Title: 1944 Beach Boulevard, LLC v. Live Oak Banking Co.

State: florida

Issuer: Florida Supreme Court

Document:

Supreme Court of Florida 
 
____________ 
 
No. SC21-1717 
____________ 
 
1944 BEACH BOULEVARD, LLC, 
Appellant, 
 
vs. 
 
LIVE OAK BANKING COMPANY, 
Appellee. 
 
August 25, 2022 
 
LAWSON, J. 
 
This case is before the Court for review of three questions of 
Florida law certified by the United States Court of Appeals for the 
Eleventh Circuit that are determinative of a cause pending in that 
court and for which there appears to be no controlling precedent.  
We have jurisdiction.  See art. V, § 3(b)(6), Fla. Const. 
The certified questions concern the interpretation of section 
679.5061(3), Florida Statutes (2021), which creates a safe harbor 
for financing statements that are otherwise ineffective to perfect a 
security interest because they fail to correctly name the debtor as 
 
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required by Florida law.  The safe harbor applies when a financing 
statement that fails to correctly name the debtor is disclosed by “a 
search of the records of the filing office under the debtor’s correct 
name, using the filing office’s standard search logic, if any.”  
§ 679.5061(3).  Collectively, the Eleventh Circuit’s questions ask us 
to delineate the proper scope of the “search” of the filing office’s 
records as that term is used in the safe harbor provision.  See In re 
NRP Lease Holdings, LLC, 20 F.4th 746, 758 (11th Cir. 2021). 
However, as explained below, we find dispositive a threshold 
question that was not expressly addressed or certified by the 
Eleventh Circuit, namely: “Is the filing office’s use of a ‘standard 
search logic’ necessary to trigger the safe harbor protection of 
section 679.5061(3)?”  Reading section 679.5061 in its entirety, our 
answer is yes.  Because Florida’s filing office, the Florida Secured 
Transaction Registry, does not employ a “standard search logic,” we 
hold that the safe harbor cannot apply, which means that a 
financing statement that fails to correctly name the debtor as 
required by Florida law is “seriously misleading” and therefore 
ineffective.  § 679.5061(2).  Accordingly, it is unnecessary to reach 
 
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the Eleventh Circuit’s three certified questions concerning the 
proper scope of the “search” under the safe harbor provision. 
BACKGROUND 
1944 Beach Boulevard, LLC (Beach Boulevard), is a limited 
liability company organized and existing under the laws of Florida.  
Beach Boulevard and its affiliates were jointly and severally 
indebted to Live Oak Banking Company (Live Oak) in the 
approximate amount of $3,000,000 on account of two loans, each 
in the original principal amount of $2,500,000.  The two loans 
purport to be secured by a blanket lien on all of Beach Boulevard’s 
assets.  To perfect its claimed security interests, Live Oak filed two 
UCC-1 Financing Statements with the Florida Secured Transaction 
Registry (Registry).  However, the financing statements filed by Live 
Oak improperly name the debtor as “1944 Beach Blvd., LLC” 
instead of “1944 Beach Boulevard, LLC.”  (Emphasis added.) 
On December 5, 2019, Beach Boulevard and its affiliates filed 
voluntary petitions for reorganization under Chapter 11 of the 
United States Bankruptcy Code.  When Beach Boulevard’s manager 
conducted a search of the Registry, Live Oak’s financing statements 
did not appear on the page of twenty results generated by the 
 
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Registry.  Live Oak’s financing statements did, however, appear on 
the immediately preceding page. 
 
Beach Boulevard filed a complaint in the bankruptcy court, 
which asserted that Live Oak’s financing statements failed to 
correctly name the debtor as required by Florida law, making the 
statements “seriously misleading” within the meaning of section 
679.5061(2) and therefore ineffective to perfect Live Oak’s security 
interest.  See In re NRP Lease Holdings, 20 F.4th at 750.  Seeking 
the statutory safe harbor protection provided by section 
679.5061(3) for financing statements that would otherwise be 
ineffective for failing to correctly name the debtor, see § 
679.5061(2), Live Oak asserted in its answer to Beach Boulevard’s 
complaint the affirmative defense that “its financing statements 
substantially complied with Florida law and that abbreviating 
‘Boulevard’ to ‘Blvd.’ was a minor error or omission that does not 
render the financing statements defective or seriously misleading.”  
In re NRP Lease Holdings, 20 F.4th at 751.  Live Oak also “claimed 
that the filing statements were not ‘seriously misleading’ because 
they can be found within one page of the initial search results.”  Id.  
In support, Live Oak explained that “while its liens do not appear on 
 
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the first page of results for a search in the Registry under ‘1944 
Beach Boulevard, LLC,’ the search results are displayed in 
alphabetical order and ‘merely clicking the blue “<<PREVIOUS” tab 
one time’ will reveal the existence of its liens.”  Id. 
 
Beach Boulevard and Live Oak filed cross-motions for 
summary judgment.  Id.  The bankruptcy court denied Beach 
Boulevard’s motion and granted Live Oak’s motion, concluding that 
Live Oak’s financing statement fell within the statutory safe harbor 
“because the Registry’s standard search logic discloses the 
financing statements on the page immediately preceding the initial 
page on the Registry’s website.”  Id.  The bankruptcy court, 
therefore, ruled that the financing statements filed by Live Oak were 
“not seriously misleading and [were] effective to perfect [Live Oak’s] 
security interest in all of [Beach Boulevard’s] assets.”  Id. 
 
Beach Boulevard appealed the bankruptcy court’s decision to 
the federal district court, which reviewed the bankruptcy court’s 
legal conclusions de novo and its factual findings for clear error.  In 
re NRP Lease Holdings, LLC, No. 3:20-cv-1344-TJC, 2021 WL 
2143912, at *1 (M.D. Fla. May 21, 2021).  Applying these 
standards, the district court affirmed the bankruptcy court’s 
 
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decision, writing only that “the bankruptcy court committed no 
errors of law and made no clearly erroneous factual findings.”  Id.  
Beach Boulevard appealed the district court’s decision to the 
Eleventh Circuit.  In re NRP Lease Holdings, 20 F.4th at 752. 
 
On appeal, the Eleventh Circuit identified “two competing 
interpretations” in the case law regarding the scope of the search 
that is necessary to determine whether the safe harbor of section 
679.5061(3) applies.  Id. at 757.  It cogently explained the split as 
follows: 
The In re John’s Bean Farm [of Homestead, Inc., 378 B.R. 
385 (Bankr. S.D. Fla. 2007),] court concluded that the 
statutorily-established “standard search logic” generates 
“a single page on which [twenty] names appear” and that 
page constitutes the entirety of the “search” for purposes 
of the safe harbor.  Id.  Under that court’s logic, if a 
financing statement with the debtor’s incorrect name 
does not appear on that page, it is ineffective.  In 
contrast, the In re Summit Staffing [Polk County, Inc., 305 
B.R. 347 (Bankr. M.D. Fla. 2003),] court concluded that 
the initial page of twenty names does not constitute the 
entirety of the “search”; instead, the “search” consists of 
the entirety of the Registry, which can be scrolled to from 
the initial page of twenty names.  See 305 B.R. at 354-
55.  And that court determined the searcher “must 
reasonably examine the results of the search” to 
determine whether it discloses a financing statement with 
the debtor’s incorrect legal name.  Id. at 355. 
 
In re NRP Lease Holdings, 20 F.4th at 756. 
 
 
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Faced with substantial doubt as to how this Court would 
resolve the split, which it found to be a matter of state law 
dispositive of the case before it, the Eleventh Circuit certified to this 
Court the following questions: 
(1) Is the “search of the records of the filing office under 
the debtor’s correct name, using the filing office’s 
standard search logic,” as provided for by Florida Statute 
§ 679.5061(3), limited to or otherwise satisfied by the 
initial page of twenty names displayed to the user of the 
Registry’s search function? 
 
(2) If not, does that search consist of all names in the 
filing office’s database, which the user can browse to 
using the command tabs displayed on the initial page? 
 
(3) If the search consists of all names in the filing office’s 
database, are there any limitations on a user’s obligation 
to review the names and, if so, what factors should 
courts consider when determining whether a user has 
satisfied those obligations? 
 
Id. at 758. 
ANALYSIS 
The certified questions present issues of statutory 
interpretation concerning the scope of the search necessary to 
determine whether a financing statement that would otherwise be 
ineffective because it fails to correctly name the debtor falls within 
the safe harbor established by section 679.5061(3).  As we recently 
explained, when interpreting a statute, “the goal of interpretation is 
 
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to arrive at a ‘fair reading’ of the text by ‘determining the application 
of [the] text to given facts on the basis of how a reasonable reader, 
fully competent in the language, would have understood the text at 
the time it was issued.’ ”  Ham v. Portfolio Recovery Assocs., LLC, 
308 So. 3d 942, 947 (Fla. 2020) (quoting Antonin Scalia & Bryan A. 
Garner, Reading Law: The Interpretation of Legal Texts 33 (2012)). 
 
Thus, we begin with the statute’s text.  The three subsections 
of section 679.5061 relevant to the certified questions read as 
follows: 
(1) A financing statement substantially complying 
with the requirements of this part is effective, even if it 
has minor errors or omissions, unless the errors or 
omissions make the financing statement seriously 
misleading. 
 
(2) Except as otherwise provided in subsection (3), a 
financing statement that fails sufficiently to provide the 
name of the debtor in accordance with s. 679.5031(1) is 
seriously misleading. 
 
(3) If a search of the records of the filing office under 
the debtor’s correct name, using the filing office’s 
standard search logic, if any, would disclose a financing 
statement that fails sufficiently to provide the name of 
the debtor in accordance with s. 679.5031(1), the name 
provided does not make the financing statement seriously 
misleading. 
 
 
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§ 679.5061(1)-(3).1 
The first subsection states that a financing statement may 
contain minor errors or omissions and remain effective to perfect a 
security interest, unless the error or omission renders the financing 
statement “seriously misleading.”  § 679.5061(1).  However, the 
Florida Legislature goes on to define “seriously misleading” as it 
relates to errors or omissions in naming the debtor in the second 
and third subsections.  Thus, while subsection (1) generally applies 
to errors or omissions in financing statements, subsections (2) and 
(3) govern financing statements like those at issue in this case that 
contain errors or omissions in naming the debtor.  See Fla. Virtual 
Sch. v. K12, Inc., 148 So. 3d 97, 102 (Fla. 2014) (explaining that “a 
specific statute will control over a general statute”). 
For financing statements that fail to correctly name the debtor, 
section 679.5061(2), does two things.  First, the subsection creates 
a zero-tolerance rule, under which a financing statement that fails 
to name the debtor as directed in section 679.5031(1), Florida 
 
 
1.  The only other provision of section 679.5061 is subsection 
(4), which addresses a situation not at issue here. 
 
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Statutes (2021), is “seriously misleading” and therefore ineffective.  
§ 679.5061(2).  Section 679.5031(1)(a), Florida Statutes (2021), 
specifies how to correctly name a debtor where, as in this case, “the 
debtor is a registered organization” as follows: “[a] financing 
statement sufficiently provides the name of the debtor . . . only if 
the financing statement provides the name that is stated to be the 
registered organization’s name on the public organic record most 
recently filed with or enacted by the registered organization’s 
jurisdiction of organization that purports to state, amend, or restate 
the registered organization’s name.”  Second, subsection (2) also 
carves out an exception to its zero-tolerance rule—the safe harbor 
of subsection (3). 
The safe harbor exception codified in section 679.5061(3) 
provides that a financing statement with errors or omissions in 
naming the debtor will still be effective to perfect a security interest 
so long as “a search of the records of the filing office under the 
debtor’s correct name, using the filing office’s standard search logic, 
if any, would disclose” the financing statement.  § 679.5061(3). 
As evinced by the Eleventh Circuit’s certified questions, 
section 679.5061(3) does not define the scope of the search of the 
 
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filing office’s records that is necessary to determine whether the 
safe harbor applies.  Its only direction is to conduct the search 
“using the filing office’s standard search logic, if any,” with no 
explanation of what “standard search logic” means.  Id. 
 
However, the meaning of “standard search logic” as used in 
Article 9 of the Uniform Commercial Code, which governs secured 
transactions and which Florida has adopted, see In re NRP Lease 
Holdings, 20 F.4th at 752 (citing ch. 679, Fla. Stat; In re Summit 
Staffing, 305 B.R. at 350), is well understood within the industry.  
See Hancock Advertising, Inc. v. Dep’t of Transp., 549 So. 2d 1086, 
1089 (Fla. 3d DCA 1989) (concluding that the court was “entitled to 
consider” the “practical construction which has in fact been 
adopted by the industry” to resolve “the statutory interpretation 
problem before [it]”).  Within the industry, “standard search logic” is 
reasonably accepted to mean a procedure that “identif[ies] the set 
(which might be empty) of financing statements on file that 
constitute hits for the search,” or stated differently, that produces 
an “[u]nambiguous identification of hits.”  Kenneth C. Kettering, 
Standard Search Logic under Article 9 and the Florida Debacle, 66 U. 
Miami L. Rev. 907, 913 (2012).  This is because “[t]he whole point of 
 
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the ‘standard search logic rule’ is to establish an objective 
procedure for determining whether a given financing statement is 
sufficient.  A procedure that does not identify which financing 
statements are hits and which are not is alien to the purpose of the 
rule.”  Id. 
The problem in Florida—as cogently explained by the amicus—
is that although the Registry offers an option for searching its 
records, that option is not a “standard search logic.”  Instead of 
returning a finite list of hits when a search is conducted, the 
Registry returns a list of twenty names starting with the name that 
most closely matches the name entered.  That list of names is but a 
point from which the user can navigate forward and backward 
through all of the names indexed in the Registry.  In other words, “a 
search” of the Registry returns an index of all of the financing 
statements in the Registry.  The Registry’s current search option 
also produces inconsistent results depending upon the date a 
search is conducted.  This is true because as financing statements 
are filed, amended, and removed, the position of a financing 
statement on the Registry’s index changes, which means that a 
 
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financing statement included in a list of twenty today might not be 
on the same list tomorrow. 
We agree with Professor Kettering that a “search procedure 
that returns as hits, for any search string, all financing statements 
in the filing office’s database cannot rationally be treated as a 
‘standard search logic.’ ”  Id.; see also Steven L. Harris & Charles 
W. Mooney, Jr., Teacher’s Manual for Security Interests in Personal 
Property: Cases, Problems and Materials 51 (6th ed. 2016) (opining 
that the search option offered by Florida’s Registry “should not be 
considered a ‘standard search logic’ ” because “the system does not 
yield particular ‘hits’ ”). 
 
In certifying its questions concerning the proper scope of the 
search required to determine whether the safe harbor of section 
679.5061(3) applies, the Eleventh Circuit recognized these problems 
with the Registry’s current search option, see In re NRP Lease 
Holdings, 20 F.4th at 756-57, but it nevertheless determined that 
the Registry employs a “standard search logic,” see, e.g., id. at 753, 
756.  In addressing the certified questions, we cannot accept the 
Registry’s search option as the “standard search logic” 
contemplated by the statute; rather, the Florida Constitution 
 
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requires us to decide de novo what “standard search logic” means.  
See art. V, § 21, Fla. Const.   
We adopt the definition of “standard search logic” accepted in 
the secured transactions industry, which requires the search to 
identify specific hits, if any, and hold that under this definition the 
search option offered by the Registry, which returns the entire 
index, is not a “standard search logic.”  Moreover, because we read 
section 679.5061(2)-(3) as conditioning the safe harbor’s application 
on the ability to search the Registry’s records using a “standard 
search logic,” it is unnecessary for us to address the Eleventh 
Circuit’s certified questions.  Instead, we hold that section 
679.5061(3) provides one way and one way only to search the filing 
office’s records for purposes of determining whether the safe harbor 
applies to a financing statement that incorrectly names a debtor—
i.e., “using the filing office’s standard search logic, if any.”  Because 
the Registry lacks a “standard search logic,” the search 
contemplated by section 679.5061(3) is impossible, which means 
that filers are left with the zero-tolerance rule of section 
679.5061(2). 
 
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This interpretation is further bolstered by reading section 
679.5061(2)-(3) together with section 679.5031(1), which plainly 
places the burden to correctly name the debtor on the filer of a 
financing statement.  See Fla. Dep’t of State v. Martin, 916 So. 2d 
763, 768 (Fla. 2005) (“The doctrine of in pari materia is a principle 
of statutory construction that requires that statutes relating to the 
same subject or object be construed together to harmonize the 
statutes and to give effect to the Legislature’s intent.”).  By 
interpreting section 679.5061(2)-(3) as being intolerant of any errors 
or omissions in naming the debtor—no matter how minor—unless 
and until the Registry implements a “standard search logic” 
necessary to determine whether the safe harbor applies, we 
faithfully adhere to the text of section 679.5061(2)-(3), keep the 
burden on the filer consistent with section 679.5031(1), and avoid 
imposing requirements on the searcher that are not specified in the 
statute. 
CONCLUSION 
The Eleventh Circuit’s certified questions ask us to define the 
scope of the search required to determine whether a financing 
statement that fails to correctly name the debtor is nevertheless 
 
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deemed effective under the safe harbor of section 679.5061(3).  
However, because we hold that the Florida Secured Transaction 
Registry’s failure to employ a “standard search logic” precludes the 
safe harbor from applying in the first instance, we find it 
unnecessary to reach the certified questions.  Unless and until the 
Registry employs a standard search logic, under the zero-tolerance 
rule of section 679.5061(2), any financing statement that fails to 
correctly name the debtor as required by section 679.5031(1) is 
“seriously misleading” and therefore ineffective.  Having explained 
why our interpretation of section 679.5061 makes it unnecessary to 
reach the certified questions, we return this case to the United 
States Court of Appeals for the Eleventh Circuit. 
It is so ordered. 
 
MUÑIZ, C.J., and CANADY, POLSTON, LABARGA, COURIEL, and 
GROSSHANS, JJ., concur. 
 
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION 
AND, IF FILED, DETERMINED. 
 
Certified Question of Law from the United States Court of Appeals 
for the Eleventh Circuit – Case No. 21-11742 
 
Richard R. Thames of Thames Markey, Jacksonville, Florida, 
 
 
for Appellant 
 
 
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Ezra Z. Scrivanich of McMichael Taylor Gray, LLC, Deerfield Beach, 
Florida, 
 
 
for Appellee 
 
Scott G. Hawkins of Jones Foster P.A., West Palm Beach, Florida, 
 
 
for Amicus Curiae Commercial Law Amicus Initiative