On October 17, 2014, the Delaware Supreme Court entered an opinion holding that a UCC-3 termination statement that is authorized by the secured party is effective to terminate the original UCC filing even though the secured party did not actually intend to extinguish the underlying security interest. Because the court determined that the relevant section of Delaware’s Uniform Commercial Code (the “UCC”) is unambiguous and contains no element of subjective intent, the court ruled that the subjective intent of the secured party is irrelevant when the secured party has reviewed and authorized the filing.
Background -
In 2006, General Motors Corporation (“GM”) entered into a $1.5 billion secured term loan with a syndicate of financial institutions. To perfect certain of the security interests granted to the lenders, the administrative agent (the “Agent”) filed a UCC-1 financing statement with the Delaware Secretary of State (the “Original Filing”). In 2008, a termination statement for the Original Filing was mistakenly included in a set of UCC-3 termination statements filed in connection with the payoff of an unrelated synthetic lease financing.
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