Court: District Court, W.D. Kentucky; August 12, 1985; Federal District Court
Plaintiff-Trustee seeks summary judgment to avoid the security interest of Peoples State Bank in certain personal property under 11 U.S.C. § 544. Both parties agree that only legal questions are at issue, with the defendant's response treated as a cross motion for summary judgment. The Trustee claims that although the debtor executed notes with specific maturity dates, the security agreement and financing statements lack such dates, leading to the argument that the stated maturity dates in the notes should govern for perfection purposes. The Trustee contends that since no continuation statements were filed within sixty days of these maturity dates, the Bank's perfection lapsed, making it a general unsecured creditor.
Conversely, the Bank asserts that its security instruments are effective for five years from filing due to the absence of maturity dates, thus maintaining its perfected status until 1989. The case facts indicate that the Bank's security interests in vehicles and equipment were perfected through filings that did not include maturity dates, and while the promissory notes had specific maturity dates, these notes were not filed. The Court must consider the principle that a motion for summary judgment is construed favorably to the opposing party and determine if the Bank's security interest remained perfected or lapsed. Under Kentucky law, governed by KRS 355.9-403(2), a financing statement without a stated maturity date remains effective for five years and lapses thereafter unless a continuation statement is filed. The Trustee argues that the interrelation of the financing statements, security agreements, and notes should allow the maturity dates on the notes to dictate perfection status.
The plaintiff-Trustee references In re Radcliff Door Company, Inc. to argue that the maturity dates of notes are determinative. However, the Court contends that this reliance contradicts KRS 355.9-403(2), which states that a financing statement without a maturity date remains effective for five years. Kentucky case law, particularly Lincoln Bank, Trust Co. v. Queenan, supports this interpretation, confirming that if a financing statement indicates a maturity date beyond five years or lacks one, it remains effective for five years from filing, with the possibility of renewal. The facts in Radcliff Door are distinguishable as it involved a security agreement with a stated maturity date, while the documents filed by the defendant here did not include such dates. There is no requirement to state a maturity date for a financing statement to be valid. The purpose of KRS 355.9-402 is to provide notice to potential creditors about security interests, aligning with the notice filing system under the Uniform Commercial Code. The Court concludes that the defendant, Peoples State Bank, possesses a valid and perfected security interest in the equipment, taking precedence over the Trustee’s claim, as supported by KRS 355-9-301(l)(b). These findings are presented as Findings of Fact and Conclusions of Law under Bankruptcy Procedure 7052, with a separate Order to follow. Counsel for both parties received copies of the Opinion.
