Does a Texas county clerk have to file a UCC lien that lists the same person as both debtor and secured party?

Plain-English summary

An Ellis County official asked whether the county clerk had to accept for filing UCC financing statements that listed the same person as both the "debtor" and the "secured party." The filings all claimed the debtor was a "transmitting utility," and the official suspected the filers were part of a "common-law court group" trying to set up priority liens to avoid taxes. The Attorney General concluded the clerk did not have to accept the documents and could refuse them, statewide.

The reasoning starts from a basic rule about a county clerk's duties: a clerk has to file and record only documents that a statute authorizes or requires the clerk to file, and only when those documents are regular on their face. A real UCC financing statement perfects a security interest, an interest one person (the debtor) gives another (the secured party) to secure a debt. By definition that takes two different people. A document that names the same person on both sides cannot create a security interest, because a person cannot owe a debt to himself or default on a loan from himself. So a self-named financing statement is not the kind of document the clerk is required to file, and the clerk may turn it away.

The opinion added a warning. Under section 37.101 of the Penal Code, a person who intentionally or knowingly presents a groundless financing statement for filing, knowing it is groundless, may commit a Class A misdemeanor. Whether any particular filer actually committed that crime is a fact question the Attorney General cannot resolve in an opinion.

Currency note

This opinion was issued in 2000. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Texas later overhauled its version of UCC Article 9, so the specific chapter 9 section numbers cited here have since been renumbered. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

The county/district attorney who asked (what the opinion held): The opinion answered the question directly. The clerk's refusal was proper. A clerk has no duty to accept a purported financing statement that names the same person as debtor and secured party, because it does not create a security interest, and the opinion saw no reason to limit that conclusion to Ellis County.

County clerks (what the opinion held for them): At the time, a clerk's filing duty under section 192.001 of the Local Government Code reached only documents the clerk was authorized to file and that were regular on their face. A self-named UCC statement was not one, so the clerk could refuse it.

People who file these statements (what the opinion noted): The opinion pointed out that intentionally or knowingly filing a groundless financing statement, knowing it is groundless, could be a Class A misdemeanor under Penal Code section 37.101, while stressing that whether any specific person committed a crime was a fact question outside an AG opinion.

Common questions

Did the clerk have to file a UCC lien naming the same person on both sides?
No. The opinion concluded the clerk had no duty to accept such a document and could refuse it, because it cannot create a security interest under chapter 9 of the Business and Commerce Code.

Why can't one person be both the debtor and the secured party?
The opinion explained that a security interest is something one person gives another to secure a debt. A person cannot owe a debt to himself or default on a loan from himself, so a single person on both sides produces nothing the law recognizes as a security interest.

Could the clerk's decision be applied outside Ellis County?
Yes. The opinion expressly said it saw no reason to limit the conclusion to the Ellis County clerk, so it applied to county clerks generally.

Is filing one of these bogus statements a crime?
The opinion noted that a person who intentionally or knowingly files a groundless financing statement, knowing it is groundless, may commit a Class A misdemeanor under Penal Code section 37.101, but whether a particular filing was a crime is a fact question an AG opinion cannot decide.

Background and statutory framework

Section 192.001 of the Local Government Code directs a county clerk to record each instrument "that is required or permitted by law to be recorded." Building on Attorney General Opinion JC-0156 and Letter Opinion LO-98-016, the opinion treated that as meaning the clerk records only documents, regular on their face, that a statute authorizes the clerk to file. Any duty to file a UCC financing statement would arise under chapter 9 of the Business and Commerce Code, the "Uniform Commercial Code-Secured Transactions" article. Chapter 9 defines a "debtor" as the person who owes the secured obligation (§ 9.105(4)), a "secured party" as the lender or other person in whose favor a security interest runs (§ 9.105(13)), and a "security interest" as an interest in personal property securing payment or performance (§ 1.201(37)(A)). A proper financing statement names both the debtor and the secured party and bears the debtor's signature (§ 9.402(a)). Because those definitions require two different people, the opinion concluded a self-named statement creates no security interest and the clerk has no duty to file it, while flagging the Class A misdemeanor in Penal Code section 37.101 for knowingly filing a groundless statement.

Citations

Statutory provisions:

• Tex. Loc. Gov't Code Ann. § 192.001 (Vernon 1999)
• Tex. Bus. & Com. Code Ann. § 9.101 (Vernon 1991)
• Tex. Bus. & Com. Code Ann. § 9.102 (Vernon Supp. 2000)
• Tex. Bus. & Com. Code Ann. § 9.105(4), (13), (d) (Vernon Supp. 2000)
• Tex. Bus. & Com. Code Ann. § 1.201(37)(A)
• Tex. Bus. & Com. Code Ann. §§ 9.302(a), .303(a), .304
• Tex. Bus. & Com. Code Ann. § 9.402(a), (b)
• Tex. Bus. & Com. Code Ann. §§ 9.501(a), .503, .504 (Vernon 1991)
• Tex. Bus. & Com. Code Ann. §§ 9.301, .312 (Vernon Supp. 2000)
• Tex. Bus. & Com. Code Ann. § 9.412
• Tex. Pen. Code Ann. § 37.101 (Vernon Supp. 2000)

Cases:

• City of Abilene v. Fryar, 143 S.W.2d 654, 657 (Tex. Civ. App.-Eastland 1940, no writ)
• Bank One, Tex. v. Stewart, 967 S.W.2d 419, 435 (Tex. App.-Houston [14th Dist.] 1998, pet. denied)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0256
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2000/jc0256.pdf

Original opinion text

Best-effort transcription from the official scanned PDF. Minor character-level errors from the source OCR have been corrected; the linked PDF is authoritative.

OFFICE OF THE ATTORNEY GENERAL - STATE OF TEXAS

JOHN CORNYN

July 18, 2000

The Honorable Joe F. Grubbs
Ellis County and District Attorney
Ellis County Courthouse
Waxahachie, Texas 75165-3759

Opinion No. JC-0256

Re: Whether a county clerk is required to accept for filing a UCC financing statement in which the listed secured party is the same person as the listed debtor (RQ-0196-JC)

Dear Mr. Grubbs:

A county clerk must file and record only those documents that the clerk is statutorily authorized or required to file. See TEX. LOC. GOV'T CODE ANN. § 192.001 (Vernon 1999); Tex. Att'y Gen. Op. No. JC-0156 (1999) at 1-2; Tex. Att'y Gen. LO-98-016, at 2-3. You ask whether the Ellis County Clerk is required to accept for filing a purported UCC financing statement that names the same person as both the secured party and the debtor. See Letter from Honorable Joe F. Grubbs, Ellis County and District Attorney, to Honorable John Cornyn, Texas Attorney General (Feb. 18, 2000) [hereinafter "Request Letter"]. We conclude that such a document does not comply with chapter 9 of the Business and Commerce Code and that the county clerk consequently is not required to accept the document. We see no reason to limit our conclusion to the clerk of Ellis County only.

The Ellis County Clerk has received documents for filing and recording that you describe as "unusual and not necessarily regular on their faces." Id. at 1. "In particular," you state, "the County Clerk has received UCC financing statements where on each the same person is named a[s] the 'debtor' and as the 'secured party.'" Id. All of the purported financing statements claim that the "debtor" is a "transmitting utility." Id. You suspect that the persons seeking to file these purported financing statements may be affiliated with "a common[-]law court group" and "may be attempting to prioritize liens in avoiding taxes." Id. at 2. The Clerk has not filed these documents, and you ask whether the Clerk's refusal is proper. Id. at 1.

This office concluded in Attorney General Opinion JC-0156 that a county clerk is required to accept for filing only a document, "regular on its face," that the clerk is "authorized, required, or permitted" by statute to file. See Tex. Att'y Gen. Op. No. JC-0156 (1999) at 2; accord Tex. Att'y Gen. LO-98-016, at 2, 6. Section 192.001 of the Local Government Code, upon which the conclusion of Attorney General Opinion JC-0156 is based, directs a county clerk to record each instrument "that is required or permitted by law to be recorded." TEX. LOC. GOV'T CODE ANN. § 192.001 (Vernon 1999); see Tex. Att'y Gen. Op. No. JC-0156 (1999) at 2; Tex. Att'y Gen. LO-98-016, at 2, 6; City of Abilene v. Fryar, 143 S.W.2d 654, 657 (Tex. Civ. App.-Eastland 1940, no writ). Conversely, a county clerk has no duty to accept for filing a document that the clerk has no statutory authority to file. See Tex. Att'y Gen. Op. No. JC-0156 (1999) at 2; accord Tex. Att'y Gen. LO-98-016, at 6.

If a county clerk has a duty to accept a purported UCC financing statement such as you describe, that duty arises under chapter 9 of the Business and Commerce Code. Chapter 9, which is also known as "Uniform Commercial Code-Secured Transactions," see TEX. BUS. & COM. CODE ANN. § 9.101 (Vernon 1991), regulates any transaction that is "intended to create a security interest in personal property or fixtures including goods, documents, instruments, general intangibles, chattel paper or accounts." See id. § 9.102 (Vernon Supp. 2000). For the purposes of chapter 9, a "debtor" is a "person who owes payment or other performance of the obligation secured." Id. § 9.105(4). A "secured party" is "a lender, seller[,] or other person in whose favor there is a security interest." Id. § 9.105(13). A "security interest" is "an interest in personal property or fixtures [that] secures payment or performance of an obligation." Id. § 1.201(37)(A); see also id. § 9.105(d) (stating that relevant definitions may be found in chapter 1, Business and Commerce Code).

Under chapter 9, a secured party generally must file a financing statement with the county clerk to perfect a security interest in a transaction. See id. §§ 9.302(a), .303(a), .304. But see id. §§ 9.104, .302, .305. A proper financing statement names the debtor and the secured party; bears the debtor's signature; lists the secured party's address so that information concerning the security interest may be obtained; states the debtor's mailing address; and lists or describes the types or items of collateral. See id. § 9.402(a). To perfect a security interest in certain kinds of goods, the secured party, not the debtor, must sign the financing statement. See id. § 9.402(b).

Once a security interest is perfected, and if the debtor defaults on the loan from the secured party, the secured party may take possession and dispose of the collateral listed on the financing statement. See id. §§ 9.501(a), .503, .504 (Vernon 1991); accord Bank One, Tex. v. Stewart, 967 S.W.2d 419, 435 (Tex. App.-Houston [14th Dist.] 1998, pet. denied). "A secured party takes priority over [the holder of] an unperfected security interest and may take priority over other secured parties depending upon when the parties perfected their interest." Bank One, Tex., 967 S.W.2d at 435; see also TEX. BUS. & COM. CODE ANN. §§ 9.301, .312 (Vernon Supp. 2000). A person who "intentionally or knowingly" presents or causes to be presented for filing a "groundless" financing statement that the person knows is groundless may commit a Class A misdemeanor. See TEX. PEN. CODE ANN. § 37.101 (Vernon Supp. 2000).

A document that purports to be a chapter 9 financing statement but that lists the same person as the debtor and the secured party does not create a security interest. "A security interest is an interest in property [that] is given, by contract, from one person to another person to secure an obligation [that] the giver of the security interest (the debtor) owes to the person to whom the security interest is given." N.D. Att'y Gen. Op. No. 99-13, 1999 WL 717972, at *2. Where the debtor and the secured party are natural persons, they must be different people. If the debtor and secured party are the same entity, the debtor cannot be legally obligated to repay a loan of money or property to the secured party. See TEX. BUS. & COM. CODE ANN. § 9.105(a)(4), (13) (Vernon Supp. 2000) (defining "debtor" and "secured party"). Similarly, a debtor cannot default on a loan from him- or herself in a way that would make sense of the statutory liability and criminal penalty provisions. See id. § 9.412; TEX. PEN. CODE ANN. § 37.101 (Vernon Supp. 2000).

Because this type of purported financing statement does not, on its face, create a security interest, a county clerk has no duty to file it and, indeed, may refuse to file it. See id.; accord Tex. Att'y Gen. Op. JC-0156 (1999) at 2 (stating that county clerk may not accept for filing any document that clerk lacks statutory authority to file); Tex. Att'y Gen. LO-98-016, at 6 (same). Depending upon the knowledge or intent of a person who attempted to file such a financing statement, he or she may be guilty of a Class A misdemeanor under section 37.101 of the Penal Code. See TEX. PEN. CODE ANN. § 37.101 (Vernon Supp. 2000). Whether a person has committed a crime in any particular circumstance is a question of fact that cannot be resolved in an attorney general opinion. See Tex. Att'y Gen. Op. Nos. JC-0020 (1999) at 2; DM-98 (1992) at 3; H-56 (1973) at 3.

SUMMARY

A county clerk is not required to accept for filing a document, purported to be a financing statement under chapter 9 of the Business and Commerce Code, if the document names the same person as the debtor and the secured party.

JOHN CORNYN
Attorney General of Texas

ANDY TAYLOR
First Assistant Attorney General

CLARK KENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee