953 F.

2d 1556
16 UCC Rep.Serv.2d 1150

SECURITIES AND EXCHANGE COMMISSION, PlaintiffAppellee,

v.
Charles Phillip ELLIOTT, et al., Defendants,
Charles O. Farrar, Receiver-Appellee,
Kenneth J. Davis, Linda J. Davis, Leroy H. Moeller, As
Personal Representative of the Estates of Adolph Hagstrom,
Squire J. Kingston, Elizabeth Woods, Caroline Estelle,
Lynnis H. McClain, Ted Masco, Anita K. Hailey, Earl
Setterblade, Francis Setterblade, Lloyd Schutzman, Shirley
Schutzman, Albert C. Heil, Melvin Burkhardt, Rosa Ella
Burkhardt, Howard Dore, Ruth Dore, Gerald J. Braun,
Christie
Braun, Monica Brooke Braun, C. Albert Ducharme Trust and
Catherine F. Ducharme Trust, Seaton F. McDaniel, Josephine
McDaniel, Trudy and Sidney Kleiner, Claimants-Appellants.
SECURITIES AND EXCHANGE COMMISSION, PlaintiffAppellee,
v.
Charles Phillip ELLIOTT, et al., Defendants,
Charles O. Farrar, Receiver-Appellee,
Melvin Burkhardt and Rosa Ella Burkhardt, MovantsAppellants.
Nos. 89-5457, 89-5528.

United States Court of Appeals,

Eleventh Circuit.
Feb. 27, 1992.

Merrill N. Johnson, Naples, Fla., for K. Davis.

Kathleen Monahan, Miami, Fla., for L. Moeller.

Mark A. Ebelini, Ft. Myers, Fla., for H. Dore.
Ronald L. Stetler, Naples, Fla., for Virginia Moore.
John Charles Coleman, Robert J. Coleman, Seaton F. and Josephine A.
McDaniel, Ft. Myers, Fla., Gertrude and Sid Kleiner, Naples, Fla.,
Kathleen A. Monahan, Joaquin Mendez, Miami, Fla., for C. Albert
Ducharme Trust.
Lyons and Farrar, Miami, Fla., for Farrar.
Frank P. Murphy, Naples, Fla., for S.J. Kingston, Melvin and Rose Ella
Burkhardt.
Marsha Lyons, Lyons & Farrar, William Sadowski, Miami, Fla., for
Securities and Exchange Com'n.
Appeals from the United States District Court for the Southern District of
Florida.
Before FAY and HATCHETT, Circuit Judges, and HILL, Senior Circuit
Judge.
PER CURIAM:

1CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR

THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF
FLORIDA PURSUANT TO ARTICLE 5, SECTION
3(b)(6) OF THE FLORIDA CONSTITUTION
2

TO THE SUPREME COURT OF FLORIDA AND ITS HONORABLE

JUSTICES:

It appears to the United States Court of Appeals for the Eleventh Circuit that
this case involves a question of Florida law which is determinative of the cause,
but unanswered by controlling precedent of the Supreme Court of Florida. We
therefore certify the question for resolution by the highest court of Florida.

This case comes to the United States Court of Appeals for the Eleventh Circuit
on appeal from the United States District Court for the Southern District of
Florida.

This appeal poses the question whether Florida tax certificates represent
interests in land for purposes of Article 9 of the Uniform Commercial Code,
thus excluding them from the scope of Article 9. Appellants Howard Dore,
Ruth Dore, Gerald J. Braun, Christie Braun, and Monica Brooke Braun
challenge the district court's finding that tax certificates are general intangibles
under Fla.Stat. 679.106. These parties had loaned money to Charles Elliott.
As collateral for these loans, Elliott tendered the appellants' tax certificates
which he had endorsed in blank before a notary public. When Elliott's assets
were put into an equitable receivership, the appellants attempted to collect taxes
paid on the liened properties, but the tax certificates were frozen by the district
court's order. In its Final Order, the district court found that tax certificates are
general intangibles, that the only way to perfect a security interest in general
intangibles is by filing a financing statement with the secretary of state, and that
the appellants had failed to do so. Thus, the Receiver had a superior lien, and
the appellants were unsecured creditors.

The Florida courts have yet to classify tax certificates for purposes of Article 9
of the Uniform Commercial Code. The appellants argue that tax certificates are
interests in land and thus are excluded from the scope of Article 9 by virtue of
Fla.Stat. 679.104(10) which excludes "the creation or transfer of an interest in
or lien on real estate, including a lease or rents thereunder." If the appellants are
correct, then Article 9 does not govern the perfection of a security interest in tax
certificates; and the appellants' failure to file a financing statement may not be
fatal to their claim of secured status.

The appellee argues that a tax certificate is personal property and a general
intangible under Fla.Stat. 679.106. This provision was intended to bring into
Article 9 "miscellaneous types of contractual rights and other personal property
which are used or may become customarily used as commercial security."
Fla.Stat. 679.106, Uniform Commercial Code Comment (1972). This provision
has been held to cover the assignment of a tax refund as collateral; In re
Ljosheim, 4 U.C.C.Rep. 46 (C.D.Cal. (Bankr.) 1967); the proceeds of an
impending lawsuit; Estate of Hill, 27 Or.App. 893, 557 P.2d 1367
(Or.Ct.App.1976); and tickets and ticket proceeds; Klinger v. Pocono Int'l
Raceway, Inc., 289 Pa.Super. 484, 433 A.2d 1357, 31 U.C.C.Rep. 1223
(Pa.Super.Ct.1981).

If the tax certificates represent an interest in land, then their assignment as

If the tax certificates represent an interest in land, then their assignment as

collateral would not be governed by Article 9. Rucker v. State Exchange Bank,
355 So.2d 171, 23 U.C.C.Rep. 1020 (Fla.Dist.Ct.App.1978) (Article 9 did not
cover assignment of real estate mortgage as collateral for bank loan). Merely
because a security agreement bears a relation to land does not mean the
agreement falls within the land exception. The assignment of the right to
receive payments under a contract for sale of real estate is a personal property
right. In re Heide, 915 F.2d 531, 533, 12 U.C.C.Rep.2d 813 (9th Cir.1990); In
re Freeborn, 94 Wash.2d 336, 617 P.2d 424, 29 U.C.C.Rep. 1625 (1980).
Likewise, the assignment as collateral of the general partner's interest in a real
estate venture was treated as personal property. In re Kelley, 34 U.C.C.Rep.
691, 21 B.R. 495 (W.D.Va. (Bankr.) 1982) (partnership's asset was real estate).

The appellants argue that the Florida courts and statutes refer to tax certificates
as creating first liens on property. Fla.Stat. 197.122 and 197.432(2) (1985).1
Gautier v. Town of Crescent City, 138 Fla. 573, 189 So. 842 (1939) (the
purpose of a tax certificate is to evidence the assignment of a tax lien).
However, the use of the term "lien" may not be dispositive of whether a tax
certificate is an interest in land for purposes of Article 9. The Florida statute
does not give the tax certificate holder the right to proceed directly against the
land or the landowner to recover the amount paid for the tax certificate. This
appears to distinguish a tax certificate holder from a mortgagee, who can
foreclose on the land in court.

10

The manner of obtaining and enforcing tax certificates is set out in the statutes.
The tax collector sells at auction tax certificates on lands for which the taxes
have not been paid. 197.432. A certificate is struck off to the person who will
pay the taxes, interest, costs and charges and will demand the lowest rate of
interest on the obligation not exceeding the maximum rate. 197.432(5). The
successful bidder receives a "tax sale certificate" which represents his first lien
on the property. 197.122. (This was the sort of certificate endorsed by Elliott
and tender by him as security).

11

If, after two years and less than seven years from the issuance of the certificate,
the tax certificate is not redeemed by the delinquent tax payer, the certificate
holder may apply for a tax deed from the tax collector. 197.502. The
certificate holder must pay the tax collector the price for redemption of all
other "outstanding tax certificates, plus interest, any omitted taxes, plus
interest, any delinquent taxes, plus interest, and current taxes, if due, covering
the land." 197.502(2). The tax collector then notifies the clerk of the circuit
court that the certificate holder has paid all fees, and the clerk administers the
sale of the property at auction. 197.502(4) and (5). If no higher bid is made

than the value necessary to redeem the tax certificate, then the certificate
holder gets a tax deed to the property. 197.542. Section 197.432(2) provides,
"A lien created through the sale of a tax certificate may not be enforced in any
manner except as provided in this chapter."
12

This was not always so. A 1929 statute prescribed procedure for tax certificate
holders to enforce their tax liens against the land in a court of equity. 1929
Fla.Laws ch. 14572. After several foreclosure cases were brought pursuant to
this statute; First Trust & Savings Bank v. West Lake Investment Co., 105 Fla.
590, 141 So. 894 (1932); Ridgeway v. Reese, 100 Fla. 1304, 131 So. 136
(1930); this statute was repealed by 1935 Fla.Laws ch. 17442.

13

After the 1935 repeal, the Florida Supreme Court held that a statutory method
of enforcing tax liens was not necessary for a court of equity to foreclose a tax
lien. Brickell v. Palbicke, 123 Fla. 508, 510, 167 So. 44 (1936) (tax certificates
may be foreclosed in courts of equity without statutory authority fixing the
procedure); Leland v. Andrews, 129 Fla. 429, 433, 176 So. 418, 420 (1937)
(the Act of 1935 did not deprive court of chancery of jurisdiction to adjudicate
tax liens).

14

However, the Florida legislature, in the present statute, seems to mandate that
the statute provides the only procedure by which a certificate holder can
recover on the certificate. 197.432(2). If this is correct, a certificate holder
can no longer foreclose on the certificate. The repeal of this foreclosure
procedure may clarify the nature of the right the certificate represents.

15

The appellee argues that the certificate represents a contract with the state for
the tax collector to pay the holder the taxes when the landowner pays the tax
collector. The certificate holder has no rights against the landowner or the land,
but can only ask the tax collector to initiate an action in the circuit court. When
the delinquent tax payer redeems the certificate, he pays the money to the tax
collector and does not deal directly with the holder. 197.472(1). The tax
collector then pays the holder the amount received less service charges, and the
holder must surrender the tax certificate. 197.472(5) and (6).

16

If the tax collector fails to perform--either by failing to pay the holder when the
certificate is redeemed or by refusing to bring a suit to obtain a tax deed--it
appears that the certificate holder cannot proceed directly against the
landowner. 197.432(2). At this point, the holder's only remedy would be to
obtain a writ of mandamus against the tax collector, for the holder has no rights
against the land or the landowner.

17

Our Court, fifty years ago, dealt with and decided a case which may be of
interest. Rorick v. United States Sugar Corporation, 120 F.2d 418 (5th
Cir.1941). In Rorick, the Everglades Drainage District issued bonds, and the
Florida state legislature provided that the bonds would be paid from drainage
taxes levied on land in the district. Id. at 419. The Board of Commissioners of
the drainage district had a duty to collect the taxes, and the state treasurer had a
duty to pay the interest on the bonds from the proceeds of these taxes. Id. at
420. Since the board had failed to collect the taxes, the bondholders sought to
foreclose the tax liens on the property and have this Court distribute the taxes.
Id. This Court held that the bondholders' remedy was to obtain a writ of
mandamus against the officers ordering them to perform their duties, for only
the taxing authority has the right to foreclose tax liens. Id. at 421. The
bondholders had a contract right, not an interest in land.

18

If a tax certificate is a personal property right, appellee observes, then the

certificate holders have failed to perfect their security interest. A contract right
is personal property and is properly classified as a general intangible under
Fla.Stat. 679.106. The only way to perfect a security interest in a general
intangible is by filing a financing statement. 679.302(1). If the appellants
failed to perfect their security interest, their interest is subordinated to the
interest of the Receiver in equity. 679.301(1) and (3).

19

We believe the issue raised by the parties is appropriate for resolution by the
highest court in Florida. We therefore certify the following question:(1) Does a
Florida tax certificate represent an interest in land for purposes of the Florida
Uniform Commercial Code, so that Article 9 does not govern the creation of a
security interest therein by virtue of 679.104(10).

20

We do not intend the particular phrasing of the question to limit the Supreme
Court of Florida in its consideration of the problems imposed by the case.
Moreover, our brief recital of the contentions of the parties is intended to
illustrate the nature of the issue and is not intended to substitute for the full
statement of contentions by counsel. To assist consideration of the case, the
briefs of the parties shall be transmitted to the Supreme Court of Florida. The
record will be returned to the Federal District Court for the Southern District of
Florida. If the Florida Supreme Court should have need of the record, or any
part, it should make that known to this Court, the United States Court of
Appeals for the Eleventh Circuit, and it shall be made available.

Since the rights of the certificate holder are determined by the law in force

when the certificate was issued, the law of 1985 appears to be applicable. See
Baldwin Drainage District v. MacClenny Turpentine Co., 154 Fla. 525, 18
So.2d 792 (1944), cert. denied 323 U.S. 798, 65 S.Ct. 554, 89 L.Ed. 637 (1944)