Mathias v. Walling Enterprises, Inc.

• Decision Date: 11 September 1992
• Docket Number: No. 90-2204,90-2204
• Citation: 609 So.2d 1323
• Parties: 17 Fla. L. Week. D2123, 19 UCC Rep.Serv.2d 594 William J. MATHIAS, et al., Appellants, v. WALLING ENTERPRISES, INC., Appellee.
• Court: Florida District Court of Appeals

Page 1323

609 So.2d 1323

17 Fla. L. Week. D2123, 19 UCC Rep.Serv.2d 594

William J. MATHIAS, et al., Appellants, v. WALLING ENTERPRISES, INC., Appellee.

No. 90-2204.

District Court of Appeal of Florida Fifth District.

Sept. 11, 1992.

On Motion for Rehearing and Certification Dec. 31, 1992.

Fred A. Morrison, of McLin, Burnsed, Morrison, Johnson & Robuck, P.A., Leesburg, for appellants.

Gary J. Cooney, of Austin, Lawrence & Landis, Leesburg, for appellee.

EN BANC

DIAMANTIS, Judge.

Mathias, Chandler and Ohnstad (investor group), appeal from a summary judgment which adjudicated that Walling Enterprises, Inc.'s landlord's lien for rent had priority over their perfected security interest in Chobe Investments, Inc.'s liquor license issued for Snaps Lounge, as well as in other items of equipment and fixtures. We affirm in part and reverse in part.

The record shows that originally Chandler, Mathias, and Ohnstad (and others) owned all the stock in Chobe Investments, Inc. They borrowed money from Citizens National Bank of Leesburg to open Snaps Lounge in Leesburg. A purchase money security agreement covering assets, inventory and equipment was executed on July 17, 1986. A UCC-1 filing was made on July 21, 1986.

An additional note for $60,000 and a security agreement covering a 4-COP liquor license was executed in the bank's favor by Chobe on August 28, 1986. At that point, Chobe had a temporary license for Snap's Lounge, issued August 27, 1986. On October 17, 1986 Citizens National Bank, pursuant to section 561.65(4), Florida Statutes (1985), recorded with the Division of Alcoholic Beverages and Tobacco the security agreement which described the liquor license. The bank on September 9, 1986 also filed with the Secretary of State's office a UCC-1 financing statement covering the liquor license.

The Division issued the permanent license on February 3, 1987. On February 6, 1987 the bank again recorded with the Division the security agreement involving the liquor license.

Chobe and Walling entered into a lease for Snap's Lounge on May 30, 1986. According to the terms of the lease, it was to run for three years beginning when the lounge opened. It opened for business on September 4, 1986. Walling never attempted to file any document with either the Division or the Secretary of State.

In August of 1989 the investor group sold all of their stock in Chobe to the Bainters. Under the lease with Walling, this was deemed to be an assignment of the lease, to which Walling consented. When the new owners of Chobe began defaulting on their rent and bank loans, the investor group who had guaranteed the bank loans settled their obligations with the bank and took an assignment of the bank's security interests and filings. Thus, the investor group stepped into the bank's secured position.

The investor group then filed this lawsuit, seeking to enforce the bank's rights in the collateral and Walling intervened to assert its landlord's lien for rent. The trial court then adjudicated the relative priorities of Walling and the investor group.

I. Statutory Landlord's Lien Attaches to a Lessee's property Interest in a Liquor License.

Florida law has recognized that a landlord's statutory lien for rent under section 83.08(2) ¹ can attach to a lessee's liquor license located on the leased premises. G.M.C.A. Corporation v. Noni, Inc., 227 So.2d 891 (Fla. 3d DCA 1969); Yarbrough v. Villeneuve, 160 So.2d 747 (Fla. 1st DCA 1964). In Yarbrough, the court held that a liquor license is subject to the attachment of a landlord's lien, and stated that while a beverage license is but the grant of a privilege and is not property in the constitutional sense, it has been recognized and considered to be property in a commercial sense, citing House v. Cotton, 52 So.2d 340 (Fla.1951) and Kline v. State Beverage Department of Florida, 77 So.2d 872 (Fla.1955). The court in Yarbrough reasoned that because the statute creating a landlord's lien for rent provides that such lien shall attach to all property of the lessee kept on the property, and because vendors must display their licenses in conspicuous places on their licensed premises, the statutory landlord's lien attached to the license. Yarbrough, 160 So.2d at 748.

We reject the argument that conceptually a liquor license does not have a "location" because it lacks substance and form and, therefore, it cannot be "brought onto" the leased premises. As in Yarbrough, a liquor license must be located in a conspicuous place in order for a business to lawfully open its doors to sell regulated alcoholic beverages. ² This requirement prevents a licensee from exercising the privilege of selling alcoholic beverages at two or more locations, and persons involved in the commercial sale of alcoholic beverages know and understand this requirement. Because the commercial world is aware of the need and real value of the physical license to the licensee, the license itself has a possessory value even though it is a "general intangible." Consequently, the physical license, while it is located on the leased premises, can be subject to a statutory landlord's lien, which lien is in essence a possessory one. ³

The advent of the Uniform Commercial Code (UCC) in 1967 did not affect the Yarbrough principle of the landlord's statutory lien as attaching to a liquor license. ⁴ A landlord's lien is expressly excluded from the provisions of the UCC. See Sec. 679.104(2), Florida Statutes (1991). Thus, we agree with the trial court that a landlord can have a statutory lien which attaches to a liquor license located on the leased premises.

II. Walling's Statutory Lien Did Not Have to be Perfected Pursuant to Either Section 561.65(4) or Section 679.401(c).

Prior to the Florida Supreme Court's opinion in United States v. McGurn, 596 So.2d 1038 (Fla.1992), applicable case law required dual filing under both sections 561.65(4) and section 679.401(1)(c) in order to perfect a security interest. See In re Seville Entertainment Complex of Pensacola, Inc., 79 B.R. 491, 493 (Bankr.N.D.Fla.1987). See also In re Coed Shop, Inc., 435 F.Supp. 472 (N.D.Fla.1977) affirmed, 567 F.2d 1367 (5th Cir.1978). In McGurn the Florida Supreme Court, in a certified question from the Eleventh Circuit, held that recording of a security interest with the Florida Division of Alcoholic Beverages and Tobacco pursuant to section 561.65(4) was sufficient under Florida law to perfect a security interest in a liquor license as against a subsequent judgment lien and that filing under section 679.401(1)(c) of the UCC was unnecessary.

Section 561.65(4)-(7) was enacted in 1981 by Chapter 81-158, section 21, Laws of Florida. This chapter also amended 561.65(1). Section 561.65(4)-(7) provides that: (1) a filing be made within ninety days of the date of creation of the security agreement or lien on appropriate forms to be filed with the Division; (2) any foreclosure shall be in the circuit court in the county in which the beverage license is issued; (3) the procedure for a foreclosure and sale and priority of payment; and (4) foreclosure or judicial transfer of the license does not prevent the Division from taking administrative action against the licensee, but a revocation shall only impair the qualifications of the licensee's officers, directors, or stockholders. Section 561.65(1) was amended to require notice by the Division to any lienholder who properly records its lien pursuant to subsection (4) of any pending revocation or suspension of a licensee's beverage license.

Section 561.65(4) provides in pertinent part:

561.65 Mortgagee's interest in license.--

* * * * * *

(4) In order to perfect a lien or security interest in a spirituous alcoholic beverage license which may be enforceable against the license, the party which holds the lien or security interest, within 90 days of the date of creation of the lien or security interest, shall record the same with the division on or with forms authorized by the division, which forms shall require the names of the parties and the terms of the obligation.

Historically, possessory liens such as a landlord's lien or a pledge did not have to be recorded in order to have priority over a subsequently acquired security interest or lien. See Lovett v. Lee, 141 Fla. 395, 193 So. 538 (1940); Spellman v. Beeman, 70 Fla. 575, 70 So. 589 (1915); United States v. S.K.A. Associates, Inc., 600 F.2d 513 (5th Cir.1979). The UCC recognizes this historic exception to the recording requirement. See e.g. Secs. 679.104 and 679.305, Fla.Stat. (1991). Section 679.104 not only exempts a landlord's lien from the requirement of recording, but such section also exempts certain enumerated non-possessory liens from this requirement.

Chapter 81-158, section 21, Laws of Florida, does not suggest that the legislature intended to abrogate this historic distinction between possessory and non-possessory liens when it enacted section 561.65(4). The purpose of recording is to place subsequent lienors and holders of security interests on notice of the prior lien or security interest. Section 83.08(2) puts such subsequent lienors and holders of security interests on notice that a debtor's landlord has a lien upon the lessee's property superior to any lien acquired subsequent to the bringing of the property upon the leased premises. Failure to record a landlord's lien may very well abrogate the requirement of section 561.65(1) that the Division notify the lienholder of any pending revocation or suspension proceedings because notice from the Division is only required to lienholders who have recorded their liens pursuant to section 561.65(4).

The Florida Supreme Court's decision in McGurn does not affect the statutory landlord's lien. McGurn dealt exclusively with a landlord's contractual security interest upon a lessee's alcoholic beverage license. A contractual security interest is broader in scope than a statutory landlord's lien in that a contractual...