IN RE SCOTT, Bankruptcy No. 09-13038-JKC-7A.

• Court: U.S. Bankruptcy Court — Southern District of Indiana
• Writing for the Court: Elizabeth Alphin, Mapother & Mapother, Louisville, KY, for Creditor
• Citation: Boston v. Chrysler Fin. Servs. Americas LLC (In re Scott), 427 B.R. 123 (Bankr. S.D. Ind. 2010)
• Decision Date: 11 March 2010
• Docket Number: Bankruptcy No. 09-13038-JKC-7A.,Adversary No. 09-50655.
• Parties: In re Brian Keith SCOTT and Michelle Dawn Scott, Debtors. Richard E. Boston, as the Chapter 7 Trustee, Plaintiff, v. Chrysler Financial Services Americas LLC d/b/a/ Chrysler Financial f/k/a DaimlerChrysler Financial Services Americas LLC, Defendant.

427 B.R. 123

In re Brian Keith SCOTT and Michelle Dawn Scott, Debtors Richard E. Boston, as the Chapter 7 Trustee, Plaintiff, v. Chrysler Financial Services Americas LLC d/b/a/ Chrysler Financial f/k/a DaimlerChrysler Financial Services Americas LLC, Defendant.

Bankruptcy No. 09-13038-JKC-7A. Adversary No. 09-50655.

United States Bankruptcy Court, S.D. Indiana, Indianapolis Division.

March 11, 2010.

COPYRIGHT MATERIAL OMITTED

Julie A. Camden, Camden & Associates, P.C., Indianapolis, IN, for Objector.

Elizabeth Alphin, Mapother & Mapother, Louisville, KY, for Creditor.

FINDINGS OF FACT AND CONCLUSIONS OF LAW ON CHRYSLER FINANCIAL'S MOTION FOR SUMMARY JUDGMENT

JAMES K. COACHYS, Bankruptcy Judge.

This matter comes before the Court on Defendant Chrysler Financial's ("Chrysler") Motion (the "Trustee"). Having reviewed the parties' respective submissions, the Court issues the following Findings of Fact and Conclusions of Law.

Findings of Fact

On or about September 22, 2008, Debtors purchased a 2008 Chrysler Town & Country (the "Vehicle") from Dellen Chrysler-Dodge-Jeep pursuant to a retail installment contract (the "Contract") under which Chrysler, as Dellen's assignee, was granted a lien on the Vehicle. Per the terms of the Contract, Chrysler's lien was then noted on the certificate of title issued by the State of Indiana for the Vehicle. Thereafter, Chrysler assigned the Contract to a "securitized trust" (the "Trust").¹ Chrysler has since acted as the servicer for the Contract. The Trust did not add its name to, or otherwise note its lien on, the Vehicle's certificate of title.

Debtor filed a voluntary Chapter 7 bankruptcy petition on September 3, 2009. Thereafter, on October 23, 2009, the Trustee filed a Complaint to Avoid Preference and Post-Petition Payments and to Declare Chrysler Financial's Lien as Unsecured and Recover Property of the Estate (the "Complaint"). The various avoidance actions alleged in the Complaint are based on the premise that because the Trust did not note its name or interest on the Vehicle's certificate of title, then its lien is unperfected.

On January 2, 2010, Chrysler filed a Motion to Dismiss under Federal Rule of Civil Procedure 12. In support of its Motion, Chrysler offered materials outside of the pleadings. Accordingly, the Court deemed the Motion to Dismiss to be one for summary judgment pursuant to Federal Rule of Civil Procedure 12(d). Hereinafter, the Court shall refer to Chrysler's Motion to Dismiss as a Motion for Summary Judgment and will apply the standards applicable under Federal Rule of Civil Procedure 56.

Conclusions of Law

On summary judgment, Chrysler raises three primary arguments: First, that the case should be dismissed because the Trustee failed to name an indispensable party by not naming the Trust as a defendant; second, that the Vehicle is no longer property of the estate because the Trustee failed to take the action required under 11 U.S.C. § 362(h); and third, that the premise of the Trustee's claims-that the Trust's lien is unperfected—is incorrect and that the claims, therefore, fail as a matter of law. This adversary proceeding is just one of many identical or nearly identical proceedings² that were filed by a group of Chapter 7 trustees since October of 2009. Given the importance of the substantive issue presented by those proceedings, the Court chooses to bypass the first two arguments raised by Chrysler—as important and interesting as they may be—in favor of a ruling solely on the merits of the Trustee's Complaint.³ Thus, the determinative question is whether the Trust's lien on the Vehicle is perfected under Indiana law.

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(K). Under Federal Rule of Civil Procedure 56(c), made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056, summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). With a motion for summary judgment, the burden rests on the moving party to demonstrate that there is an absence of evidence to support the nonmoving party's case. Id. at 325, 106 S.Ct. at 2554. After the moving party demonstrates the absence of a genuine issue for trial, the responsibility shifts to the nonmovant to "go beyond the pleadings" to cite evidence of a genuine factual dispute precluding summary judgment. Id. at 324, 106 S.Ct. at 2553. If the nonmovant does not come forward with evidence that would reasonably permit the finder of fact to find in its favor on a material question, then the court must enter summary judgment against it. Waldridge v. American Hoechst Corp., 24 F.3d 918, 920 (7th Cir.1994) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).

A. Revised Article 9 and Indiana's Certificate of Title Act

To determine whether the Trust's lien on the Vehicle is properly perfected, the Court looks first to the Uniform Commercial Code as adopted in Indiana.⁴ Pursuant to § 9.1-309, certain purchase money security interests in consumer goods are perfected upon attachment. Excepted from this automatic perfection are purchase money security interests in consumer goods subject to § 9.1-311(a) and (b). Those provisions, in turn, state in relevant part:

(a) Except as otherwise provided in subsection (d), the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to:

* * * * * *

(2) any Indiana certificate-of-title statute covering automobiles, trailers, mobile homes, boats, farm tractors, or the like, which provides for a security interest to be indicated on the certificate as a condition or result of perfection.

(b) Compliance with the requirements of a statute, regulation, or treaty described in subsection (a) for obtaining priority over the rights of a lien creditor is equivalent to the filing of a financing statement under IC 26-1-9.1. Except as otherwise provided in subsection (d), IC 26-1-9.1-313, IC 26-1-9.1-316(d), and IC 26-1-9.1-316(e) for goods covered by a certificate of title, a security interest in property subject to a statute, regulation, or treaty described in subsection (a) may be perfected only by compliance with those requirements, and a security interest so perfected remains perfected notwithstanding a change in the use or transfer of possession of the collateral.

(emphasis added). Section 9.1-311(c) further provides:

(b) Except as otherwise provided in subsection (d), IC 26-1-9.1-316(d), and IC 26-1-9.1-316(e), duration and renewal of perfection of a security interest perfected by compliance with the requirements prescribed by statute, regulation, or treaty described in subsection (a) are governed by the statute, regulation or treaty. In other respects, the security interest is subject to IC 26-1-9.1

Based on the language emphasized above, the Trustee argues that "obviously, a lienholder must have their name listed on the title to be perfected, as the word only is used." The Trustee further argues that "this reading of the UCC, as adopted by Indiana, is consistent with Indiana's titling statute which indicates that for a lienholder to be perfected the lienholder must be listed on the title. I.C. § 9-17-5." Trustee's Objection and Memorandum in Opposition to Chrysler Financial's Motion for Summary Judgment at 20 (hereinafter, the "Response") (emphasis in the original).

Contrary to the Trustee's argument, Indiana's Certificate of Title Act is not so "obvious." In Petr v. Forum Credit Union (In re Staton), Adv. Pro. No. 04-662 (May 24, 2005)(Bankr.S.D.Ind.2005), the Honorable Anthony J. Metz was asked to determine when a security interest in a motor vehicle is perfected for purposes of the Chapter 7 trustee's avoidance powers under 11 U.S.C. § 547. The trustee insisted that, pursuant to Indiana's Certificate of Title Act, Forum's lien did not attach until its name was noted on the vehicle's certificate of title on file with the Indiana Bureau of Motor Vehicles. Id. at 7. Forum Credit Union ("Forum") countered that Revised Article 9 effectuated a departure from prior Indiana law and that its security interest was automatically perfected upon attachment pursuant to § 9.1-309. Id. at 6-7.

While it ultimately agreed with the Chapter 7 trustee, the court noted that Indiana's Certificate of Title Act "contains no provision which specifically provides that the method to perfect a security interest in an automobile is for the lien to be noted on the certificate of title." Id. at 10. Rather, it appears that Indiana courts have consistently read that requirement into the Act. See id. at 9 (citing First Nat. Bank of Milltown v. Schrader, 176 Ind. App. 391, 375 N.E.2d 1124 (1978) and United Leaseshares, Inc. v. Citizens Bank & Trust, 470 N.E.2d 1383 (Ind.Ct.App. 1984)).⁵ Thus, while the Court agrees with the Trustee's general proposition that, under Indiana law, the only way to perfect a security interest in a motor vehicle is by noting the interest on the vehicle's Certificate of Title, the Court disagrees that the Certificate of Title Act is explicitly clear on this point.⁶

In any event, Chrysler does not dispute the significance of Indiana's Certificate of Title Act in establishing the manner in which a vehicle lien is perfected. Rather, it contends that the Certificate of Title Act must be read in concert with § 9.1-310(c). That provision provides that "if a secured creditor assigns a perfected security interest or agricultural lien, a filing under IC 26-1-9.1 is not required to continue the perfected status of the security interest...