February 7, 1986

Mr. David Buechler 
State's Attorney 
Turner County 
Parker, South Dakota 57053

Official Opinion No. 86-02

Release of Security Interests in Real Estate

Dear Mr. Buechler:

You have requested an official opinion from this office on the following factual situation.

FACTS: 

XYZ Corporation (Secured Party) had recorded a UCC Financing Statement covering certain fixtures.  XYZ also requested the statement to be recorded in the real estate records.  (See Exhibit 'A.')  XYZ now wishes to release its security interest and has provided the Register of Deeds with a UCC Termination Form UCC-3 (See Exhibits.)  The Register of Deeds feels a Satisfaction of Mortgage is required to release the lien since XYZ Corp. had the UCC Financing Statement recorded in the real estate records.

On the basis of that fact situation, you have asked the following question:

QUESTION: 

Is the Register of Deeds correct in requiring XYZ (Secured Party) to provide her a Satisfaction of Mortgage to satisfy the lien since it has been recorded in the real estate records?

SDCL 57A-9-403(7) provides, in part, as follows: 

When a financing statement covers timber to be cut or covers minerals or the like (including oil and gas) or accounts subject to subsection (5) of §  57A-9-103, or is filed as a fixture filing, it shall be filed for record and the filing officer shall index it under the names of the debtor and any owner  of record shown on the financing statement in the same fashion as if they were the mortgagors in a mortgage of the real estate described, and to the extent that the law of this state provides for indexing of mortgages under the name of the mortgagee, under the name of the secured party as if he were the mortgagee thereunder, or where indexing is by description in the same fashion as if the financing statement were a mortgage of the real estate described.

Formal requisites of a financing statement, and amendments appear at SDCL 57A-9-402 (Paragraphs 1 through 5).

This office has previously expressed the opinion, in Official Opinion 83-26, dated August 19, 1983, that 'a continuation statement need not contain the real estate description.'  That Opinion expresses the view that a person who observes a 'fixture filing' in the real estate mortgage records is placed upon notice of the existence of the fixture filing and is therefore obligated to check for a continuation statement.  That Opinion points out that there is available to a person checking records the uniform commercial code filings, the land index, the mortgagor mortgagee book, and usually a numerical book of filings.

SDCL 57A-9-403(2) provides in part, as follows: 

Except as provided in subsection (6) a filed financing statement is effective for a period of five years from the date of filing and thereafter  for a period of sixty days.  . . .

Subsection (6) of SDCL 57A-9-403 provides, in part, as follows: 

If the debtor is a transmitting utility (subsection (5) of §  57A-9-401) and a filed financing statement so states, it is effective until a termination statement is filed.  . . .

In your factual situation presented, the debtor is a transmitting utility, and 'a filed financing statement so states' (demonstrated by the copy of the filed financing statement, marked 'Exhibit A,' and enclosed with your factual situation).  Therefore, the filed financing statement is effective 'until a termination statement is filed.'  57A-9-403(6).  As stated in my prior opinion, in relation to continuation certificates, a person who observes a 'fixture filing' in the real estate mortgage records is placed upon notice of the fixture filing and is therefore obligated to check whether or not a 'termination statement' has been filed. 57A-9-403(6) clearly provides that filing of a 'termination statement' is sufficient to terminate the effectiveness of the financing statement.

For the reason that the effect of filing of a financing statement which is a  'sixture filing' expires by operation of law after five (5) years and sixty (60) days unless the debtor is a 'transmitting utility,' and in that case is terminated by filing of a 'termination statement,' it is my opinion that the answer to your question is 'NO.'  The provision in 57A-9-403(7) for indexing  of 'fixture filings' in real estate mortgage records does not convert the document into a conventional real estate mortgage which would require recording of a formal satisfaction to terminate its effectiveness.

Respectfully submitted,

Mark V. Meierhenry
Attorney General