In re Martella

• Decision Date: 19 August 1982
• Docket Number: Bankruptcy No. 82 Mc 0278.
• Citation: 22 BR 649
• Parties: In re Gary A. MARTELLA, Debtor. GENERAL MOTORS ACCEPTANCE CORP., Plaintiff, v. Gary A. MARTELLA, Bruce C. Bernstein, Trustee, Defendants.
• Court: U.S. Bankruptcy Court — District of Colorado

22 B.R. 649 (1982)

In re Gary A. MARTELLA, Debtor GENERAL MOTORS ACCEPTANCE CORP., Plaintiff, v. Gary A. MARTELLA, Bruce C. Bernstein, Trustee, Defendants.

Bankruptcy No. 82 Mc 0278.

United States Bankruptcy Court, D. Colorado.

August 19, 1982.

Robert I. Cohen, Denver, Colo., for plaintiff.

Bruce Bernstein, Denver, Colo., trustee.

MINUTES OF HEARING, FINDINGS, CONCLUSIONS, AND ORDER ON COMPLAINT FOR RELIEF FROM STAY

JOHN F. McGRATH, Bankruptcy Judge.

The matter before the Court is a Complaint for Relief from Stay. General Motors Acceptance Corporation (GMAC) seeks relief from stay to foreclose on the Debtor's 1978 Renault. The Trustee filed an Answer and Counterclaim contending that GMAC's security interest in the Debtor's car was a voidable preference. A hearing on the matter was held on March 22, 1982.

The facts are as follows. On September 30, 1981, the Debtor purchased a used 1978 Renault from Frontier Chevrolet. On this date, the Debtor signed an Installment Sales Contract with Frontier Chevrolet, made a $300.00 downpayment, and received possession of the car. The Installment Contract contained an assignment of the Contract to GMAC. On October 14, 1981, Frontier Chevrolet sent the necessary registration papers, including the Installment Contract indicating GMAC's security interest in the Renault, to the Denver County Clerk and Recorder. However, Adams County was the correct county in which to register the car. Consequently, the papers were returned to Frontier Chevrolet. The papers were then sent to Adams County and the title was issued, noting GMAC's lien on November 13, 1981. The Debtor filed his Petition in Bankruptcy on December 24, 1981.

The Trustee claims that this transfer is a voidable preference because it occurred within 90 days of the filing of the Debtor's bankruptcy proceeding. GMAC maintains that the transfer comes within an exception to the Trustee's avoiding powers contained in 11 U.S.C. § 547(c)(1) and (2). There is no dispute between the parties that the elements of a preferential transfer under 11 U.S.C. § 547(d) are present. The only issue before the Court is whether the transfer constitutes an exception to the Trustee's avoiding powers.

To decide this issue, the Court must determine when the transfer of property occurred. Section 101(40) of the Bankruptcy Code defines a transfer as a parting in an interest of property, including retention of title as a security interest. Using this definition, a transfer occurred when the Debtor took possession of the automobile and GMAC retained title to it as a security interest. Section 547(e)(2) (11 U.S.C. 547(e)(2)) determines the date of the transfer. It provides:

(2) For the purposes of this section, . . ., a transfer is made —

(A) at the time such transfer takes effect between the transferor and the transferee, if such transfer is perfected at, or within 10 days after, such time;

(B) at the time such transfer is perfected, if such transfer is perfected after such 10 days; or

(C) immediately before the date of the filing of the petition, if such transfer is not perfected at the later of —

(i) the commencement of the case; and

(ii) 10 days after such transfer takes effect between the transferor and the transferee.

Thus, if the transfer is perfected within 10 days, the date of the transfer relates back to the time the transfer takes effect between the parties to it. If the transfer is not perfected within 10 days, the date of perfection is the date of the transfer.

The transfer of a motor vehicle is perfected under the Bankruptcy Code when the creditor on a simple contract cannot acquire a judicial lien that is superior to a lien of the transferee. See 11 U.S.C. § 547(e)(1). Under Colorado law, a creditor cannot obtain a judicial lien superior to a transferee's interest once the requirements for the recording of the lien on a motor vehicle set out in Colo.Rev.Stat. §§ 42-6-119, 120 (1973) are fulfilled. GMAC fulfilled these requirements on November 13, 1981, when the Debtor's vehicle was registered in Adams County. This date is more than 10 days after the transfer became effective between the parties, thereby making November 13, 1981, the date of transfer.

Under these facts, the Court must determine whether the transfer is a preference that can be voided by the Trustee, or whether the transfer falls within one of the exceptions to the Trustee's avoidance powers under section 547(c) of the Bankruptcy Code.

The Trustee maintains that only section 547(c)(3) applies to these facts because this subsection deals specifically with security interests in property acquired by the Debtor. The Court agrees that the Debtor would not have a valid cause of action under section 547(c)(3), however, the legislative history is contrary to the Trustee's contention that the Debtor is limited to proceeding only under subsection (c)(3).

Subsection (c) contains exceptions to the trustees avoiding power. If a creditor can qualify under any one of the exceptions, then he is protected to that extent. If he can qualify under several, he is protected by each to the extent he can qualify under each. House Report No. 95-595, 95th Cong., 1st Sess. (1977) 373, U.S.Code Cong. & Admin.News 1978, pp. 5787, 6329.

The legislative history indicates that a Debtor is entitled to any exception for which he qualifies under section 547(c). Accordingly, the Court finds that this case is not limited to a determination under section 547(c)(3).

The creditor, GMAC, maintains that this transfer qualifies as an exception to the Trustee's avoiding power under section 547(c)(1) and (2). These sections provide as follows:

(c) The Trustee may not avoid under this section a transfer —

(1) to the extent that such transfer was —

(A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor; and

(B) in fact a substantially contemporaneous exchange;

(2) to the extent that such transfer was —

(A) in payment of a debt incurred in the ordinary course of business or financial affairs of the debtor and the transferee;

(B) made not later than 45 days after such debt was incurred;

(C) made in the ordinary course of business or financial affairs of the debtor and the transferee; and

(D) made according to ordinary business terms;

The Court concludes that the Debtor is not entitled to an exception under 547(c)(2) because the purchase of an automobile is not in the ordinary course of the Debtor's business or financial affairs. Therefore, the Court's determination of this matter will be made under section 547(c)(1).

There is no...