SHELBY COUNTY STATE BANK, AN ILLINOIS BANKING CORPORATION, Appellant, v. VAN DIEST SUPPLY COMPANY, Appellee., 303 F.3d 832

Summary

The supplier extended nearly $ 3 million in credit pursuant to its security agreement to the debtor. The controlling agreement contained an after-acquired clause. The bank extended over $ 1 million under a later recorded security agreement. Both were governed by Article 9 of the Uniform Commercial Code, adopted by Iowa Code §§ 554.9101-554.9507 (1999). Both creditors claimed the limited inventory of the debtor was secured by their respective agreements. The supplier claimed its collateral included all inventory, whether provided by the supplier or not. The bank disagreed. The bankruptcy court found that the supplier's after-acquired clause was ambiguous, because of an unclear double modifier, and construed the agreement in favor of the bank. The court of appeals agreed with the bankruptcy court's interpretation. The security agreement drafted by the supplier should be construed against it under Iowa law. The agreement as written and supplemented by a letter, did not give notice to ...