## Facts

- Copper King Inn, Inc., a Montana corporation operating a hotel, experienced financial distress beginning in 1984.
- Insider creditors John T. Noonan and Robert C. Patterson (officers/directors/shareholders) each loaned Copper King $62,500 in exchange for promissory notes; the loans were initially unsecured and repayment was repeatedly deferred.
- In February 1986, Noonan directed Northwest Capital Management & Trust Co. (predecessor to Trust Corporation of Montana) to loan Copper King $100,000 in exchange for a one-year promissory note payable to Northwest.
- Around the same time, Copper King executed a security agreement pledging its furniture and equipment to secure both the $100,000 Northwest loan and the earlier insider loans.
- The security agreement mistakenly listed Noonan as the creditor for the $100,000 loan, but it referenced the Northwest note and attached a copy of that note.
- A UCC financing statement was filed listing Noonan and Patterson as secured parties for $225,000 and did not list Northwest as a secured party.
- Copper King later filed for Chapter 11; the plan treated Noonan, Patterson, and Trust Corporation (as Northwest’s successor) as secured creditors, but dissenting shareholders challenged that secured status.
- The bankruptcy court held the Northwest loan was covered by a valid security agreement but unperfected due to the financing statement’s failure to name Northwest; the district court affirmed.

## Issues

1. Whether Trust Corporation, as successor to Northwest, held a perfected security interest in Copper King’s furniture and equipment when the filed financing statement omitted Northwest as a secured party.

## Decision

- The Ninth Circuit affirmed.
- The court held Trust Corporation did not have a perfected security interest in the furniture and equipment.
- The omission of Northwest from the financing statement was not cured by references in the security agreement or the attached promissory note.
- Because Northwest’s interest was unperfected, Trust Corporation, as successor, obtained no perfected security interest.

## Legal Principles

- Under Article 9, perfection of a security interest in personal property generally requires filing a financing statement that provides adequate public notice, including identification of the secured party.
- A financing statement that names different secured parties and omits the actual secured party does not perfect the omitted party’s security interest, even if the underlying security agreement evidences an intent to secure that party.
- The filing system’s notice function protects third parties who rely on public records; a defect that deprives the record of notice to third-party searchers leaves the interest unperfected.
- A successor in interest cannot obtain greater perfection or priority rights than the predecessor possessed.

## Conclusion

Because the filed financing statement failed to identify Northwest as a secured party, Northwest’s security interest in Copper King’s furniture and equipment was unperfected, and Trust Corporation as successor likewise lacked a perfected security interest; the Ninth Circuit therefore affirmed the denial of secured status.


Trust Corp. of Mont. v. Patterson (In re Copper King Inn, Inc.), 918 F.2d 1404 (9th Cir. 1990)