UCC3 Financing Amendment and Termination Statements: Avoiding Loss - - PowerPoint PPT Presentation

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UCC3 Financing Amendment and Termination Statements: Avoiding Loss of Lien Perfection or Priority

• Jeffrey A. Wurst
• Ruskin Moscou Faltischek, P.C.
• jwurst@rmfpc.com
• Jason I. Miller
• Blank Rome L.L.P..
• jmiller@blankrome.com

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What happened in GM?

• Underlying Facts
• Procedural History
• Bankruptcy Court Decision (Gerber)
• Delaware Supreme Court Decision (on

question certified from 2nd Circuit)

• 2nd Circuit Decision

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Amendments

• A UCC-1 can be amended by a UCC-3.

The UCC-3 can be used to:

• Change the collateral description.
• Change the name and/or address of

parties.

• Add or delete parties.

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Amendments

• Is it a Continuation, Amendment or

Termination?

• What Difference Does it Make?

.

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Amendments

• Practical Considerations:
• Filling Out the UCC-3 Statement

Amendment

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Amendments

• Miscellaneous Items to Remember
• A financing statement that is amended by an amendment

that adds collateral is effective as to the added collateral

• nly from the date of the filing of the amendment.
• A financing statement that is amended by an amendment

that adds a debtor is effective as to the added debtor only from the date of the filing of the amendment.

• You cannot delete all debtors from a financing statement.
• You cannot delete all secured parties of record.

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Assignments

• Rules – 9-514
• Must:
• Identify the File No. of the Initial Financing statement
• Provide the name of the assignor
• Provide name and address of the assignee

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Assignments

• Permissive; not mandatory.
• If no assignment is filed, then the

assignor remains the secured party of record, with the power to authorize the filing of amendments, including

• terminations. 9-514 Comment 2.

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Assignments

• Practical Considerations: Filling Out the UCC-3

Statement Amendment

• Fill in File No. in Box 1a.
• Check Box 3
• For a full assignment
• `

a. Add assignee’s name to Box 1a or 7b

• b.

Add assignee’s address in Section 7c

• For partial assignment, also:
• a.

Check Box 8

• b.

Check ASSIGN Collateral Box in Section 8

• c.

Describe collateral assigned in the blank portion of Section 8 Fill in Box 9a or 9b

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Assignments

• Practical Considerations:

Trafficking in Financing Statements.

• Ex. SP1 makes a loan to D and files a Financing

Statement on 1/1/14. SP2 makes an loan to D and files a Financing Statement on 1/1/15. D pays off SP1, but no termination is filed. SP3 makes a new loan to D and gets an assignment from SP1 and files it on 1/1/16. In a priority contest between SP2 and SP3 who wins?

• What if there was a subordination agreement between SP1

and SP2?

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Continuations

• General Rule: The UCC’s general rule is

that a financing statement remains valid for a period of five years from the date of

• filing. Unless a continuation statement is

properly filed before expiration of the five year period, the effectiveness of the financing statement will lapse.

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Continuations

• Effect of Lapse
• Time Limitations
• Successive Continuation Statements

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Continuations

• Content Requirements
• For most types of personal property collateral, the

content requirements for an effective continuation statement are minimal. The document must

• identify, by file number, the initial financing

statement to which it relates; and

• indicate that it is filed as a continuation statement
• Property Records

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Continuations

• Is it a Continuation or Amendment?
• What Difference Does it Make?

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Continuations

• Exception to the Five Year Rule:

Mortgages as Financing Statements

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Terminations

• Rule: 9-513
• Consumer Goods
• a. Must file when:
• i. if there is no outstanding obligations or

commitments, or

• ii. debtor did not authorize.
• b. When?
• i. One month after no outstanding obligations or

comments

• ii. 20 days after demand from the debtor

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Terminations

• All other collateral: Within 20 days of demand

from debtor if:

• a.

except for accounts and chattel paper sold, no outstanding obligations or commitments;

• b.

for accounts and chattel paper sold, if the account debtor or person obligated has paid;

• c.

collateral is goods consigned to the debtor, but no longer in the possession of the debtor; or

• d.

the debtor did not authorize the filing of the financing statement.

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Terminations

• Upon filing a termination, the financing

statement ceases to be effective.

• UCC3 Amendment.
• a. Fill in Box 1a
• b. Check Box 2
• c. Fill in Box 9a or 9b
• Terminations v. Releases.

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Pitfalls

• Unauthorized Termination
• Correction Statement
• Lapse
• Misleading Financing Statement
• Assignments
• Continuation following “Name Change”

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UCC3 Financing Amendment and Termination Statements: Avoiding Loss of Lien Perfection or Priority

• Jeffrey A. Wurst
• Ruskin Moscou Faltischek, P.C.
• jwurst@rmfpc.com
• R. Marshall Grodner
• McGlinchey Stafford P.L.L.C.
• mgrodner@mcglinchey.com
• Jason I. Miller
• Blank Rome L.L.P..
• jmiller@blankrome.com

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UCC3 Financing Amendment and Termination Statements: Avoiding Loss of Lien Perfection or Priority

• Jeffrey A. Wurst
• Ruskin Moscou Faltischek, P.C.
• jwurst@rmfpc.com
• Jason I. Miller
• Blank Rome L.L.P..
• jmiller@blankrome.com