Question

The Copper King Inn, Inc. had money problems. It borrowed $62,500 from two of its officers, Noonan and Patterson, but that did not suffice to keep the inn going. So Noonan, on behalf of Copper King, arranged for the inn to borrow $100,000 from Northwest Capital, an investment company that worked closely with Noonan in other ventures. Copper King signed an agreement giving Patterson, Noonan, and Northwest a security interest in the inn’s furniture and equipment. But the financing statement that the parties filed made no mention of Northwest. Copper King went bankrupt. Northwest attempted to seize assets, but other creditors objected.

Q1: Is Northwest entitled to Cooper King’s furniture and equipment under UCC-9-502 code and why?

Answer 1

No, Northwest is not entitled to Cooper King's furniture and equipment under UCC - 9 - 502 code.

According to the code, a financing statement is sufficient only if it:

(1) provides the name of the debtor;

(2) provides the name of the secured party or a representative of the secured party; and

(3) indicates the collateral covered by the financing statement.

The crux of the code is that all potential creditors are aware of existing creditors.

In the given situation , Northwest's name was omitted from the financing statement, and the court held that this was not a minor omission, and the financing statement was misleading. Therefore, Northwest has no security interest in Cooper King's furniture and equipment.