## Facts

- Spearing Tool and Manufacturing Co., Inc. entered secured financing arrangements with Crestmark Bank and Crestmark Financial Corporation, granting Crestmark a security interest in all of Spearing’s assets.
- Crestmark perfected its security interest by filing UCC financing statements using Spearing’s exact name as registered with the Michigan Secretary of State: “Spearing Tool and Manufacturing Co.”
- Spearing became delinquent on federal employment taxes.
- The IRS filed two Notices of Federal Tax Lien with the Michigan Secretary of State identifying the taxpayer as “SPEARING TOOL & MFG. COMPANY INC.,” differing from the registered name by using “&” for “and,” abbreviating “Manufacturing” as “Mfg.,” and using “Company” instead of “Co.”
- The name used by the IRS matched the name Spearing provided on its federal quarterly tax returns.
- Crestmark requested state lien searches using only the exact registered name; Michigan’s computerized search logic did not return filings under common name variants or abbreviations.
- The Secretary of State advised Crestmark to also search under “Spearing Tool & Mfg. Company Inc.”; Crestmark did not do so and continued extending funds.
- Spearing filed a Chapter 11 petition, and a priority dispute arose between Crestmark’s secured position (including later advances) and the IRS’s tax liens.

## Issues

1. Whether the IRS’s tax lien notices, using a common variant of the debtor’s name, were ineffective for lack of constructive notice because they were allegedly “seriously misleading” under Michigan’s search practices.
2. Whether the IRS tax liens had priority over Crestmark’s security interest as to advances made after the IRS filed its notices.

## Decision

- The Sixth Circuit reversed the district court and affirmed the bankruptcy court’s summary judgment for the United States.
- The court held the IRS’s lien notices sufficiently identified the taxpayer under federal law despite minor naming discrepancies.
- The court rejected using Michigan’s filing-office search limitations to invalidate an otherwise proper federal tax lien notice.
- The court concluded the IRS liens retained priority over Crestmark’s interest with respect to the disputed later advances.

## Legal Principles

- Validity and sufficiency of a Notice of Federal Tax Lien are governed by federal law; state recording systems may be used for filing, but state-law requirements cannot defeat a federally compliant notice.
- A federal tax lien notice is adequate if it reasonably identifies the taxpayer; minor, non-substantive name variations (abbreviations, punctuation, equivalent words) do not, by themselves, invalidate notice.
- Constructive notice for federal tax liens cannot turn on idiosyncrasies of a state’s search algorithm or indexing limitations.
- Sophisticated secured creditors must exercise reasonable diligence in lien searches, including considering obvious name variants and state filing-office suggestions when alerted to them.

## Conclusion

The court held that the IRS’s federal tax lien notices, filed in the proper office and using the taxpayer’s own reported name with only common variants, provided effective notice and could not be displaced by Michigan’s narrow search logic; therefore, the IRS liens remained valid and prior to Crestmark’s later advances.


In re Spearing Tool & Mfg. Co., 412 F.3d 653 (6th Cir. 2005)