As we reported a few months ago, the proposed 2010 Amendments to Article 9 of the Uniform Commercial Code (UCC) provide states with two options for determining the individual debtor’s correct name for financing statement purposes, both of which refer to the debtor’s state-issued driver’s license.
When the 2010 Amendments to UCC Article 9 take effect on July 1, 2013, the name indicated on an individual’s driver’s license will be sufficient as the name of the debtor for purposes of the financing statement. Despite the inevitable learning curve and potential snafu’s with various state driver’s license systems, the amendments could give lenders more security that UCC financing statements will be enforceable.
Prior to 2010, Article 9 simply required a secured party to use the “name of the debtor” on its financing statement. The rule sounds simple enough, but problems such as nicknames, changing names due to marriage, etc., and cultural differences in naming conventions vexed secured parties for decades. One court found “Mike” was sufficient to identify an individual debtor whose actual name was “Michael,” while a court in another jurisdiction arrived at the opposite conclusion.
In November, the U.S. Bankruptcy Court for New Mexico gave lenders another reason to wish the 2010 Amendments would hurry up and take effect.
In In re: Green, 2012 Bankr. LEXIS 5347 (Bankr. D.N.M. Nov. 14, 2012), Ronnie L. Green (Debtor), granted a security interest in a partnership interest to The Behles Law Firm, P.C. (Behles). Behles filed financing statements with the New Mexico Secretary of State to perfect its security interest.
The Debtor sometimes used the name “Ron Green,” which was the name shown on his New Mexico driver’s license. The financing statements Behles filed reflected the name of the debtor as “Ron Green.”
Sometime later, the Debtor filed a chapter 11 bankruptcy petition, which was eventually converted to a case under chapter 7 and the court appointed a chapter 7 trustee. The trustee filed to avoid Behles’ security interest on grounds that the financing statements filed by Behles failed to sufficiently name the debtor. Behles’ lost and found his security interest unsecured.
The court reasoned that there was no dispute that “Ronnie Jackson Green” was the Debtor’s legal name, and since financing statement reflected the Debtor’s name as “Ron Green,” the financing statement was seriously misleading because it failed to sufficiently provide the Debtor’s name. The court’s decision was also supported by the fact that a search of the state’s UCC index (using standard search logic and the Debtor’s legal name) failed to disclose Behles’ financing statements.
So, while we wait for the 2010 amendments to take effect in July, lenders must be sure to compare the debtor’s legal name to the name listed on his or her driver’s license. If the driver’s license name is different in any way, the secured party should provide it as an additional debtor name on the financing statement.
If you have any questions about the 2010 amendments, seek the advice of experienced legal counsel. The attorneys at Glass & Goldberg are committed to helping you minimize risk and manage uncertainty, and can help structure your policies and procedures to meet your goals.
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 See In re Erwin, 50 UCC Rep Serv 2d 933, 2003 Bankr. LEXIS 692 (Bankr. D. Kan., June 17, 2003) and In re Larsen, 2010 WL 909138, 72, UCC Rep.2d 187 (Bankr. S.D. Iowa 2010)