Case Title: Official Committee of Unsecured Creditors of Motors Liquidation Co. v. JP Morgan Chase Bank

Citation: 

Docket Number: 325, 2014

State: delaware

Court: Delaware Supreme Court

Date: 2014-10-17T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
OFFICIAL COMMITTEE OF   
§ 
 
UNSECURED CREDITORS OF MOTORS § 
 
 
 
LIQUIDATION COMPANY, 
§  
No. 325, 2014 
 
 
 
§ 
 
Plaintiff-Appellant, 
§ 
Certification of Question of   
 
  
§ 
Law from the United States   
v.  
§ 
Court of Appeals for the  
 
 
§  
Second Circuit 
JPMORGAN CHASE BANK, N.A., 
§ 
C.A. No. 13-2187-bk 
Individually and as Administrative Agent 
§  
 
for various lenders party to the Term Loan § 
Agreement described herein, 
§ 
 
 
 
§ 
 
 
Defendant-Appellee. 
§ 
 
 
 
 
Submitted:  October 8, 2014 
Decided:  October 17, 2014 
 
 
Before STRINE, Chief Justice; HOLLAND and RIDGELY, Justices; LASTER, 
Vice Chancellor; and COONIN, Judge, constituting the Court en Banc. 
 
Upon Certification of Question of Law from the United States Court of Appeals for 
the Second Circuit.  CERTIFIED QUESTION ANSWERED. 
 
Norman M. Powell, Esquire, Elena C. Norman, Esquire, John J. Paschetto, 
Esquire, Richard J. Thomas, Esquire, Young Conaway Stargatt & Taylor, LLP, 
Wilmington, Delaware; Eric B. Fisher, Esquire (argued), Barry N. Seidel, Esquire, 
Katie L. Weinstein, Esquire, Dickstein Shapiro LLP, New York, New York; 
Jeffrey Rhodes, Esquire, Dickstein Shapiro LLP, Washington, District of 
Columbia, for Plaintiff-Appellant. 
 
Gregory P. Williams, Esquire (argued), Brock E. Czeschin, Esquire, Susan M. 
Hannigan, Esquire, Richards, Layton & Finger, P.A., Wilmington, Delaware; John 
M. Callagy, Esquire, Nicholas J. Panarella, Esquire, Martin A. Krolewski, Esquire, 
Kelley Drye & Warren LLP, New York, New York; Steven O. Weise, Esquire, 
Proskauer Rose LLP, Los Angeles, California, for Defendant-Appellee. 
                                                          
 
 Sitting by designation under Del. Const. art. IV, § 12. 
 
 
 
 
Francis A. Monaco, Jr., Esquire, Ryan C. Cicoski, Esquire, Womble Carlyle 
Sandridge & Rice LLP, Wilmington, Delaware; Richard M. Kohn, Esquire, 
Jonathan N. Helfat, Esquire, Commercial Finance Association, for Amicus Curiae 
Commercial Finance Association. 
 
 
 
STRINE, Chief Justice: 
 
1 
 
I.  INTRODUCTION 
The United States Court of Appeals for the Second Circuit (“Second Circuit”) has 
certified the following question of law important to a dispute pending before it: 
Under UCC Article 9, as adopted into Delaware law by Del. Code Ann. 
tit. 6, art. 9, for a UCC-3 termination statement to effectively extinguish 
the perfected nature of a UCC-1 financing statement, is it enough that 
the secured lender review and knowingly approve for filing a UCC-3 
purporting to extinguish the perfected security interest, or must the 
secured lender intend to terminate the particular security interest that is 
listed on the UCC-3?1  
 
We more precisely answer by assuming that by the term “effectively extinguish,” 
the Second Circuit asks whether reviewing the termination statement and knowingly 
approving it for filing has the effect specified in § 9-513 of the Delaware’s version of the 
Uniform Commercial Code (“UCC”), which is that “the financing statement to which the 
termination statement relates ceases to be effective.”2  Based on that understanding and 
for reasons we explain more fully, the unambiguous provisions of Delaware’s UCC 
dictate that the answer is that “it [is] enough that the secured lender review and 
knowingly approve for filing a UCC-3 purporting to extinguish the perfected security 
interest.”3  Under the Delaware UCC, parties in commerce are entitled to rely upon a 
filing authorized by a secured lender and assume that the secured lender intends the plain 
consequences of its filing. 
 
 
                                                          
 
1 In re: Motors Liquidation Co., 755 F.3d 78, 86 (2d Cir. 2014). 
2 6 Del. C. § 9-513(d). 
3 Id.  
2 
 
II.  THE EVENTS LEADING TO THE CERTIFIED QUESTION 
The dispute pending before the Second Circuit turns on the effect of a UCC 
termination statement – a “UCC-3 termination statement” – filed with the Delaware 
Secretary of State on behalf of General Motors Corporation.4  That termination statement, 
by its plain terms, purported to extinguish a security interest on the assets of General 
Motors (“term loan security interest”) held by a syndicate of lenders, including JPMorgan 
Chase Bank, N.A. (“JPMorgan”).  But neither JPMorgan nor General Motors subjectively 
intended to terminate the term loan security interest when General Motors filed the 
termination statement.  General Motors’ counsel for a separate “synthetic lease” 
financing transaction, Mayer Brown LLP, had inadvertently included the term loan 
security interest on the termination statement that it filed in the process of unwinding the 
synthetic lease.  According to JPMorgan, no one at General Motors, Mayer Brown, or 
Simpson Thatcher Bartlett LLP (JPMorgan’s counsel for the synthetic lease transaction) 
noticed this error, even though individuals at each organization reviewed the filing 
statement before the termination statement was filed on October 30, 2008.  Under the 
stipulated question, we are also to assume that JPMorgan itself reviewed the termination 
statement and knowingly approved its filing. 
After General Motors filed for reorganization under Chapter 11 of the Bankruptcy 
Code, JPMorgan informed the unofficial committee of unsecured creditors (“Creditors 
Committee”) that a UCC-3 termination statement relating to the term loan had been 
                                                          
 
4 These factual details are taken from the Second Circuit’s opinion certifying the question of law 
to this Court and from the appendices submitted by the parties. 
3 
 
inadvertently filed.  On July 31, 2009, the Creditors Committee commenced a proceeding 
against JPMorgan in the United States Bankruptcy Court for the Southern District of New 
York (the “Bankruptcy Court”), seeking, among other things, a determination that the 
filing of the UCC-3 termination statement was effective to terminate the term loan 
security interest and thus render JPMorgan an unsecured creditor on par with the other 
General Motors unsecured creditors.  JPMorgan contested that argument, asserting that it 
had not authorized the termination statement releasing the term loan security interest, and 
that the statement was erroneously filed because no one at General Motors, JPMorgan, or 
the law firms working on the synthetic lease transaction recognized that the unrelated 
term loan security interest had been included on the statement.   
 
On cross-motions for summary judgment, the Bankruptcy Court found for 
JPMorgan on various grounds, including that JPMorgan had not empowered Mayer 
Brown to act as its agent in releasing the term loan security interest in the sense that it 
had only authorized Mayer Brown to file an accurate termination statement that released 
security interests properly related to the synthetic lease transaction.5  Because neither 
JPMorgan nor General Motors intended the legal consequences of the UCC-3 termination 
statement, the Bankruptcy Court found that the UCC-3 filing was not authorized and 
therefore was not effective to terminate the term loan security interest.6   
 
The Creditors Committee appealed to the Second Circuit, arguing, among other 
things, that Mayer Brown was authorized as JPMorgan’s agent to file the UCC-3 
                                                          
 
5 Official Comm. of Unsecured Creditors of Motors Liquidation Co. v. JPMorgan Chase Bank, 
N.A. (In re Motors Liquidation Co.), 486 B.R. 596, 606 (Bankr. S.D.N.Y. 2013). 
6 Id.  
4 
 
termination statement.  Most pertinent for present purposes, the Creditors Committee 
argued that the only issue is whether JPMorgan had authorized the filing of the UCC-3 
termination statement.  So long as JPMorgan had authorized the statement to be filed, the 
termination of all identified security interests, including the term loan security interest, 
would be effective.    
The Creditors Committee also contended that JPMorgan’s argument that a party 
can authorize a filing and then later claim that it had not authorized the filing because it 
failed to catch an error in the statement is inconsistent with the plain language of § 9-513 
of Delaware’s UCC.  That language states in pertinent part that “upon the filing of a 
termination statement with the filing office, the financing statement to which the 
termination statement relates ceases to be effective.”7 
By contrast, JPMorgan took the position that a party may authorize a specific 
document to be filed on its behalf, but that such authorization does not cause the 
termination statement to be effective if errors in the statement resulted in the release of a 
security interest that the party did not subjectively intend to release. 
 
The Second Circuit has indicated that it would be helpful to have an answer from 
this Court regarding this aspect of the parties’ dispute.  That answer may avoid any need 
for the Second Circuit to address the parties’ disagreement as to whether Mayer Brown 
was authorized to act as JPMorgan’s agent to file the UCC-3 termination statement, or 
provide some useful clarity if the agency issue must be addressed.  Accordingly, the 
Second Circuit has certified the following question: 
                                                          
 
7 6 Del. C. § 9-513(d).  
5 
 
Under UCC Article 9, as adopted into Delaware law by Del. Code Ann. 
tit. 6, art. 9, for a UCC-3 termination statement to effectively extinguish 
the perfected nature of a UCC-1 financing statement, is it enough that 
the secured lender review and knowingly approve for filing a UCC-3 
purporting to extinguish the perfected security interest, or must the 
secured lender intend to terminate the particular security interest that is 
listed on the UCC-3?8  
 
The question is precise, and we read it as asking us to assume what it literally says, which 
is that the secured party of record has itself reviewed and knowingly approved the 
termination statement for filing.  In its briefs and at oral argument, JPMorgan attempted 
to reframe the certified question by asking us to consider the issues of agency law that 
come into play whenever an entity, such as JPMorgan, acts through agents, be they 
employees, outside lawyers, or UCC-filing-service representatives.  JPMorgan argued 
about whether a filing would be authorized if a secured party granted authority to an 
agent to file a termination statement for one security interest but not another, but the 
agent mistakenly filed a termination statement for both.  That is not the question we have 
been asked to address, and the Second Circuit has said it will consider the fact-based 
question of whether Mayer Brown had authority as JPMorgan’s agent to file the 
termination statement after it receives our answer to its more precise question.  The 
question certified to us assumes that the secured party of record “review[d] and 
knowingly approve[d] [the termination statement] for filing.”  We will answer the 
question as our judicial colleagues have framed it. 
 
 
                                                          
 
8 In re: Motors Liquidation Co., 755 F.3d 78, 86 (2d Cir. 2014). 
6 
 
III.  ANALYSIS 
“The most important consideration for a court in interpreting a statute is the words 
the General Assembly used in writing it.”9  The provisions of Delaware’s UCC that are 
relevant to and support our conclusion are succinct.  Section 9-513 of the UCC states: 
(d) Effect of filing termination statement.  Except as otherwise provided 
in Section 9-510, upon the filing of a termination statement with the 
filing office, the financing statement to which the termination statement 
relates ceases to be effective.10 
 
 
In turn, § 9-510 makes plain that a termination statement is effective only if the 
statement was filed by a person who is entitled to do so under § 9-509: 
(a) Filed record effective if authorized.  A filed record is effective only 
to the extent that it was filed by a person that may file it under Section 
9-509.11 
 
 
The final step in the relevant statutory chain is § 9-509(d)(1), which addresses who 
may file amendments, which include termination statements:12 
(d) Person entitled to file certain amendments.  A person may file an 
amendment other than an amendment that adds collateral covered by a 
financing statement or an amendment that adds a debtor to a financing 
statement only if: 
(1) the secured party of record authorizes the filing; or 
(2) [circumstances inapplicable to the facts of this case].13 
 
 
“[U]nambiguous statutes are not subject to judicial interpretation.”14  The 
unambiguous terms of these UCC provisions make clear that if a “secured party of record 
                                                          
 
9 Boilermakers Local 154 Ret. Fund v. Chevron Corp., 73 A.3d 934, 950 (Del. Ch. 2013). 
10 6 Del. C. § 9-513(d). 
11 6 Del. C. § 9-509(a). 
12 See 6 Del. C. § 9-102(a)(80) (defining a “termination statement” as an “amendment of a 
financing statement”). 
13 6 Del. C. § 9-509(d)(1). 
7 
 
authorizes the filing [of a termination statement],”15 then the filing is “effective”16 “upon 
the filing of a termination statement with the filing office.”17  At that time, “the statement 
to which the termination statement relates ceases to be effective.”18  In other words, for a 
termination statement to have the effect specified under § 9-513 of the Delaware UCC, it 
is enough that the secured party authorizes the filing.  JPMorgan’s argument that a filing 
is only effective if the authorizing party understands the filing’s substantive terms and 
intends their effect is contrary to § 9-509, which only requires that “the secured party of 
record authorize[] the filing.”19   
 
This unambiguous language promotes sound policy.  It is fair for sophisticated 
transacting parties to bear the burden of ensuring that a termination statement is accurate 
when filed.20  It would be strange and inefficient for the UCC to make the effectiveness 
of a termination statement depend on whether the secured party subjectively understood 
                                                                                                                                                                                           
14 Leatherbury v. Greenspun, D.O., 939 A.2d 1284, 1288 (Del. 2007).  
15 6 Del. C. § 9-509(d)(1). 
16 6 Del. C. § 9-510(a). 
17 6 Del. C. § 9-513(d). 
18 Id.  
19 See also U.C.C. § 9-518 cmt. (“If the person that filed the record was not entitled to do so, the 
filed record is ineffective, regardless of whether the secured party of record files an information 
statement.  Likewise, if the person that filed the record was entitled to do so, the filed record is 
effective, even if the secured party of record files an information statement.”). 
20 See, e.g., Graham v. State Farm Mut. Auto. Ins. Co., 1989 WL 12233, at *2 (Del. Super. Jan. 
26, 1989) (“[F]ailure to read a contract in the absence of fraud is an unavailing excuse or defense 
and cannot justify an avoidance, modification or nullification of the contract or any provision 
thereof.”) (internal citation omitted); Hicks v. Soroka, 188 A.2d 133, 140–41 (Del. Super. 1963) 
(“If one voluntarily shuts his eyes when to open them is to see, such a one is guilty of an act of 
folly (in dealing at arm’s length with another) to his own injury; and the affairs of men could not 
go on if courts were being called upon to rip up transactions of that sort.”) (internal citation 
omitted). 
8 
 
the terms of its own filing and the effect that the filing would have on the security 
interests the filing’s own words address.21   
As a matter of ordinary course, parties who sign contracts and other binding 
documents, or authorize someone else to execute those documents on their behalf, are 
bound by the obligations that those documents contain.22  Certainly, there are doctrines 
that allow parties who sign documents they do not understand to escape the consequences 
                                                          
 
21 See, e.g., ACF 2006 Corp. v. Merritt, 2013 WL 466603, at *4 (W.D. Okla. Feb. 7, 2013), 
(“Although strict adherence to the [UCC] requirements may at times lead to harsh results, efforts 
by courts to fashion equitable solutions for mitigation of hardships experienced by creditors in 
the literal application of statutory filing requirements may have the undesirable effect of 
reducing the degree of reliance the market place should be able to place on the [UCC] 
provisions.  The inevitable harm doubtless would be more serious to commerce than the 
occasional harshness from strict obedience.”) (citation omitted), aff’d, 557 F. App’x 747 (10th 
Cir. 2014); In re Silvernail Mirror & Glass, Inc., 142 B.R. 987, 989 (M.D. Florida 2013) (“The 
Termination Statement gave all indications to the world that [the creditor] was terminating its 
security interest in all its collateral.  The filing of a Termination Statement is a method of making 
the record reflect the true state of affairs so that fewer inquiries will have to be made by persons 
who consult the public records. . . .  [E]ven if [a] Termination Statement did not reflect the 
parties’ true intent, it would be materially misleading to a potential creditor relying on the public 
records [to ignore the statement] and therefore [it] should not be set aside.”). 
22 See 11 SAMUEL WILLISTON & RICHARD A. LORD, A TREATISE ON THE LAW OF CONTRACTS 
§ 31.5 (4th ed. 2003) (“As a general principle, all adults are presumed to be capable of managing 
their own affairs, and the question whether a bargain is smart or foolish, or economically 
efficient or disastrous, is not ordinarily a legitimate subject of judicial inquiry.   If freedom of 
contract means anything, it means that parties may make even foolish bargains and should be 
held to the terms of their agreements.  A contract is not a non-binding statement of the parties’ 
preferences; rather, it is an attempt by market participants to allocate risks and opportunities.  
[The court’s role] is not to redistribute these risks and opportunities as [it sees] fit, but to enforce 
the allocation the parties have agreed upon.  While the parties to a contract often request the 
courts, under the guise of interpretation or construction, to give their agreement a meaning which 
cannot be found in their written understanding, based entirely on direct evidence of intention, 
and often on hindsight, the courts properly and steadfastly reiterate the well-established principle 
that it is not the function of the judiciary to change the obligations of a contract which the parties 
have seen fit to make. . . .   Unless the contract is voidable due to mistake, fraud, 
unconscionability, or another invalidating cause, or invalid in whole or in part due to illegality or 
another violation of public policy, the court must enforce it as drafted by the parties, according to 
the terms employed. . . .”).   
9 
 
in certain circumstances, such as mutual mistake or reformation.23  But as the Creditors 
Committee points out, had the General Assembly wished to give secured parties who 
authorize filings a safety valve against their own failure to comprehend the terms of their 
filings, it could have written § 9-509(d)(1) to state, for example, that “a person may file 
[a termination statement] . . . only if . . . the secured party of record authorizes the filing 
and intends to terminate the security interests identified in that filing.”  Or the General 
Assembly could have provided that the secured party must “authorize and understand the 
filing.”  The General Assembly did not write the statute in either way, and it would be 
improper for us to engraft such a condition on § 9-509, especially when the statutory 
language is unambiguous.24 
 
Even if the statute were ambiguous, we would be reluctant to embrace JPMorgan’s 
proposition.  Before a secured party authorizes the filing of a termination statement, it 
ought to review the statement carefully and understand which security interests it is 
releasing and why.  A secured party is the master of its own termination statement; it 
works no unfairness to expect the secured party to review a termination statement 
carefully and only file the statement once it is sure that the statement is correct.25  If 
                                                          
 
23 See e.g., id. § 70.106 (4th ed. 2003) (“A contract may be rescinded where there is a clear, bona 
fide, mutual mistake regarding a material fact or law.”); id. § 70.20-21 (“Reformation of a 
written instrument is available where, because of a mutual mistake of fact, the instrument fails to 
express the real agreement between the parties.”).  
24 See Stifel Fin. Corp. v. Cochran, 809 A.2d 555, 560 (Del. 2002) (“[T]his court should be chary 
about reading words into a statute that the General Assembly could have easily added itself.”) 
(quoting HMG/Courtland Props., Inc. v. Gray, 729 A.2d 300, 306 (Del. Ch. 1999)). 
25 If a party files a termination statement that is inaccurate, it may follow the procedure 
established by the UCC to correct the record.  Section 9-518 of Delaware’s UCC authorizes a 
person to file an “information statement” (or a “correction statement” under the UCC) if the 
person believes that the existing record is inaccurate or a statement has been wrongly filed.  
10 
 
parties could be relieved from the legal consequences of their mistaken filings, they 
would have little incentive to ensure the accuracy of the information contained in their 
UCC filings.   
We recognize that the UCC is a system of notice filing and that such a system 
contemplates that later lenders may need to conduct diligence to determine that a filing 
was authorized by the secured party of record.  But consistent with the purpose of setting 
up a notice system, one of the most important roles the UCC plays is facilitating the 
efficient procession of commerce by permitting parties to rely in good faith on the plain 
terms of authorized public filings.26  The UCC thus enables the crafting of contractual 
arrangements that generate wealth and the investment of capital in commercial enterprise 
because parties are able to rely on a clear and predicable set of rules to govern their 
transactions.27  
 
To hold that parties cannot rely upon authorized filings unless the secured party 
subjectively understood the effect of its own action would disrupt and undermine the 
                                                                                                                                                                                           
6 Del. C. § 9-518.  The information statement has no legal effect in terms of restoring the filing 
statement.  But it does give public notice that the erroneously filed record is unreliable.  See id.; 
11 ANDERSON U.C.C. § 9-518:5 (3d. ed. 2013).  To restore the security interest its mistaken 
filing released, the secured party must perfect the security interest anew by filing a new financing 
statement.  See, e.g., U.S. v. Lincoln Sav. Bank (In re Commercial Millwright), 245 B.R. 597, 
601 (Bankr. N.D. Iowa 1999). 
26 See, e.g., WEST’S ALR DIGEST SECURED TRANSACTIONS § 82.1 (2014) (“The purpose of the 
filing requirements for perfection of security interests is to guarantee that third parties will have 
notice of existing security interests in collateral, thus protecting credit transactions.”); U.S. v. 
Lincoln Sav. Bank (In re Commercial Millwright), 245 B.R. 597, 601 (Bankr. N. D. Iowa 1999) 
(“Perfection is intended to protect outside parties by providing clear notice.”).    
27 See, e.g., In re Hickory Printing Group, Inc., 479 B.R. 388, 397 (Bankr. W.D.N.C. 2012) 
(“Lenders are bound by the effects of UCC termination statements, even when such termination 
statements are filed in error, because the entire purpose of the UCC system is to provide public 
notice of secured interests without requiring the parties to look behind or beyond the four corners 
of the public filing.”).   
11 
 
secured lending markets.  It is not clear to us how an inquiring party would find out 
whether a secured party understood and intended the consequences of its own filing.  In 
the normal course of business, which is what the Delaware UCC embraces as appropriate 
policy, a party who causes a document to be executed and filed on its behalf is expected 
to understand what the filing says, the effect the filing will have, and that its own act of 
causing the document to be executed and filed will signal to others that the filing party 
subjectively intends for the filing to have the effect resulting from plain terms.28  If we 
were to embrace JPMorgan’s theory, no creditor could ever be sure that a UCC-3 filing is 
truly effective, even where the secured party itself authorized the filing, unless a court 
determined after costly litigation that the filing was in fact subjectively intended.   
 
It therefore may not be coincidental that JPMorgan did not confront the language 
of the UCC directly, but instead devoted most of its answering brief and the bulk of its 
presentation during oral argument to addressing a question that is not before us.  In its 
brief, JPMorgan dilated mostly on whether General Motors (and its counsel Mayer 
Brown) was authorized to act as JPMorgan’s agent in filing the UCC-3 Termination 
Statement.29  But the Second Circuit has asked us to assume that the secured party 
itself—JPMorgan—“review[ed] and knowingly approved for filing a UCC-3 purporting 
                                                          
 
28 See, e.g., RESTATEMENT (SECOND) OF CONTRACTS § 157 (1981) (“Generally, one who assents 
to a writing is presumed to know its contents and cannot escape being bound by its terms merely 
by contending that he did not read them; his assent is deemed to cover unknown as well as 
known terms.”); see also In re Lortz, 344 B.R. 579, 585 (Bankr. C.D. Ill. 2006) (“As with all 
perfection laws, which focus on third party perceptions and clarity and certainty of notice, the 
intent of the secured party is not relevant to questions of perfection and errors can be fatal.”); In 
re Clean Burn Fuels, LLC, 492 B.R. 445, 465 (Bankr. M.D.N.C. 2013) (“The [UCC] permits 
third parties to rely on the record to determine whether a perfected security interest exists.”). 
29 See Answering Br. at 18-24. 
12 
 
to extinguish the perfected security interest.”  We accept that assumption and refuse 
JPMorgan’s invitation to answer a separate, fact-laden question that is not properly 
before us.  As the Second Circuit made clear, it will address that issue itself after it 
receives the answer to the narrow question put to us.    
 
Thus, for the reasons we have articulated, for a termination statement to become 
effective under § 9-509 and thus to have the effect specified in § 9-513 of the Delaware 
UCC, it is enough that the secured party authorizes the filing to be made, which is all that 
§ 9-510 requires.  The Delaware UCC contains no requirement that a secured party that 
authorizes a filing subjectively intends or otherwise understands the effect of the plain 
terms of its own filing.  The Clerk is directed to transmit this opinion to the Second 
Circuit.