Official Committee of Unsecured Creditors of Motors Liquidation Co. v. JPMorgan Chase Bank, N.A. (In re Motors Liquidation Co.)
486 B.R. 596
Bankr. S.D.N.Y.2013Background
- GM’s Synthetic Lease, circa 2001, was secured by liens on 12 properties and perfected by multiple UCC-1 filings, with JPMorgan as administrative agent.
- In 2006 GM obtained a separate, unrelated $1.5 billion Term Loan, secured by substantial collateral, including a Main Term Loan UCC-1 filed in Delaware.
- In 2008 GM prepared to payoff the Synthetic Lease, generating documents including a Synthetic Lease Termination Agreement, a Closing Checklist, and UCC-3s to terminate Synthetic Lease liens.
- An Unrelated UCC-3 was drafted and filed referencing the Term Loan UCC-1 number, but no one involved intended to affect the Term Loan.
- GM and JPMorgan filed and reviewed documents; responsibility for the Unrelated UCC-3’s termination of the Main Term Loan UCC-1 was not contemplated by authorization.
- After GM’s chapter 11 filing, the court held that JPMorgan did not authorize termination of the Main Term Loan UCC-1, granting JPMorgan summary judgment and denying the Committee’s cross-motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the Main Term Loan UCC-1 terminated? | Committee: termination resulted from Unrelated UCC-3 referencing the Term Loan. | JPMorgan: termination required lender authorization; Unrelated UCC-3 was not authorized to end the Term Loan. | Not authorized; Main Term Loan UCC-1 remained in effect. |
| What constitutes proper authorization under Revised Article 9 for termination statements? | Committee: any authorized filing by the secured party’s agent ends the financing statement. | JPMorgan: authorization must be specific to the affected financing statement and should be given by the secured party of record. | Authorization must pertain to the specific financing statement; GM lacked authority to terminate the Main Term Loan UCC-1. |
| Did GM have actual or apparent authority to terminate the Main Term Loan UCC-1 on JPMorgan’s behalf? | Committee: various documents show broad agency authority to terminate; no need for express consent for the Term Loan. | JPMorgan: actual authority was limited to Synthetic Lease matters; no implied or apparent authority to affect the Term Loan. | No actual or apparent authority; no ratification. |
| Should the court apply non-UCC agency law principles to interpret authorization? | Committee: non-UCC agency concepts support broad authorization. | JPMorgan: the court must assess authority using agency law and UCC provisions (9-509, 9-510, 9-513) with strict standards. | Agency principles applied; authorization not established for the Term Loan. |
| Should the court certify the judgment for direct appeal to the Second Circuit? | Committee seeks appellate guidance on unsettled authority issues. | JPMorgan disputes need for immediate appeal given final ruling on authorization. | Court certifies for direct appeal to the Second Circuit on the stated grounds. |
Key Cases Cited
- Demarco v. Edens, 390 F.2d 836 (2d Cir. 1968) (agency authority standard; actual authority shown by principal's manifestation)
- Kitchin Equipment Co. v. Smithfield, 960 F.2d 1242 (4th Cir. 1992) (addressed pre-2001 authority; broad statements limited after 2001 amendments)
- Pacific Trencher & Equipment, Inc. v. United States, 27 B.R. 167 (Bankr. N.D. Cal. 1983) (termination statements filed by secured party; pre-2001 context)
- Silvernail Mirror & Glass, Inc. v., 142 B.R. 987 (Bankr. M.D. Fla. 1992) (pre-2001 authority; emphasized dramatic effects of termination statements)
- York Chemical Indus., Inc. v., 30 B.R. 583 (Bankr. D.S.C. 1983) (pre-2001 termination statement impact; authority issues discussed)
- Roswell Capital Partners LLC v. Alternative Construction Technologies, Inc., 436 Fed.Appx. 34 (2d Cir. 2011) (not followed here; discussed for its misapplication of notice filing logic)