Question

Elmer and Pam Strong leased and operated service stations. They were incorporated as “E. Strong Oil Co.,” although they used “Strong Oil Co.” as their trade name. The First National Bank of Lacon loaned the couple $75,000. The promissory note named “Strong Oil Co.” as the borrower. Both Elmer and Pam signed the note, along with an agreement that gave the bank a security interest in the company’s inventory, equipment, accounts, and other assets. The bank filed a financing statement, listing the debtor as “Strong Oil Co.” The Illinois Department of Revenue seized all of the company’s assets, claiming $229,000 in unpaid motor fuel taxes. The bank sued, claiming that it was entitled to all of the property, based on its security interest. The issue was whether the bank had perfected its interest. If the bank had perfected, it was entitled to the property. If the bank had failed to do so, because it filed under the name Strong rather than “E. Strong,” the Department could take everything. The trial court found that the bank had validly perfected its interest, and the Department appealed. Did the bank have a perfected security interest in the property?

Answer 1

In this case the note has been duly recorded. The First National Bank of Lacon has completed the process of ‘putting the world on notice’ with regards to its security interest in the note and hence has made its rights fully enforceable.

UCC (Uniform Commercial Code) says that there are four methods of perfecting security interests. They are: (i) filing financial statements (ii) by possession (iii) by control and (iv) by other methods under state and federal law.

A bank has to function under a set of rules and guidelines and so in all probability The First National Bank of Lacon has filed the promissory note documents with the appropriate office. Also the promissiory note bears the signature of Elmer and Pam.

Thus we can conclude that the bank has a perfected security interest in the property.