Failure to correctly identify a
debtor on a financing statement can be fatal to a creditor's attempted filing
of a security interest. Newly adopted amendments to Uniform Commercial Code
Article 9 are designed to clear up some areas of confusion regarding how
debtors' names appear on financing statements. With respect to individuals, the
Revision describes two alternatives, which are discussed in this article.
Article 9 of the Uniform
Commercial Code is one of the most recently amended articles of the UCC, having
just undergone revision in 2001 (the "2001 Revision"). Nonetheless,
the complexity of the Code and changing practices in commerce have necessitated
further revision. See, Margit Livingston, Bewitched, Bothered, and
Bewildered: The Courts and Revised Article 9 of the Uniform Commercial Code Ten
Years Later, 9 DePaul Bus. & Com. L.J. 169, 214 (2011). This does not
suggest that the 2001 Revision was unsuccessful, as the 2001 Revision clarified
numerous outstanding issues. Inconsistent outcomes in some cases and non-uniform
amendments to state law, however, led to a perceived need for further revision
to Article 9 in light of the desire for greater guidance and predictability for
secured transactions generally. Responding to the need for further revision,
the American Law Institute (ALI) and the Uniform Law Commission (ULC)
commissioned a drafting committee toward further revisions to Article 9. The
ALI and ULC have approved amendments that states may now adopt, toward an
effectiveness date of July 1, 2013.
One of the issues that led to the Revision was disagreement about how a
creditor should best specify the name of the debtor on the financing statement.
Some states, such as Texas, passed non-uniform amendments to address the
problems. See, e.g., Tex.. Bus. & Com. Code Ann. § 9.503 (2011) [an annotated version of this statute is available to lexis.com
subscribers] ; Tenn. Code Ann. § 47-9-503 (2011) [annotated version]. Under Section 9-503, a financing
statement is not seriously misleading if it lists the name of the debtor
indicated on the public record or the debtor's jurisdiction for organizations
or simply the name of the individual debtor. The model form provided in Section
9-521 added merely that this be the "exact full legal name." While
this might initially appear sufficient guidance, it became apparent that issues
remained, such as the inclusion of trade names and how to identify an
individual's name when the individual is commonly known by more than one name.
Creditors who incorrectly identified the debtor soon found that their financing
statement was ineffective because it was seriously misleading. Quite simply,
these name errors can be fatal to the creditor's attempted filing of a security
As an example, in Hastings State Bank v. Stainaker (In re EDM Corp.),
431 B.R. 459 (B.A.P. 8th Cir. 2010) [an enhanced version of this opinion is available to lexis.com
subscribers], Hastings State Bank made several loans to EDM Corp., for
which it filed first a financing statement in the name of the corporation, but added
the words "d/b/a EDM Equipment." The bankruptcy court found that
Hastings State Bank was not entitled to priority because the name of the debtor
on the financing statement was seriously misleading since the Nebraska
Secretary of State's Office search logic did not reveal the financing
statement. Id.at 461. The court concluded, "[I]n sum, we interpret
§ 9-503 to mean exactly what it says: if the debtor is a registered
organization, then a financing statement 'provides the name of the debtor' only
if it 'provides the name of the debtor indicated on the public record of the
debtor's jurisdiction of organization' - nothing more and nothing less. Trade
names may be added, but not as part of the organizational name itself.
Consequently, because [creditor]'s UCC statement added superfluous information
to [debtor]'s organizational name, it did not sufficiently provide the name of
the debtor.' Id. at 466. See also, In re Jim Ross Tires, Inc.,
379 B.R. 670 (Bankr. S.D. Tex. 2007) [enhanced version] (holding that the failure of two
creditors to properly record the name of the debtor meant that its secured
interest was never perfected and therefore the trustee had a superior lien); Host
America Corp. v. Coastline Financinal Inc., 60 U.C.C. Rep. Serv. 2d. 120 (D.
Utah 2006) [enhanced version] (finding that the financing statement
seriously misleading when it listed "K.W.M." as the debor's name
rather than "K W M" with no punctuation).
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