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SF 4387

as introduced - 91st Legislature (2019 - 2020) Posted on 03/17/2020 12:33pm

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to business organizations; governing fraudulent business filings; amending
Minnesota Statutes 2018, sections 336.9-510; 336.9-516; proposing coding for
new law in Minnesota Statutes, chapters 336; 609.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2018, section 336.9-510, is amended to read:


336.9-510 EFFECTIVENESS OF FILED RECORD.

(a) Filed record effective if authorized. A filed record is effective only to the extent
that it was filed by a person that may file it under section 336.9-509new text begin or by the filing office
under section 336.9-5135
new text end.

(b) Authorization by one secured party of record. A record authorized by one secured
party of record does not affect the financing statement with respect to another secured party
of record.

(c) Continuation statement not timely filed. A continuation statement that is not filed
within the six-month period prescribed by section 336.9-515(d) is ineffective.

Sec. 2.

Minnesota Statutes 2018, section 336.9-516, is amended to read:


336.9-516 WHAT CONSTITUTES FILING; EFFECTIVENESS OF FILING.

(a) What constitutes filing. Except as otherwise provided in subsection (b),
communication of a record to a filing office and tender of the filing fee or acceptance of
the record by the filing office constitutes filing.

(b) Refusal to accept record; filing does not occur. Filing does not occur with respect
to a record that a filing office refuses to accept because:

(1) the record is not communicated by a method or medium of communication authorized
by the filing office. For purposes of filing office authorization, transmission of records using
the Extensible Markup Language (XML) format is authorized by the filing office after the
later of July 1, 2007, or the determination of the secretary of state that the central filing
system is capable of receiving and processing these records;

(2) an amount equal to or greater than the applicable filing fee is not tendered;

(3) the filing office is unable to index the record because:

(A) in the case of an initial financing statement, the record does not provide a name for
the debtor;

(B) in the case of an amendment or information statement, the record:

(i) does not identify the initial financing statement as required by section 336.9-512 or
336.9-518, as applicable; or

(ii) identifies an initial financing statement whose effectiveness has lapsed under section
336.9-515;

(C) in the case of an initial financing statement that provides the name of a debtor
identified as an individual or an amendment that provides a name of a debtor identified as
an individual which was not previously provided in the financing statement to which the
record relates, the record does not identify the debtor's surname; or

(D) in the case of a record filed or recorded in the filing office described in section
336.9-501 (a)(1), the record does not provide a sufficient description of the real property
to which it relates;

(4) in the case of an initial financing statement or an amendment that adds a secured
party of record, the record does not provide a name and mailing address for the secured
party of record;

(5) in the case of an initial financing statement or an amendment that provides a name
of a debtor which was not previously provided in the financing statement to which the
amendment relates, the record does not:

(A) provide a mailing address for the debtor; or

(B) indicate whether the name provided as the name of the debtor is the name of an
individual or an organization;

(6) in the case of an assignment reflected in an initial financing statement under section
336.9-514 (a) or an amendment filed under section 336.9-514 (b), the record does not provide
a name and mailing address for the assignee; deleted text beginor
deleted text end

(7) in the case of a continuation statement, the record is not filed within the six-month
period prescribed by section 336.9-515 (d)deleted text begin.deleted text endnew text begin; or
new text end

new text begin (8) in the case of an initial financing statement or an amendment that provides a name
of a debtor not previously provided in the financing statement to which the amendment
relates, the office reasonably believes the record was communicated or caused to be
communicated (i) with the intent to harass or defraud the person identified as the debtor, or
(ii) for another unlawful purpose. The office has no duty to form a belief as to whether a
record was communicated or caused to be communicated with the intent to harass or defraud
the person identified as the debtor or for another unlawful purpose, and has no duty to
investigate or ascertain facts relevant to whether the intent or purpose was present.
new text end

(c) Rules applicable to subsection (b). For purposes of subsection (b):

(1) a record does not provide information if the filing office is unable to read or decipher
the information; and

(2) a record that does not indicate that it is an amendment or identify an initial financing
statement to which it relates, as required by section 336.9-512, 336.9-514, or 336.9-518, is
an initial financing statement.

(d) Refusal to accept record; record effective as filed record. A record that is
communicated to the filing office with tender of the filing fee, but which the filing office
refuses to accept for a reason other than one set forth in subsection (b), is effective as a filed
record except as against a purchaser of the collateral which gives value in reasonable reliance
upon the absence of the record from the files.

new text begin (e) Effectiveness of record; purchaser in good faith. A record that the filing office
initially refuses to accept under subsection (b)(8) but later accepts after receiving additional
information is effective as if the office had not initially refused to accept the record, except
as against a purchaser of the collateral that gives value in reasonable reliance upon the
absence of the record from the files.
new text end

Sec. 3.

new text begin [336.9-5135] TERMINATION OF WRONGFULLY FILED FINANCING
STATEMENT; REINSTATEMENT.
new text end

new text begin (a) Intent to harass. "Intent to harass" means (1) the filing party has no underlying
financial relationship with the person named as the debtor in the filing, (2) the filing party
filed the record intentionally and not accidentally or inadvertently, and (3) the filing states
collateral consisting of property belonging to the person named in the filing as the debtor.
new text end

new text begin (b) Affidavit of wrongful filing. A person identified as the debtor in a filed financing
statement may deliver to the filing office a notarized affidavit that identifies the financing
statement by file number, indicates the person's mailing address, and states that the person
believes the filed record identifying the person as the debtor was not authorized to be filed
and was communicated or caused to be communicated to the office with the intent to harass
or defraud the person identified as the debtor. The office may reject an affidavit that is
incomplete or that the office believes was delivered with the intent to harass or defraud the
secured party. The secretary of state must provide a form of affidavit for use under this
section.
new text end

new text begin (c) Termination statement by filing office. If an affidavit is delivered to the filing
office under subsection (b) and is not rejected under subsection (b), the office must promptly
file a termination statement with respect to the financing statement identified in the affidavit.
The termination statement must identify by its file number the initial financing statement
it relates to and must indicate that it was filed pursuant to this section. A termination
statement filed under this subsection is not effective until 20 days after the date it is filed.
new text end

new text begin (d) No fee charged or refunded. The filing office must not charge a fee to file an
affidavit under subsection (b) or a termination statement under subsection (c). The office
must not return any fee paid to file the financing statement identified in the affidavit, whether
or not the financing statement is reinstated under subsection (g).
new text end

new text begin (e) Notice of termination statement. On the same day a filing office files a termination
statement under subsection (c), it must send to the secured party of record for the financing
statement the termination statement relates to a notice stating the termination statement has
been filed and becomes effective 20 days after the date the termination statement was filed.
The notice must be sent by certified mail, return receipt requested, to the address provided
for the secured party of record in the financing statement, with a copy sent by e-mail to the
e-mail address provided by the secured party of record, if any.
new text end

new text begin (f) Administrative review; action for reinstatement. If a secured party believes in
good faith the filed record identified in an affidavit and delivered to the filing office under
subsection (b) was authorized to be filed and was not communicated or caused to be
communicated to the filing office with the intent to harass or defraud, the secured party may
do the following:
new text end

new text begin (1) before the termination statement takes effect, request that the filing office conduct
an expedited review of the filed record and any documentation provided by the secured
party. The filing office may, as a result of the review, remove from the record the termination
statement filed by it under subsection (c) before it takes effect; or
new text end

new text begin (2) at any time, commence an action against the filing office seeking reinstatement of
the financing statement the filed record relates to. The action must be commenced before
the expiration of six months after the date the termination statement was filed under
subsection (c) becomes effective. If the person identified as the debtor is not named as a
defendant in the action, the secured party must send a copy of the complaint to the person
identified as the debtor at the address indicated in the affidavit. The exclusive venue for the
action is the district court for the county where the filing office in which the financing
statement was filed is located. The action must be considered by the court on an expedited
basis.
new text end

new text begin (g) Office to file notice of action for reinstatement. Within ten days after being served
with process in an action under subsection (f), the filing office must file a notice indicating
the action has been commenced. The notice must indicate the file number of the initial
financing statement it relates to.
new text end

new text begin (h) Action for reinstatement successful. In an action under subsection (f), if the court
determines the financing statement was authorized to be filed and was not communicated
or caused to be communicated to the filing office with the intent to harass or defraud the
person identified as the debtor, the court must order that the financing statement is reinstated.
If a reinstatement order is issued by the court, the filing office must promptly file a record
that identifies by its file number the initial financing statement the record relates to and
indicates the financing statement has been reinstated.
new text end

new text begin (i) Effect of reinstatement. Upon the filing of a record reinstating a financing statement
under subsection (h), the effectiveness of the financing statement is reinstated and the
financing statement is considered to never have been terminated under this section. A
continuation statement filed under section 336.9-515(d) after the effective date of a
termination statement filed under subsection (c) becomes effective if the financing statement
is reinstated.
new text end

new text begin (j) Liability for wrongful filing. In an action under subsection (f), if the court determines
the filed record identified in an affidavit delivered to the filing office under subsection (b)
was not authorized to be filed and was communicated or caused to be communicated to the
filing office with the intent to harass or defraud the person identified as the debtor, the filing
office and the person identified as the debtor may recover from the secured party that filed
the action the costs and expenses, including reasonable attorney fees, that the filing office
and the person identified as the debtor incurred in the action. The recovery is under this
subsection in addition to any recovery the person identified as the debtor is entitled to under
section 336.9-625.
new text end

Sec. 4.

new text begin [609.7476] RECORDS FILED WITH INTENT TO HARASS OR DEFRAUD.
new text end

new text begin (a) A person is prohibited from communicating or causing to be communicated to the
filing office, as defined in section 336.9-102 (a) (37), to file a record if:
new text end

new text begin (1) the person is not authorized to file the record under section 336.9-509, 336.9-708,
or 336.9-808;
new text end

new text begin (2) the record is not related to an existing or anticipated transaction governed by chapter
336, article 9; and
new text end

new text begin (3) the record is filed with the intent to harass or defraud the person identified as the
debtor in the record.
new text end

new text begin (b) A person that violates paragraph (a) is guilty of a gross misdemeanor for a first
offense and a felony for a second or subsequent offense.
new text end