## Facts

- C.W. Mining Company, a Utah coal-mining business, obtained multiple loans from creditors and granted security interests covering broad assets, including accounts receivable.
- Four creditors filed UCC financing statements in Utah in 2007 to perfect their security interests.
- The debtor’s registered name in Utah public records was “C.W. Mining Company.”
- The financing statements listed the debtor as “CW Mining Company,” omitting the periods in “C.W.”
- Utah’s filing office maintained an electronic UCC database using “standard search logic.”
- A search under the correct registered name “C.W. Mining Company” did not disclose the “CW Mining Company” filings; the filings appeared only when searched under the variant name.
- An involuntary Chapter 11 petition was filed against the debtor in January 2008; the case was later converted to Chapter 7, and a trustee was appointed.
- UtahAmerican Energy, Inc. owed the debtor about $2.8 million under prepetition coal-sale contracts and interpleaded the funds due to competing claims.
- The Chapter 7 trustee sought to avoid the creditors’ asserted liens as unperfected under 11 U.S.C. § 544(a), asserting the financing statements were seriously misleading under Article 9.

## Issues

1. Whether a financing statement for a registered-organization debtor that omits punctuation from the debtor’s registered name “sufficiently provides” the debtor’s name under U.C.C. § 9-503(a)(1) (as adopted in Utah).
2. Whether the debtor-name error is “seriously misleading” under U.C.C. § 9-506 when a search under the correct registered name using the filing office’s standard search logic does not disclose the filing.
3. Whether, if the security interests were unperfected, the Chapter 7 trustee has priority over the creditors in the interpleaded receivable under 11 U.S.C. § 544(a) and Article 9 priority rules.

## Decision

- The court ruled for the Chapter 7 trustee.
- The court held the financing statements were seriously misleading because they did not use the debtor’s registered name and were not disclosed by a standard-search-logic search under the correct name.
- The court concluded the creditors’ security interests were unperfected as to the receivable.
- The court determined the trustee, as a hypothetical lien creditor under 11 U.S.C. § 544(a), had priority over the unperfected security interests and could avoid the purported liens in the interpleaded funds.

## Legal Principles

- A financing statement is sufficient only if it provides, among other things, the debtor’s name. U.C.C. § 9-502(a).
- For a registered organization, a financing statement sufficiently provides the debtor’s name only if it uses the name stated in the debtor’s public organic record. U.C.C. § 9-503(a)(1).
- A financing statement that fails sufficiently to provide the debtor’s name is seriously misleading unless a search under the debtor’s correct name, using the filing office’s standard search logic, would disclose the filing. U.C.C. § 9-506(b)–(c).
- If the filing is not disclosed by a search under the correct registered name using standard search logic, the safe harbor in U.C.C. § 9-506(c) does not apply, and the filing is ineffective to perfect.
- In bankruptcy, the trustee’s strong-arm power under 11 U.S.C. § 544(a) gives the trustee the status of a hypothetical lien creditor who takes priority over an unperfected security interest.

## Conclusion

The court held that Article 9’s debtor-name rule for registered organizations requires use of the exact registered name when the filing office’s standard search logic depends on that name; because the creditors’ filings omitted punctuation and were not found under a search of the correct name, the security interests were unperfected and avoidable by the Chapter 7 trustee, who had priority to the interpleaded receivable.


In re C.W. Mining Co., 2009 Bankr. LEXIS 2372 (Bankr. D. Utah 2009)