UCC Expert’s Corner: Court Finds Debtor’s Signature Not the Name “Indicated” on Driver’s License

Court Finds Debtor’s Signature Not the Name
“Indicated” on Driver’s License

Paul Hodnefield | Associate General Counsel for CSC®

Since the 2010 Amendments to Article 9 took effect in 2013, those who file UCC records have largely relied on the driver’s license to determine the correct name of an individual debtor for purposes of the financing statement. A driver’s license, however, may contain more than one name for the licensee, a printed name and a signed name. Which is the name indicated for UCC purposes? That was the issue addressed by the court in the recent case of In re Pierce, 2018 Bankr. LEXIS 287 (Bankr. S.D. Ga. Feb. 1, 2018).

In 2015, Farm Bureau Bank (the “Bank”) made a secured loan to Kenneth Pierce (the “Debtor”), a resident of Georgia, to finance the purchase of a fertilizer spreader for the Debtor’s farm. To perfect its security interest, the Bank filed a financing statement with the appropriate filing office.

The Bank’s financing statement provided the individual debtor name of “Kenneth Pierce.” The Debtor’s driver’s license, like nearly all such documents issued in the United States, included both the printed name of the licensee and the licensee’s signature. In this case, the driver’s license provided the printed name of “Kenneth Ray Pierce.” However, the Debtor’s signature on the license was simply “Kenneth Pierce.”

The Debtor later filed for bankruptcy protection under Chapter 12, which provides for the adjustment of the debt of a family farm. The Bank timely filed a proof of claim for the outstanding balance on its loan to the Debtor and attached a copy of its financing statement.

A few months later, the Debtor filed an objection to the Bank’s proof of claim. The Debtor alleged that the Bank’s financing statement failed to sufficiently provide the name of the debtor and, as a result, the Bank’s security interest was unperfected and its claim unsecured. The bankruptcy court, therefore, had to resolve the issue.

The court began its analysis by reviewing the Article 9 debtor name rules. Georgia adopted the 2010 Amendments with Legislative Alternative A, which provides that if the debtor is an individual, the financing statement is sufficient only if it provides the name of the individual which is indicated on the driver’s license. In contrast, Legislative Alternative B, which was adopted by only a few states, provides a safe harbor that could allow multiple name variations of an individual to be sufficient for purposes of the financing statement.

In this case, the name on the financing statement did not match the name printed on the driver’s license. The Debtor therefore argued that the financing statement did not provide the name of the debtor. The Bank, however, pointed out that there were actually two names indicated on the driver’s license, the printed name and the Debtor’s signed name. The Bank asserted that either name was sufficient for purposes of Article 9 as enacted in Georgia.

To resolve the issue, the court had to determine whether the phrase “indicated on the driver’s license” referred only to the printed name or whether it also included the name set forth in the Debtor’s signature.

The court cited In re Borden (citation omitted), a case decided before the 2010 Amendments to Article 9 took effect, that found a financing statement filed under the nickname, “Mike” was seriously misleading where various legal documents contained the printed name “Michael,” even though the debtor often signed his name as “Mike.” The court interpreted this case to mean that the name typed on legal documents trumps the name signed by the debtor.

The applicable law changed after the Borden case was decided. Georgia enacted the 2010 Amendments, which took effect in 2013, with the Alternative A “Only If” rule for individual debtor names. The court determined that the choice of Alternative A indicated that the legislature preferred greater certainly over the less precise Alternative B safe harbor rule. According to the court, allowing two equally sufficient ways of identifying the debtor, both the printed name and the signed name, would thwart the legislature’s intent. The court concluded that the precedence given the printed name in Borden and the preference for precision as expressed by the legislature’s enactment of Alternative A limited the meaning of “indicated on the driver’s license” to the printed name.

The court found further support for its conclusion in the instructions on the UCC1 Financing Statement form. The form instructs the filer to “use exact, full name, do not modify or abbreviate any part of the Debtor’s name.”  The court noted that had the Bank followed the form instruction, it would have provided the full name.

Having found that the name provided on the Bank’s financing statement was not sufficient under the Article 9 debtor name rules, the court next turned to application of what it referred to as the “safe harbor provision” of Georgia’s version of UCC § 9-506(c). Under § 9-506(c), if a search of the filing office records under the debtor’s correct name, using the filing office’s standard search logic, if any, would disclose a financing statement that provides an insufficient debtor name, the name provided does not make the financing statement seriously misleading.

In this case, the Bank produced a search that reflected its financing statement. However, that search was conducted only under the name of “Kenneth Pierce.” The Debtor’s search under “Kenneth Ray Pierce” failed to disclose the Bank’s financing statement. Because the Bank’s search was not conducted under the full name of the Debtor, the court ruled that the Bank failed to carry its burden and sustained the Debtor’s objection to the Bank’s proof of claim.

The important thing to take away from this case is that if the debtor is an individual, then the printed name on the driver’s license, not the signature, is the correct name of the debtor for purposes of the financing statement. It is the printed name that is “indicated on the driver’s license.” Although it should not be necessary, if a filer is concerned because the printed and signed names differ, then there is no harm in filing both variations as separate debtors.

Paul Hodnefield is associate general counsel for CSC® and is a frequent speaker and writer on UCC due diligence issues. Please feel free to contact him with questions or comments at paul.hodnefield@cscglobal.com or 800-927-9801, ext. 61730.