Florida Supreme Court Holds: Abbreviating the Debtor’s Name on a UCC-1 Made the Security Interest Unperfected!

This case has ominous potential for any lender securing a loan by personal property and filing a UCC-1 to perfect the lien.   In this case the debtor’s legal name in the certificate of incorporation on file with the Florida Secretary of State showed “1944 Beach Boulevard LLC.” A lender intending to have a lien on all assets of the LLC filed a UCC-1 financing statement showing the debtor’s name as “1944 Beach Blvd. LLC.” That is, the financing statement abbreviated “Boulevard” to read “Blvd.”

Overview and Holding: In the case of  In re NRP Lease Holdings, LLC (11th Cir., Sept. 29, 2022, No. 21-11742) 2022 WL 4545539, The Florida Supreme court examined Fla law which had a safe harbor for that makes financing statements effective despite “minor errors or omission.”  However,  the law also had a provision that held that a financing statement is “seriously misleading” if it does not show the debtor’s precise legal name. This is known as the “zero tolerance rule. The Court held that abbreviating the Debtor’s name on a UCC-1 Financing Statement resulted in the failure of the lender to be perfected under Fla. Law.

Technically:  Florida law provides that a financing statement is not “seriously misleading” if a search would disclose the financing statement, using the debtor’s correct name and “the filing office’s standard search logic, if any. Examining the specific search parameters used by Fla filing office (the filing office’s standard search logic”), the Court found that an abbreviation  could render the search misleading. In this case using the name in question would return a list of 20 similar names, beginning with the name that most closely matches the name searched.  Accordingly, the financing statement was seriously misleading, subject to the “Zero Tolerance Rule” and the lender was not perfected.

Why This Matters to You.  You may or may not have loans in Florida. Even if you don’t, the case  can be used as precedent in bankruptcy court cases  to void liens both subject to Fla. Law and  other states that have similar statutes. If a state’s law is ambiguous, the Fla case can be cited as persuasive authority. Take no chances, your UCC-1 should line up word for word, character for character with the legal name of the Debtor listed in the entity filing document (i.e. certificate of incorporation etc.) in the  state it is registered in.

Spencer Scheer