S.L. 2012-70

GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2011

SESSION LAW 2012-70

HOUSE BILL 1068

AN ACT to amend article 9 of the uniform commercial code relating to secured transactions, as recommended by the general statutes commission.

The General Assembly of North Carolina enacts:

PART I. 2010 UCC ARTICLE 9 AMENDMENTS.

SECTION 1. G.S. 25-9-102(a) reads as rewritten:

"§ 25-9-102. Definitions and index of definitions.

(a) Article 9 definitions. - In this Article:

…

(7) "Authenticate" means:

a. To sign; or

b. To execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record.With present intent to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol, or process.

…

(10) "Certificate of title" means a certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral. The term includes another record maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral.

…

(50) "Jurisdiction of organization", with respect to a registered organization, means the jurisdiction under whose law the organization is formed or organized.

…

(70a) "Public organic record" means a record that is available to the public for inspection and is:

a. A record consisting of the record initially filed with or issued by a state or the United States to form or organize an organization and any record filed with or issued by the state or the United States which amends or restates the initial record;

b. An organic record of a business trust consisting of the record initially filed with a state and any record filed with the state which amends or restates the initial record, if a statute of the state governing business trusts requires that the record be filed with the state; or

c. A record consisting of legislation enacted by the legislature of a state or the Congress of the United States which forms or organizes an organization, any record amending the legislation, and any record filed with or issued by the state or the United States which amends or restates the name of the organization.

…

(73) "Registered organization" means an organization formed or organized solely under the law of a single state or the United States ~~and as to which the state or the United States must maintain a public record showing the organization to have been organized.~~by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the state or the United States. The term includes a business trust that is formed or organized under the law of a single state if a statute of the state governing business trusts requires that the business trust's organic record be filed with the state.

…."

SECTION 2. G.S. 25-9-105 reads as rewritten:

"§ 25-9-105. Control of electronic chattel paper.

(a) General Rule: Control of Electronic Chattel Paper. - A secured party has control of electronic chattel paper if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to which the chattel paper was assigned.

(b) Specific Facts Giving Control. - A system satisfies subsection (a) of this section if the record or records comprising the chattel paper are created, stored, and assigned in such a manner that:

(1) A single authoritative copy of the record or records exists which is unique, ~~identifiable~~ identifiable, and, except as otherwise provided in subdivisions (4), (5), and (6) of this section, unalterable;

(2) The authoritative copy identifies the secured party as the assignee of the record or records;

(3) The authoritative copy is communicated to and maintained by the secured party or its designated custodian;

(4) Copies or ~~revisions~~ amendments that add or change an identified assignee of the authoritative copy can be made only with the ~~participation~~ consent of the secured party;

(5) Each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy; and

(6) Any ~~revision~~ amendment of the authoritative copy is readily identifiable as ~~an authorized or unauthorized revision.~~authorized or unauthorized."

SECTION 3. G.S. 25-9-307(f) reads as rewritten:

"(f) Location of registered organization organized under federal law; bank branches and agencies. - Except as otherwise provided in subsection (i) of this section, a registered organization that is organized under the law of the United States and a branch or agency of a bank that is not organized under the law of the United States or a state are located:

(1) In the state that the law of the United States designates, if the law designates a state of location;

(2) In the state that the registered organization, branch, or agency designates, if the law of the United States authorizes the registered organization, branch, or agency to designate its state of ~~location;~~ location, including by designating its main office, home office, or other comparable office; or

(3) In the District of Columbia, if neither subdivision (1) nor subdivision (2) of this subsection applies."

SECTION 4. G.S. 25-9-311(a) reads as rewritten:

"(a) Security interest subject to other law. - Except as otherwise provided in subsection (d) of this section, the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to:

(1) A statute, regulation, or treaty of the United States whose requirements for a security interest's obtaining priority over the rights of a lien creditor with respect to the property preempt G.S. 25-9-310(a);

(2) A ~~certificate-of-title~~ statute of this State covering automobiles or other goods that provides for a security interest to be indicated on ~~the~~ a certificate of title as a condition to or result of perfection of the security interest, including G.S. 20-58 and G.S. 75A-41; or

(3) A ~~certificate-of-title~~ statute of another jurisdiction which provides for a security interest to be indicated on ~~the~~ a certificate of title as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the property."

SECTION 5.(a) The catch line of G.S. 25-9-316 reads as rewritten:

"§ 25-9-316. ~~Continued perfection of security interest following~~Effect of change in governing law."

SECTION 5.(b) G.S. 25-9-316 is amended by adding two new subsections to read:

"(h) Effect on Filed Financing Statement of Change in Governing Law. - The following rules apply to collateral to which a security interest attaches within four months after the debtor changes its location to another jurisdiction:

(1) A financing statement filed before the change pursuant to the law of the jurisdiction designated in G.S. 25-9-301(1) or G.S. 25-9-305(c) is effective to perfect a security interest in the collateral if the financing statement would have been effective to perfect a security interest in the collateral had the debtor not changed its location.

(2) If a security interest perfected by a financing statement that is effective under subdivision (1) of this subsection becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in G.S. 25-9-301(1) or G.S. 25-9-305(c) or the expiration of the four-month period, it remains perfected thereafter. If the security interest does not become perfected under the law of the other jurisdiction before the earlier time or event, it becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value.

(i) Effect of Change in Governing Law on Financing Statement Filed Against Original Debtor. - If a financing statement naming an original debtor is filed pursuant to the law of the jurisdiction designated in G.S. 25-9-301(1) or G.S. 25-9-305(c) and the new debtor is located in another jurisdiction, the following rules apply:

(1) The financing statement is effective to perfect a security interest in collateral acquired by the new debtor before, and within four months after, the new debtor becomes bound under G.S. 25-9-203(d), if the financing statement would have been effective to perfect a security interest in the collateral had the collateral been acquired by the original debtor.

(2) A security interest perfected by the financing statement and which becomes perfected under the law of the other jurisdiction before the earlier of the time the financing statement would have become ineffective under the law of the jurisdiction designated in G.S. 25-9-301(1) or G.S. 25-9-305(c) or the expiration of the four-month period remains perfected thereafter. A security interest that is perfected by the financing statement but which does not become perfected under the law of the other jurisdiction before the earlier time or event becomes unperfected and is deemed never to have been perfected as against a purchaser of the collateral for value."

SECTION 6. G.S. 25-9-317 reads as rewritten:

"§ 25-9-317. Interests that take priority over or take free of security interest or agricultural lien.

(a) Conflicting security interests and rights of lien creditors. - A security interest or agricultural lien is subordinate to the rights of:

(1) A person entitled to priority under G.S. 25-9-322; and

(2) Except as otherwise provided in subsection (e) of this section, a person that becomes a lien creditor before the earlier of the time:

a. The security interest or agricultural lien is perfected; or

b. One of the conditions specified in G.S. 25-9-203(b)(3) is met and a financing statement covering the collateral is filed.

(b) Buyers that receive delivery. - Except as otherwise provided in subsection (e) of this section, a buyer, other than a secured party, of tangible chattel paper, tangible documents, goods, instruments, or a ~~security certificate~~certificated security takes free of a security interest or agricultural lien if the buyer gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.

(c) Lessees that receive delivery. - Except as otherwise provided in subsection (e) of this section, a lessee of goods takes free of a security interest or agricultural lien if the lessee gives value and receives delivery of the collateral without knowledge of the security interest or agricultural lien and before it is perfected.

(d) Licensees and buyers of certain collateral. - A licensee of a general intangible or a buyer, other than a secured party, of ~~accounts, electronic chattel paper, electronic documents, general intangibles, or investment property~~collateral other than tangible chattel paper, tangible documents, goods, instruments, or a certificated security takes free of a security interest if the licensee or buyer gives value without knowledge of the security interest and before it is perfected.

(e) Purchase-money security interest. - Except as otherwise provided in G.S. 25-9-320 and G.S. 25-9-321, if a person files a financing statement with respect to a purchase-money security interest before or within 20 days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the security interest attaches and the time of filing."

SECTION 7. G.S. 25-9-326 reads as rewritten:

"§ 25-9-326. Priority of security interests created by new debtor.

(a) Subordination of security interest created by new debtor. - Subject to subsection (b) of this section, a security interest that is created by a new debtor ~~which is~~in collateral in which the new debtor has or acquires rights and is perfected solely by a filed financing statement that ~~is effective solely under G.S. 25-9-508 in collateral in which a new debtor has or acquires rights~~would be ineffective to perfect the security interest but for the application of G.S. 25-9-316(i)(1) or G.S. 25-9-508 is subordinate to a security interest in the same collateral which is perfected other than by such a filed financing ~~statement that is effective solely under G.S. 25-9-508.~~statement.

(b) Priority under other provisions; multiple original debtors. - The other provisions of this Part determine the priority among conflicting security interests in the same collateral perfected by filed financing statements ~~that are effective solely under G.S. 25-9-508.~~described in subsection (a) of this section. However, if the security agreements to which a new debtor became bound as debtor were not entered into by the same original debtor, the conflicting security interests rank according to priority in time of the new debtor's having become bound."

SECTION 8. G.S. 25-9-406 reads as rewritten:

"§ 25-9-406. Discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory notes ineffective.

(a) Discharge of account debtor; effect of notification. - Subject to subsections (b) through (i) of this section, an account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor.

(b) When notification ineffective. - Subject to subsection (h) of this section, notification is ineffective under subsection (a) of this section:

(1) If it does not reasonably identify the rights assigned;

(2) To the extent that an agreement between an account debtor and a seller of a payment intangible limits the account debtor's duty to pay a person other than the seller and the limitation is effective under law other than this Article; or

(3) At the option of an account debtor, if the notification notifies the account debtor to make less than the full amount of any installment or other periodic payment to the assignee, even if:

a. Only a portion of the account, chattel paper, or payment intangible has been assigned to that assignee;

b. A portion has been assigned to another assignee; or

c. The account debtor knows that the assignment to that assignee is limited.

(c) Proof of assignment. - Subject to subsection (h) of this section, if requested by the account debtor, an assignee shall seasonably furnish reasonable proof that the assignment has been made. Unless the assignee complies, the account debtor may discharge its obligation by paying the assignor, even if the account debtor has received a notification under subsection (a) of this section.

(d) Term restricting assignment generally ineffective. - Except as otherwise provided in subsection (e) of this section and G.S. 25-2A-303 and ~~G.S. 25-9-407~~G.S. 25-9-407, and subject to subsection (h) of this section, a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it:

(1) Prohibits, restricts, or requires the consent of the account debtor or person obligated on the promissory note to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account, chattel paper, payment intangible, or promissory note; or

(2) Provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account, chattel paper, payment intangible, or promissory note.

(e) Inapplicability of subsection (d) to certain sales. - Subsection (d) of this section does not apply to the sale of a payment intangible or promissory ~~note.~~note, other than a sale pursuant to a disposition under G.S. 25-9-610 or an acceptance of collateral under G.S. 25-9-620.

(f) Legal restrictions on assignment generally ineffective. - Except as otherwise provided in G.S. 25-2A-303 and G.S. 25-9-407 and subject to subsections (h) and (i) of this section, a rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute, or regulation:

(1) Prohibits, restricts, or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in the account or chattel paper; or

(g) Subdivision (b)(3) not waivable. - Subject to subsection (h) of this section, an account debtor may not waive or vary its option under subdivision (b)(3) of this section.

(h) Rule for individual under other law. - This section is subject to law other than this Article which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

(i) Inapplicability. - This section does not apply to an assignment of a health-care-insurance receivable. Subsection (f) of this section does not apply to an assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, a right the transfer of which is prohibited or restricted by any of the following statutes to the extent that the statute is inconsistent with subsection (f) of this section: North Carolina Structured Settlement Act (Article 44B of Chapter 1 of the General Statutes); North Carolina Crime Victims Compensation Act (Chapter 15B of the General Statutes); North Carolina Consumer Finance Act (Article 15 of Chapter 53 of the General Statutes); North Carolina Firemen's and Rescue Squad Workers' Pension Fund (Article 86 of Chapter 58 of the General Statutes); Employment Security Law (Chapter 96 of the General Statutes); North Carolina Workers' Compensation Act (Article 1 of Chapter 97 of the General Statutes); and Programs of Public Assistance (Article 2 of Chapter 108A of the General Statutes).

(1) North Carolina Structured Settlement Act (Article 44B of Chapter 1 of the General Statutes).

(2) North Carolina Crime Victims Compensation Act (Chapter 15B of the General Statutes).

(3) North Carolina Consumer Finance Act (Article 15 of Chapter 53 of the General Statutes).

(4) North Carolina Firemen's and Rescue Squad Workers' Pension Fund (Article 86 of Chapter 58 of the General Statutes).

(5) Employment Security Law (Chapter 96 of the General Statutes).

(6) North Carolina Workers' Compensation Fund Act (Article 1 of Chapter 97 of the General Statutes).

(7) Programs of Public Assistance (Article 2 of Chapter 108A of the General Statutes).

(8) North Carolina State Lottery Act (Chapter 18C of the General Statutes).

(j) Section prevails over inconsistent law. - Except to the extent otherwise provided in subsection (i) of this section, this section prevails over any inconsistent provision of an existing or future statute, rule, or regulation of this State unless the provision is contained in a statute of this State, refers expressly to this section, and states that the provision prevails over this section."

SECTION 9. G.S. 25-9-408 reads as rewritten:

"§ 25-9-408. Restrictions on assignment of promissory notes, health-care-insurance receivables, and certain general intangibles ineffective.

(a) Term restricting assignment generally ineffective. - Except as otherwise provided in subsection (b) of this section, a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health-care-insurance receivable or a general intangible, including a contract, permit, license, or franchise, and which term prohibits, restricts, or requires the consent of the person obligated on the promissory note or the account debtor to, the assignment or transfer of, or creation, attachment, or perfection of a security interest in, the promissory note, health-care-insurance receivable, or general intangible, is ineffective to the extent that the term:

(1) Would impair the creation, attachment, or perfection of a security interest; or

(2) Provides that the assignment or transfer or the creation, attachment, or perfection of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the promissory note, health-care-insurance receivable, or general intangible.

(b) Applicability of subsection (a) to sales of certain rights to payment. - Subsection (a) of this section applies to a security interest in a payment intangible or promissory note only if the security interest arises out of a sale of the payment intangible or promissory ~~note.~~note, other than a sale pursuant to a disposition under G.S. 25-9-610 or an acceptance of collateral under G.S. 25-9-620.

(c) Legal restrictions on assignment generally ineffective. - A rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or creation of a security interest in, a promissory note, health-care-insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation:

(1) Would impair the creation, attachment, or perfection of a security interest; or

(d) Limitation on ineffectiveness under subsections (a) and (c). - To the extent that a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health-care-insurance receivable or general intangible or a rule of law, statute, or regulation described in subsection (c) of this section would be effective under law other than this Article but is ineffective under subsection (a) or (c) of this section, the creation, attachment, or perfection of a security interest in the promissory note, health-care-insurance receivable, or general intangible:

(1) Is not enforceable against the person obligated on the promissory note or the account debtor;

(2) Does not impose a duty or obligation on the person obligated on the promissory note or the account debtor;

(3) Does not require the person obligated on the promissory note or the account debtor to recognize the security interest, pay or render performance to the secured party, or accept payment or performance from the secured party;

(4) Does not entitle the secured party to use or assign the debtor's rights under the promissory note, health-care-insurance receivable, or general intangible, including any related information or materials furnished to the debtor in the transaction giving rise to the promissory note, health-care-insurance receivable, or general intangible;

(5) Does not entitle the secured party to use, assign, possess, or have access to any trade secrets or confidential information of the person obligated on the promissory note or the account debtor; and

(6) Does not entitle the secured party to enforce the security interest in the promissory note, health-care-insurance receivable, or general intangible.

(e) Section prevails over inconsistent law. - Except to the extent otherwise provided in subsection (f) of this section, this section prevails over any inconsistent provision of an existing or future statute, rule, or regulation of this State unless the provision is contained in a statute of this State, refers expressly to this section, and states that the provision prevails over this section.

(f) Inapplicability. - Subsection (c) of this section does not apply to an assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, a right the transfer of which is prohibited or restricted by any of the following statutes to the extent that the statute is inconsistent with subsection (c) of this section: North Carolina Structured Settlement Act (Article 44B of Chapter 1 of the General Statutes); North Carolina Crime Victims Compensation Act (Chapter 15B of the General Statutes); North Carolina Consumer Finance Act (Article 15 of Chapter 53 of the General Statutes); North Carolina Firemen's and Rescue Squad Workers' Pension Fund (Article 86 of Chapter 58 of the General Statutes); Employment Security Law (Chapter 96 of the General Statutes); North Carolina Workers' Compensation Act (Article 1 of Chapter 97 of the General Statutes); and Programs of Public Assistance (Article 2 of Chapter 108A of the General Statutes).

(1) North Carolina Structured Settlement Act (Article 44B of Chapter 1 of the General Statutes).

(2) North Carolina Crime Victims Compensation Act (Chapter 15B of the General Statutes).

(3) North Carolina Consumer Finance Act (Article 15 of Chapter 53 of the General Statutes).

(4) North Carolina Firemen's and Rescue Squad Workers' Pension Fund (Article 86 of Chapter 58 of the General Statutes).

(5) Employment Security Law (Chapter 96 of the General Statutes).

(6) North Carolina Workers' Compensation Fund Act (Article 1 of Chapter 97 of the General Statutes).

(7) Programs of Public Assistance (Article 2 of Chapter 108A of the General Statutes).

(8) North Carolina State Lottery Act (Chapter 18C of the General Statutes)."

SECTION 10. G.S. 25-9-502(c) reads as rewritten:

"(c) Record of mortgage as financing statement. - A record of a mortgage is effective, from the date of recording, as a financing statement filed as a fixture filing or as a financing statement covering as-extracted collateral or timber to be cut only if:

(1) The record indicates the goods or accounts that it covers;

(2) The goods are or are to become fixtures related to the real property described in the record or the collateral is related to the real property described in the record and is as-extracted collateral or timber to be cut;

(3) The record satisfies the requirements for a financing statement in this ~~section~~ section, but:

a. The record need not indicate ~~other than an indication~~ that it is to be filed in the real property records; and

b. The record sufficiently provides the name of a debtor who is an individual if it provides the individual name of the debtor or the surname and first personal name of the debtor, even if the debtor is an individual to whom G.S. 25-9-503(a)(4) applies; and

(4) The record is duly recorded."

SECTION 11. G.S. 25-9-503 reads as rewritten:

"§ 25-9-503. Name of debtor and secured party.

(a) Sufficiency of debtor's name. - A financing statement sufficiently provides the name of the debtor:

(1) Except as otherwise provided in subdivision (3) of this subsection, If if the debtor is a registered ~~organization,~~organization or the collateral is held in a trust that is a registered organization, only if the financing statement provides the name ~~of the debtor indicated~~that is stated to be the registered organization's name on the public organic record of most recently filed with or issued or enacted by the ~~debtor's~~ registered organization's jurisdiction of organization which ~~shows the debtor to have been organized;~~purports to state, amend, or restate the registered organization's name;

(2) Subject to subsection (f) of this section, If if the ~~debtor is a decedent's estate,~~collateral is being administered by the personal representative of a decedent, only if the financing statement ~~provides~~ provides, as the name of the debtor, the name of the decedent ~~and~~ and, in a separate part of the financing statement, indicates that the ~~debtor is an estate;~~collateral is being administered by a personal representative;

(3) ~~If the debtor is a trust or a trustee acting with respect to property held in trust, only if the financing statement:~~

a. Provides the name specified for the trust in its organic documents or, if no name is specified, provides the name of the settlor and additional information sufficient to distinguish the debtor from other trusts having one or more of the same settlors; and

b. ~~Indicates, in the debtor's name or otherwise, that the debtor is a trust or is a trustee acting with respect to property held in trust; and~~

If the collateral is held in a trust that is not a registered organization, only if the financing statement:

a. Provides, as the name of the debtor:

1. If the organic record of the trust specifies a name for the trust, the name specified; or

2. If the organic record of the trust does not specify a name for the trust, the name of the settlor or testator; and

b. In a separate part of the financing statement:

1. If the name is provided in accordance with sub-subdivision a.1. of this subdivision, indicates that the collateral is held in a trust; or

2. If the name is provided in accordance with sub-subdivision a.2. of this subdivision, provides additional information sufficient to distinguish the trust from other trusts having one or more of the same settlors or the same testator and indicates that the collateral is held in a trust, unless the additional information so indicates;

(4) Subject to subsection (g) of this section, if the debtor is an individual to whom this State has issued a drivers license or special identification card that has not expired, only if the financing statement provides the name of the individual which is indicated on the drivers license or special identification card;

(5) If the debtor is an individual to whom subdivision (a)(4) of this section does not apply, only if the financing statement provides the individual name of the debtor or the surname and first personal name of the debtor; and

~~(4)~~(6) In other cases:

a. If the debtor has a name, only if it the financing statement provides the ~~individual or~~ organizational name of the debtor; and

b. If the debtor does not have a name, only if it the financing statement provides the names of the partners, members, associates, or other persons comprising the ~~debtor.~~debtor, in a manner that each name provided would be sufficient if the person named were the debtor.

(b) Additional debtor-related information. - A financing statement that provides the name of the debtor in accordance with subsection (a) of this section is not rendered ineffective by the absence of:

(1) A trade name or other name of the debtor; or

(2) Unless required under ~~sub-subdivision (a)(4)b.~~sub-subdivision (a)(6)b. of this section, names of partners, members, associates, or other persons comprising the debtor.

(c) Debtor's trade name insufficient. - A financing statement that provides only the debtor's trade name does not sufficiently provide the name of the debtor.

(d) Representative capacity. - Failure to indicate the representative capacity of a secured party or representative of a secured party does not affect the sufficiency of a financing statement.

(e) Multiple debtors and secured parties. - A financing statement may provide the name of more than one debtor and the name of more than one secured party.

(f) Name of Decedent. - The name of the decedent indicated on the order appointing the personal representative of the decedent issued by the court having jurisdiction over the collateral is sufficient as the "name of the decedent" under subdivision (a)(2) of this section.

(g) Multiple Drivers Licenses or Special Identification Cards. - If this State has issued to an individual more than one drivers license or special identification card of a kind described in subdivision (a)(4) of this section, the one that was issued most recently is the one to which subdivision (a)(4) of this section refers.

(h) Definition. - In this section, the "name of the settlor or testator" means:

(1) If the settlor is a registered organization, the name that is stated to be the settlor's name on the public organic record most recently filed with or issued or enacted by the settlor's jurisdiction of organization which purports to state, amend, or restate the settlor's name; or

(2) In other cases, the name of the settlor or testator indicated in the trust's organic record."

SECTION 12. G.S. 25-9-507(c) reads as rewritten:

"(c) Change in debtor's name. - If ~~a debtor so changes its~~the name that a filed financing statement provides for a debtor becomes insufficient as the name of the debtor under G.S. 25-9-503(a) so that the financing statement becomes seriously misleading under G.S. 25-9-506:

(1) The financing statement is effective to perfect a security interest in collateral acquired by the debtor before, or within four months after, the ~~change;~~filed financing statement becomes seriously misleading; and

(2) The financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four months after the ~~change,~~filed financing statement becomes seriously misleading, unless an amendment to the financing statement which renders the financing statement not seriously misleading is filed within four months after ~~the change.~~the financing statement became seriously misleading."

SECTION 13. G.S. 25-9-515(f) reads as rewritten:

"(f) Transmitting utility financing statement. - If a debtor is a transmitting utility and a filed initial financing statement so indicates, the financing statement is effective until a termination statement is filed."

SECTION 14. G.S. 25-9-516(b) reads as rewritten:

"(b) Refusal to accept record; filing does not occur. - Filing does not occur with respect to a record that a filing office refuses to accept because:

…

(3) The filing office is unable to index the record because:

a. In the case of an initial financing statement, the record does not provide a name for the debtor;

b. In the case of an amendment or ~~correction~~ information statement, the record:

1. Does not identify the initial financing statement as required by G.S. 25-9-512 or G.S. 25-9-518, as applicable; or

2. Identifies an initial financing statement whose effectiveness has lapsed under G.S. 25-9-515;

c. In the case of an initial financing statement that provides the name of a debtor identified as an individual or an amendment that provides a name of a debtor identified as an individual which was not previously provided in the financing statement to which the record relates, the record does not identify the debtor's ~~last name;~~surname; or

d. In the case of a record filed in the filing office described in G.S. 25-9-501(a)(1), the record does not provide a sufficient description of the real property to which it relates;

…

(5) In the case of an initial financing statement or an amendment that provides a name of a debtor which was not previously provided in the financing statement to which the amendment relates, the record does not:

a. Provide a mailing address for the debtor; or

b. Indicate whether the name provided as the name of the debtor is the name of an individual or an organization; or

c. ~~If the financing statement indicates that the debtor is an organization, provide:~~

1. ~~A type of organization for the debtor;~~

2. ~~A jurisdiction of organization for the debtor; or~~

3. ~~An organizational identification number for the debtor or indicate that the debtor has none;~~

…

(7) In the case of a continuation statement, the record is not filed within the six-month period prescribed by G.S. 25-9-515(d); or

(8) In the case of a record presented for filing at the Department of the Secretary of State, the Secretary of State determines that the record is not created pursuant to this Chapter or is otherwise intended for an improper purpose, such as to hinder, harass, or otherwise wrongfully interfere with any person."

SECTION 15. G.S. 25-9-518 reads as rewritten:

"§ 25-9-518. Claim concerning inaccurate or wrongfully filed record.

(a) ~~Correction statement.~~Statement With Respect to Record Indexed Under Person's Name. - A person may file in the filing office ~~a correction~~an information statement with respect to a record indexed there under the person's name if the person believes that the record is inaccurate or was wrongfully filed.

(b) ~~Sufficiency~~ Contents of ~~correction statement.~~Statement Under Subsection (a). - ~~A correction~~An information statement under subsection (a) of this section must:

(1) Identify the record to which it relates by the file number assigned to the initial financing statement to which the record relates;

(2) Indicate that it is ~~a correction~~an information statement; and

(3) Provide the basis for the person's belief that the record is inaccurate and indicate the manner in which the person believes the record should be amended to cure any inaccuracy or provide the basis for the person's belief that the record was wrongfully filed. ~~A correction~~An information statement that is subject to the provisions of subsection (b1) of this section shall include a written certification, under oath, by the person that the contents of the ~~correction~~ information statement are true and accurate to the best of the person's knowledge.

(b1) In the case of ~~a correction~~an information statement alleging that a previously filed record was wrongfully filed and that it should have been rejected under G.S. 25-9-516(b)(8), the Secretary of State shall, without undue delay, determine whether the contested record was wrongfully filed and should have been rejected. In order to determine whether the record was wrongfully filed, the Secretary of State may require the person filing the ~~correction~~ information statement and the secured party to provide any additional relevant information requested by the Secretary of State, including an original or a copy of any security agreement that is related to the record. If the Secretary of State finds that the record was wrongfully filed and should have been rejected under G.S. 25-9-516(b)(8), the Secretary of State shall cancel the record and it shall be void and of no effect.

(b2) Statement by Secured Party of Record. - A person may file in the filing office an information statement with respect to a record filed there if the person is a secured party of record with respect to the financing statement to which the record relates and believes that the person that filed the record was not entitled to do so under G.S. 25-9-509(d).

(b3) Contents of Statement Under Subsection (b2). - An information statement under subsection (b2) of this section must:

(1) Identify the record to which it relates by the file number assigned to the initial financing statement to which the record relates;

(2) Indicate that it is an information statement; and

(3) Provide the basis for the person's belief that the person that filed the record was not entitled to do so under G.S. 25-9-509(d).

(c) Record not affected by ~~correction~~ information statement. - The filing of ~~a correction~~an information statement does not affect the effectiveness of an initial financing statement or other filed record."

SECTION 16. G.S. 25-9-521 is rewritten to read:

"§ 25-9-521. Uniform form of written financing statement and amendment.

(a) Initial financing statement form. - A filing office that accepts written records may not refuse to accept a written initial financing statement in the following form and format except for a reason set forth in G.S. 25-9-516(b):

(b) Amendment form. - A filing office that accepts written records may not refuse to accept a written record in the following form and format except for a reason set forth in G.S. 25-9-516(b):

SECTION 17. G.S. 25-9-607(b) reads as rewritten:

"(b) Nonjudicial enforcement of mortgage. - If necessary to enable a secured party to exercise under subdivision (a)(3) of this section the right of a debtor to enforce a mortgage nonjudicially, the secured party may record in the office in which a record of the mortgage is recorded:

(1) A copy of the security agreement that creates or provides for a security interest in the obligation secured by the mortgage; and

(2) The secured party's sworn affidavit in recordable form stating that:

a. A default has ~~occurred;~~occurred with respect to the obligation secured by the mortgage; and

b. The secured party is entitled to enforce the mortgage nonjudicially."

SECTION 18. G.S. 25-9-625(c) reads as rewritten:

"(c) Persons entitled to recover damages; statutory damages ~~in consumer-goods transaction.~~if collateral is consumer goods. - Except as otherwise provided in G.S. 25-9-628:

(1) A person that, at the time of the failure, was a debtor, was an obligor, or held a security interest in or other lien on the collateral may recover damages under subsection (b) of this section for its loss; and

(2) If the collateral is consumer goods, a person that was a debtor or a secondary obligor at the time a secured party failed to comply with this Part may recover for that failure in any event an amount not less than the credit service charge plus ten percent (10%) of the principal amount of the obligation or the time-price differential plus ten percent (10%) of the cash price."

PART II. TRANSITION PROVISIONS.

SECURITY INTEREST PERFECTED BEFORE EFFECTIVE DATE.

SECTION 19.(a) Continuing Perfection: Perfection Requirements Satisfied. - A security interest that is a perfected security interest immediately before the effective date of this act is a perfected security interest under Article 9 of Chapter 25 of the General Statutes as amended by this act if, when this act becomes effective, the applicable requirements for attachment and perfection under Article 9 of Chapter 25 of the General Statutes as amended by this act are satisfied without further action.

SECTION 19.(b) Continuing Perfection: Perfection Requirements Not Satisfied. - Except as otherwise provided in Section 21 of this act, if, immediately before this act becomes effective, a security interest is a perfected security interest, but the applicable requirements for perfection under Article 9 of Chapter 25 of the General Statutes as amended by this act are not satisfied when this act becomes effective, the security interest remains perfected thereafter only if the applicable requirements for perfection under Article 9 of Chapter 25 of the General Statutes as amended by this act are satisfied within one year after this act becomes effective.

SECURITY INTEREST UNPERFECTED BEFORE EFFECTIVE DATE.

SECTION 20. Security Interest Unperfected Before Effective Date. - A security interest that is an unperfected security interest immediately before this act becomes effective becomes a perfected security interest:

(1) Without further action, when this act becomes effective if the applicable requirements for perfection under Article 9 of Chapter 25 of the General Statutes as amended by this act are satisfied before or at that time; or

(2) When the applicable requirements for perfection are satisfied if the requirements are satisfied after that time.

EFFECTIVENESS OF ACTION TAKEN BEFORE EFFECTIVE DATE.

SECTION 21.(a) Pre-Effective-Date Filing Effective. - The filing of a financing statement before this act becomes effective is effective to perfect a security interest to the extent the filing would satisfy the applicable requirements for perfection under Article 9 of Chapter 25 of the General Statutes as amended by this act.

SECTION 21.(b) When Pre-Effective-Date Filing Becomes Ineffective. - This act does not render ineffective an effective financing statement that, before this act becomes effective, is filed and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in Article 9 of Chapter 25 of the General Statutes as it existed before amendment. However, except as otherwise provided in subsections (c) and (d) of this section and Section 22 of this act, the financing statement ceases to be effective:

(1) If the financing statement is filed in this State, at the time the financing statement would have ceased to be effective had this act not become effective; or

(2) If the financing statement is filed in another jurisdiction, at the earlier of:

a. The time the financing statement would have ceased to be effective under the law of that jurisdiction; or

b. June 30, 2018.

SECTION 21.(c) Continuation Statement. - The filing of a continuation statement after this act becomes effective does not continue the effectiveness of a financing statement filed before this act becomes effective. However, upon the timely filing of a continuation statement after this act becomes effective and in accordance with the law of the jurisdiction governing perfection as provided in Article 9 of Chapter 25 of the General Statutes as amended by this act, the effectiveness of a financing statement filed in the same office in that jurisdiction before this act becomes effective continues for the period provided by the law of that jurisdiction.

SECTION 21.(d) Application of Sub-Subdivision (b)(2)b. to Transmitting Utility Financing Statement. - Sub-subdivision (b)(2)b. of this section applies to a financing statement that, before this act becomes effective, is filed against a transmitting utility and satisfies the applicable requirements for perfection under the law of the jurisdiction governing perfection as provided in Article 9 of Chapter 25 of the General Statutes as it existed before amendment, only to the extent that Article 9 of Chapter 25 of the General Statutes as amended by this act provides that the law of a jurisdiction other than the jurisdiction in which the financing statement is filed governs perfection of a security interest in collateral covered by the financing statement.

SECTION 21.(e) Application of Part 5 of Article 9 of Chapter 25 of the General Statutes. - A financing statement that includes a financing statement filed before this act becomes effective and a continuation statement filed after this act becomes effective is effective only to the extent that it satisfies the requirements of Part 5 of Article 9 of Chapter 25 of the General Statutes as amended by this act for an initial financing statement. A financing statement that indicates that the debtor is a decedent's estate indicates that the collateral is being administered by a personal representative within the meaning of G.S. 25-9-503(a)(2) as amended by this act. A financing statement that indicates that the debtor is a trust or is a trustee acting with respect to property held in trust indicates that the collateral is held in a trust within the meaning of G.S. 25-9-503(a)(3) as amended by this act.

WHEN INITIAL FINANCING STATEMENT SUFFICES TO CONTINUE EFFECTIVENESS OF FINANCING STATEMENT.

SECTION 22.(a) Initial Financing Statement in Lieu of Continuation Statement. - The filing of an initial financing statement in the office specified in G.S. 25-9-501 continues the effectiveness of a financing statement filed before this act becomes effective if:

(1) The filing of an initial financing statement in that office would be effective to perfect a security interest under Article 9 of Chapter 25 of the General Statutes as amended by this act;

(2) The pre-effective-date financing statement was filed in an office in another State; and

(3) The initial financing statement satisfies subsection (c) of this section.

SECTION 22.(b) Period of Continued Effectiveness. - The filing of an initial financing statement under subsection (a) of this section continues the effectiveness of the pre-effective-date financing statement:

(1) If the initial financing statement is filed before this act becomes effective, for the period provided in G.S. 25-9-515 as it read prior to the amendment by Section 13 of this act with respect to an initial financing statement; and

(2) If the initial financing statement is filed after this act becomes effective, for the period provided in G.S. 25-9-515 as amended by this act with respect to an initial financing statement.

SECTION 22.(c) Requirements for Initial Financing Statement Under Subsection (a). - To be effective for purposes of subsection (a) of this section, an initial financing statement must:

(1) Satisfy the requirements of Part 5 of Article 9 of Chapter 25 of the General Statutes as amended by this act for an initial financing statement;

(2) Identify the pre-effective-date financing statement by indicating the office in which the financing statement was filed and providing the dates of filing and file numbers, if any, of the financing statement and of the most recent continuation statement filed with respect to the financing statement; and

(3) Indicate that the pre-effective-date financing statement remains effective.

AMENDMENT OF PRE-EFFECTIVE-DATE FINANCING STATEMENT.

SECTION 23.(a) "Pre-Effective-Date Financing Statement." - In this section, "pre-effective-date financing statement" means a financing statement filed before this act becomes effective.

SECTION 23.(b) Applicable Law. - After this act becomes effective, a person may add or delete collateral covered by, continue or terminate the effectiveness of, or otherwise amend the information provided in, a pre-effective-date financing statement only in accordance with the law of the jurisdiction governing perfection as provided in Article 9 of Chapter 25 of the General Statutes as amended by this act. However, the effectiveness of a pre-effective-date financing statement also may be terminated in accordance with the law of the jurisdiction in which the financing statement is filed.

SECTION 23.(c) Method of Amending: General Rule. - Except as otherwise provided in subsection (d) of this section, if the law of this State governs perfection of a security interest, the information in a pre-effective-date financing statement may be amended after this act becomes effective only if:

(1) The pre-effective-date financing statement and an amendment are filed in the office specified in G.S. 25-9-501;

(2) An amendment is filed in the office specified in G.S. 25-9-501 concurrently with, or after the filing in that office of, an initial financing statement that satisfies subsection (c) of Section 22 of this act; or

(3) An initial financing statement that provides the information as amended and satisfies subsection (c) of Section 22 of this act is filed in the office specified in G.S. 25-9-501.

SECTION 23.(d) Method of Amending: Continuation. - If the law of this State governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement may be continued only under subsections (c) and (e) of Section 21 of this act or Section 22 of this act.

SECTION 23.(e) Method of Amending: Additional Termination Rule. - Whether or not the law of this State governs perfection of a security interest, the effectiveness of a pre-effective-date financing statement filed in this State may be terminated after this act becomes effective by filing a termination statement in the office in which the pre-effective-date financing statement is filed, unless an initial financing statement that satisfies subsection (c) of Section 22 of this act has been filed in the office specified by the law of the jurisdiction governing perfection as provided in Article 9 of Chapter 25 of the General Statutes as amended by this act as the office in which to file a financing statement.

PERSON ENTITLED TO FILE INITIAL FINANCING STATEMENT OR CONTINUATION STATEMENT.

SECTION 24. Person Entitled to File Initial Financing Statement or Continuation Statement. - A person may file an initial financing statement or a continuation statement under this Part if:

(1) The secured party of record authorizes the filing; and

(2) The filing is necessary under this Part:

a. To continue the effectiveness of a financing statement filed before this act becomes effective; or

b. To perfect or continue the perfection of a security interest.

PRIORITY.

SECTION 25. This act determines the priority of conflicting claims to collateral. However, if the relative priorities of the claims were established before this act becomes effective, Article 9 of Chapter 25 of the General Statutes as it existed before this act becomes effective determines priority.

PART III. APPLICABILITY, EFFECTIVE DATE, AND OTHER PROVISIONS.

APPLICABILITY.

SECTION 26.(a) Pre-Effective-Date Transactions or Liens. - Except as otherwise provided in Part II of this act, this act applies to a transaction or lien within its scope, even if the transaction or lien was entered into or created before this act becomes effective.

SECTION 26.(b) Pre-Effective-Date Proceedings. - This act does not affect an action, case, or proceeding commenced before this act becomes effective.

AUTHORIZATION FOR PRINTING OF COMMENTS.

SECTION 27. The Revisor of Statutes shall cause to be printed, as annotations to the published General Statutes, all relevant portions of the Official Comments to the 2010 Amendments to Article 9 of the Uniform Commercial Code and all explanatory comments of the drafters of this act as the Revisor may deem appropriate.

EFFECTIVE DATE.

SECTION 28. This act becomes effective July 1, 2013.

In the General Assembly read three times and ratified this the 21^st day of June, 2012.

s/ Walter H. Dalton

President of the Senate

s/ Thom Tillis

Speaker of the House of Representatives

s/ Beverly E. Perdue

Governor

Approved 4:12 p.m. this 26^th day of June, 2012