The Nebraska Bankruptcy court recently reaffirmed the message that the accuracy of the debtor's name in a UCC financing statement is very important. In the Matter of EDM Corp., No. BKO 8-40788-TLS, slip op., 51 Bankr. Ct. Dec. 62, 2009 Bankr. LEXIS 202 (Bankr. D. Neb. Feb. 10, 2009). The Nebraska Bankruptcy Court found that the financing statement of the bank was seriously misleading and ineffective to perfect a security interest in collateral. The name of the debtor was EDM Corporation. The bank filed a financing statement, which identified the debtor as "EDM Corporation D/B/A EDM Equipment." Another creditor filed a financing statement on the same collateral, using just the name "EDM Corporation." The bank contended that its financing statement was proper because it included the correct corporate legal name, EDM Corporation, along with additional information, "D/B/A EDM Equipment." The other creditor indicated that, when it used the Nebraska Secretary of State's UCC search engine, it did not turn up the filing by the bank.

The court found that the term "EDM Equipment" was not a registered trade-name owned by EDM Corporation. The court found that the term "EDM Equipment" was not a part of the true legal name of the debtor. The Nebraska Bankruptcy court held that, because the search engine of the Secretary of State's office would not turn up the UCC filing by the bank using the name EDM Corporation, D/B/A EDM Equipment, it was seriously misleading and ineffective. The bank lost its security interest claim. The Nebraska Bankruptcy court, in the EDM case, relied upon an earlier decision in 2006, In re Borden, 2007 WL 2407032.

In the Borden case, the individual borrower's name was Michael Ray Borden and he sometimes used the name Michael R. Borden. John Deere Company filed a financing statement using the name Mike Borden. The Nebraska Bankruptcy court stated that, if using the correct legal name did not turn up the name Mike Borden in a search using the Secretary of State's search engine, then the filing under Mike Borden was deficient. The court found that the John Deere financing statements were ineffective because running a search under Michael Borden did not show a filing under Mike Borden. The court pointed out that, in the case of an individual, the public record for the correct name would include a driver's license, a birth certificate, or a tax return, or in this case, the bankruptcy petition, itself.

There is, currently, pending in the Nebraska Bankruptcy Court, another case in which the name of the corporation's correct legal name as shown by the Articles of Incorporation filed with the Secretary of State, is Alvo Grain and Feed, Inc. The bank filed its UCC lien using the name Alvo Grain & Feed, Inc. The bank had loan documents in its file signed by the debtor, using the name Alvo Grain & Feed, Inc. The only difference in the two names is the word "and" and the use of the term "&." The evidence indicates in that case that a search using the Nebraska Secretary of State's search engine, with the correct legal name Alvo Grain and Feed, Inc. will not turn up the UCC financing statement filed by the bank using Alvo Grain & Feed, Inc. The Chapter 7 Trustee is claiming that the bank's lien is invalid because it failed to use the correct legal corporate name.

These cases again highlight the importance of accuracy of the borrower's name, both when the borrower is an individual and when it is a corporation or a non-individual entity. Most of these situations can be avoided by checking corporate or limited liability company records as filed with the Secretary of State's office, or driver's licenses or tax returns for individuals. In some situations, multiple filings may be prudent, when debtors are known by or use name variations.