Stoumbos v. Kilimnik
United States Court of Appeals for the Ninth Circuit
988 F.2d 949 (1993)
When American Alloy Metals (AAM) bought a business from Walter Kilimnik (defendant), Kilimnik kept a security interest in certain business components; despite varied wording across documents, the collateral was described as inventory and equipment, and one clause specifically limited it to "inventory ... on hand at May 1, 1982," even though the agreement also referenced after-acquired collateral. When AAM defaulted in 1985, Kilimnik seized all inventory and equipment then in AAM's possession, including items acquired after May 1, 1982. AAM's bankruptcy trustee, Zachary Stoumbos (plaintiff), sued to recover the after-acquired items; the bankruptcy court dismissed the case and the district court affirmed, prompting Stoumbos's further appeal (with Kilimnik cross-appealing).
Whether, under the majority view in commercial law, a security agreement that does not broadly grant an interest in all inventory will be interpreted to automatically grant an interest in after-acquired inventory.