Kansas UCC Filing & the Wrong Debtor Name: It’s a BIG Deal
Filing UCCs may seem simple. I often hear folks say “Meh, it’s no big deal. I just gotta fill in the blanks.” But those folks are wrong. The details of UCC filings are absolutely a BIG deal – the details are the difference between being a secured creditor and an unsecured creditor. The details are the difference in recovering hundreds of thousands and collecting pennies, or worse. One creditor learned a hard lesson with their Kansas UCC filing, when they failed to heed the accuracy warning: the difference is in the details.
CNH Industrial Capital of America, LLC (CNH) entered into two Retail Installment Sale and Security Agreements with Dewey Dennis Preston (Preston) for the finance of farm equipment. CNH filed two UCCs, and on each of the UCCs CNH listed Preston’s name as Preston D.Dennis (with a period & no space between D. and Dennis). According to the court opinion, CNH listed Preston in the surname box and D.Dennis in the first personal name box.
Let me back up a second & give you a bit of information on Preston’s name. His full legal name is Dewey Dennis Preston, but he goes by D. Dennis Preston (a period after D and a space between D. & Dennis). Preston’s Kansas driver’s license lists his name as Preston D Dennis (no period after D and a space between D & Dennis).
Kansas UCC 9-503 specifically states the UCC sufficiently identifies the debtor if the name on the UCC is as it appears on the unexpired driver’s license: “if the debtor is an individual to whom this state has issued a driver’s license or identification card that has not expired, only if the financing statement provides the name of the individual which is indicated on the driver’s license or identification card.”
CNH argued its security interest is valid, however, CNH did not list the debtor’s name on the Kansas UCC exactly as it appears on the individual’s unexpired driver’s license:
Court Says: “…the Court finds that under Article 9 of the Kansas Uniform Commercial Code, which requires the use of Debtor’s name on financing statements as stated on his driver’s license, CNH’s security interest in untitled personal property is unperfected and therefor CNH’s claim is properly treated as unsecured in Debtor’s proposed plan.” Ouch!
The court furthered “Both of CNH’s financing statements state Debtor’s name as “Preston D.Dennis.” “Preston” is in the box for Surname, and “D.Dennis” is in the box for First Personal Name. The “Additional name(s)/initial(s)” box is blank. Because Debtor’s name stated on his driver’s license is “Preston D Dennis,” without a period and with a space, Article 9 of the Kansas Uniform Commercial Code regarding financing statements requires the conclusion that CNH’s financing statements were was “seriously misleading,” and not saved from that fate by the “safe harbor.” CNH’s financing statements are therefore ineffective.
Remember UCC 9-503(a)?
You must correctly identify and list the debtor’s name on the Financing Statement in compliance with UCC 9-503(a). Whether it is a registered entity or an individual, Article 9 says:
- Registered Entity: list the name on the Financing Statement as it appears in the public organic record
- Individual: 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.
- 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.
It’s straightforward. If it is an individual, review their driver’s license and list their name on the Financing Statement exactly as it appears on the unexpired driver’s license.
Compliance is King with Kansas UCC
Use caution when identifying your customer on the UCC filing, whether it is an organization or an individual. If it’s an individual, carefully list their name exactly as it appears on their unexpired driver’s license.