Host America Corp. v. Coastline Financial, Inc.

K.W.M. Electronics Corporation (K.W.M.) manufactured and assembled electronics products in a facility leased from Coastline Financial, Inc. (Coastline) (defendant). In 2001, K.W.M. executed a financing agreement with a bank. The financing agreement gave the bank security interests in collateral. The following year, the bank assigned those security interests to Coastline. Subsequently, K.W.M. granted a security interest in collateral to a person named Burton Sack. In 2003, Sack recorded a financing statement identifying the debtor as KWM Electronics Corporation—using no periods between the letters K, W, and M. The next year, in 2004, K.W.M. defaulted on its facility rental payments to Coastline. Coastline filed an unlawful-detainer action against K.W.M. and received a default judgment in the fall of 2004. Under the judgment, Coastline had a lien that provided an attachment against the same collateral that was listed in Sack’s financing statement. The following year (2005), Sack transferred his security interest to Host America Corporation (plaintiff). On December 22, 2005, Host America filed a financing statement on the collateral. Host America’s financing statement included periods between the letters in K.W.M.’s name. Early the next year, Host America brought a declaratory-judgment action to establish that Host America had priority in the collateral. Host America sought summary judgment. Coastline responded by seeking a partial summary judgment on the ground that there was no perfection of Host America’s security interest until after the perfection of Coastline’s lien. Specifically, Coastline argued that the financing statement recorded by Sack was seriously misleading on the ground that the debtor’s name was incorrect.