KRS 355.9-513A: Termination of wrongfully filed record -- Reinstatement.

(1) No person shall communicate a financing statement to a filing office for filing

which is:

(a) Not authorized or permitted under KRS 355.9-509 or 355.9-708;

(b) Not related to a valid existing or potential commercial or financial transaction;

and

(c) Filed with the intent to harass, hinder, or defraud a qualified person identified

as an individual debtor in the financing statement.

(2) A qualified person may file in the office of the Secretary of State's Office of

Business Services a notarized affidavit, signed under penalty of perjury, stating that:

(a) The affiant is a qualified person;

(b) None of the secured parties of record are financial institutions as defined in

subsection (15) of this section;

(c) All secured parties of record are individuals; and

(d) The financing statement was filed by an individual not authorized or permitted

to do so under KRS 355.9-509 or 355.9-708.

(3) (a) The Secretary of State shall adopt and make available a form of affidavit for

use under this section.

(b) The filing office shall not charge a fee for the filing of an affidavit or a

termination statement under this section. The filing office shall not return any

fee paid for filing the financing statement identified in the affidavit, whether

or not the financing statement is subsequently reinstated.

(c) In a case in which KRS 355.9 -501 provides that the proper office to file a

financing statement is the office designated for the filing or recording of a

record of a mortgage on real property, the Secretary of State shall promptl y

transmit to that office copies of all communications regarding an affidavit

filed under this section, including the affidavit itself, any termination

statement filed under subsection (4) of this section, and any amendment filed

or preliminary or final court order received pursuant to subsection (7) or (8) of

this section, and upon receipt the receiving office shall execute the actions

described herein.

(4) If an affidavit is filed under subsection (2) of t his section, the filing office shall

promptly file a termination statement with respect to the financing statement

identified in the affidavit. The termination statement shall indicate that it was filed

pursuant to this section. Except as provided in subse ctions (7) and (8) of this

section, a termination statement filed under this subsection shall take effect thirty

(30) days after it is filed.

(5) On the same day that a filing office files a termination statement under subsection

(4) of this section, it sh all send to each secured party of record for the financing

statement a notice advising the secured party of record that the termination

statement has been filed. The notice shall be sent by certified mail, return receipt

requested, to the address provided for the secured party in the financing statement.

(6) An individual indicated as a secured party of record on a financing statement for

which a termination statement has been filed under subsection (4) of this section

may, before or after the termination statement takes effect:

(a) Request from the Secretary of State an expedited administrative review of the

decision to terminate the filing; or

(b) Bring an action against the individual who filed the affidavit under subsection

(2) of this section seeking a determination that the financing statement was

filed by a person entitled to do so under KRS 355.9 -509(1). An action under

this subsection shall have priority on the court's calendar and shall proceed by

expedited hearing. If the individual who filed the affidavit resides in this state,

the exclusive venue in this state for the action shall be in the Circuit Court for

the county where the individual principally resides in this state. If the

individual who filed the affidavit does not reside in this state, t he exclusive

venue in this state shall be in the Circuit Court for the county where the filing

office in which the financing statement was filed is located.

(7) In an action brought pursuant to subsection (6) of this section, a court may, in

appropriate circumstances, order preliminary relief, including but not limited to an

order precluding the termination statement from taking effect or directing a party to

take action to prevent the termination statement from taking effect. If the court

issues such an or der and the filing office receives a certified copy of the order

before the termination statement takes effect as provided in subsection (4) of this

section, the termination statement shall not take effect and the filing office shall

promptly file an amend ment to the financing statement that indicates that an order

has prevented the termination statement from taking effect. If such an order ceases

to be effective by reason of a subsequent order or a final judgment of that court or

by an order issued by another court, and the filing office receives a certified copy of

the subsequent judgment or order, the termination statement shall become

immediately effective upon receipt of the certified copy and the filing office shall

promptly file an amendment to the fi nancing statement indicating that the

termination statement is effective.

(8) If the Secretary of State determines in an expedited administrative review initiated

under subsection (6)(a) of this section, or if a court determines in an action brought

pursuant to subsection (6)(b) of this section, that the financing statement was filed

by a person entitled to do so under KRS 355.9 -509(1) and the filing office receives

a certified copy of the administrative determination or court's final judgment or

order before the termination statement takes effect, the termination statement shall

not take effect and the filing office shall remove the termination statement and any

amendments filed under subsection (7) of this section from the files. If the filing

office recei ves the certified copy after the termination statement takes effect and

within thirty (30) days after the final judgment or order was entered, the filing office

shall promptly file an amendment to the financing statement that indicates that the

financing statement has been reinstated.

(9) Except as provided in subsection (10) of this section, upon the filing of an

amendment reinstating a financing statement under subsection (8) of this section,

the effectiveness of the financing statement is retroactively r einstated and the

financing statement shall be considered never to have been ineffective against all

persons and for all purposes.

(10) A financing statement whose effectiveness was terminated under subsection (4) of

this section and has been reinstated un der subsection (8) of this section shall not be

effective as against a person that purchased the collateral in good faith between the

time the termination statement was filed and the time of the filing of the amendment

reinstating the financing statement, to the extent that the person gave new value in

reliance on the termination statement.

(11) (a) A person who violates subsection (1) of this section shall be civilly liable to

an injured qualified person for:

1. Actual damages caused by the violation;

2. Reasonable attorney fees; and

3. Exemplary damages in an amount determined by the court.

(b) Civil damages under paragraph (a) of this subsection are in addition to any

recovery to which the qualified person is entitled under KRS 355.9 -625, or

under law other than this article.

(12) Neither the filing office nor any of its employees shall be subject to liability for the

termination or amendment of a financing statement in the lawful performance of the

duties of the office under this section.

(13) A person ma y not file an affidavit under this section with respect to a financing

statement filed by a financial institution, as defined in subsection (15) of this section

or a representative of a financial institution.

(14) In this section, the term "qualified perso n" means an individual who, at the time the

financing statement referred to in subsection (2) of this section was filed or within

five (5) years prior to the time of filing, was:

(a) An elected or appointed official of this state or a governmental unit of this

state as defined in KRS 355.9-102(1);

(b) An officer or employee of a federal, state, or local judicial or prosecutorial

office;

(c) An officer or employee of a federal, state, or local law enforcement office,

including a correctional officer or employee; or

(d) An officer or employee of an office designated in KRS 355.9-501 as a place to

file a financing statement.

(15) In this section, the term "financial institution" means a person that:

(a) Is in the business of extending credit and servicing loans , including acquiring,

purchasing, selling, and brokering, or other extensions of credit; and

(b) Where applicable, holds whatever license, charter, or registration that is

required to engage in such business.

The term includes banks, savings banks, savin gs associations, building and loan

associations, credit unions, consumer and commercial finance companies, industrial

banks, industrial loan companies, insurance companies, investment companies,

installment sellers, mortgage servicers, sales finance compan ies, and leasing

companies.