What’s In a Name? If the BMV Spelled Your Debtor’s Name Wrong, Don’t Correct it in Your UCC Filing

March 30, 2017 by Kristina M. Tridico, Partner
What’s In a Name? If the BMV Spelled Your Debtor’s Name Wrong, Don’t Correct it in Your UCC Filing

Secured Parties are put on a notice that a typo is not a typo when the Indiana Bureau of Motor Vehicles makes the mistake. On January 23, 2017, the US Bankruptcy Court for the Southern District of Indiana (the court) issued an opinion in Mainsource Bank v. Leaf Capital Funding, LLC (In re Nay), 563 B.R. 535 (Bankr. S.D. Ind. 2017) (In re: Ronald Nay).

The court held that the secured party was unperfected because in its financing statement the funder corrected the misspelling of the individual’s middle name on his driver’s license.  The debtor’s name as it appears on his most recently issued unexpired Indiana state driver’s license is “Ronald Markt Nay.” The funder’s filed its Uniform Commercial Code-1s (UCC-1s) with the Indiana Secretary of State removed the “t” from the Debtor’s middle name to correct the apparent misspelling and listed the Debtor’s name on both of the UCC-1s as “Ronald Mark Nay.”

The court noted that under Indiana Code § 26-1-9.1-506, a UCC-1 filing must meet the requirements of IC 26-1-9.1-501 through 25-1-9.1-527 to be an effective filing in the respective Secretary of State where the debtor is domiciled. In particular, where the UCC-1 fails sufficiently to provide the name of the debtor in accordance with IC 26-1-9.1-503(a) then it is deemed “seriously misleading,” and is therefore a defective filing. Section 503(a) provides that “if the debtor is an individual to whom a driver’s license has been issued, a financing statement sufficiently provides the name of debtor only if it provides the name of the individual which is indicated on the driver’s license.”  Practical Law Finance, In re Ronald Nay: Security Interest Unperfected Due to UCC-1 Error, 23 Mar 2017, USA (National/Federal).

The court held that in reading section 503 with section 506, the only correct name of the debtor under section 503 is the name on the Debtor’s driver’s license. Id. Reasoning  that section 503 balances the interest of filers and searchers, meaning that searchers should not be expected to have to ascertain “nicknames, trade names, and the like by which the debtor may be known” and then perform a search based on that information. It explained that it is the lender’s responsibility to provide the name of the debtor sufficiently in a filed UCC-1.

Even if you don’t believe the filing is seriously misleading and ineffective under the searchable standard, the court may determine that you have failed to establish that the UCC-1s are discoverable by searching under the debtor’s correct name using the standard search logic of the State.

If you have a question about your debtor’s name or feel there are multiple spellings or a correction file the financing statement in the name of the debtor as set forth on his or her current driver’s license, even if it is misspelled.  You can then put the “correct” name of the individual in the space for the second debtor on the UCC financing statement form.

For more information, contact Kristina Tridico, John Robinett or another member of our Financial Services group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

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