Sufficiency of financing statement

     To be sufficient, the financing statement must provide the name of the debtor and of the secured party (or the secured party's representative) and must indicate the collateral covered by the financing statement.   U.C.C. 9-502(a).  A debtor may be an individual, an individual doing business under a fictitious business name, a corporation, partnership, or limited liability company, or other type of organization or legal entity.  Accordingly, U.C.C. 9-503 elaborates on the method of providing a correct name for the debtor.  For example, if the debtor is a corporation, the financing statement must show the name of the debtor as it appears in Articles of Incorporation filed by the corporation with the state in which the corporation is registered.    U.C.C. 9-504 states how the financing statement must indicate the collateral covered by the financing statement.

     Sometimes, the person completing the financing statement makes an error in providing the name of the debtor, such as by transposing letters or words in the debtor's name or omitting parts of the debtor's name.  Because the financing statement is indexed under the name of the debtor (U.C.C. 9-519(c)), such errors may prevent or make more difficult the location of the financing statement in response to a search request.  Accordingly, U.C.C. 9-506(a) provides that a financing statement is not effective if the error or omission makes the financing statement seriously misleading. 

     Many cases decided under former Article 9 considered whether an error or omission relating to the debtor's name was seriously misleading.  (Many of these cases arose from litigation in a bankruptcy proceeding because an unperfected security interest can be avoided in bankruptcy (see Commentary.Avoiding liens in bankruptcy)).  We have reproduced one such case, In re Mines Tire Co., in which the secured creditor filed a financing statement giving the name of the debtor as Mines Company, Inc. rather than its correct name Mines Tire Company, Inc. (emphasis added).  In that case, a search on the name "Mines Tire Company, Inc." did not disclose the financing statement using the filing office's standard (computer) search logic, but the court nonetheless held the omission in the financing statement to be minor.  Should the court reach the same result under Revised Article 9?  See 9-506(a) - (c), and Official Comment 2 to U.C.C. 9-506.  If the filing office's standard search logic does disclose a financing statement that contains an error or omission in the name of the debtor, the error or omission in the financing statement will not be considered seriously misleading (U.C.C. 9-506(c)).  For an example of search logic employed by a secretary of state's office, see Rule 503 in Section 5 of the Administrative Rules of the Indiana Secretary of State's Office.

     To be sufficient, the financing statement must also indicate the collateral.  U.C.C. 9-504 tells the secured party how to do so and U.C.C. 9-506(a) states the effect of errors or omissions in the indication of collateral.