## Facts

- Peoples National Bank made a secured loan to Speedcraft Auto Parts, Inc., taking a security interest in Speedcraft’s inventory and equipment.
- The Bank retained attorney Stanley Weiner to handle the transaction and the steps needed to perfect the security interest by filing a UCC-1 financing statement.
- Weiner retained McCall Abstract Corp. to conduct searches and to file the financing statement.
- McCall filed with the county clerk and mailed a financing statement and filing fee to the New York Secretary of State.
- McCall received no stamped copy, receipt, or other acknowledgment from the Secretary of State and did not follow up to confirm acceptance or recording.
- About one month later, Speedcraft filed for bankruptcy; it was then discovered that no financing statement for the Bank had been filed with the Secretary of State.
- Because the filing was missing, the Bank’s security interest was treated as unperfected in the bankruptcy proceeding, and the Bank was relegated to general unsecured creditor status.
- The Bank sued Weiner and McCall for professional negligence and moved for partial summary judgment on liability; the trial court denied the motion, and the Bank appealed.

## Issues

1. Whether an attorney and filing service engaged to perfect a lender’s security interest breach their duty of care by merely mailing a UCC-1 to the Secretary of State, receiving no acknowledgment, and taking no steps to confirm filing when the statement is never recorded.
2. Whether the undisputed failure to secure and confirm filing entitled the Bank to partial summary judgment on liability for negligence.

## Decision

- The Appellate Division reversed the order denying partial summary judgment.
- The court held Weiner and McCall liable as a matter of law for failing to ensure that the financing statement was actually filed with the Secretary of State.
- Partial summary judgment on liability was granted to the Bank, with damages left for further proceedings.

## Legal Principles

- Professionals retained to perfect a security interest must exercise reasonable care to ensure the financing statement is actually filed in the proper office, not merely prepared or transmitted.
- Mailing a financing statement and fee, without receiving acknowledgment and without reasonable follow-up, does not satisfy the duty of care where the filing never appears of record.
- Loss of secured status and priority in the debtor’s bankruptcy is a foreseeable consequence of failing to perfect and can support causation and damages in negligence.
- Summary judgment on liability is appropriate when the material facts are undisputed and the defendants’ “mailing was enough” contention fails as a matter of law.

## Conclusion

The court held that an attorney and a filing service hired to perfect a lender’s security interest were negligent where they only mailed the UCC filing to the Secretary of State, received no confirmation, took no further steps, and the filing was never recorded, causing the lender to lose secured status in bankruptcy; liability was resolved on partial summary judgment, with damages to be determined later.


Peoples Nat’l Bank v. Weiner, 129 A.D.2d 774, 514 N.Y.S.2d 767 (N.Y. App. Div. 2d Dep’t 1987)