“Tomato, Tomahto” A Security Agreement with an Incorrect Debtor Name Passes Muster to Create a Security Interest

A trade creditor can protect itself against collection risk by obtaining a security interest in its customer’s assets to secure obligations owing to the creditor. Article 9 of the Uniform Commercial Code (“UCC”) governs the creation and perfection of a security interest in personal property. Article 9 requires proper identification of the debtor and the relevant collateral to put other potential creditors on notice of the existence of a security interest.

UCC Article 9’s requirements can be quite strict. For example, courts have held that a security interest is not properly perfected where there is even the slightest difference between a debtor’s correct legal name and the debtor’s name on a UCC-1 financing statement. Interestingly, though, a recent decision by an Illinois bankruptcy court in the Chapter 11 case of In re First to The Finish Kim and Mike Viano Sports, Inc. held that the same level of strictness doesn’t necessarily apply to identifying the debtor in a security agreement. In First to The Finish, the bankruptcy court held that the debtor’s lender had a valid security interest even though the debtor’s name on the relevant loan documents, including the security agreement, differed from the debtor’s correct legal name.