UCC SEARCHES IN THE COMPUTER AGE: A HYPHEN MAY MAKE A
DIFFERENCE
By Scott Blakeley
The introduction of computer technology is revolutionizing the credit field. Access to
seemingly limitless information and reporting is now available on a credit executives
desktop. One example of how a credit executive may use computer databases is in a lien
search. A lien search may provide important information to a credit executive evaluating
whether to extend credit and the amount of a credit line, as the search discloses the
number and type of secured creditors the debtor has. This information may be used by
the credit executive for cash flow and liquidation analysis of the debtor and may provide
a compelling picture of the risk of extending credit.
While computers reduce the time to conduct a lien search, their efficiency may also
create certain risks for the credit executive. Uncovering a lien has everything to do with
how that lien was recorded with the recording office, usually the Secretary of State. A
computerized database search of the debtors name will not uncover liens that have been
improperly recorded. Heres why: if a creditor who has filed a lien failed to properly
record the debtors name, the lien will not show up in a database search by the debtors
correct name to the exact input it is given. This is not such a widespread problem in
manual searches because the person doing the manual search also checks for basic
variations of the debtors name.
In ITT Commercial Finance Corp. v. Bank of the Westi[ii], the creditor failed to file its
financing statement using the debtors exact legal name. A computerized database search
had not uncovered the lien, yet the lien was uncovered in a manual search. The court had
to consider whether the lien should stand. Under Article 9 of the Uniform Commercial
Code, courts generally allow liens to stand where the secured creditors mistake in
recording the debtors name is not seriously misleading to anyone conducting a search.
However