Opinion ID: 2153421
Heading Depth: 1
Heading Rank: 2

Heading: duty under the code of a secured creditor where the debtor subsequently changes its name

Text: a) Duty Imposed Under MCLA 440.9402; MSA 19.9402. The formal requisites for perfection of a security interest through the filing of a financing statement are laid out in MCLA 440.9402; MSA 19.9402, which reads in pertinent part as follows: (1) A financing statement is sufficient if it is signed by the debtor and the secured party, gives an address of the secured party from which information concerning the security interest may be obtained, gives a mailing address of the debtor and contains a statement indicating the types, or describing the items, of collateral.    A copy of the security agreement is sufficient as a financing statement if it contains the above information and is signed by both parties. Through this provision, the drafters of the Uniform Commercial Code adopted a simplified and workable filing system [1] known as notice filing. The central purposes of notice filing as expressed in the Official UCC Comment to article 9, § 9-402, is to require enough facts in the financing statement to notify potential future creditors of the debtor or potential purchasers of the collateral of the possible interest of the secured creditor: What is required to be filed is not    the security agreement itself, but only a simple notice which may be filed before the security interest attaches or thereafter. The notice itself indicates merely that the secured party who has filed may have a security interest in the collateral described. Further inquiry from the parties concerned will be necessary to disclose the complete state of affairs. Under MCLA 440.9402(5), MSA 19.9402(5) the validity of the financing statement is dependent on whether it is seriously misleading, that is, whether it serves this central purpose of providing simple notice to third parties of the possible interest of the secured creditor, which would lead interested parties to inquire further to get the full picture. [2] However, a financing statement will not notify interested third parties of the possible interest of a secured creditor in the property of the debtor unless it is properly filed under the debtor's name. This is so because under MCLA 440.9403(4); MSA 19.9403(4), financing statements are to be indexed according to the debtor's name. [3] Thus, for example, after the debtor's name had been changed from South Haven Fruit Exchange to Blossom Trail Growers, Inc., in the instant case, a potential creditor of the debtor would check the index under the name Blossom Trail Growers, Inc., and would receive no notice whatsoever of a secured interest in debtor's property previously filed in a financing statement under the name South Haven Fruit Exchange. [4] Nor would this potential creditor find anything in this search of the index to signal the need for further inquiry. In such a situation, a secured creditor who is aware of the name change, and who therefore knows that its financing statement no longer provides even the simple notice required by MCLA 440.9402; MSA 19.9402 should no longer receive the protection of that financing statement unless there is a good faith attempt [5] to refile or amend the financing statement so that there is once again substantial compliance with the requirements of the statute. In the instant case, Citizen's Trust, which had actual knowledge of the debtor's name change, argues that MCLA 440.9402; MSA 19.9402 does not expressly require that a secured creditor refile, or amend its financing statement where there is a subsequent change in the name of the debtor which would be seriously misleading. However, the drafters of the code foresaw that it was impossible to articulate in express language all the rights and duties of parties which would arise from unforeseen circumstances, and specifically directed that the code be liberally construed and applied to promote its underlying purposes and policies. See MCLA 440.1102; MSA 19.1102. The Official UCC Comment to article 1, § 1-102 elaborates on this directive as follows: This Act is drawn to provide flexibility so that, since it is intended to be a semi-permanent piece of legislation, it will provide its own machinery for expansion of commercial practices. It is intended to make it possible for the law embodied in this Act to be developed by the courts in the light of unforeseen and new circumstances and practices. However, the proper construction of the Act requires that its interpretation and application be limited to its reason.