Hastings State Bank v. Stalnaker (In Re EDM Corp.)
53 Bankr. Ct. Dec. (CRR) 36, 2010 Bankr. LEXIS 1373, 431 B.R. 459 (2010)
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Rule of Law:
For a secured creditor to properly perfect its lien against a registered organizational debtor under Revised Article 9 of the UCC, the financing statement must precisely list the debtor's name as it appears on the public record of its jurisdiction of organization; adding a trade name or "doing business as" (d/b/a) designation will render the filing seriously misleading if it prevents a standard search using the correct legal name from disclosing the statement.
Facts:
- EDM Corporation was incorporated in 1991 in Nebraska, and its official name of record at the Nebraska Secretary of State’s office is "EDM Corporation."
- EDM Corporation routinely did business as "EDM Equipment" and was commonly known by that name, although it had no registered trade names with the Nebraska Secretary of State.
- Hastings State Bank made several loans to EDM and filed a financing statement on June 10, 2003, with the Nebraska Secretary of State, identifying the debtor as "EDM CORPORATION D/B/A EDM EQUIPMENT."
- On December 30, 2005, TierOne Bank extended a line of credit to EDM and subsequently filed a financing statement on January 6, 2006, listing the debtor as "EDM Corporation."
- TierOne Bank conducted three UCC searches around the time of its loan using standard search logic, none of which revealed Hastings’ financing statement.
- On November 21, 2007, Huntington National Bank made a loan to EDM and filed a financing statement on December 13, 2007, identifying the debtor as "EDM Corporation."
- Huntington National Bank conducted a UCC search under "EDM Corporation" using standard search logic, which did not reveal Hastings’ financing statement.
- Huntington National Bank and TierOne Bank had an intercreditor agreement subordinating TierOne’s interest in a specific ambulance to Huntington’s interest.
Procedural Posture:
- Hastings State Bank filed a financing statement with the Nebraska Secretary of State on June 10, 2003, listing the debtor as "EDM CORPORATION D/B/A EDM EQUIPMENT."
- TierOne Bank filed a financing statement with the Nebraska Secretary of State on January 6, 2006, listing the debtor as "EDM Corporation."
- Huntington National Bank filed a financing statement with the Nebraska Secretary of State on December 13, 2007, listing the debtor as "EDM Corporation."
- EDM Corporation filed a voluntary Chapter 7 bankruptcy case on April 10, 2008.
- Hastings State Bank subsequently filed an adversary proceeding in the United States Bankruptcy Court for the District of Nebraska (trial court) to determine the validity, extent, and priority of the liens in various of EDM's assets, including an ambulance.
- The Bankruptcy Court held that Hastings' financing statement was not validly perfected because a search of the Nebraska Secretary of State's U.C.C. records, using the office’s standard search logic under "EDM Corporation," did not reveal Hastings’ financing statement, and therefore, Huntington National Bank was in first lien position.
- Hastings State Bank (appellant) appealed the Bankruptcy Court's order to the Bankruptcy Appellate Panel for the Eighth Circuit.
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Issue:
Does a secured creditor's financing statement sufficiently provide the name of a registered organizational debtor under Nebraska's Revised Article 9 when it includes the debtor's legal name combined with a d/b/a designation, if a standard search logic under the correct legal name would not disclose the statement?
Opinions:
Majority - FEDERMAN, Bankruptcy Judge
No, a secured creditor's financing statement does not sufficiently provide the name of a registered organizational debtor under Nebraska's Revised Article 9 when it includes the debtor's legal name combined with a d/b/a designation, because such an error makes the financing statement seriously misleading if a standard search logic under the correct legal name would not disclose it. The court affirmed the Bankruptcy Court's decision, holding that Nebraska's Revised Article 9, specifically §§ 9-502(a)(1) and 9-503(a)(1), requires a financing statement for a registered organization to provide only the name of the debtor indicated on the public record of its jurisdiction of organization. The primary purpose of these filing requirements is to provide notice to subsequent creditors, and this purpose demands complete accuracy in the debtor's name, which is the crucial first step in finding a UCC statement. While official comments to § 9-503 suggest that trade names might be included, the court interpreted this to mean they can be added as additional names, not as part of or in the place of the debtor's organizational name. Nebraska's administrative regulations governing UCC filings specify that organization names are entered exactly as provided, and while 'noise words' are ignored, 'd/b/a' or names used as d/b/a are not on this list. Consequently, the addition of "d/b/a EDM Equipment" to the debtor's name field made Hastings' financing statement seriously misleading under § 9-506(a), because a search using the standard search logic for "EDM Corporation" did not disclose it. The court emphasized that for registered organizations, the name on their 'birth certificate' (e.g., articles of incorporation) controls, unlike individuals where there is no centralized public registry.
Analysis:
This case provides crucial clarification on the strict debtor naming requirements under Revised Article 9 for registered organizations. It firmly places the burden on filing creditors to ensure their financing statements precisely match the debtor's legal name on its public organizational record, rather than allowing for minor deviations or additions like 'd/b/a' designations within the name field. The decision underscores the critical role of standard search logic and administrative rules in determining whether an error is 'seriously misleading,' thereby reinforcing the need for exact conformity. This ruling significantly impacts future UCC filings, requiring meticulous attention to detail to ensure proper perfection and priority, and highlights the potential risks of relying on commonly known names or trade names without separate proper registration.
