## Facts

- In June 2003 and November 2005, The Four County Bank (“the Bank”) financed Shepherd Brothers Timber Company, LLC’s (“Shepherd”) purchase of two pieces of forestry equipment (a 2003 Tigercat Cutter and a 2005 Tigercat Skidder).
- The Bank perfected its security interests by filing UCC financing statements in the Wilkinson County Superior Court (June 5, 2003, and November 18, 2005).
- Shepherd later transferred the Cutter to Tidewater Equipment Company (“Tidewater”) as a trade-in on August 30, 2007; Tidewater resold it to a third party the same day.
- Shepherd transferred the Skidder to Tidewater as a trade-in on June 26, 2008; Tidewater later resold it to a third party on May 9, 2009.
- The equipment was not subject to a certificate-of-title lien notation system, and Tidewater did not run a UCC lien search before taking the trade-ins.
- There was no evidence that Tidewater had actual knowledge of the Bank’s security interests when it took delivery of either machine.
- The Bank did not file continuation statements within the statutory time period. After the five-year effectiveness period had run, the Bank attempted later filings (treated as new filings rather than timely continuations).
- Shepherd filed for bankruptcy in March 2011.
- In September 2012, the Bank sued Tidewater for trover and conversion, seeking return of the equipment or its value based on the Bank’s claimed security interests.
- The trial court granted summary judgment to Tidewater, and the Bank appealed.

## Issues

1. Whether the Bank’s financing statements lapsed under OCGA § 11-9-515 because the Bank failed to file timely continuation statements, making the Bank’s security interests unperfected as to Tidewater.
2. Whether Tidewater qualified under OCGA § 11-9-317 as a buyer/purchaser for value that received delivery without actual knowledge of the Bank’s security interests and therefore took the equipment free of those interests once the filings lapsed.
3. Whether Article 9 or Georgia law imposes a judicially created duty on an equipment dealer to conduct a UCC lien search before accepting trade-ins or reselling them, as a condition to taking free of an unperfected security interest.

## Decision

- The Court of Appeals of Georgia affirmed the grant of summary judgment to Tidewater.
- The court held the Bank’s financing statements were effective for five years and lapsed because the Bank did not file continuation statements within the six-month window before expiration as required by OCGA § 11-9-515.
- Once the lapse occurred, the Bank’s security interests became unperfected and, as against a purchaser for value, were treated as never having been perfected.
- The court concluded Tidewater gave value, took delivery, and lacked actual knowledge of the Bank’s security interests; therefore, under OCGA § 11-9-317, Tidewater took the equipment free of the Bank’s interests.
- The court rejected the Bank’s argument that Tidewater should be liable for failing to search UCC records, explaining that Article 9 places the continuation burden on the secured party and does not require buyers to perform lien searches absent actual knowledge.

## Legal Principles

- A filed financing statement is generally effective for five years; it lapses unless a continuation statement is filed within six months before the five-year expiration date. OCGA § 11-9-515.
- When a financing statement lapses, the related security interest becomes unperfected, and as against a purchaser for value the security interest is treated as never perfected. OCGA § 11-9-515.
- A buyer of goods can take free of a security interest if the buyer gives value, receives delivery without actual knowledge of the security interest, and takes before the interest is perfected (including when perfection is lost by lapse). OCGA § 11-9-317.
- A secured party’s late filing after lapse does not revive continuous perfection against buyers who acquired the collateral during the lapse period; it operates prospectively like a new filing.
- Article 9 does not impose a general duty on a purchaser (including a dealer taking trade-ins) to conduct UCC searches to claim buyer protections; the statutory limitation is actual knowledge, not constructive notice from the filing system.

## Conclusion

Because the Bank failed to file timely continuation statements, its financing statements lapsed under OCGA § 11-9-515 and its security interests were unperfected as to Tidewater; Tidewater, having given value and taken delivery without actual knowledge of the Bank’s interests, took the equipment free under OCGA § 11-9-317, so summary judgment for Tidewater on the Bank’s trover and conversion claims was proper.


Four County Bank v. Tidewater Equip. Co., 331 Ga. App. 753, 771 S.E.2d 437 (2015)