November 9, 1987
The Honorable Joyce Hazeltine
Secretary of State
State Capitol
Pierre, South Dakota 57501
Official Opinion No. 87-39
Secretary of State's duties regarding effective financing statements
Dear Secretary Hazeltine:
You have requested an official opinion from this Office concerning the following factual situation:
FACTS:
Article Nine of the Uniform Commercial Code (SDCL ch. 57A-9) covers secured transactions. Certain of the provisions of that chapter allow a creditor to "perfect" a secured property ("security") interest by filing notice of the interest with the Secretary of State. These documents in general take the form of financing statements. The statutes also outline where and how a security interest is to be filed in order to be "effective." Many such security interest filings come into the Secretary of State's office lacking one or more of the legal necessities to render them effective.
Based upon the above factual situation, you have asked the following questions:
QUESTIONS:
1. What are the minimum requirements for an effective financing statement filing under the Uniform Commercial Code?
2. What is the responsibility of the Secretary of State to file a financing statement if it does not meet those legal requirements?
For reasons which shall become clear later, I will deal with Question No. 2 first.
IN RE QUESTION NO. 2:
Duties of public officials may be classified in different ways. One such classification differentiates between "judicial," "quasi-judicial," and "ministerial" duties. A second, and closely-related means of classification, categorizes official duties as either "discretionary" or "ministerial." As one might expect, the "judicial" and "quasi-judicial" categories are very similar to those designated as "discretionary."
The South Dakota Supreme Court has noted similarities while outlining differences between judicial and quasi-judicial functions and, by their absence, impliedly has segregated ministerial functions:
The term 'quasi judicial' is used to describe acts, not of judicial tribunals usually, but acts of public boards and municipal officials, presumed to be the product or result of investigation, consideration, and human judgment, based upon evidentiary facts of some sort, in a manner within the discretionary power of such board or officer. (Emphasis added.)
Adamson v. Minnehaha County, 67 S.D. 423, 293 N.W. 542 (1940) citing Hoyt v. Hughes County, 32 S.D. 117, 142 N.W. 471 (1913). Obviously, judicial functions call for discretion and, on the basis of case law definition, so do quasi-judicial functions. Any designation of official duties that establishes them as quasi judicial, as opposed to ministerial, also categorizes such duties as discretionary, rather than ministerial.
A short definition of ministerial duties has been provided by another earlier South Dakota Supreme Court case, wherein the Court said:
A ministerial act or duty is one which is to be performed under a given state of facts, in a prescribed manner in obedience to the mandate of legal authority, and without regard to or exercise of the judgment of the one doing it upon the propriety of the act being done. (Emphasis added.)
Stephens v. Jones, 24 S.D. 97, 123 N.W. 705 (1909). In other words, in South Dakota, ministerial acts or functions are those which do not depend upon any particular weighing of facts in order to render a judgment, but rather are the day-to-day administration of statutorily assigned duties.
The Nebraska Supreme Court has outlined the differences in categories of official duties. That court says:
A ministerial act has been defined as one performed in response to a duty which has been positively imposed by law and its performance required at a time and in a manner or upon conditions which are specifically designated, the duty to perform under the conditions specified not being dependent upon the officer's judgment or discretion.... The character of a duty as ministerial or discretionary must be determined by the nature of the act to be performed, and not by the office of the performer. Official duty is ministerial when it is absolute, certain, and imperative, involving merely execution of a specific duty arising from fixed and designated facts....
State v. Ellis, 163 Neb. 86, 77 N.W.2d 809 (1956). Sixteen years later, the same court again provided a basis for distinguishing duties:
When the law commits to any officer the duty of looking into facts and acting upon them, not in a way which it specifically directs, but after a discretion in its nature judicial, the function is quasi judicial. Where the officer or official body has no judicial power or discretion as to the interpretation of the law, and the course to be pursued is fixed by law, their acts are ministerial only.
School District of Minatare v. County of Scotts Bluff, 189 Neb. 395, 202 N.W.2d 825 (1972).
The distinctions that set ministerial duties apart from others become clear.
The duties of the Secretary of State are outlined generally under SDCL 1-8-1. Subdivision (4), therein, states that the Secretary of State is "To file any document, official oath, official bond, articles of incorporation and amendments thereof, and letters of acceptance which the law requires to be filed in his office; ...." In enacting, amending, and preserving the statute, the Legislature appears not to have intended to bestow a discretionary duty upon the Secretary of State regarding these documents, oaths, etc.; rather, the required duty is to accept and maintain such filings on behalf of the citizens of South Dakota.
SDCL 57A-9-401 notes that the proper place to file a security interest in order to perfect it may be with the Secretary of State. The statute deals with technical aspects of the Uniform Commercial Code. Its reference to "filing" documents with the Secretary of State must be read in conjunction with SDCL 1-8-1 in order to establish a duty for your office to accept such documents. Nowhere, however, does either statute mandate a duty on your part to determine whether such filings are "effective." Your obligation in regard to financing statements is ministerial.
In State v. Baker, 74 N.D. 244, 21 N.W.2d 355 (1945), the North Dakota state auditor refused to follow a state statute mandating payment of state legislators' living expenses on the basis of her belief that the enabling statute was unconstitutional. The auditor arrived at her conclusion on her own and, it appeared, had ignored or would ignore the state attorney general's opinion on the statute's constitutionality. The North Dakota Supreme Court said that the auditor's duties were ministerial in processing legislators' expense vouchers and that, as such, her determination of the statute's constitutionality went beyond the scope of her duties. The court added that not only was the auditor not to volunteer such legal determinations within her ministerial function, but that she could not be ordered or expected to. "Now the state auditor is not required to be a lawyer or to be learned in the law. Neither the constitution nor the statute presupposes that he shall be." Id. at 362.
The auditor argued that her constitutional oath required that she handle the expenditure of state monies and that to expend such funds under an unconstitutional statute would cause her to violate her oath and expose her to liability. The court said that since her duties were ministerial and since she was not expected to be an attorney or to function like one, she could not be held liable for exercising her specific duties under the statute, whether constitutional or unconstitutional. In your case, the duties are ministerial and you are not expected to make any legal or judicial interpretations regarding them, with the special exception noted in the next paragraph.
Because your primary method of indexing and filing U.C.C. financing statements is by debtor's name, that part of an "effective" financing statement is required for you to carry out your ministerial duties. According to James J. White and Robert S. Summers, eminent authorities on the Uniform Commercial Code, certain principles regarding effective financing statements are necessary when filing them for indexing.
For example, if two different versions of the debtor's name appear on the financing statement, try to determine which is the correct name and file the statement accordingly. If the debtor is an individual and his name is spelled one way according to his legible signature and another way as part of his address, index the statement according to his signature spelling. If the debtor's signature is illegible, index according to his name if and as it appears as part of his address. If you still have a question, there is no harm in contacting the creditor and/or the debtor to ascertain a proper spelling. (Your use of social security numbers as an additional indexing and search method goes a long way toward avoiding problems in this area.) In the case of an entity debtor, a name that is reasonably accurate should be sufficient. If you suspect that the filing statement contains an incorrect name, use your corporate records or other records, if possible, to get the true name of the business.
Minor name deviations are tolerated in almost every instance by our courts. For example, if Joe Smith Ford, Inc. is the debtor and the financing statement is filed under Joe Smith Ford, or even Smith Ford, this virtually always would be regarded by our courts as properly filed and effective. The basic rule on indexing of both human and entity debtors, according to White and Summers, is that inaccuracies should not be "seriously misleading" and should be filed so that "a reasonably diligent searcher would be likely to discover a financing statement indexed under the incorrect name." (James J. White and Robert S. Summers, Handbook of the Law Under the Uniform Commercial Code, 839 (1972)).
Although the above suggestions somewhat shift your ministerial duties somewhat into the realm of the quasi judicial or discretionary, that is no cause for concern. "An act is not necessarily taken out of the class styled 'ministerial' because the officer performing it is nevertheless vested with a discretion respecting the means or the method to be employed." Bair v. Struck, 29 Mont. 45, 74 P. 69 (1903). The Legislature's authorization for you to carry out your ministerial duties includes an authorization for quasi-judicial determinations that are necessary for your office to perform its mandated functions. As long as you are performing the Secretary of State's statutory duties, you are given great latitude in your methodology. "The duties of such public officer include ... those which, although incidental and collateral, are germane to, or serve to promote or benefit the accomplishment of the principal purposes." Dison v. Hanson, 248 Minn. 87, 78 N.W.2d 679 (1956). You may perform your ministerial duties in any reasonable, efficient manner that you choose, but there is neither a requirement nor authorization for you to extend your efforts beyond those required by the State Constitution or the South Dakota Codified Laws.
IN RE QUESTION NO. 1:
Since, in answering Question No. 2 above, it has been shown that there is no requirement for you to judge which financing statements are effective, there is no need to engage in a long, complex legal dissertation on what does or does not constitute an effective financing statement.
Respectfully submitted,
Roger A. Tellinghuisen
Attorney General
