Nov 18, 2014

Financing statement shows bankrupt’s full name, address and birth date but describes the vehicle with an incorrect serial number. The Trustee rejected the applicant’s claim to the security on the ground that the registration was seriously misleading because of the error. Does this meet the seriously misleading threshold? Yes.

The applicant tried to argue that the serial number was only off with respect to two digits, so it wasn’t a big deal. Court found that it might not be a big deal when numbers are being used to measure quantity, but sometimes digits are used to identify something or someone. In this case, correct serial numbers are critical. The court found that when you are using numbers for the purposes of identification, you need to get them exactly right. Section 48 uses the word “all.” You have to keep the specific serial number rules in mind. Serial numbers are meant only for consumer goods – that is why s. 44(8) (b) says “consumer goods” and doesn’t mention anything else. Thus, if you screw up the serial number for equipment and inventory it doesn’t matter. Because the search using the correct serial number does not disclose the applicant’s financing statement, the error is seriously misleading.

Where a serial number is required for the registration description of the interest—for instance, serial-numbered consumer goods—it must be entered into the registry correctly. Failure to do so results in a defect that is seriously misleading to the reasonable person.