## Facts

- Dewey Dennis Preston filed a Chapter 12 bankruptcy case in the U.S. Bankruptcy Court for the District of Kansas.
- Preston had the same first and last name as his father and commonly held himself out as “D. Dennis Preston” to avoid confusion.
- Preston’s non-expired Kansas driver’s license listed his name as “Preston D Dennis.”
- In 2015 and 2016, Preston bought two pieces of farm machinery and financed each purchase through CNH Industrial Capital America, LLC (CNH).
- CNH took a purchase-money security interest in each item of machinery as collateral for Preston’s payment obligations.
- To perfect its security interests, CNH filed two UCC-1 financing statements with the Kansas Secretary of State.
- Both financing statements listed the debtor’s name as “Preston D.Dennis,” placing “Preston” in the debtor surname field and “D.Dennis” in the debtor first-name field; the middle-name field was left blank.
- When Preston filed bankruptcy, his proposed Chapter 12 plan treated CNH’s claim as unsecured, asserting CNH’s security interests were unperfected because the financing statements did not use the driver’s-license name.
- The parties’ dispute turned on whether the financing statements complied with Kansas’s individual-debtor naming statute and, if not, whether a search under Kansas standard search logic would still reveal CNH’s filings.

## Issues

1. Whether CNH’s financing statements “sufficiently provide” the name of an individual debtor under K.S.A. 84-9-503(a)(4) and (g) when the debtor has a non-expired Kansas driver’s license showing the name “Preston D Dennis.”
2. If the financing statements failed the statutory naming requirement, whether they were nevertheless not “seriously misleading” under K.S.A. 84-9-506(c) because a search under the correct driver’s-license name using the filing office’s standard search logic would disclose the filings.
3. Whether CNH’s security interests in the farm machinery were perfected as of the petition date, determining whether CNH’s bankruptcy claim should be treated as secured or unsecured in the Chapter 12 case.

## Decision

- The court held that Kansas’s version of U.C.C. § 9-503 uses an “only-if” rule for individual debtors with a non-expired Kansas driver’s license, requiring the financing statement to provide the debtor’s name exactly as shown on the license.
- The court concluded CNH’s financing statements did not sufficiently provide Preston’s name because “Preston D.Dennis” did not match the driver’s-license name “Preston D Dennis,” including the way the name was entered into the surname and first-name fields.
- The court held the financing statements were “seriously misleading” under K.S.A. 84-9-506(b) because they failed the statutory name requirement.
- The court held the K.S.A. 84-9-506(c) safe harbor did not apply because a search of the Kansas filing office records under the correct driver’s-license name using standard search logic did not disclose CNH’s financing statements.
- The court concluded CNH’s security interests in the debtor’s non-titled personal property were unperfected as of the petition date.
- The court entered judgment determining CNH’s claim was unsecured for purposes of plan treatment in the Chapter 12 case.

## Legal Principles

- In Kansas, when an individual debtor has a non-expired Kansas driver’s license, a financing statement sufficiently provides the debtor’s name only if it provides the name indicated on that license. K.S.A. 84-9-503(a)(4), (g).
- A financing statement that fails to sufficiently provide the debtor’s name is “seriously misleading” unless the statutory exception applies. K.S.A. 84-9-506(b).
- The exception in K.S.A. 84-9-506(c) applies only if a search of the filing office records under the debtor’s correct name, using the filing office’s standard search logic, would disclose the financing statement.
- For name-based indexing systems, punctuation, spacing, and how a filer splits the debtor’s name between fields can affect search results and can defeat perfection when the filing is not returned by a standard search under the correct name.
- In bankruptcy, a creditor with an unperfected Article 9 security interest is treated as unsecured as against the estate’s rights as of the petition date.

## Conclusion

In In re Preston, the bankruptcy court held that CNH’s UCC-1 financing statements naming the debtor “Preston D.Dennis” did not satisfy Kansas’s “only-if” driver’s-license naming rule because the debtor’s license showed “Preston D Dennis,” and the flawed filings were seriously misleading since Kansas standard search logic did not reveal them when searched under the correct license name; CNH’s security interests were therefore unperfected and its claim was treated as unsecured in the debtor’s Chapter 12 case.


In re Preston, 612 B.R. 770, 100 U.C.C. Rep. Serv. 2d 1138 (2019)