Southern Update: In re WasteTech, 2019 WL 2351877 (Bankr. N.D. Ga. May 31, 2019

Creditor does not have a perfected security interest in Debtor’s property when it files a UCC-1 Financing Statement which lists inaccurate identifying information for the Debtor and does not adequately describe the collateral. In re WasteTech, 2019 WL 2351877 (Bankr. N.D. Ga. May 31, 2019).

By: Jeff Dutson (King & Spalding)

In 2017, the Debtor entered into six Purchase and Sale of Future Receivables Agreements in favor of Defendant-creditor. The agreements granted a security interest to the Defendant in all of Debtor’s future receivables, inventory, equipment, goods, accounts, investment property, and other personal property and assets, and authorized the Defendant to file one or more UCC-1 Financing statements prior to each sale of Future Receivables for purposes of providing public notice. The Defendant subsequently filed a UCC-1 financing statement, but mistakenly used one of the Debtor’s prior names rather than its correct current one. A search of the records of the filing office under the Debtor’s correct name, using the filing office’s standard search logic, did not disclose the financing statement. The collateral description also described only a subset of the Debtor’s property and was limited to certain future receivables purchased by the buyer pursuant to a future receivables agreement. Moreover, the collateral description listed the wrong buyer and the wrong date of the agreement, making it impossible to identify which future receivables agreement was being referenced, and consequently which property was being described.

The United States Bankruptcy Court in the Northern District of Georgia, Atlanta Division granted the Trustee’s Motion for Summary Judgment, finding that the Defendant’s security interest in the Debtor’s Accounts Receivable granted under the Receivables Agreements was not properly perfected because neither of the two elements required for perfection by Georgia law were met. A search of the records of the filing office under the Debtor’s correct name, using the filing office’s standard search logic, did not disclose the financing statement. The Court did not find it relevant that the Defendant had continued to operate its business under its former name after the name change, nor that a search of the Debtor’s name in the Georgia business search would have yielded results for the prior name as well.

Moreover, the Court found that the collateral description was insufficient because the financing statement did not indicate that it covered all assets or personal property of the Debtor, and, due to its misidentification of the Buyer’s name and date of agreement, also failed to provide a description of, or reasonably identify, the Debtor’s Accounts Receivable that are subject to the Defendant’s security interest.