A lender provided a loan to a parent company that had subsidiaries and filed a UCC-1 financing statement identifying only the parent company as the debtor. However, the lender listed the collateral as assets located at the leased space of the subsidiaries. Later that year, the subsidiaries’ lessor filed financing statements based on security interests granted to the lessor in various leases. The lessor’s new financing statements named the subsidiaries as the debtors. When the debtor parties went into default on both the lender’s loan and the lease agreements, the lender filed suit to foreclose its interest in the subsidiaries’ tangible assets and property as specified in its financing statement and argued its perfected security interest had priority over the lessor’s filings. The lessor counterclaimed, sought attorneys’ fees, and argued that its security interest had priority over the lender’s insufficient filing. The primary dispute regarded whether the lender’s UCC-1 financing statement, which was filed first but only identified the parent company as the debtor, gave the lender priority in the collateral over a lessor’s subsequent financing statements that named the parent’s subsidiaries as debtors. After cross-motions for summary judgment, the trial court found the lessor’s security interest took priority over the lender’s but denied legal fees. Both parties appealed.
In PJ Visionary PTE. Ltd. v. Five Senses LLC, 570 P.3d 1 (Haw. Ct. App. 2025), the court found that the lessor had priority because the lender’s security interest in the subsidiaries’ collateral was not perfected. The court first tackled the lender’s contention that its financing statement perfected a security interest in the subsidiaries’ collateral. Relying on Hawai’i’s adoption of UCC Article 9, HRS §§ 490:9-503 and 490:9-506, the court held that full debtor identification was required and that a financing statement that does not provide the registered organization’s correct legal name is “seriously misleading.” Thus, as the lender’s filing listed only the parent as a debtor, the statement perfected a security interest only in collateral owned by that parent company and did not perfect any interest in the omitted subsidiaries’ property. The court additionally rejected the argument that knowledge of the parent–subsidiary relationship cured the omission, because it determined that perfection depends on a public record, not private party knowledge of a corporate relationship. Additionally, the court ruled that shared funding structures and officers between the omitted subsidiaries and parent company were irrelevant for purposes of perfection of a security interest in collateral. Second, on the matter of attorneys’ fees, the court affirmed the denial, holding that the lessee possessed no privity with the lender and had no other statutory basis to support recovery between the parties. Moreover, legal actions to enforce security interests do not qualify as “in the nature of assumpsit” under Hawai'i law. Thus, the court affirmed that the lender’s initial filing perfected the lender’s security interest in only the parent company’s collateral and that the lessor could not obtain attorneys’ fees.
By Landon Womack [email protected]
Edited By Taylor O’Brien [email protected]
Edited By Kristin Meurer [email protected]
Edited By Hayden Mariott [email protected]