In re O'Neill

• Decision Date: 06 June 2007
• Docket Number: Adversary No. 05-01739 ABC.,BAP No. CO-06-064.,Bankruptcy No. 05-27079 ABC.
• Citation: 370 B.R. 332
• Parties: In re Terrance George O'NEILL, also known as Terrance G. Oneil, also known as Terrance G. Oneill, and Cynthia D. O'Neill, also known as Cynthia D. Mathews, also known as Cynthia D. Oneil, Debtors. Jeffrey L. Hill, Trustee, Plaintiff-Appellant, v. WFS Financial, Inc., Defendant-Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Tenth Circuit

370 B.R. 332

In re Terrance George O'NEILL, also known as Terrance G. Oneil, also known as Terrance G. Oneill, and Cynthia D. O'Neill, also known as Cynthia D. Mathews, also known as Cynthia D. Oneil, Debtors.

Jeffrey L. Hill, Trustee, Plaintiff-Appellant, v. WFS Financial, Inc., Defendant-Appellee.

BAP No. CO-06-064.

Bankruptcy No. 05-27079 ABC.

Adversary No. 05-01739 ABC.

United States Bankruptcy Appellate Panel of the Tenth Circuit.

June 6, 2007.

Submitted on the briefs:^*

Harvey Sender and David V. Wadsworth of Sender & Wasserman, P.C., Denver, Colorado, for Plaintiff-Appellant.

Janice Hofmann Clark and Andrew T. Snyder of Hopp & Shore, LLC, Englewood, Colorado, for Defendant-Appellee.

Before BOHANON, CORNISH, and NUGENT, Bankruptcy Judges.

OPINION

NUGENT, Bankruptcy Judge.

Appellant trustee appeals from a summary judgment order holding that the perfection of a security interest in a Colorado motor vehicle relates back to the date of its "filing" under applicable Colorado statute. The bankruptcy court held that § 9-317(e) of the Uniform Commercial Code ("UCC") as adopted in Colorado¹ is a "generally applicable law" that renders perfection of a security interest in a Colorado motor vehicle retroactive and subjects the trustee's avoiding powers to such relation back under 11 U.S.C. § 546(b)(1)(A). In so holding, the bankruptcy court rejected the trustee's assertion that the Colorado Certificate of Title Act (CCTA)² lacks a relation back provision and is therefore not a "generally applicable law." While we agree that the CCTA does not contain a "relation back" provision, we conclude that the CCTA renders the UCC inapplicable to titled vehicle transactions and REVERSE.

I. Jurisdiction

This. Court has jurisdiction to hear timely-filed appeals from "final judgments, orders, and decrees" of bankruptcy courts within the Tenth Circuit, unless one of the parties elects to have the district court hear the appeal.³ The bankruptcy court's judgment disposed of the adversary proceeding on the merits and is a final order subject to appeal under 28 U.S.C. § 158(a)(1). The Appellant timely filed his notice of appeal.⁴ Neither party elected to have this appeal heard by the United States District Court for the District of Colorado, thus consenting to review by this Court.

II. Standard of Review

The applicable standard of review of an order granting summary judgment is de novo, and this Court is to apply the same legal standard as was used by the bankruptcy court to determine whether either party is entitled to judgment as a matter of law.⁵ Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."⁶ Here, the matter was presented to the bankruptcy court on stipulated facts, leaving no material issue of fact. What remains for us is a de novo review of the bankruptcy court's legal conclusions.

III. The Facts and the Bankruptcy Court's Holding

On July 2, 2005, the debtors purchased a car from John Elway Olds Honda Hyundai North ("Elway"), granting to Elway a purchase money security interest in the car. On the same day, Elway assigned the security interest to WFS Financial, Inc. ("WFS"). On July 11, 2005, WFS submitted the lien and title documents to the Boulder County Clerk and Recorder. On July 12, 2005, debtors filed their bankruptcy petition. On July 18, 2005, the clerk entered the lien in the Department of Motor Vehicles ("DMV") database. The DMV issued a title that reflects the "Date Filed" and "Date Accepted" of the lien as July 18, 2005.

Thereafter, the trustee filed an adversary proceeding seeking to avoid WFS' lien, claiming it was perfected after the petition date and may therefore be avoided and preserved for the benefit of the estate. On March 3, 2006, the trustee and WFS filed cross-motions for summary judgment. The parties also filed a Joint Statement of Stipulated Facts and Law. WFS argued that the relation back provision in Colorado's UCC applies to liens on automobiles and since it complied with the requirements of the certificate of title statute, it perfected its interest prepetition.

Relying on prior decisions of the bankruptcy judges sitting in Colorado, the bankruptcy court concluded that in order for a security interest in a motor vehicle to be perfected, the lien must be entered in the DMV database. That occurred after the petition date here. The bankruptcy court concluded that the CCTA does not contain a "relation back" provision and is therefore not a "generally applicable law that permits relation back of perfection" under § 546(b)(1)(A). Instead, the court held that Colo.Rev.Stat. § 4-9-317(e) applied to grant priority to WFS as of the date it filed its lien and title documents, July 11, 2005. Colorado Revised Statute § 4-9-317(e) provides that if the holder of a purchase money security interest files a financing statement within 20 days after the debtor receives the collateral, the security interest takes priority over an intervening lien creditor. Although WFS never filed a financing statement, it complied with the CCTA when its lien was noted in the DMV database which is "equivalent to the filing of a financing statement" under Colorado Revised Statute § 4-9-311(b). The bankruptcy court concluded that Colorado Revised Statute § 4-9-317(e) is a "generally applicable law" of the kind referenced in 11 U.S.C. § 546(b)(1)(A), and that the trustee's intervening claim, which arose on the debtors' bankruptcy petition filing date of July 12, 2005, was subsequent in priority to WFS' lien which related back to the July 11 lien and title filing date.

IV. Discussion⁷

A. Issue on Appeal

The gist of the trustee's appeal is that the bankruptcy court erred in resorting to the UCC to resolve the case. Relying on express language in the CCTA that makes the UCC inapplicable to the "filing, recording, releasing, renewal and extension of chattel mortgages ... [in] motor vehicles,"⁸ the trustee asserts that because there is no express relation back provision in the CCTA, WFS's security interest was perfected as of July 18, 2005, and is therefore subject to the trustee's avoiding powers. Thus, the sole issue on appeal is whether the UCC-exclusion language of § 42-6-120(1) renders § 4-9-317(e) inapplicable and, therefore, not "generally applicable law" that would provide for relation back under 11 U.S.C. § 546(b)(1).

In its first attempt to resolve this appeal, this Court certified the following questions to the Colorado Supreme Court, the final arbiter on matters of Colorado state law:

(1) Does the exclusion of the provisions of the Colorado Uniform Commercial Code as adopted in Title 4 of the Colorado Revised Statutes relating to the filing, recording, releasing, renewal, and extension of chattel mortgages in titled motor vehicles as provided for in Colo.Rev.Stat. § 42-6-120 operate to render inapplicable to vehicle title priority disputes the "relation-back" provisions of Colo.Rev. Stat. § 4-9-317(e)?

(2) Does the date of priority of a properly perfected purchase money security interest in a motor vehicle under the Colorado Certificate of Title Act, Colo.Rev.Stat. § 42-6-101, et seq., relate back to the date the secured party delivers title and lien documents to the county clerk under § 42-6-121? By a 6-1 vote, the Colorado Supreme Court declined to answer these questions, leaving us to determine how the Colorado state courts might view the intersection between the CCTA and the Colorado UCC and how that intersection affects the relation back question. We must examine the perfection provisions in the CCTA, determine the extent to which the UCC, particularly § 9-317(e), may apply, and decide whether the CCTA contains a relation back provision.

B. Analysis

1. The CCTA Filing Process

A Colorado secured lender perfects a security interest in a titled vehicle by complying with the CCTA. It provides that in order for any "mortgage"⁹ to encumber or create a lien on a vehicle to be "perfected as a valid lien against the rights of third persons," it must be "filed for public record.¹⁰ The fact of the filing is to be noticed on the certificate of title and the "filing of a mortgage with an authorized agent substantially in the manner provided in section 42-6-121 shall constitute notice to the world" of the secured creditor's rights.¹¹

A Colorado secured lender perfects a security interest in a titled vehicle by following this process.¹² First, the secured party must present the "mortgage" and the certificate of title or an application for a certificate of title to the authorized agent for the director of the department of revenue in this case, the Boulder County Clerk and Recorder ("Clerk").¹³ Second, when that mortgage and certificate or application for certificate is received, the Clerk is to satisfy him or herself that the vehicle referenced in the mortgage is the same as that referenced on the certificate or application.¹⁴ If it is the same, the Clerk shall file within the "director's authorized agent's motor vehicle database" "notice" of the mortgage or lien "in which shall appear the day and hour on which said mortgage was received for filing" as well as "the day and year on which said mortgage was filed for public record...."¹⁵ If the Clerk uses an electronic filing system, this information is to be transmitted to the director's central information registry.¹⁶

Section 42-6-130 of the CCTA provides that priority among mortgages filed for record or noted on a certificate of title "shall take priority in the same order that they were filed in the office of the authorized agent." Presumably this is why § 42-6-121 requires the Clerk to enter in the database "the day and hour" the Clerk received the mortgage. The date of the lien is to appear on the certificate of title...