## Facts

- PTM Technologies, Inc. (a North Carolina corporation) obtained four loans from Maxus Capital Group, LLC, secured by a master security agreement covering specified collateral.
- Maxus assigned certain loans and related security interests to General Electric Capital Corporation.
- Maxus and GE Capital filed UCC-1 financing statements with the North Carolina Secretary of State to perfect their security interests.
- The financing statements identified the debtor as “PTM Tecnologies, Inc.” rather than “PTM Technologies, Inc.” (omitting the “h”).
- North Carolina’s UCC database provided a designated “Standard RA9” search logic and an alternative “Non-Standard RA9” search that included a “sounds like” feature.
- A search under the correct debtor name using Standard RA9 did not disclose the filings; a Non-Standard RA9 search did.
- PTM filed for Chapter 11 and, as debtor-in-possession, commenced an adversary proceeding under 11 U.S.C. § 544(a)(1) to avoid the asserted liens as unperfected.
- The case was decided on cross-motions for summary judgment.

## Issues

1. Whether financing statements that misspell a registered organization’s name fail to sufficiently provide the debtor name under N.C. Gen. Stat. § 25-9-503 and are therefore “seriously misleading” under § 25-9-506(b).
2. Whether the § 25-9-506(c) safe harbor applies when the filing is discoverable only through a non-standard “sounds like” search rather than the filing office’s designated standard search logic.
3. Whether, if the security interests are unperfected, the debtor-in-possession may avoid them under 11 U.S.C. § 544(a)(1).

## Decision

- The court granted PTM’s motion for summary judgment and denied Maxus’s and GE Capital’s cross-motions.
- The court held the financing statements did not provide the debtor’s correct name as required by § 25-9-503(a) and were “seriously misleading” under § 25-9-506(b).
- The court held the § 25-9-506(c) safe harbor did not apply because a search under the correct name using the filing office’s Standard RA9 logic did not disclose the filings.
- The court held the security interests were unperfected as of the petition date and avoidable by PTM as debtor-in-possession under § 544(a)(1).

## Legal Principles

- For a registered organization, a financing statement must provide the debtor name as shown on the public record; a minor spelling error can defeat sufficiency under UCC § 9-503 (as enacted in North Carolina).
- A financing statement that fails to sufficiently provide the debtor’s name is “seriously misleading” under UCC § 9-506(b).
- The UCC § 9-506(c) safe harbor applies only if a search under the debtor’s correct name using the filing office’s designated standard search logic would disclose the filing; retrieval through non-standard or “sounds like” search options does not satisfy the statute.
- Under 11 U.S.C. § 544(a)(1), a debtor-in-possession has the status of a hypothetical judicial lien creditor as of the petition date and may avoid unperfected security interests subordinate to such a creditor.

## Conclusion

Because the secured creditors’ UCC filings misspelled PTM’s name and were not disclosed by a search using the filing office’s standard search logic, the filings were seriously misleading and ineffective to perfect; PTM, as debtor-in-possession, avoided the unperfected liens under § 544(a)(1).


In re PTM Techs., Inc., 452 B.R. 165 (Bankr. M.D.N.C. 2011)