Under the Uniform Commercial Code (UCC), a secured party can perfect its lien on certain of a debtor’s assets by the filing of a UCC-1 financing statement. However, Section 9-509 of the UCC provides that a party may file such a financing statement only if the debtor authorizes the filing: either expressly in an authenticated record or, more commonly, by executing a security agreement. The UCC does not specify when a debtor must provide such authorization, but the U.S. Bankruptcy Court for the Southern District of New York recently held that a debtor’s written authorization need not precede the filing of a financing statement. In In re The Adoni Group, 530 B.R. 592 (Bankr. S.D.N.Y. 2015), the secured party filed a financing statement before the parties had executed a security agreement, and without the debtor having otherwise authorized the filing in writing. However, because the debtor ultimately executed a security agreement, the court held that the debtor effectively ratified the filing and that the secured party’s lien was thus validly perfected. In so holding, the court clarified that the term “authorize,” as used in Section 9-509 of the UCC, encompasses forward-looking authorization as well as retroactive ratification of a filed financing statement.
The Facts
Capital Business Credit LLC filed a UCC-1 financing statement with New York’s Department of State, asserting a blanket lien against substantially all of the assets of The Adoni Group Inc. (the debtor). At the time of the filing, the debtor had not signed a security agreement nor had the debtor otherwise provided Capital with written authorization to file the financing statement.
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