Request By:
Ms. Judy Long Witt
Montgomery County Clerk
Mt. Sterling, Kentucky 40353
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
You request the opinion of this office regarding the filing of financing statements and security agreements.
The question:
"I would like to know if a carbon copy of a financing statement is acceptable for filing? Also, are carbon copies of signatures acceptable for filing? If the UCC-1 form is signed only by the secured party, but the xerox copy of the installment contract is signed by the debtor, is that acceptable for filing?"
KRS 355.9-402 contains no explicit requirement that the original financing statement be filed with the clerk. Under subsection (1) of that statute a financing statement is sufficient if it is signed by the debtor and the secured party, gives an address of the secured party from which information concerning the security interest may be obtained, gives a mailing address of the debtor and contains a statement indicating the types, or describing the items, of collateral. Subsection (6) of KRS 355.9-402 provides that a financing statement substantially complying with the requirements of this section is effective even though it contains minor errors which are not seriously misleading. A financing statement may be filed before a security agreement is made or a security interest otherwise attaches. Subsection (1) explicitly provides that a copy of the security agreement is sufficient as a financing statement if it contains the information required by subsection (1) and is signed by both parties.
The answer to your first question is that a carbon or photostatic copy of the financing statement, which complies with the requirements of KRS 355.9-402(1), as above mentioned, is acceptable for filing with the county clerk.
When we say carbon or photostatic copies of the original financing statement, that suffices for the signatures of the debtor and secured party where the copy plainly indicates that the debtor and secured party both signed the original. A carbon copy is really a duplicate original. It is thus our opinion that carbon copies or photocopies of the original financing statement are acceptable for filing with the clerk, where the requisites of KRS 355.9-402(1) are met, without the necessity for manual signature of the parties on such copies. See Gus Datillo Fruit Co. v. Louisville & N.R. Co., 238 Ky. 322, 37 S.W.2d 856 (1931), holding that duplicates or multiplicates of an original document is deemed an original by the courts. Also see, of similar import, L. & N.R. Co. v. Gibson, 294 Ky. 65, 170 S.W.2d 907 (1943); and Liberty Nat. Bank & Trust Co. v. Louisville Trust Co., 295 Ky. 825, 175 S.W.2d 524 (1943) 528.
"A financing statement merely gives notice of the existence of a security interest but in itself does not create a security interest, for which a security agreement is required." Anderson, Uniform Commercial Code, Vol. 4 (2nd ed.), § 9-402:4, page 469. Matter of Maple Contractors, Inc., 142 N.J. Super. 348, 411 A.2d 1182 (1979).
You indicated by phone that the financing statement was signed only by the secured party. Thus under the express language of KRS 355.9-402(1), neither the original nor a photocopy or carbon copy of such financing statement is acceptable for filing, as above pointed out. The financing statement must be signed by the debtor as well as the secured party under the explicit terms of the statute.
Finally, you ask whether a photocopy of the security agreement signed by the debtor and secured party, is acceptable for filing as a financing statement.
Under the express language of KRS 355.9-402(1), a copy of the security agreement is sufficient as a financing statement if it contains the information required in that subsection and is signed by both parties. Here you tell me it was signed by both parties. Thus if it contains the information required by subsection (1), it is acceptable for filing as a financing statement.
As we wrote above, the purpose behind KRS 355.9-402(1) is to put subsequent creditors on notice. Riley v. Miller, Ky.App., 549 S.W.2d 314 (1977) 315. It is important to know that in Riley v. Miller the Court of Appeals held that the lack of the creditor's signature on the financing statement (chattel mortgage being the security agreement to be used as the financing statement) is a minor error and the instrument filed as a financing statement with that omission, nevertheless, was in substantial compliance with KRS 355.9-402(1). The court relied on the premise that the failure of the creditor to sign could not have seriously misled anyone. See also Alloway v. Stuart, Ky., 385 S.W.2d 41 (1964). However, the holding of the court should be received with caution, since only the courts can determine judicially substantial compliance. The conservative course for the county clerks of Kentucky would be to insist upon the literal compliance with KRS 355.9-402(1), as we dealt with that point above.