101 F.3d 435 (5th Cir. 1996), 95-60786, Matter of Locklin

Docket Nº:95-60786.
Citation:101 F.3d 435
Party Name:Tex.Bankr.Ct.Rep. 43 In the Matter of Larson C. LOCKLIN, Debtor. Jacob C. PONGETTI, Trustee for the Estate of Larson Locklin, Appellant, v. GENERAL MOTORS ACCEPTANCE CORPORATION, Appellee.
Case Date:December 16, 1996
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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101 F.3d 435 (5th Cir. 1996)

Tex.Bankr.Ct.Rep. 43

In the Matter of Larson C. LOCKLIN, Debtor.

Jacob C. PONGETTI, Trustee for the Estate of Larson Locklin, Appellant,

v.

GENERAL MOTORS ACCEPTANCE CORPORATION, Appellee.

No. 95-60786.

United States Court of Appeals, Fifth Circuit

December 16, 1996

Page 436

Jacob Charles Pongetti, Columbus, MS, pro se.

Dennis W. Voge, Stephen Holace Morris, Mitchell, Voge, Beasley & Corban, Tupelo, MS, for appellee.

Page 437

Appeal from the United States District Court for the Northern District of Mississippi.

Before POLITZ, Chief Judge, and EMILIO M. GARZA and STEWART, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Plaintiff Jacob C. Pongetti, the trustee of the estate of Larson C. Locklin, appeals the district court's order affirming the bankruptcy court's dismissal of his complaint requesting the court to avoid defendant General Motors Acceptance Corporation's purchase money security interest in a vehicle purchased by Locklin and to declare the vehicle the property of Locklin's estate. We reverse.

I

On May 4, 1990, Larson C. Locklin, apparently an Alabama resident, bought a new 1990 GMC Safari Van from Mitchell Buick, Pontiac, GMC Truck, Inc. ("Mitchell Buick"), a dealer in Mississippi. He agreed to pay $18,300 for the van, plus a finance charge of $4,945.44, for a total of $23,245.44, payable in forty-nine equal monthly installments. Locklin and Mitchell Buick executed a retail installment contract, granting the dealer a purchase money security interest in the van. Mitchell Buick then assigned the contract and security interest to General Motors Acceptance Corporation ("GMAC").

The same day, Locklin took possession of the van from Mitchell Buick, and also received a number of documents, including the manufacturer's certificate of origin, which is necessary to obtain a certificate of title in Alabama. On May 9, Locklin applied for an Alabama certificate of title with the Tuscaloosa license commissioner ("the commissioner") in Tuscaloosa, Alabama. On May 18, the commissioner prepared a titled remittance advance and mailed it, along with various required documents, to the Alabama Department of Revenue ("the department") in Montgomery, Alabama. The department received these documents on May 21, seventeen days after Locklin bought and received the van. More than two weeks later, the department issued a certificate of title showing Locklin as owner and GMAC as lienholder.

On May 23, two days after the department received the documents, Locklin, asserting that he was a Mississippi resident, filed a Chapter 7 petition for bankruptcy in the United States Bankruptcy Court for the Northern District of Mississippi. Jacob C. Pongetti, the trustee for Locklin's estate, filed a complaint against GMAC in bankruptcy court requesting the court to avoid GMAC's security interest in the van, and declare the van the property of Locklin's estate. The trustee asserted that the court must avoid the lien because it was not "perfected on or before 10 days after the debtor receives possession of such property...." 11 U.S.C. § 547(c)(3)(B). The bankruptcy court rejected this argument, ruling that GMAC perfected its security interest under § 32-8-61 of the Alabama Code when Locklin delivered the required documents to the local license commissioner five days after he received possession of the van. The district court affirmed.

On appeal, the trustee contends that the district court erred by refusing to apply the plain meaning of the phrase "delivery to the department" in § 32-8-61. In reply, GMAC asserts that the district court was correct, but also suggests two alternative grounds for upholding the court's judgment. First, GMAC contends that the twenty-day grace period set forth in § 32-8-61 preempts the ten-day period provided by § 547(c)(3)(B), and that the trustee cannot avoid the security interest because the required documents were delivered to the department itself in seventeen days. Second, GMAC maintains that the trustee cannot avoid the security interest because it can shelter the property under the contemporaneous exchange exception in § 547(c)(1).

II

We review findings of fact for clear error and legal conclusions de novo. McFarland v. Leyh (In re Texas Gen. Petroleum Corp.), 52 F.3d 1330, 1334 (5th Cir.1995). When the district court has affirmed the

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bankruptcy court's findings of fact, our review for clear error is strict. Young v. National Union Fire Ins. Co. (In re Young), 995 F.2d 547, 548 (5th Cir.1993). Moreover, we review determinations of state law de novo. See Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991) (holding that a court of appeals should review a district court's determination of state law de novo); Lindsay v. Beneficial Reins. Co. (In re Lindsay), 59 F.3d 942, 949 (9th Cir.1995) (holding the same with regard to determinations of state law by both district court and bankruptcy court), cert. denied, --- U.S. ----, 116 S.Ct. 778, 133 L.Ed.2d 730 (1996).

III

The trustee argues that the district court misconstrued the phrase "delivery to the department" in § 32-8-61 as meaning either delivery to the department itself or delivery to a designated agent of the department, rather than just delivery to the department itself.

A trustee can avoid a purchase money security interest (also called an enabling loan) if it can show that this security interest does not meet one of the requirements of § 547(c)(3). The parties do not dispute that the security interest here meets the four requirements of § 547(c)(3)(A). 1 Rather, they disagree whether the security interest satisfies the demand in § 547(c)(3)(B) that it "[be] perfected on or before 10 days after the debtor receives possession of such property."

To determine if the security interest is perfected, we turn to state law. 2 Palmer v. Radio Corp. of Am., 453 F.2d 1133, 1138 (5th Cir.1971). Section 32-8-61 of the Alabama Code provides:

(a) Unless excepted by this section, a security interest in a vehicle for which a certificate of title is required by the terms of this chapter is not valid against creditors of the owner or subsequent transferees or lienholders of the vehicle unless perfected as provided in this article.

(b) A security interest is perfected by the delivery to the department of the existing certificate of title, if any, an application for a certificate of title containing the name and address of the lienholder and the date of his security agreement and the required fee. It is perfected as of the time of its creation if the delivery is completed within 20 days thereafter, otherwise, as of the time of the delivery.

The district court first determined that the ten-day grace period mandated by 11 U.S.C. § 547(c)(3)(B) preempts the twenty-day grace period set forth in § 32-8-61. However, it then decided that the security interest was perfected five days after Locklin took possession of the van when he delivered the required documents to the commissioner, and that thus the trustee could not avoid it. The court reasoned that the commissioner had "apparent authority to accept the documents for the ultimate purpose of perfecting a security interest" because § 32-8-34 made county commissioners of licenses "designated agents" of the department and because the commissioner "held himself out as an official involved in both licensing and perfection." The court also noted that it did not think that the Alabama legislature intended to "punish a party acting in good faith for the transgressions of a negligent public officer."

As an initial matter, we determine that the district court's finding that the commissioner "held himself out as an official involved in ... perfection" is clearly erroneous. The bankruptcy court never made such a finding, and there is nothing in the record that supports it.

Next, we determine whether the district court erred in its legal analysis. While several

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cases applying Alabama law touch on § 32-8-66, none applies it in the specific context presented by this case. The Alabama Supreme Court, though, has implied that it believes that courts should be especially careful not to "tinker" with the statute that contains this provision, the Alabama Uniform Certificate of Title and Antitheft Act ("the act" or "the statute"), ALA.CODE § 32-8-1 et seq. In Hill v. McGee, 562 So.2d 238 (Ala.1990), the plaintiff argued that his security interest in certain trucks was perfected by the filing of a UCC-1 financing statement with the Alabama secretary of state. The Alabama Supreme Court rejected this contention, and held that the statute provides the "exclusive method of perfecting a security interest in a motor vehicle covered by the Act...." Id. at 240. The court approvingly quoted the state circuit court as stating

[a]n attempt to do "justice at the palace gate" by carving out one or more exceptions to the exclusive procedures set forth in the certificate of title act will have some appeal in a given case; however, the proliferation of such exceptions by the courts of this state could lead to chaos in the marketplace which existed prior to 1973. Such tinkering would be harmful and confusing to consumers, lenders and dealers alike.

Id. Thus, we must turn to the interpretation of words of § 32-8-66 themselves.

"The starting point in every case involving a construction of a statute is the language itself." Greyhound Corp. v. Mt. Hood Stages, Inc., 437 U.S. 322, 330, 98 S.Ct. 2370, 2375, 57 L.Ed.2d 239 (1978). However, statutory language must always be read in its proper context. King v. St. Vincent's Hosp., 502 U.S. 215, 221, 112 S.Ct. 570, 574, 116 L.Ed.2d 578 (1991). In determining the plain meaning of a statute, the court must "look not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy." Crandon v. United...

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