## Facts

- A micro-computer dealership began as Carlos Chacon’s sole proprietorship (“Compucentro USA”) and later incorporated as Compu-Centro, USA, Inc.
- Before incorporation, Coronado Bank and Texas National Bank made loans to Chacon and filed UCC financing statements under variations of “Carlos Chacon d/b/a Compucentro USA.”
- Bank of the West (BOW) later acquired those loans and filed assignment notices that did not reflect the debtor’s incorporation.
- After incorporation, BOW made additional loans to the corporation and filed a financing statement naming the debtor as “Compucentro, USA, Inc.” (omitting the hyphen in “Compu-Centro”).
- ITT Commercial Finance Corporation (ITT) later loaned to the corporation, took a security interest in the same collateral, and filed under the corporation’s correct legal name, “Compu-Centro, USA, Inc.”
- A search of the Texas Secretary of State’s computerized index under the corporation’s correct name did not disclose BOW’s filing due to the name discrepancy.
- After the debtor defaulted, BOW received proceeds from the collateral and applied them to its loans.
- ITT sued for a declaration of priority and for conversion; the district court ruled ITT had priority and granted ITT summary judgment on conversion.

## Issues

1. Whether BOW’s financing statement that misstated the corporate debtor’s name was “seriously misleading” under Texas UCC Article 9, rendering it ineffective to perfect and causing ITT to have priority.
2. Whether BOW’s receipt and application of collateral proceeds, despite ITT’s priority, established conversion as a matter of law under Texas law.

## Decision

- The Fifth Circuit affirmed the determination that ITT’s security interest had priority over BOW’s interest.
- The court held BOW’s debtor-name variation was seriously misleading where it prevented discovery of BOW’s filing in a standard search under the correct corporate name, making BOW’s filing ineffective to perfect.
- The Fifth Circuit reversed summary judgment for ITT on conversion and remanded.
- The court held the summary-judgment record did not establish, as a matter of law, that BOW’s conduct was “wrongful” dominion over ITT’s property for conversion purposes.

## Legal Principles

- Under Texas UCC Article 9 (notice-filing), a financing statement is ineffective if an error in the debtor’s name is “seriously misleading,” particularly when it defeats discovery through the filing office’s standard indexing/search process.
- The relevant filing inquiry is practical notice to subsequent creditors—i.e., whether a reasonable search under the debtor’s correct legal name would disclose the prior filing.
- Priority under Article 9 does not automatically establish tort liability for conversion.
- Texas conversion requires proof of a superior right to possession and a wrongful exercise of dominion or control inconsistent with the plaintiff’s rights; whether conduct is wrongful may present fact questions when a defendant acts under an asserted claim of right.

## Conclusion

The Fifth Circuit upheld ITT’s priority because BOW’s debtor-name error made its filing seriously misleading and ineffective to perfect, but it rejected conversion liability on summary judgment because the record did not conclusively show BOW’s control over the proceeds was wrongful under Texas law.


ITT Commercial Finance Corp. v. Bank of the W., 166 F.3d 295 (5th Cir. 1999)