- Official Committee of Unsecured Creditors of Motors Liquidation Company v. JPMorgan Chase Bank, N.A. (In re Motors Liquidation Company), Docket No. 2013-02187, --- F.3d --- (2d. Cir. Jan. 21, 2015)
- The UCC-3 termination statement filed by the debtor terminating three UCC-1s, including one mistakenly included that related to a separate term loan, was effective to terminate the security interest in the term loan even though the secured creditor did not intend for its termination as it assented to and authorized the filing of a UCC-3 termination statement that had that effect such that the creditor’s claim became unsecured.
- Procedural context:
- Following the Second Circuit’s certifying a question to the Delaware Supreme Court on the interpretation of UCC 9-509(d)(1), the Second Circuit reviewed the issues raised in the appeal from the Bankruptcy Court’s order (Gerber, J.) granting summary judgment in favor of the secured creditor concluding that the UCC-3 filing was unauthorized and therefore not effective to terminate the security interest. The Second Circuit reversed the granting of summary judgment and remanded to the Bankruptcy Court to enter partial summary judgment in favor of the Committee as to the termination of the UCC-1.
- The Committee commenced an adversary proceeding against JPMorgan for a determination that despite an unintended termination of an unrelated UCC-1, the UCC-3 termination statement was effective to terminate JPMorgan’s security interest rendering it an unsecured creditor. The Court relied on the Delaware Supreme Court’s answer to its certified question that a termination statement is effective under UCC Section 9-509 when the secured party authorizes its filing without any requirement that the secured creditor intend or otherwise understand the effect of the filing. Based upon the facts presented, while JPMorgan did not intend to terminate the UCC for the term loan as it was incorrectly included on the termination statement, it authorized the Debtors to file the termination statement after its counsel reviewed and approved the termination statement and signed the closing documents, thus assenting to the termination.
- Winter, Wesley, and Carney, Circuit Judges
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