Blue Cypress: Name Change, After-Acquired Equipment, and PMSI Priority
Blue Cypress LLC is a Delaware limited liability company with its principal place of business in Pennsylvania. On March 3, 2021, it borrows $2 million from First Meridian Bank and grants a security interest in 'all equipment now owned and hereafter acquired.' First Meridian files a UCC-1 financing statement in Delaware naming 'Blue Cypress LLC.' In June 2022, the LLC changes its name to 'Blue Cypress Solutions LLC' and does not notify the bank. On April 1, 2023, the company borrows $500,000 from Harbor Credit and grants a security interest in the same equipment; Harbor files a UCC-1 in Delaware under the new name. On April 20, 2024, a vendor sells the company a forklift on credit and retains a purchase-money security interest; the vendor files a UCC-1 on May 1, 2024. The company defaults in 2025. First Meridian claims priority in all equipment, including the forklift. Harbor argues First Meridian's filing became ineffective after the name change. The vendor claims PMSI priority.
1. Which financing statement controls, and is First Meridian still perfected after the name change? Apply UCC §§ 9-503, 9-506, and 9-507.
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Under § 9-503, the debtor's correct name is the LLC's registered name. A filing under the old name becomes seriously misleading after the June 2022 name change under § 9-506. Under § 9-507(c), the original filing remains effective for collateral acquired before the change and within four months after the change, but it is ineffective for collateral acquired more than four months later unless an amendment is filed. First Meridian therefore remained perfected in equipment owned before June 2022 and equipment acquired through October 2022. Equipment acquired after that, including the 2024 forklift, is not perfected under the old filing. Harbor's April 2023 filing under the correct new name perfects its interest in after-acquired equipment covered by its security agreement.
2. What priority does the vendor's purchase-money security interest have in the forklift?
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The vendor has a PMSI in the forklift. Under § 9-324(a), a PMSI in equipment has priority over a conflicting security interest in the same collateral if it is perfected when the debtor receives possession or within 20 days after. The vendor delivered the forklift on April 20, 2024, and filed on May 1, 2024, 11 days later. That is timely. The vendor's PMSI therefore has priority over Harbor and over First Meridian, assuming the security agreement creates a PMSI and the filing is correct. First Meridian's after-acquired property clause does not defeat a timely PMSI.
3. How would the analysis change if First Meridian had filed a UCC-3 amendment in September 2022?
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A UCC-3 amendment filed in September 2022 would be within four months of the June 2022 name change. Under § 9-507(c), the financing statement would remain effective and would not become seriously misleading. First Meridian's priority would relate back to March 2021 for all equipment, including after-acquired equipment and the forklift. If the amendment had been filed after the four-month period, it would perfect only from the date of the amendment, and Harbor's earlier 2023 filing could prevail for collateral acquired before the amendment.