Creditors that have a security interest in the same collateral will often dispute the priority of each other’s liens. In general, the security interest that is first perfected will be entitled to priority over subsequent liens. A security interest is generally perfected by filing a financing statement that satisfies the requirements of section 9-502 of the UCC. Section 9-502 provides that 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. Nevertheless, a subsequent lienholder may challenge a filed financing statement because it has errors or omissions rendering it “seriously misleading” under UCC § 9-506 and thus ineffective.3 U.C.C. § 9-506.
Also, creditors often dispute over whether or not a good has become a fixture in real property. A court’s determination that a good has or has not become a fixture can have implications on a creditor’s security interest. Part I of this memorandum will explore recent court decisions addressing what renders a financing statement seriously misleading under UCC 9-506. It will also discuss safe harbor provisions within the UCC that provide protection for creditors that fail to provide the debtor’s name in accordance with UCC § 9-503(a). Part II of this memorandum will explore the methodology used by courts to determine when a good has become a fixture. It will also examine different UCC filings used to perfect a security interest in fixtures and how courts resolve priority disputes based on the type of filing used by a creditor.