Worthen Bank & Trust Co. v. Hilyard Drilling Co.

840 F.2d 596 (8th Cir. 1988)

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Nature of the Case

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Facts

D granted to National a security interest in all of D's existing and future accounts receivable and the proceeds thereof. National perfected this interest by filing financing statements. Four years later, D was also being financed by Worthen (P). D got a letter of renewal on those lines of credit with P and P took a second lien position on accounts receivable. D granted a security interest in the same accounts that National had such an interest in. P perfected that filing before July 8th. Within a month of this second assignment, National filed an additional statement, which would have perfected National's interest in the accounts. However, National had missed the statutory deadline and not file a continuation statement, and during this gap in filing from April 25th to July 8th, National's interest was unperfected, and P then acquired its own interest. D then filed for bankruptcy. The petition filed indicated that debts to National and P exceeded D's accounts receivables. P filed a motion before the bankruptcy court and the court determined that P’s interest had first priority. That was affirmed on appeal.