Worthen Bank & Trust Co., N.A. v. Hilyard Drilling Co.

NBC (defendant) perfected a security interest in Hilyard's (defendant) accounts receivable by filing a financing statement in 1979, set to expire in April 1984. Worthen (plaintiff) later took a security interest in the same collateral, acknowledging NBC's first-priority lien, and perfected its own interest by filing in June 1983. NBC restructured Hilyard's loans and filed a second financing statement in July 1983 — but that filing neither fell within the six-month pre-expiration window nor referenced the original 1979 statement. NBC never filed a proper continuation statement, and its original filing lapsed. When Hilyard later went bankrupt, the amount owed exceeded the receivables' value, and Worthen sought a priority determination.

Whether, under the Uniform Commercial Code, a creditor's lien may lose priority if the creditor does not file a continuation statement for the original financing statement within six months before its expiration.