Uniform Commercial Code

Plain English Breakdown

The official source material does not provide details about the consequences of failing to comply with the new requirements or how existing financing statements will be affected.

Changes to Financing Statement Filings in Tennessee

This act modifies how financing statements are handled when a public official disputes their filing by adding requirements for administrative review and judicial review processes.

What This Bill Does

• Requires the filing office to send both the Uniform Commercial Code financing statement and the notarized affidavit of the public official to the administrative procedures division along with the petition for review.
• Adds that if an administrative law judge finds reasonable basis or legal cause, the secured party must give a copy of this determination to the filing office.
• Requires the public official who filed the affidavit to provide a copy of any determination by an administrative law judge to the filing office.
• If the secured party wants to review the decision made by an administrative law judge, they must send a petition for judicial review to the filing office within seven days.

Who It Names or Affects

• Public officials who are debtors in financing statements
• Secured parties involved in contested financing statement cases

Terms To Know

Financing Statement

A document filed to protect a creditor's interest in the property of a debtor.

Public Official

An individual who holds an office or position within a government entity.

Limits and Unknowns

• The bill does not specify what happens if the required documents are not provided to the filing office.
• It is unclear how this act will affect existing financing statements before its enactment.
• There is no information on how disputes over financing statements were handled prior to these changes.

Official Summary Text

Present law generally requires a financing statement to be fil
ed to perfect a security interest in certain collateral, and a termination statement to be filed for the financing statement in certain situations, such as when the debtor did not authorize the filing of the initial financing statement.

PUBLIC OFFICIAL
AS DEBTOR

Present law authorizes a public official who is identified as a debtor in a filed financing statement to file a notarized affidavit, signed under penalty of perjury, which contains the uniform commercial code financing statement file number of
the financing statement, the affiant's mailing address, a statement that the affiant is a public official, and a statement that the affiant believes that the filed record identifying the affiant as a debtor was filed without any reasonable basis or legal
c
ause, and the affiant's factual basis for why the filed record lacks any reasonable basis or legal cause.

Once an affidavit is so filed with the filing office pursuant to the previous provisions, present law requires the filing office to indicate on th
e Uniform Commercial Code financing statement that the underlying statement is "Contested
—
Under Review
." Additionally, within three business days of receipt of an affidavit so filed, the filing office must send a copy of the affidavit, by registered or
certified mail, with return receipt requested addressed to the secured party of record for the financing statement to which the affidavit relates.

ADMINISTRATIVE REVIEW

Within 20 business days of delivery of the affidavit to the secured party, present
law authorizes a secured party who believes in good faith that their filed financing statement was filed with a reasonable basis or legal cause, to
file with the filing office a petition for review by an administrative judge pursuant to the contested case
procedures of the Uniform Administrative Procedures Act
, accompanied by a cost bond of $200.

Within three business days of the receipt of the petition for review and cost bond by the filing office, present law requires the filing office to forward the
petition
to the administrative procedures division of the office of the secretary of state, along with a request for a hearing.
This bill revises this provision to require such office to also forward the Uniform Commercial Code financing statement that is
the subject of the petition and the notarized affidavit of the public official to the administrative
procedures division of the office of the secretary of state, along with a request for a hearing.

Present law provides that if, following a contested c
ase hearing of a petition for review is filed by a secured party under the provisions above, an administrative judge determines that there
is reasonable basis or legal cause for the financing statement, the filing office
must
remove the
"
Contested
—
Under
Review
"
indication from the Uniform Commercial Code financing statement and the effectiveness of the financing statement will be reflected as the original date of filing.
This bill adds that if an
administrative law judge reaches
such
a determination, the
n the secured party
must
provide a copy of the determination to the filing office.

However, if
an administrative judge determines that the financing statement was filed without any reasonable basis or legal cause,
present law provides that
the filing off
ice
must
void and remove from the public record the financing statement along with all other documents associated with the financing statement upon the administrative judge's order becoming effective and no longer subject to review pursuant to
present law
.
This bill adds that if
an administrative law judge reaches
such
a determination, then the public official
so
filing an affidavit
must
provide a copy of such determination to the filing office.
This bill additionally provides that if
the secured party se
eks review of
such
a determination made by an administrative law judge, then the secured party
must
provide a copy of the petition for judicial review to the filing office within seven days of the filing of the petition.

Current Bill Text

SENATE BILL 544
By Stevens

HOUSE BILL 1342
By Lamberth

HB1342
000675
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 47,
relative to Uniform Commercial Code financing
statement filings.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 47-9-513(e)(5)(C), is amended by
deleting the subdivision and substituting:
(C) Within three (3) business days of receipt of the petition for review and cost
bond by the filing office, the filing office shall forward the petition, the Uniform
Commercial Code financing statement that is the subject of the petition, and the
notarized affidavit of the public official to the administrative procedures division of the
office of the secretary of state, along with a request for a hearing.
SECTION 2. Tennessee Code Annotated, Section 47-9-513(e)(7), is amended by
adding the following language at the end of the subdivision:
If an administrative law judge reaches a determination as described in this subsection,
then the secured party shall provide a copy of the determination to the filing office.
SECTION 3. Tennessee Code Annotated, Section 47-9-513(e)(8), is amended by
adding the following language at the end of the subdivision:
If an administrative law judge reaches a determination as described in this subsection,
then the public official filing an affidavit under this part shall provide a copy of such
determination to the filing office. If the secured party seeks review of a determination
made by an administrative law judge under this subsection pursuant to § 4-5-322, then
the secured party shall provide a copy of the petition for judicial review to the filing office
within seven (7) days of the filing of the petition.

- 2 - 000675

SECTION 4. This act takes effect upon becoming a law, the public welfare requiring it.