UCC3 Financing Amendment and Termination Statements: Avoiding Loss of Lien Perfection or Priority • Jeffrey A. Wurst • Jason I. Miller • Ruskin Moscou Faltischek, P.C. • Blank Rome L.L.P.. • jwurst@rmfpc.com • jmiller@blankrome.com 1
What happened in GM? • Underlying Facts • Procedural History • Bankruptcy Court Decision (Gerber) • Delaware Supreme Court Decision (on question certified from 2 nd Circuit) • 2 nd Circuit Decision 2
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. 3
Amendments • Is it a Continuation, Amendment or Termination? • What Difference Does it Make? . 4
Amendments • Practical Considerations: • Filling Out the UCC-3 Statement Amendment 5
Amendments • Miscellaneous Items to Remember • A financing statement that is amended by an amendment that adds collateral is effective as to the added collateral only 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. 6
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 7
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. 8
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 9
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? 10
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. 11
Continuations •Effect of Lapse •Time Limitations •Successive Continuation Statements 12
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 13
Continuations • Is it a Continuation or Amendment? • What Difference Does it Make? 14
Continuations • Exception to the Five Year Rule: Mortgages as Financing Statements 15
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 16
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. 17
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. 18
Pitfalls • Unauthorized Termination • Correction Statement • Lapse • Misleading Financing Statement • Assignments • Continuation following “Name Change” 19
UCC3 Financing Amendment and Termination Statements: Avoiding Loss of Lien Perfection or Priority • Jeffrey A. Wurst • R. Marshall Grodner • Jason I. Miller • Ruskin Moscou Faltischek, P.C. • McGlinchey Stafford P.L.L.C. • Blank Rome L.L.P.. • jwurst@rmfpc.com • mgrodner@mcglinchey.com • jmiller@blankrome.com 20
UCC3 Financing Amendment and Termination Statements: Avoiding Loss of Lien Perfection or Priority • Jeffrey A. Wurst • Jason I. Miller • Ruskin Moscou Faltischek, P.C. • Blank Rome L.L.P.. • jwurst@rmfpc.com • jmiller@blankrome.com 21
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