House Bill 3400, effective August 1, 2022, makes changes to the financing statement filing system in regards to unauthorized financing statements filed with the intent to harass or defraud the person named as the debtor. Among other things the bill provides a procedure whereby a person named as a debtor in a financing statement may file an affidavit with Secretary of State stating that the financing statement was unauthorized and filed with intent to harass or defraud and directing the Secretary of State to file a termination statement if the Secretary of State does not reject the affidavit.
House File 2764, effective January 1, 2019, amends provisions governing conversions of limited partnerships and partnerships and adds provisions for domestications of limited partnerships and partnerships.
Case summaries
UCC
Receivership of United Prairie Bank v. Molnau Trucking, LLC, No. A23-1478, decided May 6, 2024. The Minnesota Court of Appeals affirmed the trial court’s ruling in favor the respondent bank in a dispute with the appellant surety over the rights to an LLC’s accounts receivable. The bank perfected its security interest in the collateral by filing a financing statement before the appellant paid on the bonds it issued naming the LLC as contractor and the appellant as surety and before the appellant filed its own financing statement. The court rejected the appellant’s argument based on an equitable subrogation theory, noting that this theory required the appellant to have acted based on an excusable mistake. However, because the bank had filed its financing statement already, the appellant was on notice of the bank’s security interest in the accounts receivable and the decision to pay on the bonds anyway was not an excusable mistake. Therefore, under either the equitable subrogation precedent or UCC law, the appellant’s interest in the accounts receivable must take a back seat to the bank’s.
Shareholder Status
Demskie v. United States Bank, NA, A22-0777, decided May 8, 2024. The Minnesota Supreme Court held that the allegation that a bank was a controlling shareholder of a corporation was sufficient under the notice pleading standard and the Court of Appeals erred in dismissing the plaintiff’s complaint on the pleadings because the complaint did not allege that the bank was registered on the books and records as an owner of shares in the corporation.
Effect of Reinstatement
Design Innovations, LLC v. Lockhart, A23-0423, decided August 21, 2023. The Minnesota Court of Appeals affirmed the district court’s ruling that a Minnesota LLC had standing to bring its breach of contract action. The LLC had been administratively terminated by the Secretary of State for failing to pay a fee but the district court found that the LLC had represented that it cured the defect and paid the fee. With the fee paid the LLC was returned to active status as of the date of termination and had standing to sue.
Separate Existence of Affiliated LLCs
State v. Owens, A18-1800, decided May 20, 2019. The Minnesota Court of Appeals answered a certified question by stating that two wholly owned subsidiary LLCs of the same parent were separate entities and thus the transfer of cannabis oil from one subsidiary to the other was a transfer to another person and violated the law prohibiting transfers to another person.
Charging Order
Benzick v. Palm Properties LLC, A18-0956, decided March 25, 2019. The Minnesota Court of Appeals ruled the trial court abused its discretion in issuing a charging order that required LLCs to deliver all payments due to a debtor member to the creditor and not just distributions due.
Other notices
As a reminder, Minnesota enacted the Revised Uniform Limited Liability Company Act effective August 1, 2015. The old law remained in effect and continued to govern LLCs formed or registered before August 1, 2015 until January 1, 2018. On January 1, 2018 the old law is repealed, at which time the Revised Act will govern all LLCs. Read the notice from the Secretary of State.