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Key: Green = existing Code. Red = new code to be enacted
Senate Bill No. 426
(By Senator Snyder)
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[Introduced March 4, 2013; referred to the Committee on
Interstate Cooperation; and then to the Committee on the
Judiciary .]
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A BILL to amend and reenact §46-9-510, §46-9-516 and §46-9-521 of
the Code of West Virginia, 1931, as amended; and to amend said
code by adding thereto a new section, designated §46-9-516a,
all relating to the Uniform Commercial Code and the
effectiveness of filed records; creating additional authority
to refuse to accept a record; creating circumstances under
which a record filing is false; creating criminal penalties
for filing or attempting to file a false record; creating
civil penalties for filing or attempting to file a false
record; setting an administrative procedure initiated by the
Secretary of State or a person identified as a debtor on a
record; requiring party to an adverse administrative decision
by the Secretary of State to file action in Kanawha County Circuit Court if the party wishes to have the Secretary of
State's decision reversed; exempting the filing office and its
employees from liability; exempting filings by a regulated
financial institution or its representatives from certain
provisions; clarifying the applicability of provisions to
records filed prior to the effective date of this article; and
providing for a uniform format for current forms.
Be it enacted by the Legislature of West Virginia:
That §46-9-510, §46-9-516 and §46-9-521 of the Code of West
Virginia, 1931, as amended, be amended and reenacted; and that said
code be amended by adding thereto a new section, designated
§46-9-516a, all to read as follows:
ARTICLE 9. SECURED TRANSACTIONS; SALES OF ACCOUNTS AND CHATTEL
PAPER.
§46-9-510. Effectiveness of filed record.
(a) Filed record effective if authorized.-- A filed record is
effective only to the extent that it was filed by a person that may
file it under section 9-509. section five hundred nine of this
article.
(b) Authorization by one secured party of record.-- A record
authorized by one secured party of record does not affect the
financing statement with respect to another secured party of record.
(c) Continuation statement not timely filed.-- A continuation
statement that is not filed within the six-month period prescribed
by section 9-515(d) subsection (d), section five hundred fifteen of
this article is ineffective.
(d) A filed record ceases to be effective if the filing office
terminates the record pursuant to section five hundred sixteen-a of
this article.
§46-9-516. What constitutes filing; effectiveness of filing.
(a) What constitutes filing. -- Except as otherwise provided
in subsection (b) of this section, communication of a record to a
filing office and tender of the filing fee or acceptance of the
record by the filing office constitutes filing.
(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:
(1) The record is not communicated by a method or medium of
communication authorized by the filing office;
(2) An amount equal to or greater than the applicable filing
fee is not tendered;
(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 information statement, the
record:
(i) Does not identify the initial financing statement as
required by 9-512 or 9-518, section five hundred twelve or section
five hundred eighteen of this article, as applicable; or
(ii) Identifies an initial financing statement whose
effectiveness has lapsed under section 9-515; five hundred fifteen
of this article; or
__(iii) Identifies an initial financing statement which was
terminated pursuant to section five hundred sixteen-a of this
article;
(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 surname; or
(D) In the case of a record filed or recorded in the filing
office described in section 9-501(a)(1), subdivision (1),
subsection (a), section five hundred one of this article, the
record does not provide a sufficient description of the real
property to which it relates; or
__(E) In the case of a record submitted to the filing office described in subdivision (1), subsection (a), section five hundred
one of this article, the filing office has reason to believe, from
information contained in the record or from the person that
communicated the record to the office, that:
__(i) If the record indicates that the debtor is a transmitting
utility, the debtor does not meet the definition of a transmitting
utility as described in subdivision (81), subsection (a), section
one hundred two of this article;
__(ii) If the record indicates that the transaction relating to
the record is a manufactured home transaction, the transaction does
not meet the definition of a manufactured home transaction as
described in subdivision (54), subsection (a), section one hundred
two of this article; or
__(iii) If the record indicates that the transaction relating to
the record is a public finance transaction, the transaction does
not meet the definition of a public finance transaction as
described in subdivision (70), subsection (a), section one hundred
two of this article;
__(4) In the case of an initial financing statement or an
amendment, if the filing office believes in good faith that the
record was communicated to the filing office in violation of
section five hundred sixteen-a of this article;
__(4) (5) In the case of an initial financing statement or an amendment that adds a secured party of record, the record does not
provide a name and mailing address for the secured party of record;
(5) (6) 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;
(B) Indicate whether the name provided as the name of the
debtor is the name of an individual or an organization;
(6) (7) In the case of an assignment reflected in an initial
financing statement under section 9-514(a) subsection (a), section
five hundred fourteen of this article or an amendment filed under
section 9-514(b), subsection (b), section five hundred fourteen of
this article, the record does not provide a name and mailing
address for the assignee; or
(7) (8) In the case of a continuation statement, the record is
not filed within the six-month period prescribed by section
9-515(d). subsection (d), section five hundred fifteen of this
article.
(c) Rules applicable to subsection (b). -- For purposes of
subsection (b):
(1) A record does not provide information if the filing office
is unable to read or decipher the information; and
(2) A record that does not indicate that it is an amendment or
identify an initial financing statement to which it relates, as
required by section 9-512, 9-514 or 9-518, sections five hundred
twelve, five hundred fourteen or five hundred eighteen of this
article, is an initial financing statement.
(d) Refusal to accept record; record effective as filed
record. -- A record that is communicated to the filing office with
tender of the filing fee, but which the filing office refuses to
accept for a reason other than one set forth in subsection (b) of
this section, is effective as a filed record except as against a
purchaser of the collateral which gives value in reasonable
reliance upon the absence of the record from the files.
(e) Administrative review. -- If the Secretary of State
determines that a financing statement which identities a public
official or employee as a debtor is fraudulent or that an
individual debtor and an individual secured party would appear to
be the same individual on the financing statement or that the
individual debtor claims to be a transmitting utility, without
supporting documents, the Secretary may commence administrative
proceedings to remove the statement from its records in accordance
with the provisions of article five, chapter twenty-nine-a of this
code.
(1) Upon the commencement of proceedings pursuant to this subsection, the Secretary of State shall identify the financing
statement in its records as subject to administrative review and
publish a notice in the West Virginia Register regarding the
proceedings.
(2) A financing statement may be found to be fraudulent only
if, based upon clear and convincing evidence, no good faith basis
exists upon which to conclude that the secured party was authorized
to file the statement and the statement was submitted for the
purpose of harassment or intimidation or fraudulent intent of the
alleged debtor.
(3) If upon the completion of administrative review, it is
determined that the filing of a financing statement was fraudulent,
the filing party shall be assessed all costs incurred by the
Secretary in reaching a final determination, including
reimbursement for all costs of the hearing. The filing party may
also be subject to a civil penalty not exceeding $500 per
fraudulent filing. If upon completion of administrative review or
any subsequent appeal of a decision of the Secretary of State, it
is determined that a filing subject to appeal is not fraudulent,
the secretary or court may award the prevailing party reasonable
costs and expenses, including attorney fees.
(4) The Secretary of State shall annually submit a report to
the Legislature regarding actions taken against fraudulent filings pursuant to this section which identifies the number and
characteristics of such proceedings, identifies any creditors found
to have made fraudulent filings, describes proceedings initiated by
the secretary in which it is ultimately determined that fraudulent
filings did not occur, describes the number and type of complaints
received by the secretary in which it is alleged that fraudulent
filings have occurred, and describes the actions taken by the
secretary to investigate complaints concerning allegedly fraudulent
filings and the results of the investigations.
(5) A decision by the secretary to remove a financing
statement determined to have been fraudulently filed subject to
appeal de novo to the circuit court of Kanawha County. Pending the
outcome of an appeal, the financing statement may not be removed
from the records of the Secretary, but shall be identified in the
records as having been adjudicated to be fraudulent, subject to a
pending appeal by the putative creditor.
(6) A financing statement filed by a regulated financial
institution is not subject to the provisions of this section. For
the purposes of this section, a regulated financial institution is
a bank, bank and trust company, trust company, savings bank,
savings association, building and loan association, credit union,
consumer finance company, insurance company, investment company,
mortgage lender or broker, securities broker, dealer or underwriter, or other institution chartered, licensed, registered
or otherwise authorized under federal law, the law of this state or
any other state, to engage in secured lending.
§46-9-516a. Fraudulent records.
(a) No person may cause to be communicated to the filing
office for filing a false record the person knows or reasonably
should know:
(1) Is not authorized or permitted under sections five hundred
nine, seven hundred eight or eight hundred eight of this article;
(2) Is not related to a valid existing or potential commercial
or financial transaction, an existing agricultural or other lien or
a judgment of a court of competent jurisdiction; and
(3) Is filed with the intent to harass or defraud the person
identified as debtor in the record or any other person.
(b) A person who violates subsection (a) of this section
shall, for a first offense, be guilty of a misdemeanor and, upon
conviction thereof, shall be fined not less than $100 nor more that
$1000 or, in the discretion of the court, be confined in jail not
exceeding twelve months, or both fined and confined; and, for a
second or subsequent offense, shall be guilty of a felony and, upon
conviction thereof, shall be confined in a state correctional
facility not less than one nor more than five years.
(c) A person who violates subsection (a) of this section is liable in a civil action to each injured person for:
(1) The greater of the actual damages caused by the violation
or up to $10,000 in lieu of actual damages;
(2) Reasonable attorney fees;
(3) Court costs and other related expenses of bringing an
action including reasonable investigative expenses; and
(4) In the discretion of the court, exemplary damages in an
amount determined by the court or jury.
(d) A person identified as a debtor in a filed record the
person believes was caused to be communicated to the filing office
in violation of subsection (a) of this section may, under penalty
of perjury, file with the Secretary of State an affidavit to that
effect. The Secretary of State shall adopt and make available a
form affidavit for use under this section.
(e) Upon receipt of an affidavit filed under this section, or
upon administrative action by the Secretary of State, the Secretary
of State shall communicate to the secured party of record on the
record to which the affidavit or administrative action relates and
to the person that communicated the record to the filing office, if
different and known to the office, a request for additional
documentation supporting the effectiveness of the record. The
Secretary of State shall review all such documentation received
within thirty days after the first request for additional documentation is sent if the Secretary of State has a reasonable
basis for concluding that the record was communicated to the filing
office in violation of subsection (a) of this section.
The Secretary of State may initiate an administrative action
under this subsection with regard to a filed record if the
Secretary of State has reason to believe, from information
contained in the record or obtained from the person that
communicated the record to the filing office, that the record was
communicated to the filing office in violation of subsection (a) of
this section. The Secretary of State may give heightened scrutiny
to a record that indicates the debtor is a transmitting utility or
that indicates the transaction to which the record relates is a
manufactured home transaction or a public finance transaction.
(f) The Secretary of State may not charge a fee to file an
affidavit under this section and may not return a fee paid for
filing a record terminated under this section.
(g) The Secretary of State shall promptly communicate to the
secured party of record a notice of the termination of a record
under subsection (e) of this section. A secured party of record
that believes in good faith the record was not communicated to the
filing office in violation of subsection (a) of this section may
file an action to require that the record be reinstated by the
filing office. A person that communicated a record to the filing office that the filing office rejected in reliance on subdivision
(4), subsection (b), section five hundred sixteen of this article,
who believes in good faith that the record was not communicated to
the filing office in violation of subdivision (4), subsection (b),
section five hundred sixteen of this article, may file an action to
require that the record be accepted by the filing office. The
jurisdiction for the action is the circuit court of Kanawha County.
(h) If a court determines that a record terminated under this
section or rejected in reliance on subdivision (4), subsection (b),
section five hundred sixteen of this article should be reinstated
or accepted, the court shall provide a copy of an order to that
effect to the Secretary of State. On receipt of an order
reinstating a terminated record, the Secretary of State shall
refile the record along with a notice indicating that the record
was refiled pursuant to this section and its initial filing date.
On receipt of an order requiring that a rejected record be
accepted, the Secretary of State shall promptly file the record
along with a notice indicating that the record was filed pursuant
to this section and the date on which it was communicated for
filing. A rejected record that is filed pursuant to an order of a
court shall have the effect described in subsection (d), section
five hundred sixteen of this article for a record the filing office
refuses to accept for a reason other than one set forth in subsection (b), section five hundred sixteen of this article.
(i) A terminated record that is refiled under subsection (h)
of this section is effective as a filed record from the initial
filing date. If the period of effectiveness of a refiled record
would have lapsed during the period of termination, the secured
party may file a continuation statement within thirty days after
the record is refiled and the continuation statement has the same
effect as if it had been filed during the six-month period
described in subsection (d), section five hundred fifteen of this
article. A refiled record is considered never to have been