Article courtesy of Jeff Dutson of King & Spalding
Under Georgia law, a creditor’s failure to include the debtor’s middle name on its financing statements, when his driver’s license had his full middle name, strongly indicated that its liens were invalid for purposes of the pending motion.
In re: Darren E. Bryant, No. 20-70789 (Bankr. M.D. Ga. 2021).
In 2017, a Debtor filed for Chapter 11 protection. Regions Bank (“Regions”) filed a proof of claim, including a secured claim. The Debtor proposed a Chapter 11 plan, and Regions objected to confirmation. Eventually, the Debtor and Regions resolved the objection through a consent order, and the plan achieved substantial consummation. In 2020, the Debtor filed for Chapter 12 protection. Again, Regions filed a proof of claim, including a secured claim. Shortly thereafter, Regions filed a motion for adequate protection or, in the alternative, for relief from the automatic stay based on its security interest evidenced by financing statements filed in Georgia. The Chapter 12 trustee (the “Trustee”) objected, arguing that Region’s liens were not valid because clerical errors in Region’s financing statement rendered the liens seriously misleading. Regions argued that its liens were valid and that the doctrines of res judicata and judicial estoppel barred the Trustee’s argument.
Under Georgia law, the financing statement required to perfect a nonpurchase money security interest in personal property must include the name of the debtor, the name of the secured party or a representative of the secured party, describe the collateral covered by the financing statement, and state the maturity date of the security obligation or state that the obligation is not subject to a maturity date. Ga. Code Ann. § 11-9-502. Despite the UCC-1 form’s explicit instruction that no part of a debtor’s name should be abbreviated, Regions used the Debtor’s middle initial on its financing statements, thereby abbreviating his name from the name on his driver’s license, and a UCC standard search of the Debtor’s name as stated on his driver’s license did not disclose the liens on the property. The United States Bankruptcy Court for the Middle District of Georgia concluded that under Georgia law, the deficient financing statement qualified as seriously misleading, but limited its holding to the context of an adversary proceeding. Accordingly, the Court held that Region’s failure to include the Debtor’s middle name on its financing statements, when his driver’s license had his full middle name, strongly indicated that Region’s liens were invalid, thus precluding relief.
