STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6345

February 20, 1986

SECURED TRANSACTION:

Removal of lapsed financing statement from records of Department of State where bankruptcy proceeding is pending

STATE, DEPARTMENT OF

Removal of notice of state or federal tax liens from records of Department of State

TAX LIENS:

Removal of notice of state or federal tax lien from records of Department of State

The Legislature has not authorized the removal from the records of the Department of State notices of state or federal tax liens filed with the Secretary of State.

The Department of State may not remove from its records a financing statement it considers lapsed upon notice of a bankruptcy proceeding affecting the financing statement until the Department of State ascertains that the bankruptcy proceeding has been terminated.

Honorable Richard H. Austin

Secretary of State

State Treasury Building

Lansing, MI 48918

You have requested my opinion with respect to two questions, the first of which is:

The Secretary of State is designated the filing official for notices of tax liens where the tax is owed by a corporation or partnership whose principal executive office is in this state. This applies to both state taxes, MCL 211.682(b)(1); MSA 7.753(52)(b)(1), and federal taxes, MCL 211.663(3)(a); MSA 7.753(3)(3)(a). For state and federal tax liens the Secretary of State is directed to 'cause the notice to be marked, held and indexed in accordance with the provisions of subsection (4) of section 9403 of Act No. 174 of the Public Acts of 1962, as amended, being section 440.9403 of the Compiled Laws of 1948 as if the notice were a financing statement within the meaning of the act.' MCL 211.684(a)(1); MSA 7.753(54)(a)(1) (state tax liens); MCL 211.665(1); MSA 7.753(5) (federal tax liens).

The procedure for filing state and federal tax liens is expressly prescribed in MCL 440.9403(4); MSA 19.9403(4), which, in part, states 'a filing officer shall mark [the tax lien] with a file number and with a date and hour of filing and shall hold the statement or a microfilm or other photographic copy thereto for public inspection. In addition, the filing officer shall index the [tax lien] according to the name of the debtor and shall note in the index the file number and . . . address of the debtor . . ..'

Although a filed financing statement may be removed from the Secretary of State's files under certain conditions, MCL 440.9403(3); MSA 19.9403(3), no statute provides for the removal of state and federal tax liens. Without expressed authorization from the Legislature a public record may not be disposed of, mutilated or destroyed. OAG, 1941-1942, No 23200, p 601 (May 6, 1942). Moreover, it is a criminal misdemeanor to improperly dispose of a public record. MCL 750.491; MSA 28.759.

It is my opinion, therefore, that records filed under the State Tax Lien Registration Act, MCL 211.681 et seq; MSA 7.753(51) et seq, and the Uniform Federal Tax Lien Registration Act, MCL 211.661 et seq; MSA 7.753(11) et seq, may not be removed from Department of State records because of the lack of legislative authority to do so.

Your second question is:

Where a bankruptcy proceeding is not involved, a filed financing statement is effective for a five year period after the filing date. MCL 440.9403(2); MSA 19.9403(2). At the end of the five years the financing statement is considered lapsed, assuming no continuation statement is filed. Once a financing statement has lapsed, the filing officer may remove it from the files and destroy it, either immediately, if a microfilm or photographic record is kept, or after one year following the lapse. MCL 440.9403(3); MSA 19.9403(3).

A bankruptcy proceeding, however, continues the validity of a financing statement until the end of the bankruptcy proceeding and 60 days thereafter, or until the expiration of a five-year period, whichever is later. MCL 440.9403(2); MSA 19.9403(2). Thus, it is necessary for the Secretary of State to verify that the bankruptcy proceeding has terminated in order to determine when the financing statement has lapsed for purposes of removing the statement from the files. No statute or court rule designates a maximum number of years to conclude a bankruptcy proceeding. In the event that neither a notice of conclusion of a bankruptcy proceeding is received by the Department of State, nor inquiry by the department with respect thereto has been responded to, the fact of termination of the bankruptcy proceedings must actually be ascertained, by examination of the bankruptcy court records, if necessary, before a financing statement may be removed from the department's files.

It is my opinion, therefore, that where a bankruptcy proceeding impacts a financing statement, it is necessary to ascertain that the bankruptcy proceeding has terminated before the said statement is eligible for removal from the Department of State files.

Frank J. Kelley

Attorney General