Viewing: UCC News

Jul 10

July 10, 2017

UCC Expert’s Corner: Court Applies Former Article 9 Standard to Sufficiency of Judgment Lien Debtor Name

UCC Expert’s Corner: Court Applies Former Article 9 Standard to Sufficiency of Judgment Lien Debtor Name

Court Applies Former Article 9 Standard to Sufficiency of Judgment Lien Debtor Name By Paul Hodnefield, Esq. Since 2001, those who file UCC records have been well aware that even seemingly minor errors in a debtor name can render a financing statement seriously misleading. However, what standard do the courts apply to the sufficiency of debtor names that appear on other types of lien records?  A court recently addressed that question with respect to a judgment lien in the case…
Mar 27

March 27, 2017

UCC Expert’s Corner: Right Name/Wrong Field Renders Financing Statement Seriously Misleading

UCC Expert’s Corner: Right Name/Wrong Field Renders Financing Statement Seriously Misleading

By Paul Hodnefield, Esq. Those who file UCC records have long been aware of the importance of filing under the correct debtor name. However, identifying the correct debtor name is only half the battle. The filer must also provide the name in the correct debtor name fields on the financing statement. Failure to properly transfer the name to the financing statement can render the record seriously misleading to the same extent as if the filer provided the wrong debtor name….
Feb 21

February 21, 2017

UCC Expert’s Corner: Court Holds That Middle Name Matters on Driver’s License

The 2010 Amendments to UCC Article 9, which took effect in most states on July 1, 2013, provided new rules for the sufficiency of an individual debtor name. Most states enacted a legislative option which required a financing statement to provide the name of an individual debtor that was indicated on the person’s unexpired driver’s license issued by the state where the record was filed. A court recently addressed the effect of an individual debtor name that appears differently on…
Sep 29

September 29, 2016

UCC Expert’s Corner: Buyer Beware – Unauthorized Transfer Provides Secured Party With Multiple Causes of Action

UCC Expert’s Corner: Buyer Beware – Unauthorized Transfer Provides Secured Party With Multiple Causes of Action

By Paul Hodnefield, Esq. Debtors have been known to sell or otherwise transfer assets subject to a security interest without the knowledge of the secured party. When this occurs, the transferee often takes subject to the security interest, which can be a costly proposition. A buyer discovered this the hard way in the recent case of Beach Community Bank v. Disposal Services, LLC, 2016 Fla. App. LEXIS 14159 (Fla. Ct. App. Sept. 21, 2016). In this case, Beach Community Bank…
Jul 6

July 6, 2016

UCC Expert’s Corner: Determining the Priority of Unperfected Security Interests with Simultaneous Attachment

UCC Expert’s Corner: Determining the Priority of Unperfected Security Interests with Simultaneous Attachment

On rare occasions, a security interest perfection or priority question may arise for which UCC Article 9 provides no answer. When that occurs, the courts must resolve the issue based on other factors. That situation occurred in a recent case, Pet Food Experts, Inc. v. Alpha Nutrition, Inc., 2016 R.I. Super. LEXIS 58 (R.I. Sup. Ct. May 10, 2016). In September, 2014, Alpha Nutrition, Inc. (“Alpha”) borrowed $700,000 from Pet Food Experts, Inc. (“PFE”). To secure the obligation, Alpha granted…
Jun 1

June 1, 2016

UCC Expert’s Corner: Court Finds UCC Security Interest Superior to Set-Off Rights of Farm Products Buyer

UCC Expert’s Corner: Court Finds UCC Security Interest Superior to Set-Off Rights of Farm Products Buyer

Sorting out UCC security interests, agricultural liens, and Effective Financing Statements (“EFS”) filed under the Food Security Act (“FSA”) can be a challenge for both lenders and buyers of farm products. These three distinct but overlapping concepts all were issues in the recent case of Guaranty Bank & Trust Company v. Agrex, Incorporated, 2016 WL 1720105 (5th Cir. Apr. 28, 2016). To understand the issues in the case, a little background on agricultural liens and interests might be helpful. There…
May 2

May 2, 2016

UCC Expert’s Corner: Court Denies Equitable Remedies Due to Secured Party’s Lack of Due Diligence

UCC Expert’s Corner: Court Denies Equitable Remedies Due to Secured Party’s Lack of Due Diligence

Thorough due diligence can help the secured party avoid later perfection and priority problems with a secured loan. In fact, the failure to conduct adequate due diligence may leave the secured party without access to equitable remedies, even if the debtor prevents the secured party from perfecting its security interest. That was the situation in a recent case, Fangio v. DivLend Equipment Leasing, LLC (In re Ajax Integrated, LLC), 2016 WL 1178350 (Bankr. N.D.N.Y. Apr. 4, 2016). On May 20,…
Apr 5

April 5, 2016

UCC Expert’s Corner: Court Finds UCC Financing Statement that Described LLC’s Property was Insufficient to Perfect a Security Interest in the Debtor’s LLC Membership Interest

UCC Expert’s Corner: Court Finds UCC Financing Statement that Described LLC’s Property was Insufficient to Perfect a Security Interest in the Debtor’s LLC Membership Interest

A debtor’s membership interest in a limited liability company (“LLC”) will often serve as collateral for secured loans. The secured party, however, must be very careful to correctly perfect its security interest in that type of asset. Any mistake can be costly, as the secured party discovered in the recent case In re: 11 East 36th, LLC, 2016 WL 1117588 (S.D.N.Y. March 21, 2016). 11 East 36th, LLC owned 15 units in a building located at 11 East 36th Street…
Mar 3

March 3, 2016

UCC Expert’s Corner: Court Finds Secured Party’s Failure to Refile UCC not a Defense for Buyer of Collateral

UCC Expert’s Corner: Court Finds Secured Party’s Failure to Refile UCC not a Defense for Buyer of Collateral

One of the greatest challenges for secured parties after the filing of a financing statement is a change in the governing law. The law governing perfection and priority may change when a debtor relocates across state lines or transfers collateral to a third party that is located in a different state than the debtor. Either way, the secured party has a very limited time to refile in the new jurisdiction to maintain perfection of its security interest. There are some…
Feb 3

February 3, 2016

UCC Expert’s Corner: Court Finds Security Interest in Inventory and Proceeds Not Perfected by Real Estate Law

UCC Expert’s Corner: Court Finds Security Interest in Inventory and Proceeds Not Perfected by Real Estate Law

A real estate instrument can serve as a security agreement with respect to the debtor’s tangible personal property and proceeds. However, recording that same instrument may not perfect that security interest, even if the personal property collateral is physically located on the related real property. As a secured party learned in the recent case In re: Shree Meldikrupa, Inc., 2016 WL 235205 (Bankr. S.D. Ga. Jan. 15, 2016), perfection of such a security interest in personal property and proceeds normally…