What’s in a Name under the Uniform Commercial Code in Washington?
For a secured transaction under the Uniform Commercial Code (the “UCC”) starting on July 1, 2013, it is a lot. It could mean the difference between success and failure. Article 9 of the UCC (Article 9A in Washington) governs the creation of most security interests in personal property. In most cases, a financing statement must be filed in the appropriate state office. That filing allows the public to search the records for the existence of the security interest. One piece of information that is required for the financing statement is the name of the debtor – the individual or entity that has granted a security interest.
Under current Washington law, a financing statement sufficiently provides the name of a debtor that is a “registered organization” only if the financing statement uses the name of the debtor indicated on the public record of the jurisdiction where the debtor was organized which shows that the debtor was organized. A “registered organization” is an organization formed or organized solely under the law of a single state or the United States for which the state or the United States must maintain a public record showing that the organization was organized. The most common registered organizations are corporations, limited liability companies and limited partnerships. For example, a Washington corporation is formed by filing Articles of Incorporation with the Washington Secretary of State. For an individual person, the Washington UCC does not provide any guidance other than to require the “individual” name of the person.
In 2010, the National Conference of Commissioners on Uniform State Laws proposed amendments to the UCC. One of the purposes of the amendments was to provide more guidance on the sufficiency of a debtor’s name on a financing statement. For example, “public record” is not defined under the current UCC. Since there are various “public records” and a “registered organization” could be identified differently from public record to public record, this causes confusion. Which public record is the correct one to use? For individuals, it could be even more confusing. For example, if the individual’s first name is Robert, the financing statement might identify him as Robert, Rob, or Bob. Maybe the individual does not use his or her first name, only the initial of their first name, and is known by their middle name.
In 2011, the state of Washington adopted amendments to its UCC. These amendments become effective on July 1, 2013. The definition of a “registered organization” has been modified from current law. It will be defined as “an organization formed or organized solely under the law of a single state or the United States by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the state or the United States”. “Public organic record” is defined in part as a record that is available to the public for inspection and is a record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and any record filed with or issued by the state or the United States which amends or restates the original record. In Washington, these are Articles of Incorporation for a corporation, a Certificate of Formation for a limited liability company, or a Certificate of Limited Partnership for a limited partnership, and are filed with the Washington Secretary of State. These registered organizations can change their name by filing Articles of Amendment or a Certificate of Amendment, as applicable, with the Secretary of State. The original Articles or Certificate and the Articles or Certificates of Amendment constitute the “public organic record”. Effective July 1, 2013, for a UCC financing statement filed in Washington against a registered organization (whether organized in Washington or in another state), the financing statement sufficiently provides the name of the debtor only if the financing statement provides the name that is stated to be the registered organization’s name on the public organic record most recently filed with or issued by the state in which the registered organization was organized. Consequently, the name of the registered organization debtor on the financing statement must match the name on the most recent public organic record for that organization.
When the National Conference of Commissioners on Uniform State Laws proposed the amendments for identifying individual persons, it provided two alternatives. Under the first alternative, the financing statement sufficiently identifies an individual debtor only if it provides the name of the individual as it appears on the individual’s unexpired driver’s license issued by the state where the financing statement will be filed. If the individual does not have such a driver’s license, the individual debtor’s surname (last name) and first personal name may be used. Most states that have adopted the proposed amendments adopted this alternative. The second alternative permits the use of the individual’s name if sufficient under current law, the surname and first personal name of the debtor, or the debtor’s name as indicated on an unexpired driver’s license as provided in the first alternative. The state of Washington is one of six states, so far, to adopt the second alternative and its amendment provides that the debtor’s name as indicated on an unexpired identification card issued to the individual by the state of Washington is also sufficient. If the state of Washington has issued to an individual more than one driver’s license or identification card, the one that was issued most recently is the one to which the statute refers.
An error in properly identifying the debtor on a UCC financing statement may make the financing statement “seriously misleading”, which would make the financing statement ineffective. An ineffective financing statement affects the security interest reflected in the financing statement and could result in the secured party being treated as an unsecured creditor of the debtor, a result the secured party did not intend.
Beresford Booth PLLC – Edmonds Business and Real Estate Lawyers (425.776.4100), www.beresfordlaw.com
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