Filing a UCC in Georgia? Make Sure You Correctly Identify the Debtor because Georgia Takes “Seriously Misleading” Seriously.
Compliance with UCC 9-503(a) must be one of the easiest and most challenging aspects of perfecting security interests. A contradiction, right? Under Article 9, a debtor should be identified on the UCC as its name appears on the public organic record (organization) or unexpired driver’s license (individual) – it’s that easy. And yet, following the Article 9 requirement has proven time and again to be quite a challenge for creditors when filing UCCs. And most courts, like the U.S. Bankruptcy Court in Georgia, are no nonsense when it comes to properly perfecting a security interest.
What is Compliance with UCC 9-503(a)?
In compliance with UCC 9-503(a), when the debtor is a registered organization, creditors should rely on the information found on the public organic record.
If the debtor is an individual, creditors must first look to the state’s legislation. With the 2010 Amendments, each state had to decide whether they would implement “Alternative A” or “Alternative B.”
- Alternative A: if the debtor holds an unexpired driver’s license, the Financing Statement must list the debtor’s name as it appears on the unexpired driver’s license. (If the debtor does not have a driver’s license, the Financing Statement should list the “individual name” of the debtor or the debtor’s surname and first personal name.)
- Alternative B: the debtor’s driver’s license name, the debtor’s actual name or the debtor’s surname and first personal name may be used on the Financing Statement.
Summary of IN RE Bryant, Bankr. Court, MD Georgia 2021
The debtor, Darren Eugene Bryant (Bryant), filed for bankruptcy protection. The creditor, Regions Bank (Regions), filed a Proof of Claim for $2,515,673.21, which included both funds secured by a UCC filing and unsecured funds. The bankruptcy trustee argued Regions’ UCC was seriously misleading (thus unperfected) because Regions failed to correctly identify Bryant on the UCC.
- Bryant’s unexpired driver’s license identified him as: Darren Eugene Bryant
- Regions’ UCC Financing Statement identified Bryant as: Darren E Bryant or Darren E. Bryant
You see where this is going, right? This is from the court opinion:
“The financing statement must include the name of the debtor, the name of the secured party or a representative of the secured party, describe the collateral covered by the financing statement, and state the maturity date of the security obligation or state that the obligation is not subject to a maturity date. The name on the financing statement sufficiently identifies a debtor ‘if the debtor is an individual to whom this state has issued a driver’s license that has not expired, only if the financing statement provides the name of the individual which is indicated on the driver’s license[.]’”
Yep, Regions failed to comply with UCC 9-503(a).
“The Trustee argues that the Debtor’s name as listed on [Regions’] financing statements does not comply with O.C.G.A § 11-9-503(a)(4). This Court agrees. The statute requires that, for the financing statement to be effective, the name must ‘provide the name of the individual which is indicated on the driver’s license.’”
But, But, But… No, Buts, The Instructions Are Clear
In rendering its decision, the court points to the standard filing form provided by GSCCCA, stating “The UCC-1 form specifically notes that any part of Debtor’s name should not be abbreviated. While [Regions] attempted to argue that the abbreviation of the Debtor’s name still matched the Debtor’s driver’s license, [Regions] abbreviated the Debtor’s name from the name on the driver’s license despite the explicit instructions to the contrary. Therefore, the name on the financing statement does not match the Debtor’s name on the Debtor’s driver’s license, [Regions] financing statement does not comply with O.C.G.A § 11-9-503(a)(4).”
Here’s the Debtor’s Name section of the Financing Statement:
Here’s the instructions for the form (highlight added):
Would It Appear in the Search?
You’re familiar with the phrase “grasping at straws,” yes? Well, in true straw-grasping-fashion, Regions tried one more argument. Regions argued if a search was done without the middle name and/or middle initial, its UCC filing would have appeared. But, the court disagreed, because in theory the searcher would be searching by the name as it appears on the driver’s license.
“A third party searching for a lien on potentially encumbered property relies on the system created by the Georgia Superior Court Clerks’ Cooperative Authority, the ‘GSCCCA,’ to produce results. Whether using the exact search or the stem search, the Georgia UCC Search logic description states, “[w]hen searching for an individual, [the Debtor’s] last name and first name are required, [the Debtor’s] middle name is optional.’ Georgia Superior Court Clerks’ Cooperative Authority, UCC NAME SEARCH LOGIC. Therefore, a proper search done by the guidelines set by the GSCCCA could include a debtor’s middle name. Liens that would not be disclosed by a search that includes a debtor’s middle name would not be perfected. In this case, a third-party searcher optionally could include the Debtor’s middle name, Eugene, when searching for encumbered property, which would not disclose [Regions’] lien. Because a search for “Darren Eugene Bryant”, a correct search according to the guidelines set by the GSCCCA for liens on the Debtor’s property, would not have disclosed [Regions’] lien, [Regions’] financing statement would qualify as seriously misleading under § 11-9-506(c).”
It’s an expensive lesson to learn. Always, always, always identify the individual debtor by the name that appears on their unexpired driver’s license.