Article 9 - Reversing Unauthorized Terminations

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Question:

In regards to the following Guru Q & A: <a href="http://www.bankersonline.com/lending/gurus_ldng120202b.html">UCC, Refinancing, & Termination</a>, Sam Ott answered: "The Revision to Article 9 of the UCC does allow terminations...If the filing is not made by an authorized party, it is not effective even though it is filed of record." Here's my question: If it is filed of record, how do you reverse the unauthorized termination?

Answer:

Revised Article 9 provides that any filing made by an unauthorized party has no effect. A termination statement that is filed by an unauthorized party remains on the record BUT does not terminate any effective filing. The secured party or a party authorized by the secured party may file a termination statement. In the event that the secured party has failed to file or send a termination statement upon the payment of the underlying obligation, the debtor or a party authorized by the debtor can file a termination statement. They are the only parties that can file an effective termination statement. For this reason, it is important to check who filed a termination statement if one is found upon a search of the record. See Sections 9-509 and 9-513. Revised Article 9

First published on BankersOnline.com 9/25/06