Panel Requires Individual Debtor's Legal Name To Perfect Security Interest
By: BEAU J. HURTIG
March 2005
The Uniform Commercial Code (UCC) provides that the name of an individual debtor on a financing statement must not be misleading. Does that mean the secured party must list the debtor’s full legal name, or will a nickname or common name suffice? In a recent decision of the U.S. Bankruptcy Appellate Panel (In re Kinderknecht, 308 B.R. 71, 53 U.C.C. Rep. Serv. 2d 167 (B.A.P. 10th Cir. 2004)), the Panel held that the secured party must list the individual debtor’s exact legal name on the financing statement to have a perfected security interest in the debtor’s property.
In Kinderknecht, the secured party, Deere and Company and Deere Credit Services, Inc. (Deere), properly filed its security interest on two of debtor’s farm implements and listed the debtor’s name as Terry J. Kinderknecht, debtor’s commonly used nickname. Debtor’s full legal name was Terrance Joseph Kinderknecht. After debtor filed for bankruptcy, the question arose as to whether listing a debtor on a financing statement by nickname, rather than by full legal name, was seriously misleading, and therefore ineffective, under the UCC. The bankruptcy court held that listing the debtor by nickname sufficed, but the U.S. Bankruptcy Panel of the Tenth Circuit reversed.
The Panel of the Tenth Circuit found that a secured party must use the debtor’s full legal name to have a perfected security interest. The Panel held that the debtor name on the financing statement filed by Deere was seriously misleading under the UCC, and denied Deere a perfected security interest in the debtor’s property.
This decision may seem Draconian from Deere’s perspective, but the Panel listed several practical considerations. First, requiring debtor’s full legal name on the financing statement makes clear that no other name will suffice. Second, requiring debtor’s full legal name simplifies UCC searches because persons searching the records need only search by debtor’s exact legal name. Third, the Panel’s holding helps decrease litigation over whether a reasonable searcher would have searched under debtor’s nickname. Finally, determining debtor’s legal name prior to filing is not difficult or burdensome.
Secured parties should heed the Panel’s finding in Kinderknecht and list the full legal name of individual debtors on UCC financing statements.