The Uniform Commercial Code (UCC) is a comprehensive set of laws governing commercial transactions in the United States. Article 9 of the UCC specifically deals with secured transactions, which are transactions intended to create security interests in personal property or fixtures. For businesses and legal professionals, understanding Article 9 is crucial, especially when it comes to filing financing statements. This guide aims to provide a clearer understanding of key aspects of Article 9, particularly focusing on filing requirements and the importance of accurate debtor information.
Determining Governing State Law Under UCC Article 9
One of the initial steps in any secured transaction is determining the governing law. Article 9 dictates that in many, but not all, situations, the law of the jurisdiction where the debtor is “located” governs perfection and priority issues. It is the filer’s responsibility to consult Part 3 of Article 9 to ascertain whether New York State law or the laws of another state are applicable to their specific transaction. This determination is crucial as it dictates where and how filings must be made to perfect a security interest.
It’s important to emphasize that determining the governing law for perfection and priority is solely the responsibility of the filer. The Department of State cannot provide legal advice on this matter, underscoring the need for businesses to seek competent legal counsel to navigate these complexities.
Original Financing Statements (UCC1) and Filing Location
When New York State law governs perfection and priority, Section 9-501 of Article 9 dictates the proper place for filing an original financing statement (UCC1). The location depends on the nature of the collateral:
Filing with County Clerk or New York City Register
According to subsection (a)(1) of Section 9-501, filings should be made with the office designated for recording real estate mortgages – typically the county clerk or the New York City Register – under specific circumstances:
- As-Extracted Collateral or Timber to be Cut: When the collateral involves minerals to be extracted or timber to be cut.
- Fixture Filings: When the financing statement is filed as a fixture filing, and the collateral consists of goods that are or will become fixtures (items so related to real property that an interest in them arises under real property law).
- Cooperative Interests: When the collateral is a cooperative interest.
Filing with the Secretary of State
Subsection (a)(2) of Section 9-501 specifies that in all other cases, the appropriate office for filing a financing statement to perfect a security interest is the office of the Secretary of State. This broad category covers the majority of financing statements, excluding those specifically directed to county clerks or the NYC Register.
Furthermore, subsection (b) clarifies that even fixture filings for transmitting utilities should be filed with the Secretary of State, creating an exception to the general fixture filing rule for this specific type of debtor.
Amendments, Assignments, Continuations, and Terminations (UCC3)
For subsequent filings related to an original financing statement, such as amendments, assignments, continuations, and terminations (typically using UCC3 forms), the filing location depends on where the original financing statement was filed and the nature of the collateral covered. The filer must determine the most appropriate location based on these scenarios:
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Original Filing with County Clerk/NYC Register (Collateral Specific to that Office): If the original UCC1 was filed with a county clerk or the New York City Register and covered only collateral properly filed in that office under Article 9, then amendments, assignments, continuations, or terminations should also be filed in the same county clerk’s office or NYC Register.
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Original Filing with Department of State (Collateral Specific to that Office): If the original UCC1 was filed solely with the Department of State and covered only collateral properly filed with the Department of State under Article 9, then subsequent UCC3 filings should be made with the Department of State.
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Original Filing in Both Locations (Mixed Collateral): If the original UCC1 was correctly filed in both a county clerk’s office (or NYC Register) and with the Department of State – for instance, a filing covering both fixtures and general business collateral – then all subsequent UCC3 filings (amendments, assignments, continuations, or terminations) should be filed in both offices. This ensures consistency and maintains the integrity of the public record in both locations.
The Critical Importance of the Debtor’s Exact Legal Name
Article 9 places significant emphasis on accurately identifying the debtor’s legal name in all UCC filings. Section 9-502(a)(1) mandates that a financing statement must include the debtor’s name. This is not merely a formality; it is essential for the effectiveness of the filing and the ability of interested parties to discover it through public record searches.
Financing statements are indexed under the debtor’s name. Therefore, anyone searching for filings related to a specific debtor will search using that name. If the debtor’s name is incorrect or incomplete, the financing statement may not be discoverable under a standard search, potentially rendering the security interest unperfected and jeopardizing the secured party’s claim.
“Seriously Misleading” Financing Statements
Section 9-506(b) addresses the consequences of failing to provide the debtor’s name correctly. It states that a financing statement that does not sufficiently provide the debtor’s name as per Section 9-503(a) is considered “seriously misleading,” with significant legal ramifications for perfection.
Exception: The “Standard Search Logic” Safe Harbor
However, subsection (c) of Section 9-506 offers a limited exception. If a search of the filing office’s records under the debtor’s correct name, using the filing office’s standard search logic, would still disclose the financing statement despite the name error, then the name is not considered “seriously misleading.”
This exception is narrow. The New York Department of State’s standard search logic under Article 9 is designed to return results for the exact debtor name entered in the search. Therefore, minor deviations from the exact legal name can easily result in a failed search and a “seriously misleading” determination. Filers cannot rely on this exception as a substitute for due diligence in obtaining and accurately entering the debtor’s legal name.
Section 9-503: Rules for Debtor Names
Section 9-503 provides specific rules for determining what constitutes a sufficient debtor name, depending on the type of debtor:
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Registered Organizations: For registered organizations (like corporations or LLCs), the financing statement is sufficient only if it uses the name indicated on the public record of the debtor’s jurisdiction of organization. This means checking official state records (e.g., Secretary of State websites) to verify the precise legal name.
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Decedent’s Estates: For a decedent’s estate, the filing must include the name of the deceased and indicate that the debtor is an estate.
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Trusts: For trusts or trustees acting for trusts, the financing statement must include either the name specified for the trust in its organic documents or, if no name is specified, the settlor’s name plus enough additional information to distinguish it from other trusts with the same settlor. It must also indicate that the debtor is a trust or trustee.
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Other Cases (Individuals and Unregistered Organizations):
- (A) Debtors with Names: If the debtor has a name (e.g., an individual or an unregistered organization with a recognized name), the financing statement must provide the individual or organizational name.
- (B) Debtors Without Names: If the debtor does not have a name (a rare scenario, possibly referring to certain types of unincorporated associations), the filing must list the names of the partners, members, associates, or other persons comprising the debtor.
Subsection (b) of Section 9-503 clarifies that the inclusion of trade names or other non-legal names does not invalidate a financing statement that correctly provides the legal debtor name. However, subsection (c) explicitly states that using only a debtor’s trade name is insufficient to provide the debtor’s name for Article 9 purposes.
Department of State’s Role and Filer Responsibility
The Department of State’s role is primarily ministerial. They will enter the debtor’s name exactly as it is provided on the financing statement form, including any titles, designations, extraneous information, or even typographical errors. The Department of State assumes no responsibility for verifying the accuracy or legal sufficiency of the debtor’s name under Section 9-503.
Therefore, it is unequivocally the filer’s responsibility to provide the correct legal name of the debtor in the “Debtor’s Name” section of the financing statement.
Common Errors in Debtor Names
The original article provides numerous examples of common errors when setting forth an organization’s or individual’s name. These include:
For Organizations:
- Adding “d/b/a” (doing business as) trade names within the legal name field.
- Including descriptive information like “(a New York Corporation)”.
- Abbreviating words (e.g., “Manufacturing” to “Mfg.”).
- Adding division or subsidiary information.
- Including “a/k/a” (also known as) designations within the legal name.
- Reversing the legal name and trade name (e.g., using the trade name as the primary debtor name).
For Individuals:
- Adding titles (Mr., Ms., Esq., M.D., C.P.A.).
- Using incomplete names (e.g., “John Smith” instead of “John J. Smith”).
- Adding “debtor in possession” designations.
- Including “d/b/a” or “a/k/a” information within the individual’s legal name field.
Best Practices for Trade Names and “Also Known As” Names
If a filer wishes to include a trade name or “also known as” name, the recommended practice is to list it as a separate debtor on the financing statement. For example, use the legal name as the primary debtor (line 1a or 1b of UCC1) and the trade name as an additional debtor (line 2a or 2b of UCC1). Crucially, all required information (address, organization type, jurisdiction) must be provided for both the legal name and any trade names listed as separate debtors. For individual debtors, the last name must always be identified.
Uniform Commercial Code Filing Requirements and Filer Responsibility
The 2001 revisions to Article 9 brought about increased information requirements for UCC filings. Filers must ensure they provide:
- The correct legal name of the debtor.
- The mailing address of the debtor.
- Indication of whether the debtor is an individual or an organization.
- If an individual, the debtor’s last name.
- If an organization, both the type of organization and its jurisdiction of organization.
It’s vital to understand that while a filing office may reject a record only for limited, specified reasons, acceptance of a filing does not guarantee its effectiveness. The filer bears the sole responsibility for:
- Determining the proper filing office.
- Ensuring the record contains all necessary information to be effective for the filer’s intended purpose.
Given the complexities of Article 9, especially regarding debtor names and filing locations, it is strongly recommended that businesses and individuals involved in secured transactions seek guidance from their legal counsel to ensure compliance and protect their interests.
Conclusion
Navigating Article 9 Of The Uniform Commercial Code requires meticulous attention to detail, particularly concerning debtor names and filing locations. While this guide provides a comprehensive overview, it is not a substitute for professional legal advice. Accurate filings are essential for perfecting security interests and ensuring the enforceability of secured transactions under the UCC. Filers must take full responsibility for understanding and adhering to these requirements to mitigate risks and safeguard their financial interests.
