“No Implied Release without Express Words”: Sixth Circuit Clarifies UCC § 9-315 and the Buyer-in-Ordinary-Course Defense in
HBKY, LLC v. Elk River Export, LLC

I. Introduction

HBKY, LLC v. Elk River Export, LLC, No. 24-5862 (6th Cir. Aug. 5, 2025) presents a modern collision between Article 9 secured-credit law and the timber industry. Two outsiders to the original loan—Elk River Export, a timber cutter, and its president Robin Wilson—found themselves adverse to a lender’s special-purpose vehicle, HBKY, over who owns thousands of acres of standing timber in Kentucky. The dispute required the court to decide:

• Whether a series of loan documents impliedly authorized Kingdom Energy Resources, the debtor, to dispose of timber free of HBKY’s perfected security interest.
• Whether Elk River fell within the Uniform Commercial Code’s coveted status of “buyer in the ordinary course of business” (“BIOCOB”) and therefore took the timber lien-free.

The Sixth Circuit affirmed summary judgment for HBKY, crystallising two legal propositions of broad significance:

1. Express-Authorization Rule. Under revised UCC § 9-315(1)(a) (adopted in Kentucky), a secured party’s authorization must explicitly state that a sale is “free of” the security interest; mere permission to sell or knowledge that sales will occur is insufficient.
2. Evidentiary Burden on BIOCOB. At summary judgment, the purported buyer bears the burden to produce concrete evidence that the seller is “in the business of selling goods of that kind” and that the sale occurred in the “ordinary course.” A single or sporadic sale will not do.

II. Summary of the Judgment

Judge Nalbandian, writing for a quorum of the panel, held:

• The mortgage’s clause that any “sale … shall not impair” HBKY’s lien negated any inference that HBKY authorized lien-free timber sales. The Security Agreement, Note Purchase Agreement, and Royalty Assignment—although referencing timber sales—did not contain language releasing HBKY’s interest.
• Pre-revision Kentucky cases (e.g., Universal C.I.T. and Trimble) allowing implied releases were distinguished both on their contract language and because the statutory text was amended in 2001 to require express authorization “free of the security interest.”
• Elk River’s BIOCOB defense failed because it introduced virtually no record evidence that Kingdom was “in the business of selling timber” or that the transaction conformed with ordinary-course practices. One or two isolated contracts were insufficient.

Accordingly, HBKY’s first-priority, perfected security interest in the timber survived, and the district court’s judgment was affirmed.

III. Analysis

A. Precedents Cited and Their Influence

• Universal C.I.T. Credit Corp. v. Middlesboro Motor Sales, 424 S.W.2d 409 (Ky. Ct. App. 1968).
  • Held, under pre-2001 UCC, that authorization to sell goods in ordinary course could include implicit release.
  • Sixth Circuit declined to follow because the modern statute now demands authorization free of the lien, and—unlike HBKY’s mortgage—no “anti-impairment” clause existed in Universal C.I.T.
• Trimble v. North Ridge Farms, Inc., 700 S.W.2d 396 (Ky. 1985).
  • Recognised implied authorization where collateral could be “sold, exchanged or otherwise transferred.”
  • Distinguished for same reasons; importantly, the Sixth Circuit’s footnote questions the continuing vitality of Trimble after the 2001 UCC revisions.
• In re Bluegrass Ford-Mercury, 942 F.2d 381 (6th Cir. 1991).
  • Quoted for the fundamental principle that sale does not cut off a lien absent secured-party authorization.
• UCC Commentary & Post-2001 Text.
  • The court leaned heavily on Official Comment 2 to § 9-315: the authorization must be “free of” the security interest.

B. Core Legal Reasoning

1. Contract Integration. All documents executed contemporaneously with the $22 million loan formed a single transaction; Kentucky law requires reading them together. The mortgage’s unequivocal anti-impairment language controlled.
2. Statutory Overlay. Revised § 9-315(1)(a) makes the “free of” clause explicit, curtailing courts’ ability to infer releases. The Sixth Circuit uses this to narrow earlier Kentucky precedent.
3. Text v. Context. While context showed HBKY knew sales might happen, the court privileged the clear textual statement that liens “shall not be impaired.”
4. Summary-Judgment Methodology. Because BIOCOB is an affirmative defense, Elk River had the burden; HBKY could merely point to the lack of specific evidence. Elk River’s failure to marshal affidavits, business records or deposition excerpts was fatal.

C. Likely Impact

The decision’s ripple effects extend beyond timber:

• Heightened Drafting Vigilance. Secured lenders will likely replicate HBKY’s belt-and-suspenders language. Debtors and trade partners must negotiate explicit release provisions if they expect to convey assets free of liens.
• Narrowing of Kentucky’s Implied-Release Doctrine. Although not formally overruled, Trimble and Universal C.I.T. are effectively limited to pre-2001 fact patterns with silent or ambiguous contracts.
• Burden-Shifting Clarified. Buyers invoking BIOCOB must be ready, at the summary-judgment stage, with detailed evidence of seller’s ordinary-course business; one contract or “everybody knew” arguments will not suffice.
• Guidance for Multi-Document Transactions. The ruling underscores that a single anti-impairment clause can trump contrary inferences from other contemporaneous documents.

IV. Complex Concepts Simplified

• Security Interest & Perfection. A security interest is a lender’s legal right in collateral; “perfection” (e.g., by public filing) makes that right effective against third parties.
• Authorized Disposition. The UCC allows collateral to be sold free of a lien only if the secured party expressly says so. After 2001 amendments, the phrase “free of the security interest” must be explicit.
• Buyer in the Ordinary Course of Business (BIOCOB). A purchaser who buys goods (1) in good faith, (2) without knowledge of a violation of another’s rights, and (3) from a seller in the business of selling goods of that kind, takes the goods free of liens created by that seller.
• Constructive Severance of Timber. Kentucky treats standing timber as personal property (“goods”) once it is sold for prompt cutting, even though trees are still rooted. The term “immediate” is contextual, not literal.

V. Conclusion

HBKY v. Elk River is significant for two intertwined reasons: it cements, within the Sixth Circuit, the post-2001 UCC rule that only an express release will divest a perfected security interest upon sale, and it clarifies that the burden to prove BIOCOB status remains squarely on the buyer—mere assumptions or isolated transactions do not suffice. For secured lenders, the decision validates the protective power of robust anti-impairment clauses. For commercial actors purchasing collateral‐laden assets, it is a cautionary tale: demand explicit lien releases or face the risk of buying encumbered goods, no matter how “ordinary” the deal seems.