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In Re: Ben Miller and ) Debbie Ann Miller, Debtors v. In Re: Ben Miller and Debbie Ann Miller

August 17, 2012


The opinion of the court was delivered by: Michael P. McCUSKEY U.S. District Judge


Friday, 17 August, 2012 04:10:32 PM Clerk, U.S. District Court, ILCD


This is an appeal from an Order entered by the United States Bankruptcy Court for the Central District of Illinois (Bankruptcy Case No. 10--92570). This court has jurisdiction over the appeal pursuant to 28 U.S.C. § 158(a). This court has carefully reviewed both parties' arguments. Following this careful review, this court reverses the Order of the Bankruptcy Court.


Mr. and Mrs. Miller opened a personal banking account with the State Bank of Arthur ("Bank") on or about February 25, 1995, in the name of Bennie A. Miller ("Miller") and Debbie A. Miller. The Millers subsequently purchased Power Plus, a lawn equipment business based in Arthur, Illinois. During the period from January 2, 1999 until the time of this lawsuit, the Millers executed and delivered five promissory notes with different principal amounts to the Bank in which they promised to pay the Bank the note amounts plus interest. The Millers also executed and delivered five commercial security agreements and one mortgage as security for the notes; the commercial security agreements gave the Bank a security interest in most of the Millers' business assets. All of the loan documents were signed by Mr. Miller as "Bennie A. Miller." The Bank filed a UCC1 financing statement on January 7, 1999, and the statement identified the debtors as "Bennie A. Miller" and "Debbie A. Miller." Mr. Miller signed the financing statement as "Bennie A. Miller." Timely continuations of the original financing statement were filed on September 5, 2003, and July 21, 2008.

At trial, Mr. Miller testified that he has gone by the name "Bennie Miller" for much of his adult life, and that he is generally known by this name in the community. "Bennie A. Miller" is also the name listed on his unexpired driver's license, his Social Security card, the deed to the Millers' home, his federal income tax returns, the signature card he signed when the Millers opened their original account with the bank in 1995, all of the loan documents with the Bank, a Capital One credit card account, and the bill of sale from the purchase of the Power Plus business. In contrast, "Ben Miller" is the name listed on Mr. Miller's birth certificate, on a letter from another creditor, on two proofs of claim filed by Mr. Miller's accountant and his doctor, and on his American Express account.

On December 22, 2010, the Millers filed for Chapter 13 bankruptcy and listed the Bank as a secured creditor. On June 17, 2011, the Millers filed an adversary proceeding against the Bank to avoid the Bank's security interest. The Millers argued that the Bank incorrectly identified Mr. Miller on its financing statement, as governed by Article 9 of the Uniform Commercial Code (UCC), as adopted by the Illinois Legislature, 810 ILCS 5/9-521, by listing the name, "Bennie A. Miller," and thereby failed to perfect its security interest.

Following an evidentiary hearing on October 24, 2011 at which both parties were asked to submit written closing arguments, the Bankruptcy Court filed a written Opinion and Order in which it ruled in favor of the Millers. The Millers were thus allowed to avoid the Bank's lien on Mr. Miller's one-half interest in the business assets. The Bank then timely filed this appeal.


A federal district court reviews a bankruptcy court's conclusions of law de novo and its findings of fact only for clear error. Freeland v. Enodis Corp., 540 F.3d 721, 729 (7th Cir. 2008). A finding of fact is clearly erroneous when "although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Aiello v. Providian Fin. Corp., 257 B.R. 245, 248 (N.D. Ill. 2000). Mixed questions of law and fact are reviewed de novo. In re Winer, 158 B.R. 736, 740 (N.D. Ill. 1993). Finally, questions of statutory construction are considered questions of law and are also reviewed de novo. LaSalle Nat'l Bank Ass'n v. Cypress Creek 1, 242 Ill. 2d 231, 237 (Ill. 2011). Although the Millers argue that this case presents solely an issue of fact-that is, whether the financing statement was factually "seriously misleading," this court disagrees. As the present issue may best be characterized as an interpretation of 810 ILCS 5/9-101 et seq., which tracked the language of Article 9 of the UCC, the case presents at best a mixed question of law and fact. Accordingly, this court will review these proceedings de novo.

On issues of state law, in the absence of binding Illinois authority, a federal court must predict how the Illinois Supreme Court would rule and decide it the same way. MindGames, Inc. v. W. Pub. Co., Inc., 218 F.3d 652, 655-56 (7th Cir. 2000); In re My Type, Inc., 407 B.R. 329, 334 (Bankr. C.D. Ill. 2009) (bankruptcy). In bankruptcy cases, the federal court may refer to "all relevant data including state appellate decisions, state supreme court dicta, restatements of law, law review commentaries, and the majority rule among other states." In re Giaimo, 440 B.R. 761, 769 (B.A.P. 6th Cir. 2010).


The Bankruptcy Court reasoned as follows: (1) as the law currently exists in Illinois, a UCC1 financing statement must set forth the legal name of a borrower; (2) a debtor's legal name is the one indicated on his birth certificate, rather than the name on his driver's license or Social Security card; (3) Miller's name on his Indiana birth certificate is "Ben Miller"; (4) Miller has not changed his legal name to "Bennie Miller"; and (5) a search using the filing office's standard search logic for the legal name "Ben Miller" did not disclose a financing statement for him. Therefore, the Bankruptcy Court concluded that the Bank's use of the name "Bennie A. Miller" on its financing statement was "seriously misleading." Accordingly, that court held that the financing statement was insufficient to perfect the Bank's security interest in the collateral, and thus, the Bank was not entitled to receive Bennie Miller's 50% of the collateral, but rather, only Debbie Miller's 50% share.

However, neither Illinois law nor the UCC requires that a "legal name" be used on the financing statement in order to perfect a security interest. Instead, the UCC requires only a "correct name". Because the Bankruptcy Court created an additional requirement of law where none exists by mandating that lenders use the debtor's "legal name" on the financing statement and held that the name on a debtor's birth certificate takes priority over ...

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