Professor Margit Livingston on the Debtor's Name under the 2010 Amendments to U.C.C. Article 9: California's Interesting Journey

Professor Margit Livingston on the Debtor's Name under the 2010 Amendments to U.C.C. Article 9: California's Interesting Journey

 The 2010 Amendments to U.C.C. Article 9 went into effect in most states on July 1, 2013. A key portion of the amended debtor name provisions focused on the appropriate name of an individual debtor so as to ensure the best prospects of giving notice of the security interest. The drafters offered two alternate provisions-Alternative A and Alternative B. Most states adopted Alternative A; a few Alternative B. California chose a different path.

Excerpt:

The 2010 Amendments to U.C.C. Article 9 went into effect in most states on July 1, 2013. These amendments preserve the basic structure of Article 9 from the 2001 revisions but make important changes to troublesome issues regarding the debtor's name on a financing statement and the effect of interstate relocations and reincorporations of debtors. A key portion of the amended debtor name provisions focused on the appropriate name of an individual debtor for a filed financing statement so as to ensure the best prospects of successfully giving notice to the world of the security interest. The drafters offered these provisions in two forms to the states—Alternative A and Alternative B, which will be discussed more fully below. Most states adopted Alternative A; a few Alternative B. California, a huge commercial jurisdiction, was not only tardy in adopting the revisions but also rejected both alternatives during a legislative journey that encompassed social and political issues not usually part of the commercial law landscape. As will be seen, California ended up with essentially the pre-amendment law on this point.

In 2010, the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI) promulgated a number of amendments to the existing 2001 version of Article 9, with a suggested effective date of July 1, 2013. Most states have enacted the 2010 Amendments, and legislation is still pending a few others. National Conference Commissioners on Uniform State Laws, Legislative Fact Sheet—UCC Article 9 Amendments (2010). In amending Article 9, the drafters sought to clarify and simplify the law regarding the appropriate financing statement name for individual debtors (i.e., natural persons). The 2001 version of Article 9 required only the debtor's "name" on a financing statement where the debtor is an individual. U.C.C. § 9-503 (a)(4) (2009). Courts have disagreed as to whether "name" means "legal name" or any name by which the debtor is commonly known, such as a nickname or a driver's license name. The 2010 Amendments attempt to resolve that division by offering the states two new debtor name provisions from which to choose.

Under Alternative A to section 9-503 (a)(4), the secured party must use the name of an individual debtor as indicated on his/her unexpired driver's license issued by "this State." U.C.C. § 9-503 (a)(4), Alt. A (2010). If the debtor does not have an unexpired driver's license issued by "this State," then the secured party should provide the "individual name of the debtor or the surname and first personal name of the debtor." U.C.C. § 9-503 (a)(5), Alt. A (2010). This alternative, called the "only-if" option, narrows the options for the filing secured creditor. It directs the creditor to use the debtor's name as indicated on his/her driver's license issued by "this State." "This State" is a reference to the state in which the financing statement will be filed, which, for individual debtors, is the state of the debtor's principal residence. See U.C.C. §§ 9-301 (1) (specifying that the law of the jurisdiction where the debtor is located governs perfection); 9-307 (b)(1) (stating that individual debtors are located in the state of their principal residence).

Thus, under Alternative A, if the debtor holds an unexpired driver's license from Illinois, which is also the state of his/her principal residence, the secured party should use the driver's license name on the filed financing statement. The secured party no longer has to wonder whether its financing statement is sufficient where it picks one of several names that the debtor uses on various documents. Nor does the creditor have to file multiple financing statements under the various names to "cover all the bases."

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