appeals, or the highest court of any other state. Though the size of the
amount in controversy here, and its effect upon thousands of GM creditors, may be regarded as
personal to them, the underlying legal issues are important, as are their potential effect, going
forward, on secured lending.
With respect to the second prong, available authorities, while helpful to a point, came
nowhere close to addressing a factual situation of this nature. The issues were complicated by
broad language in the caselaw, much of which, in this Court’s view, should no longer be
regarded as having validity in cases involving UCC filings by an entity other than the secured
party. Though the Court believes that the authorities may be harmonized, in part, and many may
be distinguished on their facts, broad language in many of those cases required resolution of
conflicting decisions. The Court has declined to follow the reasoning of the second rationale of
Roswell, which, if it were regarded as anything other than dictum, would result in a conflict
between lower courts in the Second Circuit.
With respect to the third prong, the Court believes that an immediate appeal from the
judgment in this adversary proceeding is likely to advance the progress of the GM case. The
outcome of this controversy may have a material impact on unsecured creditor distributions, and
will obviously have a material effect on secured creditor distributions. A second level of appeal
(which would otherwise be likely, given the stakes of the controversy) would have a foreseeable
adverse effect on the timing and finality of creditor distributions.219
219 	In one of its earlier decisions in the GM case, see the Sale Appeal Certification Decision, 409 B.R. at 27-
29, this Court denied certification to the Circuit of its order approving GM’s section 363 sale after this
Court’s decision in In re General Motors Corp., 407 B.R. 463 (Bankr. S.D.N.Y. 2009) (the “363 Sale
Decision”), stay pending appeal denied, 2009 WL 2033079 (S.D.N.Y. 2009) (Kaplan, J.), appeal dismissed
and aff'd, 428 B.R. 43 (S.D.N.Y. 2010) (Buchwald, J.) and 430 B.R. 65 (S.D.N.Y. 2010) (Sweet, J.),
appeal dismissed, No. 10–4882–bk (2d Cir. July 28, 2011)—even though, as the subsequent history of the
363 Sale Decision indicates, it ultimately did go up to the Circuit.
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Conclusion
The Court concludes, based on the undisputed facts and under the applicable law, that
JPMorgan did not authorize the termination of the UCC-1 with respect to the Term Loan, and
that anything JPMorgan said or did in connection with the payoff of the Synthetic Lease was not
effective in bringing the UCC-1 securing the Term Loan to come to an end.
JPMorgan’s motion for summary judgment is granted. The Committee’s motion for
partial summary judgment is denied. Pursuant to Fed. R. Civ. P. 58 (made applicable to this
adversary proceeding by Fed. R. Bankr. P. 7058), the Court is today entering a separate
standalone judgment consistent with its first ruling, denying the relief sought by the Committee
in its complaint. The Court is also today entering an order with respect to the underlying cross-
motions, which includes a decretal paragraph, consistent with the Court’s second ruling, denying
the Committee’s motion for partial summary judgment.
The Court is certifying its judgment for direct appeal to the Second Circuit.
Dated: New York, New York 	s/Robert E. Gerber
March 1, 2013 	United States Bankruptcy Judge
This Court did so because while GM’s well-being and that of its suppliers, as a business matter, had
substantial public importance, the legal issues were not particularly debatable. The 363 Sale Decision was
a straightforward application of controlling authority in the Second Circuit (if not also elsewhere)—
including five published decisions of the Second Circuit on the 363 Sale issue, and the Circuit’s oral
affirmance of Chrysler (on a direct appeal) on the successor liability issue. See Sale Appeal Certification
Decision, 409 B.R. at 28-29; 363 Sale Decision, 407 B.R. at 489 & n.39.
Here, by contrast, the Court had much less in the way of available caselaw—and none from the Circuit—
with which to work. Also, though the Court is mindful of its earlier statement in the Sale Appeal
Certification Decision that appellate courts “review judgments, not statements in opinions,” 409 B.R. at 28,
and its view that this should be taken into account when deciding whether the necessary conflict exists to
warrant certification, here both sides, and the Court, were required to work with statements in the
conflicting authority for lack of any better alternative.
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Appendix A

09-00504-reg 	Doc 27-24 	Filed 07/01/10 	Entered 07/01/10 13:00:37 	Exhibit X
Pg 2 of 2
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