In Re- NRP LEASE HOLDINGS, LLC, et al.,

Case Type:
Business
Case Status:
Affirmed
Citation:
21-11742 (11th Circuit, Dec 10,2021) Published
Tag(s):
Ruling:
Acknowledging that under Florida law, any deviation from a debtor's legal name in a financing statement renders the statement "seriously misleading" unless a search of the Florida Secured Transaction Registry using the debtor's correct legal name would disclose the defective statement, the Eleventh Circuit certified to the Florida Supreme Cour three questions concerning the meaning of a "search" of the Florida Secured Transaction Registry "using the filing office's standard search logic" necessary for a defective financing statement to fall within the statutory safe harbor provision.
Procedural context:
Relying on the decisions in In re Summit Staffing Polk County, Inc, and In re John's Bean Farm of Homestead, Inc.., the bankruptcy court granted creditor's cross motion for summary judgment and entered judgment in favor of the creditor. The bankruptcy court concluded that, even though the creditor's financing statement did not use the debtor's correct legal name as required by section 679.5061(2), Florida Statutes, the financing statement was nevertheless not seriously misleading and was sufficient to perfect the creditor's security interest because the financing statement fell within the safe harbor created by section 679.5061(3), Florida Statutes. In Summit Staffing, the bankruptcy court held that a financing statement was not seriously misleading because a search of the debtor's correct legal name revealed the defective financing statement on the page preceding the initial search results, thereby imposing an obligation on parties to search the results immediately preceding and immediately following the initial search results. However, in the John's Bean Farm case, another Florida bankruptcy court found that a financing statement was seriously misleading and did not fall within the safe harbor provision where a search of the debtor's correct legal name did not produce the financing statement on the initial page of search results. The district court affirmed the ruling of the bankruptcy court, and the debtor appealed. Given the importance of the issues to parties loacted in or doing business in Florida and conflicting rulings from at least two Florida bankruptcy courts, the Eleventh Circuit certified to the Florida Supreme Court three questions concerning the meaning of a "search" of the Florida Secured Transaction Registry "using the filing office's standard search logic" necessary for a defective financing statement to fall within the statutory safe harbor provision.
Facts:
1944 Beach Boulevard, LLC ("Beach Boulevard")and affiiated entities sought relief under chapter 11 of the Bankruptcy Code. Beach Boulevard, along with the affiliated entities, were jointly and severally liable to Live Oak Banking Company ("Live Oak") on account of two loans in the approximate amount of $3,000.000.00. Live Oak contended the loans were secured by a blanket lien on Beach Boulevard's assets. However, the financing statement filed with Florida Secured Transaction Registry identified the debtor as "1944 Beach Blvd., LLC" instead of its legal name provided in the articles of organization filed with the Florida Secretary of State. Beach Boulevard filed a complaint to initiate an adversary proceeding to avoid Live Oak's lien under section 544 of the Bankruptcy Code on the grounds that the financing statement was seriously misleading because the debtor's correct legal name was not identified in the UCC-1 financing statement and a search of the debtor's correct legal name would not reveal Live Oak's financing statements on the first page of results. In response, Live Oak alleged that the error in identifying the debtor's name was a minor ommission and that its financing statement was not seriously misleading because the UCC-1 could be found on the Florida Secured Transaction Registry within one page of the initial search results by simply clicking the "Previous" tab on the webpage.
Judge(s):
Newsom, Lagoa, and Anderson

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