Lost in Translation: The Importance of Accurate Spelling in UCC Filings

Sometimes a typo can be more than a benign mistake. Jocelyne A. Macelloni and Matthew Akiba of Barakat + Bossa PLLC explain how misspelling a company’s name can have serious consequences when filing a UCC financing statement in Florida and other jurisdictions.


Florida filers beware! Recent developments in the state’s case law may impact the priority and enforcement of your security interest in your customer’s collateral.

Article 9 of the Uniform Commercial Code, which is enacted in Florida in Florida Statutes Chapter 679, governs the creation and enforcement of security interests, which are consensual liens on personal property. Article 9 defines a “secured party” as, inter alia, “[a] person to whom accounts, chattel paper, payment intangibles, or promissory notes have been sold.” It follows, therefore, that factors, upon the purchase and assignment of accounts, are “secured parties”

In a typical factoring agreement, to secure the payment on accounts sold to the factor, factors will take a security interest in the customer’s “collateral,” which is “the property subject to a security interest or agricultural lien. The term includes, inter alia: [a]ccounts, chattel paper, payment intangibles and promissory notes that have been sold . . . .”. Article 9 provides that for a factor (or any other secured party) to have a security interest in collateral, the security interest must be “attached” to the collateral and be “perfected.” Absent attachment and perfection, the factor is limited in remedies following a default under the factoring agreement. Having a signed factoring agreement with your customer satisfies the attachment requirement, and in Florida, filing a UCC-1 financing statement with the Florida Secretary of State’s Secured Transaction Registry will satisfy the perfection requirement for most collateral.

A UCC-1 financing statement is a single page document that must include (1) the name of the debtor, (2) name of the secured party and (3) identification of the collateral which the secured party has an interest in. Filing a UCC-1 financing statement effectively gives notice to other potential creditors of a secured party’s/creditor’s security interest in the collateral. Inevitably, mistakes can occur when completing a financing statement, such as misspelling the debtor’s name.

Sunshine State Statutes

Florida Statute § 679.5061(3), which was adopted verbatim from Section 9-506 of the UCC, creates a safe harbor provision for financing statements that contain some type of errors. Typically, a mistake in the debtor’s name that is ‘seriously misleading’ will limit the effectiveness of the security interest in the collateral unless a search on the state’s secured transaction registry using the debtor’s correct name would nonetheless disclose the financing statement. The question of what constitutes a ‘seriously misleading’ identification of the debtor on the UCC-1 financing statement and the degree of error sufficient to rise to the level of such a mistake or omission to ‘seriously misleading’ is an often litigated issue. Thankfully, Article 9 provides some guidance as a starting point in Florida Statute § 679.50618, which provides that:

(1) A financing statement substantially complying with the requirements of this part is effective, even if it has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading.

(2) Except as otherwise provided in subsection (3), a financing statement that fails sufficiently to provide the name of the debtor in accordance with s. 679.5031(1) is seriously misleading.

(3) If a search of the records of the filing office under the debtor’s correct name, using the filing office’s standard search logic, if any, would disclose a financing statement that fails sufficiently to provide the name of the debtor in accordance with s. 679.5031(1), the name provided does not make the financing statement seriously misleading.

The Florida Secured Transaction Registry is the “centralized database in which all financing statements, amendments, assignments and other statements of change” are filed in Florida. The registry is quite simple to use, and financing statements can be filed under the debtor’s name or the document number. Moreover, prior to a search, the Florida UCC website provides instructive guidance and illustrative examples on how and when to search for actual or compact name inquires. When searching for a financing statement under a debtor’s name, the initial search page produces 20 entries with an exact or nearest match at the top of the search results. The results do not end there; at the top of the registry website, the page prompts you to use the previous and next buttons to display additional search results beyond the 20 entries on the initial search page. The additional results are then displayed alphabetically, with different variations of the root name, beginning with the names closest to the key entered. This function of the registry’s website ensures that even if you are unsure of the exact spelling, a diligent searcher will still be able to find the UCC filing by scrolling through.

However, the ‘reasonable diligent searcher’ standard, which Florida courts apply on a case-by-case basis, has created extensive litigation and produced contradictory decisions. To clear up the pitfalls of the standard, the revised language in section 9-506 has significantly shifted and now applies “a clearer standard based on the computerized search logic of the filing office.” The revised language also says, “the purpose of the revisions was to shift the responsibility to the filer by requiring the not-too-heavy burden of using the legal name of the debtor, thereby relieving the searcher from conducting numerous searches using every conceivable name variation of the debtor.”

Case Law

In the case of In re John’s Bean Farm of Homestead, Inc., the U.S. Bankruptcy Court for the Southern District of Florida was tasked with determining the degree of error necessary to render a UCC-1 financing statement “seriously misleading.” The creditor filed a UCC-1 financing statement with the secured transaction registry; however, the debtor was named as ‘John Bean Farms, Inc.’ rather than its incorporated name, ‘John’s Bean Farm of Homestead, Inc.’ The court noted that Florida’s standard search logic leads to one page (the initial single page result), as the registry’s information page does not mention the use of the “previous” and “next” buttons in connection with the search criteria. Considering this, the court held there is a reasonable limit to the search when accessing the registry and that it should not deviate from more than one page “previous” or “next” from the initial search result page. Regardless of the financing statement having been found on the registry, it was listed 60 pages prior to the initial page result and not one page away. Therefore, the court found that the error in the name of the debtor was seriously misleading and the creditor did not hold a secured or priority claim over the $152,000 loan due from the debtor.

Though the court in John’s Bean correctly asserts that the registry’s information page fails to mention the “previous” and “next” buttons, the search results page does “[u]se the previous and next buttons to display additional search results.” However, John’s Bean fails to recognize the “additional search results” pages as results of Florida’s standard search logic.

More recently, in 1944 Beach Blvd, LLC. v. Live Oak Banking Co., the Florida Supreme Court explained that the term “standard search logic” acknowledges that “[w]ithin the industry … is reasonably accepted to mean a procedure that ‘identif[ies] the set (which might be empty) of financing statements on file that constitute hits for the search,’ or stated differently, that produces an ‘[u]nambiguous identification of hits.’” In that case, Live Oak filed the UCC-1 financing statement by improperly naming the debtor as ‘1944 Beach Blvd’ instead of ‘1944 Beach Boulevard.’ The court went on to note that Florida’s standard search logic does not produce a bounded, finite list of hits, but instead returns 20 entries that start with the name or closely match the name searched, allowing navigation through all the names in the registry.

The court in 1944 Beach Blvd, relying on the secured transaction industry’s definition of “standard search logic” and applying the language in Florida Statute. § 679.5061(3) of “using the filing office’s standard search logic, if any,” held that the registry fails to employ a “standard search logic,” which precludes a triggering of the safe harbor provision under the statute. Therefore, the Florida Supreme Court found that without a safe harbor provision, any financing statement that fails to correctly name the debtor is seriously misleading and therefore ineffective.

Considering current prevalent case law, factoring companies should be on high alert and use necessary caution when filing a UCC-1 financing statement in Florida. Florida Statute § 679.5031(1)(a) provides that the debtor’s name should be “the name that is stated to be the registered organization’s name on the public organic record most recently filed with or issued or enacted by the registered organization’s jurisdiction.” Check it twice! This is applicable to not only future filings, but already filed financing statements, which should be amended to reflect the debtor’s correct name.

Consistently exercising due diligence with regards to your filed financing statements is imperative in mitigating the risk of your claim being left unsecured. •


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