Related Articles: Commercial Landlord

Mistake in Name Favors Landlord Over Lender

FACTS: Canterbury Shopping Center (hereinafter "the Shopping Center) leased premises to Canterbury Old English Pub, Inc. (hereinafter "the Pub"). Richmond Fixture sold equipment to the Pub and recorded a UCC 1 under the name of Canterbury Inn, Inc. When the Pub fell behind on its rent, the Shopping Center levied on the property within the premises, and obtained a judgment for possession and an award of $4,705.35. The Shopping Center then locked the premises and kept the keys. Thereafter, Richmond Fixture claimed an interest in the property the Pub left behind. The Shopping Center began procedures to satisfy its judgment through a sheriff's sale and informed Richmond Fixture that no lien against the Pub had been recorded. Three months later Richmond Fixture realized its mistake and amended its UCC 1 to include the proper name for the Pub. The property sold at the sheriff's sale for $5,300. Who gets the money?COURT RULING: The Shopping Center did not have knowledge of Richmond Fixture's lien due to Richmond Fixture's failure to file the lien under the correct name. Richmond Fixture's amendment did not relate back to the date of the original filing because the error was not a minor error. Because the lien filed by Richmond Fixture was not perfected when the Shopping Center filed its writ of fieri facias and became a lien creditor, Richmond Fixtures was only entitled to the leftover proceeds of the sheriff's sale, after the Shopping Center received its money and the sheriff received his fees and expenses. ADVICE TO LENDERS: A lender must be careful when recording a UCC 1 or judgment order to include the exact name and address of the debtor. Be sure to find out if the debtor is trading under different names and record the UCC 1 for all such names. Be certain to record the UCC 1 in accordance with the new UCC rules (see our recent fax article for more details).

ADVICE TO LANDLORDS: Landlords should be aware of their tenant's trade names (a comprehensive tenant application can help). Do a title search to learn of any recorded liens against tenant's property. Check the State Corporation Commission records.