BUT there is a limitation—effective except against a purchaser of the collateral who gives value in reliance upon absence of the record Definition of purchaser: purchaser taking by … SI ... or any other voluntary transaction creating an interest in property [doesn’t mean just buy” it “to – includes lending against the collateral] Ie. lent on this collateral/bought this “I collateral in reliance on the absent record” Subsequent lenders fall within this limitation to the effectiveness (they are who have given “purchasers” value under the UCC) Judicial lienholders are not protected by this § b/c they don’t value” “give Thus, this fin. statement would be effective as against judgment lienholders The idea is that these type of people don’t search the filing system (C) If information is incorrect, but filing is accepted: This is by far the most common [ie. info is there, but wrong] If the debtor name is wrong, you’re in trouble (fin. statement is prob. ineffective) Exception: debtor name can be wrong and still be effective if the search logic of the system would have disclosed the mistaken name with a search of the correct name [§ 9-506(c)] REQUIRED INFO § 9-506(a) standard/test re: notice to subsequent searcher [“seriously misleading”] Mistake in SC’s name effective b/c not seriously – misleading [b/c you don’t search by the SC’s name] Mistake in indication of collateral can be more misleading – but effective unless misleading See case in CB OTHER INFO § 9-520(c) a filed fin statement satisfying § 9-502(a) is effective, – but if § 9-516(b)(5) info is in there but wrong, § 9-338 applies [limited effectiveness idea] § 9-338 SI be subordinate to a conflicting, perfected – interest in the collateral where value was given in reliance on the mistaken info. A purchaser who buys in reliance upon the incorrect info is also protected [ie. it is effective, but won’t give your SI priority over other fin. statements that don’t have mistakes] Does not say anything about info contained in § Lender may rely on address Prob. 18.1 Issue: You don’t have the debtor’s mailing address
BUT there is a limitation—effective except against a purchaser of the collateral who gives value in reliance upon absence of the record Definition of purchaser: purchaser taking by … SI ... or any other voluntary transaction creating an interest in property [doesn’t mean just “to buy” – it includes lending against the collateral] Ie. “I lent on this collateral/bought this collateral in reliance on the absent record” Subsequent lenders fall within this limitation to the effectiveness (they are “purchasers” who have given value under the UCC) Judicial lienholders are not protected by this § b/c they don’t “give value” Thus, this fin. statement would be effective as against judgment lienholders The idea is that these type of people don’t search the filing system (C) If information is incorrect, but filing is accepted: This is by far the most common [ie. info is there, but wrong] If the debtor name is wrong, you’re in trouble (fin. statement is prob. ineffective) Exception: debtor name can be wrong and still be effective if the search logic of the system would have disclosed the mistaken name with a search of the correct name [§ 9-506(c)] REQUIRED INFO § 9-506(a) standard/test re: notice to subsequent searcher [“seriously misleading”] Mistake in SC’s name – effective b/c not seriously misleading [b/c you don’t search by the SC’s name] Mistake in indication of collateral can be more misleading – but effective unless misleading See case in CB OTHER INFO § 9-520(c) – a filed fin statement satisfying § 9-502(a) is effective, but if § 9-516(b)(5) info is in there but wrong, § 9-338 applies [limited effectiveness idea] § 9-338 – SI be subordinate to a conflicting, perfected interest in the collateral where value was given in reliance on the mistaken info. A purchaser who buys in reliance upon the incorrect info is also protected [ie. it is effective, but won’t give your SI priority over other fin. statements that don’t have mistakes] Does not say anything about info contained in § Lender may rely on address Prob. 18.1 Issue: You don’t have the debtor’s mailing address
Secured-Transactions_Buxbaum_Spring-2012.docx