Request By:
Mr. W. A. Johnson
Attorney at Law
Meade Building
P.O. Box 470
Paintsville, Kentucky 41240-0470
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Your letter requests our opinion as to whether a particular document tendered to the Johnson County Clerk qualifies as a financing statement. The letter reads:
"Pursuant to our recent telephone conversation, I am transmitting herewith a copy of a financing statement which was tendered to the Johnson County Court Clerk for filing. The Clerk refused to accept the financing statement stating that the equipment referred to in the financing statement would have to be more fully described. We tried to explain to the Clerk that this was not a formal Security Agreement but was merely a financing statement to serve as notice to all persons who were doing business with the debtor, that the Citizens National Bank had a security interest in any and all equipment owned by the debtor. It is our contention that this substantially complies with the requirement of KRS 355.9-402(1).
"It will be appreciated if you will direct an opinion from your office stating whether or not the tendered financing statement substantially complies with the statute and is legally recordable by the Clerk. "
The document was labelled as "Financing Statement. " The debtor's name and address were stated. The secured party's name and address appears. The maturity date was stated as "until cancelled." Item 5 describes the property covered: "All equipment now owned or hereafter acquired by Douglas Fleming (debtor) of Paintsville, Johnson County Kentucky." (Emphasis added). The document was signed by the debtor and the secured party.
KRS 355.9-402(1) provides in part that "A financing statement is sufficient if it is signed by the debtor and the secured party, gives an address of the secured party from which information concerning the security interest may be obtained, gives a mailing address of the debtor and contains a statement indicating the types, or describing the items, of collateral. " (Emphasis added).
It can be observed that the subject document complies with KRS 355.9-402(1), except that we must look closely to the provision that the financing statement must either describe the items of collateral or indicate the types of collateral.
You have indicated by telephone that the equipment you had in mind relates to heavy equipment the debtor uses in his strip mining of coal, which could include bulldozers, graders, and front-end loaders. Such items would constitute "equipment" as covered in KRS 355.9-109(2), i.e., equipment used in a business. Westinghouse Credit v. Rovi Property, Etc., Ky.App., 607 S.W.2d 682 (1980).
Whenever a financing statement required by KRS Chapter 355 relating to any vehicle registered or required to be registered in Kentucky for use on the highway is presented to the county clerk for filing, the clerk must immediately note information required by the department (Bureau of Vehicle Regulation) relative thereto on the owner's copy of the registration or transfer receipt issued for the current registration period as noted in KRS 186.170(2), which the secured party must obtain and present to the county clerk, along with the financing statement. KRS 186.045(2)(a); and Vanover v. Bank of Alexandria, Ky., App., 644 S.W.2d 948 (1983) 949. However, the equipment here does not involve a registered vehicle as just described.
Since the intended collateral is "equipment", as specifically defined in KRS 355.9-109(2), and since motor vehicles, fixtures, crops, and farm equipment are not involved, it is our opinion that the use of the word "equipment" in the financing statement is valid; and the clerk should so file it. The word "equipment" refers specifically to equipment used primarily in a business, pursuant to KRS 355.9-109(2). Factually you have informed us that such equipment, as intended on the financing statement, is precisely that, i.e., equipment used in strip mining of coal. See Uniform Commercial Code Handbook, page 262, relating to "Equipment." In "Secured Transactions", by Oscar Spivak (U.C.C. Practice Handbooks 1-6), page 50, relating to "equipment", as defined in KRS 355.9-109(2), the author observes that the principal definition of "equipment" is a negative one. In effect, he says, any goods related to a business, farming or a professional activity which does not fall within the category of the other classifications of goods, is equipment. Moreover, he says even if the goods do not technically meet the requirement that their use be primarily a business one, the definition requires classifying goods as equipment if such goods cannot be classified as consumer goods, inventory or farm products.
In James Talcott Inc. v. Franklin Nat. Bank of Minneapolis, 292 Minn. 277, 194 N.W.2d 775 (1972), the court held that any description of goods in a financing statement is sufficient, whether or not it is specific, if it reasonably identifies what is described and makes possible the identification of the articles or goods intended as security.
The Oklahoma Court, in Security State Bank of Wewoka v. Dooley, Okla. App., 604 P.2d 153 (1979), observed that a financing statement need not be specific. It is enough to indicate the type of collateral covered. As relates to description of collateral, the Virginia Court, in In Re Varney Wood Products, Inc., C.A., Va., 458 F.2d 435 (1972), held that all that is required under the Code is that the financing statement be sufficiently descriptive so as reasonably to generate further inquiry.
For the foregoing reasons, we conclude that the description of collateral in the Financing Statement was adequate under KRS 355.9-402. See Bank of Danville v. Farmers Nat. Bank, Etc., Ky., 602 S.W.2d 160 (1980). Thus the financing statement was legally recordable.