Filing a UCC on an Individual? List the Name as It Appears on the Unexpired Driver’s License… or Not
I can’t begin to tell you the number of times I have said or written some variation of “… when filing a UCC, always list the individual’s name as it appears on the unexpired driver’s license …” I’m certain if you run a query via the NCS blog for “9-503(a)” you will find oodles of information. I’ve said it oodles of times, because it’s true; it’s right there in UCC Article 9! It’s true, until a court case drops and mucks it all up.
UCC 9-503(a)… I Feel Like a Broken Record
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 lays it out —
- 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. Should I repeat one more time? List the debtor’s name exactly as it appears on the unexpired driver’s license. I do sound like a broken record… do folks still play records?
The Court Case That Mucked It Up
I’ll do my best to break this down –
- The Jurisdiction: Wisconsin
- The Debtor: Jeffrey Ossmann
- The Arguing Secured Parties with an Interest in Same Collateral: Northside Elevator, Inc. and Bremer Bank
Jeffrey Ossmann (Ossmann), a farmer, obtained two loans from Bremer Bank (Bank). In turn, Ossmann and Bank executed a security agreement and Bank filed a UCC. On the Financing Statement, Bank identified Ossmann as “Jeffrey A. Ossmann” which was the name on Ossmann’s unexpired license.
In 2016, Ossmann was issued a new license. The name on the new license was “Jeffrey Alan Ossmann“.
Time Out! Under ordinary circumstances, what should Bank do right now (if it was 2016 and within four months of the name change)? Yes, Bank should file an amendment and list the debtor’s name as “Jeffrey Alan Ossmann.” Good! Back to the timeline.
Northside Elevator, Inc. (Northside) had been selling seed and fertilizer to Ossmann. When Ossmann was unable to pay the balance, an agreement was executed and Northside filed a UCC. On the Financing Statement, Northside identified Ossmann as “Jeffrey Alan Ossmann” which was the name on Ossmann’s unexpired license.
Northside claimed its security interest took priority over Bank’s because Bank’s Financing Statement did not correctly list Ossmann’s name as it appeared on Ossmann’s unexpired license. (“Jeffrey Alan Ossmann” for those still with me.)
As with many court proceedings there is a great deal of information, but only small bits are of interest to me; this is what I call the blah-blahs. The case goes on to review the various bits of Ossmann failing to pay, descriptions of the collateral, the legalities of Northside appealing the Circuit Court’s ruling in favor of the bank, and the relevant bits of Article 9: correctly identifying the debtor, what is seriously misleading, standard search logic and what constitutes minor errors/omissions.
Standard Search Logic, Not So Standard?
Northside claims that Bank’s security interest is unperfected, because a search on “Jeffrey Alan Ossmann” (Ossmann’s license name when Northside filed its UCC) did not reveal Bank’s UCC filing.
“Northside asserts that the name ‘Jeffrey A. Ossmann’ on Bremer Bank’s financing statement renders the statement seriously misleading, under WIS. STAT. § 409.506(3), because a search of DFI records using the name ‘Jeffrey Alan Ossmann’ did not reveal Bremer Bank’s financing statement.”
Clearly, the tricky business with the search is due to the variance of middle name vs. middle initial. To offer clarity, the court explained the search logic.
“(1) NAME SEARCHED. A search request shall set forth the full correct name of a debtor or the name variant desired to be searched and specify whether the debtor is an individual or an organization. The full name of an individual shall consist of a first name, a middle name or initial, and a last name, although a search request may be submitted with no middle name or initial and, if only a single name is presented, it shall be treated as a last name… A search request shall be processed using the name in the exact form it is submitted.”
OK, this makes sense. Northside did a search by the debtor’s full correct name: Jeffrey Alan Ossmann. Bank’s filing did not appear in the search result, which would make Bank’s Financing Statement seriously misleading / unperfected. So, what’s the problem? According to the court, Northside didn’t use a logical search.
“Section DFI-CCS 5.04(1)(e) provides: ‘For first and middle names of individuals, initials shall be treated as the logical equivalent of all names that begin with the initials, and no middle name or initial shall be equated with all middle names and initials.'”
Essentially, a search for “Jeffrey A Ossmann” should display all Jeffrey Ossmanns with either a middle name beginning with “A” or the middle initial “A.” In theory, a search for “Jeffrey A Ossmann” would display results for Jeffrey Armstrong Ossmann, Jeffrey Awesome Ossmann, Jeffrey A. Ossmann, etc. So, the court is saying, if Northside had simply searched by “Jeffrey A Ossmann” it would have seen Bank’s existing UCC filing.
In fact, the court stated the following –
“A searcher who fails to take advantage of the DFI’s search logic cannot later complain that a financing statement is seriously misleading if that statement would have been disclosed if the searcher had availed himself or herself of the search logic.”
** Screeching Record Noise Plays Here **
“We conclude that, because a search of the name ‘Jeffrey Alan Ossmann,’ using the DFI’s search logic, and any permissible name variations permitted by that logic, would have disclosed Bremer Bank’s financing statement, that statement is not seriously misleading.”
Wait, What? Why? What?
I’m going to say it: I don’t agree with the court in this case. I understand the court’s reasoning, in that I understand the usefulness of a vague search (“Jeffrey A Ossmann”). But I don’t understand how Northside can comply with Article 9 and then get burned for doing so. Northside identified the individual by the unexpired license and searched the records by the same name. Northside complied with Article 9.
There’s a Lesson Here
Despite my frustration with the court in this case, there is a useful lesson here. When searching, take the extra minute to search a logical variation of the name. What’s considered logical? Well, that’s for another post, but in this case if there is a middle name, try a quick search using just the middle initial and not the full middle name.