Keeping track of the developments to state Uniform Commercial Code (UCC) laws is important for businesses that borrow, for lenders, and for the lawyers that advise both borrowers and lenders.
But it can also be hard to do for busy individuals with so much else on their plates. To help all interested parties keep up CT Corporation has compiled some of the significant legislative and case law developments we have tracked and reported for you in 2024.
I. UCC amendments regarding emerging technologies
In 2022 the UCC’s sponsoring organizations adopted amendments to the UCC dealing with transactions involving emerging digital technologies. Although almost every article of the UCC was revised in some way, the key to the 2022 amendments was the addition of a new Article 12, which governs transactions in a subset of digital assets called “controllable electronic records” or CERs. Amendments to Article 9 clarify how to perfect security interests in CERs.
In 2024 the 2022 UCC amendments dealing with emerging technologies were adopted by the following states:
- Alabama (House Bill 348 (Laws of 2023), effective July 1, 2024);
- Georgia (House Bill 1240, effective July 1, 2024);
- Louisiana (Senate Bill 110, effective August 1, 2024);
- Minnesota (House Bill 3868, effective August 1, 2024);
- Nebraska (Legislative Bill 94, effective July 19, 2024);
- Oklahoma (House Bill 2776, effective November 1, 2024);
- Pennsylvania (Senate Bill 1084, effective August 30, 2024);
- Rhode Island (House Bill 7210 & Senate Bill 2781, each effective June 10, 2024);
- South Dakota (House Bill 1163, effective July 1, 2024)
II. Other UCC law amendments
Tennessee
Senate Bill 2219, effective April 11, 2024, amended the definitions of money and deposit account in Tennessee’s UCC law to provide that they do not include central bank digital currency.
Utah
Senate Bill 43, effective May 1, 2024, amended Utah’s UCC law to provide that if a debtor files a termination statement, the filing office shall send to the secured party of record for the financing statement to which the termination relates a notice that the termination statement has been filed, no later than 14 days after the day on which the termination statement is filed.
III. UCC Case law
Kansas
In re: TW Automation, LC, Case No. 23-21184, decided December 2, 2024. The U.S. Bankruptcy Court for the District of Kansas held that a financing statement filed by the Small Business Association was seriously misleading and therefore ineffective under Kansas’ UCC law. The financing statement listed the debtor’s name using the entity indicator “LLC” at the end of its name. However, the debtor’s actual entity indicator was “LC”. Kansas’ search logic as set forth in its administrative regulations disregards certain words and abbreviations at the end of a name that indicate the existence or nature of an organization. However, the list does not include “LC”. Therefore, according to the court, “LC” is not disregarded under Kansas’ search logic, and a search of the debtor’s correct name would not and did not disclose a financing statement under the name with the “LLC” ending.
Minnesota
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 of 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.
Tennessee
Greenville Federal Bank, FSB v. First Farmers and Commercial Bank (In re K&L Trailer Leasing, Inc.), Case No. 3:20-bk-31620, decided November 4, 2024. The U.S. Bankruptcy Court, Eastern District of Tennessee, applying Article 9 of Tennessee’s UCC law held that where the plaintiff bank and defendant bank both had properly perfected liens in 10 trailers by filing UCC-1s, the plaintiff bank’s inventory lien had priority over the defendant bank’s lien. The plaintiff bank’s debtor transferred the trailers to the defendant bank’s debtor without the plaintiff bank’s consent. The court noted that the transferee knew the trailers violated the plaintiff bank’s rights and thereby was not a buyer in the ordinary course of business. Furthermore, the defendant bank was aware of the relationship between the plaintiff’s debtor and its debtor and could have inquired as to the source of the trailers or searched inventory liens and contacted the plaintiff bank to ask if it consented to the transfer.
Texas
In Re Texas Dow Employees Credit Union, No. 13-24-00053, decided March 26, 2024. The Texas Court of Appeals held that the request for documents from a financial institution is governed by Sec. 59.006 of the Texas Finance Code, which governs discovery of customer records from a financial institution and not Sec. 9.210 of Texas’ UCC law, which allows a debtor to request an accounting, list of collateral or statement of account from a secured party. A credit union filed a suit claiming to have a superior claim to a vehicle for which it had filed a financing statement. The defendants made a request pursuant Sec. 9.210 of the UCC law for loan and other documents and the credit union moved for an order of protection from discovery. The court ruled that the trial court erred in rejecting the credit union’s motion because the defendants failed to comply with the requirement of Sec. 59.006.
Learn more
As you navigate 2025, CT Corporation is dedicated to helping your business stay compliant. If you want to learn more, contact a CT Corporation representative.
