## Facts

- Darrell and Shannon Reckart owned Reckart Equipment Co., Inc. (the debtor).
- Multiple UCC financing statements were filed over time against the debtor’s personal property.
- In 1974, Citizens Bank of West Virginia, Inc. (Citizens) filed a financing statement covering the debtor’s heavy construction equipment and kept that filing effective through continuation statements.
- In 2007, the Reckarts filed a financing statement against their own corporation with a broad collateral description including “furniture, fixtures, inventory, vehicles, or other personal property,” accounts receivable, proceeds, and after-acquired property.
- In January 2008, Citizens submitted another UCC-1 financing statement intended to perfect a broader security interest in the debtor’s assets (the 2008 financing statement).
- The West Virginia Secretary of State’s office received the 2008 financing statement but indexed it incorrectly, so a standard search under the debtor’s correct name did not show Citizens’ 2008 filing.
- In 2009, Davis Trust Company (Davis Trust) loaned money to the debtor and filed two financing statements against the debtor after conducting a UCC search that did not reveal Citizens’ mis-indexed 2008 filing.
- In 2011, the Reckarts assigned their 2007 financing statement to Citizens.
- After the debtor filed Chapter 7 bankruptcy in 2012, Davis Trust and Citizens disputed which creditor held first priority in the debtor’s collateral, leading to an adversary proceeding to determine lien priority.

## Issues

1. Whether a UCC financing statement that was properly delivered and accepted for filing, but mis-indexed by the filing office, is effective to perfect the secured party’s security interest.
2. If the mis-indexed filing is effective, whether Citizens’ 2008 filing has priority over Davis Trust’s 2009 filings under Article 9’s first-to-file-or-perfect rule.

## Decision

- The court held that Citizens’ 2008 financing statement was effective to perfect Citizens’ security interest even though the Secretary of State mis-indexed it.
- The court concluded that the indexing mistake was an error of the filing office, not a defect in Citizens’ submission that would defeat perfection.
- Because Citizens’ 2008 filing was effective when received and accepted by the filing office, Citizens perfected before Davis Trust filed in 2009.
- Applying Article 9 priority rules, the court determined Citizens’ security interest had priority over Davis Trust’s later-filed security interests.

## Legal Principles

- Under UCC Article 9 (as enacted in West Virginia), a financing statement is generally effective upon filing—meaning delivery of a record to the filing office with the filing fee and acceptance by that office.
- A filing office’s failure to properly index a filed record does not, by itself, make the financing statement ineffective against third parties; the risk of filing-office indexing mistakes falls on later searchers.
- Priority among conflicting perfected security interests in the same collateral is generally determined by the first secured party to file a financing statement or otherwise perfect.
- Different rules may apply when the defect is attributable to the secured party (for example, an incorrect debtor name that makes the financing statement seriously misleading), but an indexing error by the filing office does not convert a properly filed financing statement into an unperfected one.

## Conclusion

In *In re Reckart Equipment Co., Inc.*, the bankruptcy court resolved a dispute between Citizens and Davis Trust by holding that Citizens’ 2008 UCC-1—though mis-indexed by the West Virginia filing office—was still effective upon filing and therefore perfected Citizens’ security interest before Davis Trust filed in 2009; as a result, Citizens had priority under Article 9’s first-to-file-or-perfect rule.


In re Reckart Equipment Co., Inc., 2017 WL 943909 (2017)