## Facts

- Benjamin and Laura Youngblood operated a furniture business and borrowed funds from Citizens Bank of Fort Valley, Georgia to finance the business.
- On February 4, 1999, the Youngbloods executed a loan with the Bank and granted the Bank a security interest in the business’s inventory and related assets; the Bank claimed a purchase-money security interest in collateral bought with the loan proceeds.
- On February 22, 1999, the Bank filed a UCC-1 financing statement listing the debtors as “Benjamin Scott Youngblood” and “Laura B. Youngblood.”
- On February 25, 1999, the business was incorporated as “Benjamin S. Youngblood, Inc.” The Youngbloods did not notify the Bank, and the Bank did not amend its financing statement to reflect the corporate debtor name.
- In July 2001, the loan terms were modified, but the documents continued to identify the individual Youngbloods (not the corporation) as debtors and did not cure the filing-name problem.
- In March 2002, Benjamin S. Youngblood, Inc., doing business as Honey Creek Home Furnishings, hired Planned Furniture Promotions, Inc. (PFP) under a consulting agreement to conduct a liquidation sale of the business’s assets.
- PFP conducted the liquidation and held net proceeds (approximately $110,632.24) while multiple parties asserted claims to the fund, including the Bank (as secured lender) and the United States (based on IRS tax assessments and filed notices of federal tax lien against Benjamin S. Youngblood, Inc.).
- PFP filed an interpleader action to deposit the proceeds and obtain discharge, and it sought summary judgment against counterclaims asserted by certain defendants.
- The United States, on behalf of the IRS, moved for summary judgment against the Bank, arguing the Bank’s financing statement became ineffective as to later-acquired corporate collateral because the debtor name on the UCC filing was seriously misleading after incorporation, leaving the IRS tax liens with priority.

## Issues

1. Whether the Bank’s financing statement, which identified only the individual Youngbloods, became “seriously misleading” once the business operated as “Benjamin S. Youngblood, Inc.” under U.C.C. Article 9.
2. If the filing became seriously misleading, whether U.C.C. Article 9 limited the Bank’s perfected status to collateral acquired before, or within four months after, the debtor’s name change/incorporation.
3. Whether the IRS’s federal tax liens, noticed under the corporate name, had priority over the Bank’s security interest in the liquidation proceeds.
4. Whether PFP, as an interpleader stakeholder, was entitled to summary judgment disposing of counterclaims and to discharge from further liability regarding the fund.

## Decision

- Granted summary judgment for the United States on its priority claim against Citizens Bank, holding the IRS’s federal tax liens had priority over the Bank with respect to the disputed liquidation proceeds at issue.
- Held the Bank’s financing statement, filed only under the individual names and not amended after incorporation, was seriously misleading as to the corporate debtor for Article 9 purposes.
- Applied Article 9’s four-month rule for a debtor name change that renders a financing statement seriously misleading, concluding the Bank’s perfected status did not extend to collateral acquired by the corporation beyond the four-month period absent a timely amendment.
- Granted PFP summary judgment in its role as stakeholder to the extent it sought dismissal of counterclaims and discharge consistent with interpleader practice, leaving the priority dispute to be resolved between the competing claimants under the court’s rulings.

## Legal Principles

- Summary judgment is appropriate when there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law.
- Under U.C.C. Article 9, a financing statement must sufficiently provide the debtor’s correct name; a filing is ineffective if it is “seriously misleading,” unless a search under the correct name using the filing office’s standard search logic would still disclose the filing. See U.C.C. §§ 9-503, 9-506.
- When a debtor changes its name so that an existing financing statement becomes seriously misleading, the secured party’s filing remains effective only for collateral acquired before the change and within four months after the change; perfection as to later-acquired collateral requires an amended filing within that period. See U.C.C. § 9-507(c).
- Federal tax liens generally take priority over competing interests that are not perfected/choate as against third parties at the relevant time; a secured creditor that is unperfected as to the property at issue can be subordinated to a later-noticed federal tax lien.
- Interpleader allows a disinterested stakeholder facing competing claims to deposit the fund with the court and obtain dismissal and discharge, while claimants litigate entitlement among themselves.

## Conclusion

The court concluded that Citizens Bank’s UCC-1, filed only under the individual Youngbloods’ names and never amended after the business became “Benjamin S. Youngblood, Inc.,” was seriously misleading under Article 9 and, after the four-month statutory period, did not perfect the Bank’s interest in later-acquired corporate collateral; because the IRS properly noticed federal tax liens under the corporate name, the IRS had priority to the liquidation proceeds, and PFP was entitled to interpleader-style discharge and dismissal of counterclaims in its capacity as stakeholder.


Planned Furniture Promotions, Inc. v. Benjamin S. Youngblood, Inc., 374 F. Supp. 2d 1227 (2005)