UCC Filing Declared Invalid Because Debtor’s Name On UCC Filing Not Exactly The Same As It Appears On Debtor’s Driver’s License

April 20, 2017

Wisconsin enacted certain UCC Article 9 amendments in 2013, including the “only if” rule for designating an individual debtor’s name on a UCC financing statement.  Under the “only if” rule, the UCC financing statement is sufficient only if the name of the debtor on the UCC financing statement is exactly the same as it appears on the debtor’s unexpired Wisconsin driver’s license

Several other states also adopted the “only if” rule, including Indiana.  A recent case in Indiana confirms the absolute requirements of the “only if” rule and is a reminder to creditors in Wisconsin of the absolute necessity of including the name of the debtor on a UCC filing exactly as it appears on the debtor’s unexpired Wisconsin driver’s license (assuming the debtor is a Wisconsin resident). 

The Indiana case demonstrates that the failure to follow the “only if” rule will cause the loss of the creditor’s perfection in the collateral.  In this case a bankruptcy court in Indiana determined that a UCC financing statement filed to perfect a creditor’s purchase money security interest in certain collateral was invalid because it contained a misspelling of the debtor’s middle name.  The debtor’s name on his Indiana driver’s license was “Ronald Markt Nay”, but the creditor dropped the “t” from the middle name and instead used “Ronald Mark Nay” on the UCC filing.  A big mistake!  Under the “only if” rule, the creditor must use the debtor’s name on the UCC filing exactly as it appears on the debtor’s unexpired driver’s license.  Here, the creditor dropped off the “t” from the middle name.  The UCC filing was declared invalid and the security interest was deemed unperfected.  The case is In re: Ronald Markt Nay, Sherry L. Nay, Debtors, Mainsource Bank, Plaintiff, v. Leaf Capital Funding, LLC, Defendant, 563 B.R. 535 (Bankr. S. D. Ind. January, 2017). 

A Wisconsin court would likely make the same decision under the same facts.  So best for banks in Wisconsin to always follow the “only if” rule.  I have a few suggested practices: 

Under the “only if” rule, an individual debtor’s name on a UCC filing must be exactly the same as the name of the debtor on the debtor’s unexpired Wisconsin driver’s license. This is required even if the name on the driver’s license contains a typographical error.

  • Identify the debtor’s first name and last name (called “surname”) shown on debtor’s driver’s license and place that first name and surname in the appropriate boxes on the UCC financing statement.
  • If the debtor has an additional name on the debtor’s driver’s license, such as a middle name or initial, place that name in the Additional Name(s)/Initial(s) box on the UCC financing statement.
  • If a suffix is a part of the debtor’s name on debtor’s driver’s license, like Sr., Jr., or III, place the suffix in the Suffix box on the UCC financing statement.
  • When the individual debtor is known by a name which is different than the name on the driver’s license the creditor may if it wishes also file on that other name by including it in the second Debtor’s Name box on the UCC financing statement, but the creditor must still include the exact name on the driver’s license in the first Debtor’s Name box on the UCC filing.

Bottom line, under the “only if” rule the simplest of mistakes can lead to a harsh result in a legal case, such as it did in this case where a typographical error on a UCC financing statement caused its invalidity and loss of collateral. 

DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.

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