Accessions

Under Revised Article 9 accessions is perhaps the one area of titled vehicle lien perfection that is indeed as simple as practioners believe. Under Revised Article 9, the lienholder on the title has a special priority in all accessions, even PMSI accessions funded by another secured party 16.  If, however, a secured party who holds a lien on the title intends to have priority on goods that may, but may not, be an accession, the secured party should be sure to independently perfect its lien in said item(s) through a timely UCC-1 filing.

Secured Party’s Obligation to Terminate Liens on Titles

Under Article 9, with consumer goods the secured party must terminate the financing statement within thirty days after there is no current obligation and no commitment to give value in the future. The thirty days is reduced to twenty days when the secured party receives an authenticated request from the debtor 17.  In the case of non-consumer goods, even where there is no current obligation and no commitment to give value, there is no obligation on behalf of the secured party to terminate a financing statement unless and until the secured party receives an authenticated demand. Upon receipt of a demand, the secured party has twenty days to file a termination statement or send one to the debtor 18. 

If the secured party fails to timely comply with these obligations it is liable to the debtor (or any guarantor or assignee) as it would be for filing an unauthorized financing statement for $500 plus actual damages, including the debtor’s inability to obtain financing or the increased cost of financing 19.  Of course, the debtor may also then file the termination 20. 

The secured party with a lien on a title should check the state’s title statute for similar lien termination obligations. Title statutes may not distinguish between consumer and non-consumer goods and may require the secured party to release the lien on the title without any authenticated request 21.

Endnotes

1. Perfection in a new car purchased from inventory may also be through possession of an MCO (Manufacturer’s Certificate of Origin). In re Zysset, 2008 WL 4283131, 2008 Bankr. LEXIS 2711 (D. Neb. 2008). (Under Nebraska title statute, bank held to have been perfected in vehicle once bank had possession of loan documents and MCO). But possession of a certificate of title without the lien noted on it is not perfection. In re Global Environmental Services Group, LLC, 2006 WL 98052. 59 U.C.C. Rep. 2d 655 (D. Haw. 2006). As for commercial trucks operating under an ICC permit, federal law defers to the state certificate of title laws. 49 U.S.C. § 14301.The 2010 Amendments to Article 9, which went into effect in most states July 1, 2013, modifies the definition of a “certificate of title” to include state systems that permit or require electronic records of title.
2. In re Circus Timer, 641 F.2d 39 (1st Cir. 1981); In re Rose Way, Inc., 113 B.R. 527 (S.D. Iowa 1990); Contra, In re Otasco, 111 B.R. 976 (Bankr. N.D. Okla. 1990), rev’d, 196 B.R. 554 (N.D. Okla. 1991) (court found true lease as opposed to lease disguised as a security interest).
 3. U.C.C. §9-311(d). In re Moye, 2008 WL 4179239, 2008 Bankr. LEXIS 3236 (Bankr. S.D. Tex. 2008). Notably, an inventory filing is not just a matter of filing a UCC-1. Perfection of a Purchase Money Security Interest (“PMSI”) in inventory requires all of the following: (1) the purchase money security interest is perfected when the debtor receives possession of the inventory; (2) the purchase money secured party sends an authenticated notification to the holder of the conflicting security interest; (3) the holder of the conflicting security interest receives the notification within five years before the debtor receives possession of the inventory; and (4) the notification states that the person sending the notification has or expects to acquire a purchase money security interest in inventory of the debtor and describes the inventory. U.C.C. § 9-324 (b).
4. U.C.C. § 9-311(d).
5. Missouri had also adopted the old version of the law, but amended its statute effective August 28, 2012.
6. See, e.g. Union Planters Bank v. Peninsula Bank, 897 So. 2d 499 (Fla. Dist. Ct. App. 2005).
7. Id.
8. U.C.C. § 9-514, Official Comment 2. Until the financing statement is assigned of record, however, the original secured party remains the “secured party”, authorized to file amendments.
9. In re Johnson, 407 B.R. 364 (Bankr. E.D. Ark. 2009); But see, In re Clark Contracting Services, Inc., 399 B.R. 789, 2008 LUL 5459818 (Bankr. W.D. Tex. 2008), subsequently overruled by legislation.
10. Brenner Financial, Inc. v. Cinemacar Leasing, 2012 N.J. Super. Unpub. LEXIS 937, 77 U.C.C. Rep. Serv. 2D 440 ( NJ Super. App. Div. 2012), citing IAC, Ltd. v. Princeton Porsche-Audi. 75 N.J. 379, 382 A.2d 1125 (N.J. 1978).
11. Id.
12. U.C.C.§9-320 (a) and §9-315 (a) (l).
13. See U.C.C. § 9-311, comment 5.
14. Dorton v. BMW Bank of North America, 346 B.R. 271, 60 U.C.C. Rep. 2d 701 (D.D.C. 2006); See also, In re Hicks, 2006 WL 1764119, 60 U.C.C. Rep. 2d 413 (D. Kan. 2006) (secured party deemed perfected upon filing “Notice of Security Interest” even though state issued title without noting lien).
15. See U.C.C. § 9-303 (a).
16. See U.C.C. § 9-335 (d).
17. U.C.C. § 9-513(c)(1).
18. U.C.C. § 9-513(c).
19. U.C.C. § § 9-625(b), (c) and (e)(1), (2) and (4).
20. U.C.C. § 9-509 (d)(2).
21. See N.J.S.A. 39:10-10.