Viewing: UCC News

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…
Jan 5

January 5, 2016

UCC Expert’s Corner: Court Finds Bill of Exchange Not Legal Tender for Payment Under Chapter 13 Plan

UCC Expert’s Corner: Court Finds Bill of Exchange Not Legal Tender for Payment Under Chapter 13 Plan

For many years, anti-government and anti-tax protestors have used the UCC filing system to harass, intimidate, and defraud certain targets, primarily government officials. Increasingly, the same theories and tactics used by this anti-government movement serve as the basis for fraudulent debt elimination schemes. These schemes, however, can tie up the courts and increase the costs for all the parties involved. The recent case of In re: Hill, 2015 WL 5575499 (Bankr. E.D. Tenn. Sept. 18, 2015) illustrates this problem. This…
Dec 3

December 3, 2015

UCC Expert’s Corner: Court Finds Lease Arrangement was Disguised Security Interest

UCC Expert’s Corner: Court Finds Lease Arrangement was Disguised Security Interest

The parties to a lease, consignment, sale, or other arrangement may not realize that the transaction is governed by UCC Article 9. Article 9 applies to any transaction, regardless of form, that creates a security interest in personal property by contract. If the transaction does fall within the scope of Article 9, the lessor, consignor, or seller must comply with the statutory perfection requirements. Failure to comply could prove costly, as the purported lessor learned in a recent case, In…
Nov 18

November 18, 2015

Effective December 1: Delaware UCC Paper Filing Change

Effective December 1: Delaware UCC Paper Filing Change

Let CSC help you through Delaware’s new paperless process. Effective December 1, 2015, the Delaware Division of Corporations will modify the acceptable methods of communications for the filing of Uniform Commercial Code (UCC) records. The Division will no longer accept paper UCC forms submitted across the counter or via mail, courier, or fax. This new process does not end the filing of paper UCC forms in Delaware. It only means that paper UCC forms cannot be submitted directly to the…
Nov 3

November 3, 2015

UCC Expert’s Corner: Court Finds Lack of Due Diligence Prevents Fraud Claim Based on UCC Records

UCC Expert’s Corner: Court Finds Lack of Due Diligence Prevents Fraud Claim Based on UCC Records

The UCC search is an essential part of many commercial transactions, and with good reason.   A party’s failure to conduct an adequate search, or perform sufficient due diligence into the status of the disclosed UCC records can carry harsh consequences. The potential cost of insufficient due diligence was demonstrated in the recent case of Western Mortgage & Realty Co. v. KeyBank National Association, 2015 WL 5611579 (D. Idaho Sept. 9, 2015). Two Young brothers (the “Youngs”) owned farms and some…
Oct 2

October 2, 2015

UCC Expert’s Corner: The Risks of Too Much Information on a UCC Financing Statement

UCC Expert’s Corner: The Risks of Too Much Information on a UCC Financing Statement

A record filed under UCC Article 9 provides notice to interested parties that a security interest may exist. As a mere notice, the UCC financing statement is a simple record. It generally requires little more than the party names, addresses, and an indication of the collateral. The secured party generally does not need to include dollar amounts, terms and conditions, or other information about the debtor or transaction as part of the financing statement. It is possible, however, for the…
Sep 9

September 9, 2015

UCC Expert’s Corner: Court Finds Department of Revenue Improperly Levied Without a Lien

UCC Expert’s Corner: Court Finds Department of Revenue Improperly Levied Without a Lien

Nothing ruins a secured party’s day faster after a debtor goes into default than the discovery of an unknown prior tax lien. Tax liens can be intimidating for secured parties and it’s tempting to believe they always win in a priority dispute. However, that perception is not always accurate. State revenue authorities have to satisfy the applicable statutes for creation of a tax lien. Failure to comply the statutory requirements may leave the state authorities unable to enforce the tax…
Aug 10

August 10, 2015

UCC Expert’s Corner: Post-Transfer Lapse Prevented Enforcement of Security Interest Against Transferee

UCC Expert’s Corner: Post-Transfer Lapse Prevented Enforcement of Security Interest Against Transferee

A secured party relies on its properly filed financing statement to allow enforcement of its security interest against a transferee when the debtor disposes of collateral. Generally, the security interest remains effective against the collateral following a transfer, unless the transferee is a buyer in ordinary course of business. However, a security interest that was perfected at the time of the transfer may become unenforceable if the financing statement later lapses. That was the situation in the recent case of…
Jul 1

July 1, 2015

UCC Expert’s Corner: Terminations, Continuations, and Bankruptcy

UCC Expert’s Corner: Terminations, Continuations, and Bankruptcy

Secured parties tend to be cautious about filing any UCC records after a debtor files for bankruptcy. Violations of the automatic stay or discharge injunction can have serious consequences for the offending secured party. However, secured parties may file certain UCC records after the filing of a bankruptcy petition, as a court recently found in the case of Botson v. Citizens Banking Company, 2015 WL 3486616 (Bankr. N.D. Ohio June 1, 2015). The Botsons (the “Debtors”) owned a small insurance…