Supreme Court of Florida
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No. SC21-1717
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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
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 “<