California Commercial Code Finally Follows National Trend In Perfecting Security Interests Against Individuals

Are you an exclusive marketing agent who advances money to a grower to help finance the grower's crops for the season while taking a security interest in the crops and other personal property assets of the debtor?  Or, do you help finance the purchase of a high priced item and in turn, take back a purchase money security interest in the item?  If so, the following information will be of particular interest to you.

On January 1, 2015, provisions of AB 1858 take effect bringing California's individual debtor name filing rules into conformity with 40 other states.  The bill amends California Commercial Code Sections 9503(a)(4) and (5) by changing the filing rules to perfect a security interest against an individual debtor's personal property. In order to perfect a security interest in personal property against an individual, the secured creditor must file the financing statement in the state where the secured debtor is domiciled.  [UCC Section 9307(b)(1)].  For a California debtor, the place of filing is the California Secretary of State.   Under California's revised Article 9, Commercial Code Section 9503 now requires that a financing statement against an individual identify that person by the name on an unexpired driver's license or a DMV-issued personal identification card.  If the secured debtor's CA Driver's License reads "John Quincy Adams," then the UCC financing statement must identify the debtor as "John Quincy Adams" and not "John Adams" or even "John Q. Adams." 

If the person does not have either an unexpired driver's license or DMV-issued personal identification card, it is sufficient if his or her "individual name" or "surname and first personal name" is shown on the financing statement (which is the current standard).  Generally, the first personal name is the given name; and, the surname is considered the "family name;" however, in certain cultures, particularly Latin cultures, this is not necessary the case.  For example, Spain's former Primer Minister, Jose Luis Rodriguez Zapatero has two given names,Jose Luis, and two surnames - Rodriguez as his first paternal surname, and Zapatero as his second maternal surname. Under the revised rules, if the Prime Minister does not have an unexpired driver's license or a DMV-issued personal identification card, then the secured party should file under all possible variations of the name to account for the double first names and double surnames. 

Take Away

If you are filing a secured lien against an individual to perfect a security interest in that individual's personal property assets, file the financing statement under the name identified in the unexpired driver's license or DMV-issued personal identification card. If neither is available, then file under the debtor's "individual name" or "surname and first personal name."  In addition, as a precaution, when filing or searching secured liens, file or search under all variations of the individual's name.  This effort will help identify senior secured liens and provide subsequent notice to junior lien holders.