## Facts

- Suna Brothers, Inc. (Suna) consigned jewelry to Tyringham Holdings, Inc. (Tyringham), a registered organization.
- Suna claimed a security interest in the consigned inventory and attempted to perfect it under Article 9 by filing a UCC financing statement with the Virginia State Corporation Commission (SCC).
- Suna’s financing statement identified the debtor as “Tyringham Holdings,” omitting the “Inc.” that appeared in Tyringham’s registered name on the public organic record.
- Tyringham later became a Chapter 11 debtor in the United States Bankruptcy Court for the Eastern District of Virginia.
- In the bankruptcy case, the Official Committee of Unsecured Creditors (the Committee) brought an adversary proceeding to determine the validity of Suna’s asserted lien (including as to consigned jewelry in the estate’s possession).
- Suna argued the omission of “Inc.” should not matter because “Inc.” functions like a “noise word” that is ignored by computerized search systems, and that searching the SCC’s records would still disclose its financing statement.
- The SCC’s standard search logic did not treat “Inc.” as a removable or ignored term, and an official SCC UCC search conducted under the correct name, “Tyringham Holdings, Inc.,” did not return Suna’s financing statement.

## Issues

1. Whether a financing statement for a registered organization is sufficient under Virginia’s version of UCC § 9-503(a)(1) when it omits “Inc.” from the debtor’s name as stated in the public organic record.
2. Whether the omission is “seriously misleading” under UCC § 9-506, or excused by the UCC § 9-506(c) safe harbor because a search under the correct name using the filing office’s standard search logic would disclose the record.
3. Whether, if Suna’s security interest was unperfected, the Committee (standing in the estate’s shoes with lien-creditor powers) could avoid Suna’s interest in the consigned inventory.

## Decision

- The court held the financing statement did not sufficiently provide the debtor’s name because Virginia law requires the exact name stated on the registered organization’s public organic record, and Suna omitted “Inc.”
- The court held the name error was “seriously misleading” because an official SCC search under “Tyringham Holdings, Inc.” using the SCC’s standard search logic did not disclose Suna’s financing statement.
- The court rejected reliance on alternative search methods and non-SCC search tools; the controlling test was the filing office’s standard search logic and what that official search returned.
- Because the financing statement was seriously misleading, Suna’s security interest was unperfected as against the estate, and the Committee could avoid the lien.
- Judgment was entered for the Committee, leaving Suna without a perfected Article 9 interest in the consigned jewelry as against the bankruptcy estate.

## Legal Principles

- For a registered organization, a financing statement sufficiently provides the debtor’s name only if it uses “the name that is stated to be the registered organization’s name on the public organic record.” (UCC § 9-503(a)(1), as adopted in Virginia).
- A financing statement containing a debtor-name error is ineffective if the error is “seriously misleading.” (UCC § 9-506(a), (b)).
- A debtor-name error is not seriously misleading only if a search of the filing office’s records under the debtor’s correct name, using the filing office’s standard search logic, would disclose the financing statement. (UCC § 9-506(c)).
- Whether a term such as “Inc.” is ignored in searching depends on the filing office’s actual standard search logic; a filer cannot rely on assumptions about “noise words” if the official search does not return the record.
- In bankruptcy, an unperfected security interest is subordinate to the estate’s rights under lien-creditor avoidance powers (commonly exercised under 11 U.S.C. § 544(a)), permitting avoidance of the unperfected lien for the benefit of unsecured creditors.

## Conclusion

Because Suna’s UCC-1 did not list Tyringham’s registered name exactly as shown on the public organic record, and an official SCC search under “Tyringham Holdings, Inc.” using the SCC’s standard search logic did not find the filing, the financing statement was seriously misleading under UCC §§ 9-503 and 9-506; Suna’s interest remained unperfected and was avoidable by the Committee on behalf of the bankruptcy estate.


Official Committee of Unsecured Creditors for Tyringham Holdings, Inc. v. Suna Brothers. Inc., 354 B.R. 363 (2006)