(Warning: Inside Secured Transactions baseball.)
Notwithstanding the best efforts of the very good drafters of Article 9 of the Uniform Commercial Code, the Wisconsin Court of Appeals managed to get it wrong in Northside Elevator, Inc. v. Ossmann, 2019 WI App 33 (Court of Appeals 2019).
The year 2000 and subsequent revisions to Article 9 (read about many of them in my 2001 article here) aimed to achieve several goals. One of them was the clean up the confusion of how to identify the name of a debtor when perfecting (registering) a security interest. In short, should subsequent searchers have to look under all potential names, or should original filers be required to get it "right" the first time on pains of being unperfected? The drafters unequivocally chose option number 2: it's up to the original filer to file under the correct name of the debtor and to amend the filing if the name of the debtor changes.
It's easy to get the name of a corporation or other registered entity right, after all, a filer can simply look to the corporation's registration with the appropriate state authority. But what about individuals? Do filers need to get their birth certificates? No, it's much simpler. A secured creditor filer need only use the name of an individual as it appears on her drivers license. Easy, right? Not so fast.
What if the drivers license of, say, Jeffrey A. Ossmann, expires, and he gets a new one with the name Jeffrey Alan Ossmann? Here too the rule is simple: the original filer has to keep track of its borrowers and file an amendment within four months of the change. A change in name on a drivers license is not common but it regularly happens when women marry. In any event, banks should have systems in place to monitor this sort of thing. But Bremer Bank didn't.
Enter Northside Elevator. It also wanted to extend credit to Jeffrey so it searched under the name on his new drivers license. Did Bremer Bank's filing, still under Jeffrey's old name, appear on Northside's search under his new name? No, it did not. With a clear search Northside went ahead, extended credit to Jeffrey, and filed under his now-correct name. When Jeffrey couldn't pay, Northside went to seize its collateral only to be met by Bremer Bank that claimed its earlier filing meant it had priority. But Bremer hadn't amended its filing to reflect Jeffrey's "new" name. Which meant it should be subordinate.
Bremer Bank certainly should have been subordinate to Northside but that's not what the Wisconsin Court of Appeals decided. In an obtuse opinion it concluded that Northside(!) should have searched under variations of Jeffrey's name, even though Article 9 states that the name of the drivers license is an individual's correct name, and even though Bremer Bank had four months after Jeffrey's name change to protect itself.
Perhaps this case should encourage students who struggle with their course in Secured Transactions. Even their "betters" can get it wrong. Better yet, the opinion states that it "may not be cited in any court of this state as precedent or authority." At least the court got that right.
Notwithstanding the best efforts of the very good drafters of Article 9 of the Uniform Commercial Code, the Wisconsin Court of Appeals managed to get it wrong in Northside Elevator, Inc. v. Ossmann, 2019 WI App 33 (Court of Appeals 2019).
The year 2000 and subsequent revisions to Article 9 (read about many of them in my 2001 article here) aimed to achieve several goals. One of them was the clean up the confusion of how to identify the name of a debtor when perfecting (registering) a security interest. In short, should subsequent searchers have to look under all potential names, or should original filers be required to get it "right" the first time on pains of being unperfected? The drafters unequivocally chose option number 2: it's up to the original filer to file under the correct name of the debtor and to amend the filing if the name of the debtor changes.
It's easy to get the name of a corporation or other registered entity right, after all, a filer can simply look to the corporation's registration with the appropriate state authority. But what about individuals? Do filers need to get their birth certificates? No, it's much simpler. A secured creditor filer need only use the name of an individual as it appears on her drivers license. Easy, right? Not so fast.
What if the drivers license of, say, Jeffrey A. Ossmann, expires, and he gets a new one with the name Jeffrey Alan Ossmann? Here too the rule is simple: the original filer has to keep track of its borrowers and file an amendment within four months of the change. A change in name on a drivers license is not common but it regularly happens when women marry. In any event, banks should have systems in place to monitor this sort of thing. But Bremer Bank didn't.
Enter Northside Elevator. It also wanted to extend credit to Jeffrey so it searched under the name on his new drivers license. Did Bremer Bank's filing, still under Jeffrey's old name, appear on Northside's search under his new name? No, it did not. With a clear search Northside went ahead, extended credit to Jeffrey, and filed under his now-correct name. When Jeffrey couldn't pay, Northside went to seize its collateral only to be met by Bremer Bank that claimed its earlier filing meant it had priority. But Bremer hadn't amended its filing to reflect Jeffrey's "new" name. Which meant it should be subordinate.
Bremer Bank certainly should have been subordinate to Northside but that's not what the Wisconsin Court of Appeals decided. In an obtuse opinion it concluded that Northside(!) should have searched under variations of Jeffrey's name, even though Article 9 states that the name of the drivers license is an individual's correct name, and even though Bremer Bank had four months after Jeffrey's name change to protect itself.
Perhaps this case should encourage students who struggle with their course in Secured Transactions. Even their "betters" can get it wrong. Better yet, the opinion states that it "may not be cited in any court of this state as precedent or authority." At least the court got that right.
No comments:
Post a Comment