## Facts

- Ronald Markt Nay and Sherry L. Nay filed Chapter 11 and owned farm equipment.
- MainSource Bank held a blanket security interest in the debtors’ personal property, including farm equipment, and perfected by filing a UCC-1 with the Indiana Secretary of State.
- LEAF Capital Funding, LLC financed two specific pieces of farm equipment and claimed a purchase-money security interest (PMSI) in that equipment.
- LEAF filed UCC-1 financing statements but listed Ronald’s name as “Ronald Mark Nay” rather than “Ronald Markt Nay,” the name on his unexpired Indiana driver’s license.
- MainSource brought an adversary proceeding seeking a declaration that its perfected blanket lien had priority because LEAF’s debtor-name error made LEAF’s filings ineffective.

## Issues

1. Whether, under Indiana Code § 26-1-9.1-503(a)(4), a financing statement for an individual debtor with an unexpired Indiana driver’s license sufficiently provides the debtor’s name if it does not exactly match the driver’s-license name.
2. Whether the misspelling is excused as a minor error under Indiana Code § 26-1-9.1-506(a), or instead is “seriously misleading” under § 26-1-9.1-506(b).
3. Whether the § 26-1-9.1-506(c) safe harbor applies because a search under the debtor’s correct name using the filing office’s standard search logic would disclose the financing statement.

## Decision

- The court granted MainSource’s motion for judgment on the pleadings under Rule 12(c) (as incorporated by Bankruptcy Rule 7012).
- LEAF’s financing statements were seriously misleading and therefore ineffective to perfect its security interest in the equipment.
- Because LEAF was unperfected, MainSource’s properly perfected security interest had priority in the disputed collateral.

## Legal Principles

- For an individual debtor with an unexpired Indiana driver’s license, a financing statement sufficiently provides the debtor’s name only if it uses the name indicated on the driver’s license. Ind. Code § 26-1-9.1-503(a)(4).
- A financing statement that fails to sufficiently provide the debtor’s name under § 503(a) is seriously misleading as a matter of law. Ind. Code § 26-1-9.1-506(b).
- The “minor errors” rule does not preserve effectiveness where the debtor-name requirement is not met and § 506(b) applies. Ind. Code § 26-1-9.1-506(a), (b).
- The safe harbor applies only if a search under the correct debtor name using the filing office’s standard search logic would disclose the filing; if the search does not disclose it, the filing remains seriously misleading. Ind. Code § 26-1-9.1-506(c).
- A creditor claiming PMSI priority must first have a perfected security interest; an unperfected PMSI is subordinate to a perfected competing security interest in the same collateral.

## Conclusion

The court held that Indiana’s driver’s-license rule for individual debtor names requires exact compliance; LEAF’s one-letter misspelling of the debtor’s middle name rendered its UCC-1 filings seriously misleading and unperfected, so MainSource’s perfected blanket lien took priority in the equipment.


Mainsource Bank v. Leaf Capital Funding, LLC (In re Nay), 563 B.R. 535 (Bankr. S.D. Ind. 2017)