Collateral Descriptions on Article 9 Financing Statements

Collateral Descriptions on Article 9 Financing Statements

 
Under the U.C.C., to be effective, a filed financing statement must contain the debtors name, the secured partys name (or the name of its representative), and an indication of the collateral. In a recent decision, the Eighth Circuit Court of Appeals held that the secured party’s indication of collateral, although containing some errors, was legally sufficient due to an all assets clause.

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Professor Livingston writes: For secured creditors, perfecting their security interests properly under Article 9 of the Uniform Commercial Code is essential to ensuring priority over competing claimants to the same property of the debtor and to avoiding loss of their security interests in bankruptcy. Most secured parties file financing statements in the appropriate public record to perfect their security interests. U.C.C. § 9-310 (a) (2009). To be effective, a filed financing statement must contain the debtor's name, the secured party's name (or the name of its representative), and an indication of the collateral. U.C.C. § 9-502 (a). In a recent decision, the Eighth Circuit Court of Appeals reversed the district court's ruling and held that the secured party's indication of collateral, although containing some errors, was legally sufficient. ProGrowth Bank, Inc. v. Wells Fargo Bank, N.A., 558 F.3d 809 (8th Cir. 2009). The court emphasized the very general notice-giving function of the financing statement and the need for subsequent parties to inquire further about the exact nature of the security interest indicated in the financing statement.

In ProGrowth Bank, the plaintiff secured party, ProGrowth Bank, sought a declaratory judgment against an earlier secured party, Global One Financial, Inc., and its agent, Wells Fargo Bank, N.A., to the effect that the plaintiff's security interest in the debtor's annuity contracts had priority over the defendants' security interests. Global had filed a financing statement through its agent, Wells Fargo, on September 8, 2005, listing the debtor as "Christopher J. Hanson" and the collateral as "[a]ll of Debtor's right, title, and interest in and to, assets and rights of Debtor, wherever located and whether now owned or hereafter acquired or arising, and all proceeds and products in that certain Annuity Contract No.: LE900015 issued by Lincoln Benefit Life in the name of Debtor. . . ." The number and issuer for the annuity contract specified by the security agreement were incorrect on the financing statement. The actual number of the annuity contract was "L9E00015," and the actual issuer was Fidelity & Guaranty Life Insurance Company. 558 F.3d at 811.

On September 16, 2005, Global filed a second financing statement through its agent listing the same debtor and containing an almost identical collateral description. The only difference in the collateral description was the number of the annuity contract: "L9E00016," the correct number for a second annuity contract encumbered by the parties' security agreement. The annuity issuer, however, was still incorrectly identified as "Lincoln Benefit Life" instead of Fidelity & Guaranty. 558 F.3d at 811.
 
 
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