Opinion ID: 160061
Heading Depth: 4
Heading Rank: 1

Heading: Termination of 1991 Financing Statement

Text: 14 NTPCA first urges that the district court erred in rejecting NTPCA's claim that it has priority in the proceeds received by MCNB from the sale of the 1,090 head of cattle based on the theory that MCNB terminated the 1991 Financing Statement. 6 NTPCA can provide no direct evidence to show that MCNB terminated the 1991 Financing Statement. In an effort to show that MCNB terminated the statement, NTPCA emphasizes that (1) the 1991 Financing Statement was missing from the public record and (2) MCNB engaged in a pattern of filing and releasing financing statements. NTPCA asserts that, based on this evidence, a genuine issue of material facts exists as to whether MCNB also terminated the 1991 Financing Statement. We agree. 15 The record reflects that NTPCA searched the McCurtain County records for liens against or other security interests in the Clarks' assets on December 9, 1992, March 10, 1993, November 1, 1994, and October 20, 1995. NTPCA never located a copy of the 1991 Financing Statement during these searches. Moreover, NTPCA requested the McCurtain County Clerk to conduct a certified lien search on November 3, 1995. Apparently, this lien search did not reveal the existence of the 1991 Financing Statement either. 16 The fact that the financing statement was missing from the record, alone, would not be sufficient to put NTPCA into a position of first priority. Under the UCC, the presentation for filing of a financing statement and tender of the filing fee or acceptance of the statement by the filing officer constitutes proper filing. See Okla. Stat. Ann. tit. 12A, § 9-403(1). In addition, a secured party does not bear the risk of improper filing or indexing as long as its conduct does not lead to the error on the part of the filing officer. See Okla. Stat. Ann. tit. 12A, § 9-407 cmt.1; McMillin v. First Nat'l Bank & Trust Co., 407 F. Supp. 799, 803 (W.D. Okla. 1975); Liberty Nat'l Bank & Trust Co. v. Garcia, 686 P.2d 303, 306 (Okla. Ct. App. 1984). 17 NTPCA argues, however, that the present situation can be distinguished from these cases, because MCNB engaged in a practice of filing and later terminating financing statements. NTPCA argues that a fact finder could infer that the 1991 Financing Statement was terminated like a number of other financing statements filed by MCNB with the McCurtain County Clerk in connection with loans made to the Clarks. NTPCA provides evidence to show that MCNB filed UCC-1 financing statements on: September 28, 1989; July 2, 1990; October 22, 1990; March 28, 1991; September 20, 1991; June 23, 1992; December 15, 1992; December 15, 1994; and November 12, 1995. 18 Moreover, NTPCA provides evidence that six of these eight financing statements were terminated by MCNB. 7 Wyrick testified during his deposition that on September 26, 1990, MCNB terminated the financing statements filed on September 28, 1989 and July 2, 1990. In addition, the record includes copies of the October 22, 1990 financing statement and the March 28, 1991 financing statement which each bear the handwritten statement Released 9-11-91. 8 NTPCA has also produced a copy of the June 23, 1992 financing statement bearing a stamp from the County Clerk's office stating Released December 3, 1992 and a copy of the December 15, 1994 financing statement bearing a stamp from the County Clerk's office stating Released March 12, 1993. 9 19 The record also includes evidence describing the practice of the McCurtain County Clerk's office when terminating UCC-1 financing statements. Karen Conaway, the McCurtain County Clerk, stated in a sworn affidavit that [w]henever a termination statement or release of lien is presented to the Clerk's Office, the Clerk removes the original filing maintained in the public records, stamps it released and returns it to the secured party. Based on this explanation of the procedures used by the McCurtain County Clerk's office, a fact finder could conclude that the financing statements bearing the released notation had been terminated by MCNB. 10 20 We also believe a fact finder could conclude that MCNB terminated the 1991 Financing Statement because it wished to hide its lending relationship with the Clarks and its related security interests in the Clarks' livestock. A fact finder could draw this inference from evidence suggesting that MCNB terminated a number of its other financing statements in order to prevent NTPCA from detecting its security interests in the Clarks' cattle. NTPCA conducted regular inspections of the McCurtain County records in order to ensure the absence of any other liens which could impair NTPCA's collateral. Apparently, NTPCA almost always gave Rowland Clark advance notice of its intention to inspect the McCurtain County records a few days before it did so. On three occasions, MCNB's decision to terminate financing statements preceded NTPCA's lien searches by a few days. Specifically, MCNB terminated two financing statements on September 26, 1990 the day before NTPCA performed a search of the liens on file at McCurtain County. Similarly, MCNB terminated two other financing statements on September 11, 1991, which was one day before NTPCA inspected the county records. Finally, MCNB allegedly terminated the June 23, 1992 financing statement just six days before NTPCA inspected the McCurtain County records on December 9, 1992. 21 We further note that a fact finder could also find it significant that MCNB terminated its financing statements despite the fact there was a substantial amount remaining due on MCNB's loans to the Clarks that were associated with these liens. 11 When MCNB terminated the financing statements filed on September 28, 1989 and July 2, 1990, the Clarks still owed MCNB $193,931.31. Similarly, when MCNB allegedly terminated the October 22, 1990 and March 28, 1991 financing statements, the Clarks owed $199,677.96 to MCNB. Finally, the Clarks owed MCNB $199,536.24 when MCNB allegedly terminated the filing statements filed on June 23, 1992 and December 15, 1992. This evidence tends to support the conclusion that the financing statements were released for the purposes of hiding the lending relationship, rather than because the Clarks had repaid their loans to MCNB. 22 We find NTPCA's evidence supporting the conclusion that MCNB engaged in a practice of terminating UCC-1 financing statements in order to preclude detection of its lending relationship with Rowland Clark by NTPCA is sufficient to create a genuine issue of material fact as to whether MCNB also terminated the 1991 Financing Statement. We therefore conclude that the district court erred in granting summary judgment for MCNB on NTPCA's lien priority claim.