Filing of Unauthorized UCC Termination Statement Held Ineffective
The United States Bankruptcy Court for the Southern District of New York, in Official Committee of Unsecured Creditors of Motors Liquidation Company v. JPMorgan Chase Bank, N.A., 486 B.R. 596 (Bankr. S.D.N.Y. 2013), ruled against a creditors' committee when the court granted summary judgment in favor of the secured parties and found that a UCC financing statement termination was not effective because the termination was unauthorized. The mistake occurred when General Motors Corporation paid off a synthetic lease and a UCC-3 termination statement was mistakenly filed terminating a UCC-1 financing statement for an unrelated $1.5 billion term loan. JPMorgan Chase Bank, N.A., agent for a syndicate of lenders for the term loan, sought summary judgment and argued that the UCC termination statement was not authorized. The court found that, although JPMorgan was provided a copy of the erroneous UCC-3 termination before the termination was filed, JPMorgan did not intend to terminate the UCC financing statement and, equally important, GM did not believe it was authorized to terminate the financing statement.