Official Committee of Unsecured Creditors of Motors Liquidation Co. v. JPMorgan Chase Bank, N.A.
103 A.3d 1010
Del.2014Background
- Second Circuit certified a question about whether a Delaware UCC-3 termination statement can extinguish a UCC-1 perfected security interest when the secured party reviews and knowingly approves the filing.
- A UCC-3 termination statement was filed on behalf of General Motors by Mayer Brown, unintentionally including the term loan security interest with the synthetic-lease-related interests.
- JPMorgan allegedly reviewed the filing and approved it; the creditors committee later argued authorization sufficed to terminate the interest, while JPMorgan contended intent to terminate the listed interest was required.
- Bankruptcy Court ruled for JPMorgan, finding the filing was not authorized to release the term loan security interest due to lack of intended authorization.
- Delaware Supreme Court held that under §§ 9-509, 9-510, and 9-513, it is enough that the secured party authorize the filing for the termination statement to be effective, regardless of subjective understanding of the terms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether authorization suffices to extinguish | JPMorgan argued no; authorization alone not enough without intent to terminate the listed interest. | Creditors Committee argued authorization to file terminates the listed security interests. | Authorization is enough; no subjective intent required. |
Key Cases Cited
- In re Motors Liquidation Co., 755 F.3d 78 (2d Cir. 2014) (certified question context and UCC-9-513 interpretation)
- Official Comm. of Unsecured Creditors of Motors Liquidation Co. v. JPMorgan Chase Bank, N.A. (In re Motors Liquidation Co.), 486 B.R. 596 (S.D.N.Y. 2013) (bankruptcy court decision cited in underlying dispute)
- Boilermakers Local 154 Ret. Fund v. Chevron Corp., 73 A.3d 934 (Del. Ch. 2013) (statutory interpretation and reliance on UCC filing)
- Stifel Fin. Corp. v. Cochran, 809 A.2d 555 (Del. 2002) (statutory construction approach)
- In re Clean Burn Fuels, LLC, 492 B.R. 445 (Bankr. M.D.N.C. 2013) (notice filing and third-party reliance in UCC)
- In re Lincoln Saving Bank (In re Commercial Millwright), 245 B.R. 597 (Bankr. N.D. Iowa 1999) (perfection and reliance in UCC termination)