Opinion ID: 200041
Heading Depth: 2
Heading Rank: 3

Heading: Perfection of the Security Interest

Text: 15 New Hampshire law provides that a creditor, to perfect a security interest, must file a UCC-1 financing statement with the Secretary of State and, if the debtor conducts business in only one town within the state, also with the clerk of such town. See N.H.Rev.Stat. Ann. § 382-A:9-401(1)(c) (1994). 6 When a debtor conducts business in more than one town within the state, then a creditor need only file a UCC-1 financing statement with the Secretary of State. See id. The bankruptcy court determined, and the district court affirmed, that Yamaha's security interest was not perfected according to New Hampshire state law inasmuch as Yamaha did not file a UCC-1 financing statement with the clerk of the town of New Durham, the town where Perry Hollow conducted business. 16 On appeal, Yamaha offers three theories to support its claim that filing in Wolfeboro was sufficient to perfect its security interest. First, Yamaha argues that it was not required to file in New Durham because Perry Hollow conducted business in more than one town within the state. Second, Yamaha contends that even if it was required to file in New Durham, it substantially complied with the filing requirements so as to perfect its security interest. Third, Yamaha claims that it justifiably relied on Perry Hollow's representations that it was located in Wolfeboro, thereby excusing Yamaha's failure to file in New Durham under Field v. Mans, 516 U.S. 59, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995). 17 Yamaha argues that because Perry Hollow had a mailing address in Wolfeboro and a physical location in New Durham, Perry Hollow was conducting business in more than one town in the state, thereby relieving Yamaha of the duty to file a financing statement with anyone other than the Secretary of State. The bankruptcy court, however, found that Perry Hollow does business only in one town within New Hampshire. Given that the Wolfeboro address was only a mailing address, we cannot say that this finding was clearly erroneous. Therefore, under New Hampshire law, Yamaha had to file a financing statement with both the Secretary of State and the clerk of the town of New Durham to perfect its security interest. 18 Relying on In re Circus Time, 641 F.2d 39 (1st Cir.1981), Yamaha further argues that even if it was obligated to file in New Durham, it substantially complied with this requirement. In Circus Time, this Court held that minor errors, not seriously misleading, in certificates of title were not sufficient to render a security interest in those vehicles unperfected; substantial compliance with the documentary requirements was sufficient. See id. at 43; see also N.H.Rev.Stat. Ann. § 382-A:9-402(8) (1994) 7 (providing that a financing statement substantially complying with requirements is effective). This case, however, is easily distinguishable. Circus Time involved errors in the financing documents ( i.e., the certificates of title), as opposed to errors in the filing process. The doctrine of substantial compliance has not been extended to filing requirements. See In re Covey, 66 B.R. 459, 460 (Bankr. D.N.H.1986) (holding that security interest was not perfected since debtor conducted business only in one town in the state and creditor did not file financing statement in that town); In re Sports Enters., Inc., 38 B.R. 282, 282-83 (Bankr.D.N.H.1984) (holding that security interest was unperfected where creditor, in addition to filing with the Secretary of State, mistakenly filed with the clerk of the town adjacent to where debtor conducted business); see also N.H.Rev.Stat. Ann. 382-A:9-401, Offic. Comm. 5 (stating that filing in only one of two required places is not effective). 19 A misfiled UCC-1 financing statement fails to serve the intended purpose of the filing requirement, which is to give proper notice that a secured interest exists. If we were to adopt Yamaha's argument, we would be placing an undue burden on all creditors. In addition to checking for prior encumbrances with the clerk of the town where the debtor is actually located, creditors would be forced to undergo the task of checking for misfiled security interests in adjacent towns, perhaps even statewide. Moreover, Yamaha's proposed scheme would reward creditors who negligently misfile their UCC-1 financing statements. Such an outcome would undermine the statute's purpose. Therefore, we hold that Yamaha's actions in this case were insufficient to perfect its security interest. 20 Yamaha's final justification for filing in Wolfeboro, instead of New Durham, is that it justifiably relied on Perry Hollow's representations that it was located in Wolfeboro. As a result, Yamaha argues that under Field v. Mans, 516 U.S. 59, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995), its security interest should not be avoidable. In Field, the Court held that a creditor, who, in extending credit, placed justifiable reliance on fraudulent representations made by the debtor, could except a debt from discharge under 11 U.S.C. § 523(a)(2)(A). Field, 516 U.S. at 74, 116 S.Ct. 437. 21 Yamaha alleges that Perry Hollow made false representations by not providing the true location of its business and that, therefore, Yamaha could justifiably rely on the Wolfeboro address provided by Perry Hollow when filing the financing statement. This argument is flawed. First, Field applies to actions under 11 U.S.C. § 523(a) to except a debt from discharge. This is not the case here. 22 Second, Yamaha fails to proffer evidence that Perry Hollow committed fraud in providing its Wolfeboro address. Specifically, Yamaha must prove that Perry Hollow intended to deceive it when providing the Wolfeboro address. We are not convinced that providing a valid mailing address, instead of a physical address, constitutes an intentionally false representation. Therefore, insofar as this action was not brought under 11 U.S.C. § 523(a), and absent a showing of fraud, we decline to extend Field 's justifiable reliance standard to this matter. See In re Perry Hollow Mgmt. Co., 260 B.R. at 62 (stating that no case has applied Field to a suit avoiding a security interest under 11 U.S.C. § 544). 23