WALTER SHAPERO, Bankruptcy Judge
The matter before the Court is Wells Fargo Equipment Finance, Inc.'s ("Wells Fargo") Motion for Adequate Protection and to Condition the Use, Sale, and Lease of Property. Specifically, the issue before the Court is whether the financing statement indicating Wells Fargo's security interest sufficiently identifies the collateral covered. The Court held a hearing on November 10, 2010 and permitted the parties to file post-hearing briefs prior to a further hearing. At the end of the latter hearing, the Court indicated on the record that it was deciding the issue in favor of Wells Fargo but that it would later issue a more detailed and written opinion to that effect. This is that opinion.
BACKGROUND
D L Equipment, Inc. Is in the business of selling and leasing stone crushing equipment primarily for use in road construction and improvement. On May 4, 2000, Debtor and The CIT Group/Equipment Financing, Inc. ("CIT") entered into a security agreement, wherein CIT agreed to provide commercial floor plan financing to the Debtor and, to secure repayment, Debtor granted CIT a security interest in the equipment acquired by Debtor with the floor plan financing. Debtor used the floor plan financing to acquire stone crushing equipment for its inventory.
CIT filed a UCC-1 financing statement with the Michigan Secretary of State on September 30, 2005, naming CIT as the secured party and containing the following collateral description:
Equipment and inventory financed by The CIT Group/Equipment Financing, Inc. which are held for sale or lease, or which are returned goods, together with all present and future attachments, accessories, substitutions, replacements, accessions and additions thereto, instruments, accounts, rental and contract rights now existing
or hereafter arising with respect to the foregoing and all cash and non-cash proceeds thereof.
In 2007, Wells Fargo purchased CIT's interest in the floor plan financing, i.e., it purchased the debt and received an assignment of the security interest and any other effectuating and collateralizing documents. On October 17, 2007, in furtherance of such, CIT filed a UCC-3 amendment to the financing statement with the Michigan Secretary of State, assigning its security interest to Wells Fargo. In January 2008, Debtor and Wells Fargo executed certain amendments and supplements to the financing arrangement, whereby Wells Fargo agreed to continue advancing funds to the Debtor for the purpose of acquiring equipment inventory and Debtor agreed to pay to Wells Fargo principal, interest, and other charges promptly as billed. On April 26, 2010, Wells Fargo filed a UCC-3 continuation statement of its security interest. Neither the filed amendment nor the continuation statement set forth any change in the description of the collateral from the above quoted language in the originally filed financing statement. Wells Fargo is the present owner and holder of the debt and the security interest in the collateral.
Debtor ultimately failed to pay submitted invoices and is currently in default under the terms of that agreement. Prior to the filing of the Debtor's bankruptcy petition, Wells Fargo accelerated and demanded full payment of the outstanding balance and obtained a state court order granting Wells Fargo possession of the collateral.
After the Debtor filed its bankruptcy petition, Wells Fargo filed a Motion to Condition the Use, Sale, and Lease of Property by Debtor and Requiring Adequate Protection. Debtor filed a response thereto, in part denying that Wells Fargo's security interest in the collateral was duly perfected. Specifically, the question before the Court is whether Wells Fargo's security interest was properly perfected with regard to collateral, the purchase of which it financed after its acquisition of the debt and security interest. Debtor argues that Wells Fargo has a properly perfected security interest in only two pieces of collateral, i.e., those that were financed by CIT prior to the assignment to Wells Fargo, contending that, because the financing statement contains the "limiting language," to wit: "equipment and inventory financed by The CIT Group/Equipment Financing, Inc.," (emphasis added) it does not cover or describe the equipment and inventory financed by Wells Fargo after the assignment. Wells Fargo argues that the financing statement is adequate because any creditor could look at the financing statement itself, the amendment regarding the assignment, and continuation statement and they would immediately recognize that Wells Fargo may hold a security interest in some or all of the Debtor's equipment inventory and they would then have a duty to make further inquiry to determine the complete state of affairs, and, that satisfies the perfection and description of collateral requirements.
DISCUSSION
According to the Michigan Uniform Commercial Code, a financing statement is sufficient if it: (a) provides the name of the debtor; (b) provides the name of the secured party or a representative of the secured party; and (c) indicates the collateral covered by the financing statement. MCL § 440.9502. MCL § 440.9504 gives additional instruction regarding the indication of collateral by providing that "[a] financing statement sufficiently indicates the collateral that it covers if the financing statement provides 1 of the following: (a) a description of the collateral pursuant to section 9108. . . ." MCL § 440.9108(1) provides that "a description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described." "[A] description of collateral reasonably identifies the collateral if it identifies the collateral by 1 or more of the following: (a) specific listing[;] (b) category[;] or (c) [e]xcept as otherwise provided in subsection (5), a type of collateral defined in the uniform commercial code. . . ." MCL § 440.9108.
The drafter's commentary to MCL § 440.9502 states:
This section adopts the system of "notice filing." What is required to be filed is not, as under the pre-UCC chattel mortgage and conditional sales acts, the security agreement itself, but only a simple record providing a limited amount of information (financing statement).
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The notice itself indicates merely that a person may have a security interest in the collateral indicated. Further inquiry from the parties concerned will be necessary to disclose the complete state of affairs.
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Notice filing has proved to be of great use in financing transactions involving inventory, accounts, and chattel paper, because it obviates the necessity of refiling on each of a series of transactions in a continuing arrangement under which collateral changes from day to day."
MCL § 440.9502, cmt. 2.
"The drafters frankly acknowledged their expectation that, after a potential lender has encountered a financing statement, `[f]urther inquiry . . . will be necessary to disclose the complete state of affairs.'" In re Tri-State Equipment, Inc., 792 F.2d 967, 971 (10th Cir. 1986). "The burden is placed on later creditors to protect themselves by getting full information on any prior agreements flagged by the minimal financing statement filing." Id. "For these reasons, the settled rule . . . is that the description in the filing `need only put other creditors on notice of a possible security interest in the collateral in question.'" Id. "Most other courts are also now willing to find a description that is unclear or susceptible to more than one distinct meaning sufficient in circumstances in which the description would put other creditors on notice of the need for further inquiry." Id. (citations omitted).
In this case, the cumulative effect of the three filed documents precludes a finding that only those items of inventory financed before Wells Fargo came on the scene are covered by this financing statement and that perfection is to be limited to such — particularly when considered in light of MCL § 440.9506(1). This latter provision states that "[a] financing statement substantially satisfying the requirements of this part is effective, even if it has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading." MCL § 440.9506(1).
The filings sufficiently indicate on their face, or sufficiently provoke a reasonable inquiry which would divulge that the collateral involved, to wit: "inventory," is the type of collateral that was subject not only to CIT's original financing arrangement, but also the financing given by Wells Fargo, which the filings reveal stepped into CIT's shoes as successor to CIT with regard to the inventory collateral. Thus, the phrase "financed by The CIT Group/Equipment Financing, Inc." is not to be read as a limitation, or at least a limitation other than one which would exclude inventory financed by parties other than either CIT initially, or Wells Fargo as CIT's successor. Even if one considered that phrase as legally limiting (which this Court concludes it is not), at the very lest it would put a reasonable person on notice and require an inquiry as to exactly what specific inventory and collateral was financed by CIT. The result of that inquiry would reveal the exact items of collateral claimed to be covered by the subject security agreement and financing statement. Therefore, the indicated description satisfies the letter and intent of the statute.
CONCLUSION
For the reasons stated herein, the Court previously concluded and announced its conclusion that the filed financing statement documents sufficiently perfect all of the inventory financed by Wells Fargo after the assignment. Wells Fargo shall submit an appropriate order, if it so desires.