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Mikulicka v. Baer

Decided: February 26, 1982.

STEVEN MIKULICKA, INDIVIDUALLY AND STEVEN ENTERPRISES, INC., A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFFS,
v.
DAVID M. BAER, GIROLAMO GIOMBANCO, IONAB CORPORATION DBA VILLA CARINI RESTAURANT, A CORPORATION OF THE STATE OF NEW JERSEY AND FIRST NATIONAL STATE BANK-EDISON, A NATIONAL BANKING ASSOCIATION, DEFENDANTS



Cohen, J.s.c.

Cohen

These cross-motions for summary judgment present a priority contest between the secured seller of a restaurant and the bank that helped to finance the buyer. Central to resolution of the contest are questions of the validity and effect of the refusal by the Secretary of State to file the seller's financing statement.

The seller owned a bar and lounge. He contracted to sell it to the buyer for $145,000, of which $109,000 was to be paid in installments. The payments were to be secured by a purchase money security interest in some business assets. The buyer also borrowed $40,000 from the bank, repayment of which was also to be secured by a security interest in some business assets.

The closing was held on February 26, 1979. Three days before, on February 23, the buyer received the bank loan and signed a note and security agreement. Appropriate UCC-1 financing statements were filed with the Middlesex County Clerk on February 26 and with the Secretary of State on February 28. At the closing the buyer executed a $109,000 note and security agreement in favor of the seller. Appropriate UCC-1 financing statements were sent off for filing on the same day. The one sent to the county clerk was accepted and filed. The one sent to the Secretary of State was not. On March 6 it was sent back with a form letter stating that the $10 check tendered with the two-page document was insufficient and that filing of the second page required an additional $5 fee. When the seller received the March 6 mailing does not appear. On March 13 the seller sent the financing statement back to the Secretary of State with the demanded $15 and the document was filed on March 16.

In April the bank lent the buyer an additional $10,000 and in May a further $20,000. The entire loan of $70,000 was purportedly secured by the originally filed financing statements. N.J.S.A. 12A:9-204(5). Before advancing the final $20,000, according to the affidavit of a bank officer, the bank obtained a lien search that showed the seller's security interest to have been filed on March 16.

The bank was first to perfect its security interest in the restaurant assets. Ordinarily, that would give it priority over a later perfected security interest. N.J.S.A. 12A:9-312(5). But, a purchase money security interest in collateral other than inventory has priority over a competing security interest*fn1 if it is perfected (in this case by filing) within ten days after the debtor receives possession of the collateral, N.J.S.A. 12A:9-312(4), even

if the competing security interest is earlier perfected. Cf. N.J.S.A. 12A:9-312(3).

In this case, therefore, the seller's purchase money security interest in fixtures, which was perfected by filing a financing statement with the Middlesex County Clerk, N.J.S.A. 12A:9-401(1)(b), has priority over the bank's security interest in fixtures. If the Secretary of State had accepted and filed the seller's financing statement, his security interest in nonfixture, noninventory collateral would also have priority over the bank. What effect has the action of the Secretary of State?*fn2

Filing, according to N.J.S.A. 12A:9-403(1), is accomplished by presentation of a financing statement for filing, tender of the filing fee and acceptance of the statement by the filing officer. "The uniform fee for filing . . . for an original or continuation statement . . . shall be $10.00." N.J.S.A. 12A:9-403(5). The seller presented the financing statement for filing and tendered the filing fee of $10. Yet, the Secretary of State did not accept it. He had decided many years ago that he would charge $5 extra to file a one-page financing statement with an attached second page, and $1 more for every additional page. He notified the bar of the additional charges in 1964. 87 N.J.L.J. 206. Since 1971 the additional charges have appeared in a schedule of fees published by the Uniform Commercial Code Section of the Department of State. See, also, 28 N.J. Practice , Uniform Commercial Code Forms, c.9, pt.3.

The Secretary of State has statutory authority to charge "For filing any paper or document for which no other fee is fixed, $5.00." N.J.S.A. 22A:4-1. But the fee for filing a UCC-1 financing statement is fixed. N.J.S.A. 12A:9-403(5) has fixed it at $10 and has done so without reference to the number ...


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