Standard Search Logic, UCC Debtor Names and Filing Office Error. Paul Hodnefield Jim Prendergast Kelly Kopyt November 7, 2007

Transcription

1 Standard Search Logic, UCC Debtor Names and Filing Office Error Paul Hodnefield Jim Prendergast Kelly Kopyt November 7, 2007

2 The "Correct Debtor Name" Name of Debtor and Secured Party. (a) Sufficiency of debtor s name. A financing statement sufficiently provides the name of the debtor: (1) if the debtor is a registered organization, only if the financing statement provides the name of the debtor indicated on the public record of the debtor s jurisdiction of organization that shows the debtor to have been organized; (2) if the debtor is a decedent s estate, only if the financing statement provides the name of the decedent and indicates the debtor is an estate; (3) if the debtor is a trust or a trustee acting with respect to property held in trust, only if the financing statement: (A) provides the name specified for the trust in its organic documents or, if no name is specified, provides the name of the settlor and additional information sufficient to distinguish the debtor from other trusts having one or more of the same settlers; and (B) indicates, in the debtor s name or otherwise, that the debtor is a trust or is a trustee acting with respect to property held in trust; and (4) in other cases: (A) if the debtor has a name, only if it provides the individual or organizational name of the debtor; and (B) if the debtor does not have a name, only if it provides the names of the partners, members, associates, or other persons comprising the debtor.

3 Effect of Debtor Name Errors Failure to Provide the Correct Debtor Name: A financing statement that fails to sufficiently provide the name of the debtor in accordance with 9-503(a) is seriously misleading. See 9-506(b). A seriously misleading financing statement is not effective as a matter of law. Exception in 9-506(c) : If a search of the records of the filing office under the debtor s correct name, using the filing office s standard search logic, if any, would disclose a financing statement that fails sufficiently to provide the name of the debtor in accordance with Section 9-503(a), the name provided does not make the financing statement seriously misleading.

4 Standard Search Logic How It Works

5 Debtor Name - Normalization Normalization Example 1. Name on Financing Stmt. 2. Case neutral 3. Strip Punctuation 4. Strip ending noise words 5. Eliminate leading THE 6. Remove Spaces Normalized name: The A.B.C. Group, L.L.C. THE A.B.C. GROUP, L.L.C. THE ABC GROUP LLC THE ABC GROUP ABC GROUP ABCGROUP ABCGROUP Search string is also normalized. Only EXACT matches are included in SSL search results.

6 Search Logic Variation Example Correct Debtor Name: ABC-NACO, INC. Run May 2006 Normalized Name Ohio ABCNACO Iowa ABC Alabama??? Utah??? Use SSL Yes Yes Yes No Searched As: State 1 State 2 State 3 State 4 ABC-NACO INC Found Found Found Hidden ABC-NACO Found Found Found Hidden ABC NACO INC Found Found Hidden Hidden ABC NACO Found Found Hidden Found ABC Hidden Found Hidden Hidden

7 Search Logic Examples Correct Debtor Name: The Associates, Inc. Search Results: Ohio NONE Iowa CUSA, INC FSB PARTNERS SASC, INC. CHARTER BANK NAPA

8 Model SSL Challenges SSL Performance Variances, intended or otherwise. Noise Word Iterations Noise Word Lists Punctuation Symbols & Non-keyboard Characters Jurisdictions Without Model Standard Search Logic: Colorado Florida Georgia North Dakota Utah Vermont Virginia All Counties

9 Debtor Name Requirements

10 Registered Organizations Definition of "Registered Organization: [A]n organization organized solely under the law of a single State or the United States and as to which the State or the United States must maintain a public record showing the organization to have been organized. See 9-102(a)(70). Registered Organization Debtor Name is Sufficient: Only if the financing statement provides the name of the debtor indicated on the "public record" that shows the debtor to have been organized. See 9-503(a)(1). Source of Registered Organization Name: Formation documents, such as Articles of Incorporation?

11 Registered Organizations RA9 does not define the term "Public Record". State Business Entity Database? Created for convenience of filing officers. Free and fast. Problem: State Database may not match Articles. New Hampshire example: Articles: Corp Database: John Wrobleski Construction, LLC. Wrobleski John Construction LLC

12 Registered Organization Errors

13 Individual Names Individual Debtor Name Sufficiency: Only if the financing statement provides the individual name of the debtor. ( 9-503(a)(4)(A)). Challenges: 9-503(a) provides no guidance for secured party. Left to the filer s judgment. Search logic is unforgiving.

14 Individual Name Common Errors

15 Decedent's Estate Decedent's Estate Debtor Name is Sufficient: Only if the financing statement provides the name of the decedent and indicates that the debtor is an estate (a)(2) contains 2 requirements: Name of Decedent Indication Debtor is an estate. Decedent's Estate Name Pointers: Decedent's Estate debtor name is provided as an individual. State administrative rules call for indexing decedent as individual. "Estate" is not part of the debtor name for decedent. The Financing Statement, not the debtor name, must contain the indication that debtor is an estate. The word "Estate" should never appear in name of decedent.

16 Estate Name Common Errors

17 Trusts Trust, or Trustee acting with respect to property held in trust. Debtor Name is Sufficient: Only if it provides the name of the debtor trust specified in its organic documents, or if no name is specified, the name of the settlor and additional information to distinguish from other trusts with same settlor(s); and Must indicate in debtor's name or otherwise, that debtor is a trust or trustee acting with respect to property held in trust. Caution! Only name options are the trust OR settlor. Additional information and trust indication does not go in debtor name. Use Addendum check box in Section 17. Exception is if trust indication is part of name found in organic documents.

18 Trust Name Common Errors

19 THE BAD LAW CASES In re: Spearing Tool and Manufacturing Co., Inc., 6 th Circuit, June 21, 2005 CERT DENIED Planned Furniture Promotions, Inc., Plaintiff v. Benjamin S. Youngblood, Inc., 374 F.Supp (M.D. Ga. 2005) In re: Summit Staffing of Polk County, Inc., Debtor, Middle District of Florida, 305 B.R. 347 (October 15, 2003)

20 THE GOOD LAW CASES Pankratz Implement Co. v. Citizens Nat l Bank, 130 P.3d 57 (Kan. 2006) Host American Corporation v. Coastline Financial, Inc., No. 2:06CV5 (USDC, District of Utah), May 30, 2006 In Re: Tyringham Holdings, Inc., CN DOT(USBC E.D. Va. 12/1/06).

21 THE GOOD LAW CASES In re Kinderknecht, 308 B.R. 71 (B.A.P. 10 th Cir. 2004) overruling In re: Michael A. Erwin, Kansas Bankruptcy Court, June 27, 2003 In re Augusta Tissue Mill, LLC, 2007 WL (Bkrtcy.M.D.N.C.), Sept. 5, 2007

22 SOME FILING OFFICE PROBLEMS

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25 These filings were NOT shown on the initial search

26 Nor were these filings shown on the initial search

27 This is the only filing that appeared in the initial search

28 CAN YOU FIGURE THIS OUT?

29 EFFECT OF INDEXING ERRORS. The failure of the filing office to index a record correctly does not affect the effectiveness of the filed record.