McRae v. Security Pacific Housing Services, Inc.

• Court: Alabama Supreme Court
• Writing for the Court: SHORES; HORNSBY
• Citation: McRae v. Security Pacific Housing Services, Inc., 628 So.2d 429 (Ala. 1993)
• Decision Date: 27 August 1993
• Parties: 21 UCC Rep.Serv.2d 855 Joan G. McRAE and C. Michael Stilson, as trustee, intervenor, v. SECURITY PACIFIC HOUSING SERVICES, INC. Virginia W. JOHNSON and C. Michael Stilson, as trustee, intervenor, v. SECURITY PACIFIC HOUSING SERVICES, INC. Charlie DEGRAFFENRIED and C. Michael Stilson, as trustee, intervenor, v. SECURITY PACIFIC HOUSING SERVICES, INC. 1921108.

Page 429

628 So.2d 429

21 UCC Rep.Serv.2d 855

Joan G. McRAE and C. Michael Stilson, as trustee, intervenor, v. SECURITY PACIFIC HOUSING SERVICES, INC.

Virginia W. JOHNSON and C. Michael Stilson, as trustee, intervenor, v. SECURITY PACIFIC HOUSING SERVICES, INC.

Charlie DEGRAFFENRIED and C. Michael Stilson, as trustee, intervenor, v. SECURITY PACIFIC HOUSING SERVICES, INC.

1921108.

Supreme Court of Alabama.

Aug. 27, 1993.

Jesse P. Evans III and Marvin E. Franklin of Najjar Denaburg, P.C., Birmingham, for C. Michael Stilson as trustee, intervenor.

Richard C. Duell III, Paul J. Spina III, and Edith Jane Schauble of Duell & Spina, P.C., Birmingham, for appellee.

Robert E. Sasser and Dorothy W. Littleton of Sasser & Littleon, P.C., Montgomery, for amicus curiae The Alabama Manufactured Housing Institute.

SHORES, Justice.

The United States Bankruptcy Court for the Northern District of Alabama, Western Division, certified the following question of law to us:

"Does the last sentence of Ala.Code § 7-9-403(6) mean that a financing statement perfecting a security interest in a pre-1990 mobile home lapses after 5 years under Ala.Code § 7-9-403(2) where the financing statement does not state specifically that it will remain effective until a termination statement is filed or, contain other indicia of the maturity date of obligation beyond the 5-year period?"

The question of law presented is deemed determinative of three consolidated actions before the United States bankruptcy court for which there is no clear controlling precedent in the decisions of this Court. All three cases are adversary proceedings within the three debtor's reorganization cases under Chapter 13. Security Pacific Housing Services, Inc., is the creditor in all three cases. The Alabama Manufactured Housing Institute has filed a brief in support of the creditor.

The following pertinent facts were also provided by the bankruptcy court for our consideration.

"Ms. McRae alleged in her complaint against Security Pacific Housing Services, Inc., that the creditor could not be classed as a secured creditor in her bankruptcy. Her complaint alleged the creditor's perfection lapsed because it had failed to renew the original Uniform Commercial Code Form-1 financing statement on the mobile home she purchased in 1985. Security Pacific Housing Services, Inc., contended that it is entitled to secured status because under the last sentence of Ala.Code 1975, § 7-9-403(6), the original UCC-1, filed October 3, 1985, in the Hale County Probate Office, would be effective until a termination statement was filed. However, the Chapter 13 Standing Trustee, as Intervenor, Plaintiff, argued in opposition to the creditor that the same last sentence of Code § 7-9-403(6) should be construed to the opposite effect in these cases. The Trustee, C. Michael Stilson, contended that an original financing statement on a mobile home will be effective until its termination only if the financing statement itself states this fact, or at least lists a maturity date for the loan. The original UCC-1 included in this file does not say it will remain effective until its termination nor does it list a maturity date for the loan.

"Mrs. Johnson's complaint against Security Pacific also objected to the secured status of its claim because no continuation statement had been filed. Ms. Johnson entered into an installment sales contract to purchase her mobile home in 1985. The seller, Piggy Bank Mobile Homes, recorded a UCC-1 with the Tuscaloosa County Probate Office on August 13, 1985. It is not disputed that neither Piggy Bank nor Jefferson Federal Savings & Loan, its first assignee, failed to file a continuation statement. Security Pacific is receiver for Jefferson Federal. It contends that the last sentence of Code § 7-9-403(6) means that such an initial UCC-1 on a mobile home remains valid until a termination statement is filed. C. Michael Stilson, the Chapter 13 Standing Trustee, argued to the contrary that the sentence should be interpreted in this way only if the UCC-1 so specified, or at the very least stated a firm maturity date for the loan. The UCC-1 in this case does not state it is valid until termination nor does it include a maturity date.

"Mr. Degraffenried also filed a complaint objecting to the secured status of Security Pacific's claim, contending that the creditor was unsecured because it did not timely file a continuation statement. The original UCC-1 financing statement perfecting the security interest of Security Pacific's predecessor was filed with the Pickens County Probate Office on December 13, 1985. Mr. Degraffenried purchased the mobile home from Nationwide Mobile Homes which assigned its security interest to Jefferson Federal, and that interest is now assigned to Security Pacific. Security Pacific made the same argument on this point--that the last sentence of Code § 7-9-403(6) means that an original UCC-1 financing statement is valid to maintain perfection of a security interest in a mobile home until a termination statement is filed. C. Michael Stilson, the Standing Chapter 13 Trustee, again argued that the same statute means that the financing statement for a mobile home must state that it is valid until a termination is filed, or at least list the maturity date of the loan. Otherwise, he argued it would lapse after five years like most financing statements perfecting security interests in collateral."

Section 7-9-403(2) reads as follows:

"Except as provided in subsection (6), a filed financing statement is effective for a period of five years from the date of filing, or, where both (i) the collateral described consists only of consumer goods and (ii) the secured obligation is originally $2000 or less, then until the 30th day following any maturity date if specified in the financing statement. The effectiveness of a filed financing statement lapses on the expiration of the effective period unless a continuation statement is filed prior to the lapse. If a security interest perfected by filing exists at the time insolvency proceedings are commenced by or against the debtor, the security interest remains perfected until termination of the insolvency proceedings and thereafter for a period of 60 days or until expiration of the effective period, whichever occurs later; but when the effective period expires before the expiration of the 60-day period, the security interest remains continuously perfected beyond the 60-day period only if a continuation statement is filed before expiration of the effective period or a new financing statement is filed between the time of expiration of the effective period and expiration of the 60-day period. Upon lapse the security interest becomes unperfected, unless it is perfected without filing. If the security interest becomes unperfected upon lapse, it is deemed to have been unperfected as against a person who became a purchaser or lien creditor before lapse."

(Emphasis added.)

Section 7-9-403(6) reads as follows:

"If the debtor is a utility (subsection (5) of section 7-9-401) and a filed financing statement so states, it is effective until a termination statement is filed. A real estate mortgage which is effective as a fixture filing under subsection (6) of section 7-9-402 remains effective as a fixture filing until the mortgage is released or satisfied of record or its effectiveness otherwise terminates as to the real estate. A financing statement covering a mobile home, other than a mobile home constituting inventory, remains effective, if it so states, until a termination statement is filed."

(Emphasis added.)

In resolving the question before the Court, we look to the historical perspective of § 7-9-403(6). The reason and necessity for a statute are relevant to its interpretation. Ex parte Birmingham Board of Education, 601 So.2d 93 (Ala.1992). As originally enacted, § 7-9-403 (Ala.Acts 1965, Act No. 549) made no mention of any special durational periods associated with financing statements. Neither were durational periods added by amendment or by the recodification in 1975. However, an amendment adopted in 1981 (Ala.Acts 1981, Act No....