In re EDM Corporation, 2010 WL 1929772 (8th Cir BAP May 14, 2010)


A first-in-time secured lender is moved to the end of the creditor line when a field in the financing statement filed by the lender contains too much information. The court held that adding the debtor’s trade name to the registered corporate name in the “name” field of a financing statement rendered the statement “seriously misleading” and therefore ineffective. To avoid this pitfall, a financing statement filed against a registered organization should only provide “the name of the debtor indicated on the public record of the debtor’s jurisdiction of organization – nothing more and nothing less.”


The case involved three lenders with liens against common collateral of the debtor, EDM Corporation. The debtor’s official name registered with its state of incorporation (Nebraska) was “EDM Corporation,” although it used “EDM Equipment” as a trade name. (EDM had never registered its trade name). The first-in-time lender, Hastings State Bank, filed a financing statement identifying the debtor as “EDM Corporation d/b/a EDM Equipment.”

Subsequently, the debtor granted liens in the same collateral to TierOne Bank. TierOne ran UCC searches, using the Nebraska standard search logic, under the debtor name “EDM Corporation.” However, none of the searches revealed Hastings’ prior financing statement. TierOne filed a financing statement to perfect its perceived first priority lien. EDM subsequently granted liens in the same collateral to Huntington National Bank. Huntington ran the same UCC search as TierOne had, using the Nebraska standard search logic; this search did not reveal Hastings’ financing statement, although it did reveal TierOne’s financing statement.

EDM then filed a voluntary chapter 7 bankruptcy case, sparking a priority dispute among the three banks holding competing liens in the same collateral. The Bankruptcy Court held that Hastings’ financing statement was not validly perfected, because a search for “EDM Corporation” utilizing the standard search logic did not reveal the statement identifying the debtor as “EDM Corporation d/b/a/ EDM Equipment.”


On appeal, the Bankruptcy Appellate Panel noted that Revised Article 9 of the Uniform Commercial Code provides that “a financing statement sufficiently provides the name of the debtor . . . if the debtor is a registered organization, only if the financing statement provides the name of the debtor indicated on the public record of the debtor’s jurisdiction of organization . . . .” Revised Article 9 also provides a safe harbor provision whereby a financing statement is deemed “not seriously misleading” if a search of the records of the filing office under the debtor’s correct legal name, using that office’s standard search logic, would disclose the financing statement.

The court also noted the purpose of filing a financing statement: to put subsequent creditors on notice that the debtor’s property is encumbered. The court stated that the “very first step of that process for creditors is finding the UCC statement in the first place, and the way to do that is by searching the records under the debtor’s organizational name. In other words, complete accuracy is even more important with the debtor’s name than it is with the description of the collateral.” (Emphasis in opinion.)

The court emphasized that Revised Article 9 “evidenced an intent to shift the responsibility of getting the debtor’s name right to the party filing the financing statement. This approach would enable a searcher to rely on that name and eliminate the need for multiple searches using variants of the debtor’s name, all leading to commercial certainty.”

The court concluded that, because Hastings’ statement contained superfluous information in the particular field of the statement, it did not “sufficiently provide the name of the debtor.” If the debtor is a registered organization, then a financing statement sufficiently “provides the name of the debtor” only if it provides the exact legal name of the debtor indicated on the public record of the debtor’s jurisdiction of organization - nothing more and nothing less. The court stated that “it simply cannot be the rule that a financing statement should be deemed effective as long as words constituting the legal name of the debtor appeared somewhere in the string of words listed as the debtor’s name, and regardless of whatever additional words are tacked on to the end.”  

Having determined that the debtor’s name as set forth in the financing statement was insufficient, the court then considered whether the error rendered the filing “seriously misleading.” Had the subsequent lenders’ UCC searches disclosed Hastings’ erroneous financing statement, the error would not have been seriously misleading under Revised Article 9’s safe harbor provision. However, since those standard searches did not reveal Hastings’ lien, the safe harbor did not apply. The court concluded that the financing statement was, therefore, seriously misleading, so that Hastings lost its priority lien, and the junior liens were elevated in priority.


In an apparent attempt to provide helpful information in its financing statement, the first priority secured lender here ended up at the back of the line of secured creditors. This case teaches a clear lesson - it is imperative that a creditor seek legal advice as to the specific filing requirements, including the search logic, in a particular jurisdiction, in order to protect the creditor’s security interest and priority.