Myers v. American Exchange Bank (In re Alvo Grain and Feed, Inc.)

Alvo Grain and Feed, Inc. (Alvo) (plaintiff), a Nebraska business, filed a Chapter 11 bankruptcy petition. The American Exchange Bank (bank) (defendant) held a lien on Alvo’s personal property, including Alvo’s accounts and other payment rights, inventory, and equipment. The bank filed financing statements pursuant to Nebraska’s Uniform Commercial Code (UCC) to perfect its liens with the Nebraska secretary of state (secretary). However, the bank’s financing statements used the name “Alvo Grain & Feed, Inc.” rather than Alvo’s correct name of “Alvo Grain and Feed.” That is, the financing statements used an ampersand rather than the word “and.” Alvo, along with two of its unsecured creditors (plaintiffs), filed an adversary proceeding against the bank, seeking to avoid the bank’s lien on the ground that the financing statements’ use of the wrong name made the financing statements seriously misleading and thus invalid. Upon the conversion of the case to a Chapter 7 case, the Chapter 7 Trustee (trustee) (plaintiff) was substituted as the plaintiff. At trial, the trustee presented evidence that various searches of the secretary’s UCC records for “Alvo Grain and Feed” using the secretary’s office’s standard search logic failed to reveal the bank’s financing statements. This was because (1) the search logic searched for a name exactly as provided by the searcher, and the secretary’s office did not manipulate the provided name or look for variants of it; (2) the search logic did not disregard either the word “and” or the ampersand symbol; and (3) the secretary’s search database identified only debtors whose names exactly matched a searched-for name. The bank responded that searchers at the secretary’s office could have, with minimal effort, found the bank’s financing statements.