## Facts

- MAKO, Inc., a convenience-store chain, granted Core-Mark a security interest in MAKO’s inventory, after-acquired inventory, and inventory proceeds; Core-Mark perfected by filing a financing statement naming MAKO as debtor.
- MAKO filed Chapter 11 and, under a confirmed plan, Retail Marketing Company (RMC), an unrelated entity, acquired certain store assets and took over operations, including MAKO inventory subject to Core-Mark’s lien.
- The plan stated Core-Mark would retain its lien in assets acquired by RMC under the plan and that the lien would continue in full force and effect.
- After plan confirmation, RMC executed a new note and security agreement assuming MAKO’s debt and granting Core-Mark a security interest in RMC’s inventory, after-acquired inventory, and inventory proceeds.
- Core-Mark did not file a new financing statement naming RMC as debtor.
- RMC sold the transferred MAKO inventory in the ordinary course, commingled sale proceeds with other assets so proceeds became unidentifiable, and replaced the inventory with new inventory.
- RMC later filed Chapter 11; it then brought an adversary proceeding seeking to avoid Core-Mark’s claimed lien in RMC’s after-acquired inventory under 11 U.S.C. § 544(a)(1).
- The district court granted summary judgment for RMC, holding Core-Mark’s security interest in RMC’s after-acquired inventory was unperfected.

## Issues

1. Whether a financing statement naming MAKO as debtor perfected Core-Mark’s security interest in RMC’s after-acquired inventory after RMC assumed MAKO’s debt and granted a new security interest.
2. Whether confirmation language in MAKO’s Chapter 11 plan preserving Core-Mark’s lien carried forward perfection into RMC’s after-acquired inventory without a new UCC filing.
3. Whether RMC, as debtor-in-possession, could avoid Core-Mark’s unperfected security interest under 11 U.S.C. § 544(a)(1).

## Decision

- The Tenth Circuit affirmed summary judgment for RMC.
- Core-Mark did not hold a perfected security interest in RMC’s after-acquired inventory because it failed to file a financing statement naming RMC as debtor as required by Oklahoma Article 9.
- The MAKO plan’s lien-preservation language did not substitute for state-law perfection requirements as to third-party priority.
- Because the original collateral was sold and proceeds became unidentifiable, Core-Mark could not rely on a perfected proceeds interest to reach replacement inventory.
- RMC, exercising § 544(a)(1) rights as a hypothetical lien creditor, avoided Core-Mark’s unperfected security interest, leaving Core-Mark unsecured as to that collateral.

## Legal Principles

- UCC Article 9 perfection by filing depends on correct identification of the debtor; a filing under one debtor’s name does not perfect a security interest in property of a different debtor.
- A security interest continues in proceeds only to the extent proceeds are identifiable; commingling that destroys identifiability cuts off reliance on proceeds to claim later-acquired assets.
- A confirmed Chapter 11 plan may preserve a lien between parties as to transferred assets, but it does not displace state-law filing requirements governing perfection and priority against third parties.
- Under 11 U.S.C. § 544(a)(1), a debtor-in-possession has the powers of a hypothetical judicial lien creditor and may avoid an unperfected security interest enforceable only between the contracting parties.

## Conclusion

The court held that Core-Mark’s failure to file a financing statement naming RMC as debtor left its claimed lien in RMC’s after-acquired inventory unperfected under state law, and RMC, as debtor-in-possession, could avoid the lien under § 544(a)(1) despite plan language purporting to preserve Core-Mark’s lien.


LMS Holding Co. v. Core-Mark Mid-Continent, Inc., 50 F.3d 1520 (10th Cir. 1995)