Fidelity Financial Serv. v. Fink

• Decision Date: 13 January 1998
• Docket Number: 961370
• Citation: 522 U.S. 211,139 L.Ed.2d 571,118 S.Ct. 651
• Parties: FIDELITY FINANCIAL SERVICES, INC., Petitioner, v. Richard V. FINK, Trustee
• Court: U.S. Supreme Court

522 U.S. 211

118 S.Ct. 651

139 L.Ed.2d 571

FIDELITY FINANCIAL SERVICES, INC., Petitioner,

v Richard V. FINK, Trustee.

No. 96-1370.

Supreme Court of the United States

Argued Nov. 3, 1997.

Decided Jan. 13, 1998.

Syllabus^*

Diane Beasley purchased a new car and gave petitioner, Fidelity Financial Services, Inc., a promissory note for the purchase price, secured by the car. Twenty-one days later, Fidelity mailed the application necessary to perfect its security interest under Missouri law. Beasley later filed for bankruptcy, and the trustee of her bankruptcy estate, respondent Fink, moved to set aside Fidelity's security interest on the ground that the lien was a voidable preference under 11 U.S.C. §547(b). Section 547(c)(3)(B) prohibits the avoidance of a security interest for a loan used to acquire property if, among other things, the security interest is "perfected on or before 20 days after the debtor receives possession of such property.'' Fink argued that this "enabling loan'' exception was inapposite because Fidelity had not perfected its interest within the 20-day period. Fidelity responded that Missouri law treats a motor vehicle lien as having been "perfected'' on the date of its creation (in this case, within the 20-day period), if the creditor files the necessary documents within 30 days after the debtor takes possession. The Bankruptcy Court set aside the lien as a voidable preference, holding that Missouri's relation-back provision could not extend §547(c)(3)(B)'s 20-day perfection period. The District Court affirmed on substantially the same grounds, as did the Eighth Circuit, holding a transfer to be perfected when the transferee takes the last step required by state law to perfect its security interest.

Held: A transfer of a security interest is "perfected'' under §547(c)(3)(B) on the date that the secured party has completed the steps necessary to perfect its interest, so that a creditor may invoke the enabling loan exception only by satisfying state law perfection requirements within the 20-day period provided by the federal statute. Section 547(e)(1)(B) provides that "a transfer of . . . property . . . is perfected when a creditor on a simple contract cannot acquire a judicial lien that is superior to the interest of the transferee.'' This definition implies that a transfer is "perfected'' only when the secured party has done all the acts required to perfect its interest, not at the moment as of which state law may retroactively deem that perfection effective. A variety of considerations support this conclusion, including §546, which raises a negative implication that Congress did not intend state relation-back provisions or grace periods to control a trustee's power to avoid preferences, and the fact that, under Fidelity's reading, the net effect of the 1994 amendment extending the §547(c)(3)(B) perfection period from 10 to 20 days would be merely to benefit a class of creditors in only ten jurisdictions. Indeed, the broader statutory history of the preference provisions persuasively suggests that Congress intended §547(c)(3)(B) to establish a uniform federal perfection period immune to alteration by state laws permitting relation back. Thus, the statutory text, structure, and history lead to the understanding that a creditor may invoke the enabling loan exception only by acting to perfect its security interest within 20 days after the debtor takes possession of its property. Pp. ___-___.

102 F.3d 334 (C.A.8 1996), affirmed.

SOUTER, J., delivered the opinion for a unanimous Court.

Michael P. Gaughan, Kansas City, MO, for petitioner.

Richard V. Fink, Kansas City, MO, for respondent.

Justice SOUTER delivered the opinion of the Court.

Although certain transfers made before the filing of a petition in bankruptcy may be avoided as impermissibly preferential, a trustee may not so displace a security interest for a loan used to acquire the encumbered property if, among other things, the security interest is "perfected on or before 20 days after the debtor receives possession of such property.'' 11 U.S.C. §547(c)(3)(B). The question in this case is whether a creditor may invoke this "enabling loan'' exception if it performs the acts necessary to perfect its security interest more than 20 days after the debtor receives the property, but within a relation-back or grace period provided by the otherwise applicable state law. We answer no and hold that a transfer of a security interest is "perfected'' under §547(c)(3)(B) on the date that the secured party has completed the steps necessary to perfect its interest, so that a creditor may invoke the enabling loan exception only by satisfying state law perfection requirements within the 20-day period provided by the federal statute.

I

On August 17, 1994, Diane Beasley purchased a 1994 Ford and gave petitioner, Fidelity Financial Services, Inc., a promissory note for the purchase price, secured by the new car. Twenty-one days later, on September 7, 1994, Fidelity mailed the application necessary to perfect its security interest addressed to the Missouri Department of Revenue. See Mo.Rev.Stat. §301.600(2) (1994). ¹

Two months after that, Beasley sought relief under Chapter 7 of the Bankruptcy Code. After the proceeding had been converted to one under Chapter 13, respondent, Richard V. Fink, the trustee of Beasley's bankruptcy estate, moved to set aside Fidelity's security interest. He argued that the lien was a voidable preference, the enabling loan exception being inapposite because Fidelity had failed to perfect its interest within 20 days after Beasley received the car. Fidelity responded that Missouri law treats a lien on a motor vehicle as having been "perfected'' on the date of its creation (in this case, within the 20-day period), if the creditor files the necessary documents within 30 days after the debtor takes possession. Mo.Rev.Stat. §301.600(2)(1994).

The Bankruptcy Court set aside the lien as a voidable preference, holding that Missouri's relation-back provision could not extend the twenty-day perfection period imposed by §547(c)(3)(B). In re Beasley, 183 B.R. 857 (Bkrtcy.W.D.Mo.1995). Fidelity appealed to the United States District Court for the Western District of Missouri, which affirmed on substantially the same grounds, as did the Court of Appeals for the Eighth Circuit, holding a transfer to be perfected "when the transferee takes the last step required by state law to perfect its security interest.'' 102 F.3d 334, 335 (1996) (Per curiam) (internal quotation marks omitted).

We granted certiorari, 520 U.S. ----, 117 S.Ct. 1690, 137 L.Ed.2d 818 (1997), to resolve a conflict among the Circuits over the question when a transfer is "perfected'' under §547(c)(3)(B).² We affirm.

II

Without regard to whether Fidelity's lien is a preference under §547(b), Fink cannot avoid the lien if it falls within the enabling loan exception of §547(c)(3), one requirement of which is that the transfer of the interest securing the lien be "perfected on or before 20 days after the debtor receives possession.'' 11 U.S.C. §547(c)(3)(B). Perfection turns on the definition provided by §547(e)(1)(B), that "a transfer of . . . property other than real property is perfected when a creditor on a simple contract cannot acquire a judicial lien that is superior to the interest of the transferee.''

Like the Courts of Appeals that have adopted its position, see n. 2, supra, Fidelity sees in subsection (c)(3)(B) not only a federal guarantee that a creditor will have 20 days to act, but also a reflection of state law that deems perfection within a statutory grace or relation-back period to be perfection as of the creation of the underlying security interest. Under Missouri law, for example, a "lien or encumbrance on a motor vehicle . . . is perfected by the delivery [of specified documents] to the director of revenue,'' Mo.Rev.Stat. §301.600(2) (1994), but the date of the lien's perfection is "as of the time of its creation if the delivery of the aforesaid to the director of revenue is completed within thirty days thereafter, otherwise as of the time of the delivery.'' Ibid. Thus, Fidelity contends that although it delivered the required documents more than 20 days after Beasley received the car, its lien must be treated as perfected on the day of its creation because it delivered the papers within the 30 days allowed by state law to qualify for the relation-back advantage. If this is sound reasoning, Fidelity's lien was perfected on August 17, 1994, the very day that Beasley drove away in her Ford, and Fidelity may invoke §547(c)(3)'s enabling loan exception. ³

The assumption that the term "perfected'' as used in subsection (c)(3)(B) and defined in subsection (e)(1)(B) may refer to the relation-back date is not to be made so easily, however. It is quite certain, to begin with, that in the relevant context Congress sometimes used the word "perfection'' to mean the legal conclusion that for such purposes as calculating priorities perfection of a lien should be treated as if it had occurred on a particular date, and sometimes used it to refer to the acts necessary to support that conclusion. Section 546(b)(1)(A) speaks of state laws that permit "perfection . . . to be effective . . . before the date of perfection.'' 11 U.S.C. §546(b)(1)(A). The distinction implicit in speaking of "perfection'' antecedent to the "date of perfection'' shows that Congress was thinking about the difference between the legal conclusion that may be entailed by applying a relation-back rule and, on the other hand, the acts taken to trigger an application of the rule.

Knowing that Congress understood "perfection'' in these two different senses, one can see how Fidelity's construction of §547(e)(1)(B) is a poor fit with the text. Although Fidelity and two Courts of Appeals have thought this provision means that a transfer is perfected as of whatever date an enabling creditor could claim in...