In re Simmons

• Decision Date: 03 July 1991
• Docket Number: Bankruptcy No. 90-21027,Adv. No. 91-2030.
• Citation: 129 BR 84
• Court: U.S. Bankruptcy Court — Northern District of West Virginia
• Parties: In re Eugene M. SIMMONS d/b/a Lakeview Angus Farm, Debtor. Robert G. DURNAL, Trustee, Plaintiff, v. ROANOKE PRODUCTION CREDIT ASSOCIATION, Greenbrier Valley National Bank, Pendleton County Bank, and Jesse O. Guills, as Special Commissioner, Defendants.

129 B.R. 84 (1991)

In re Eugene M. SIMMONS d/b/a Lakeview Angus Farm, Debtor.

Robert G. DURNAL, Trustee, Plaintiff, v. ROANOKE PRODUCTION CREDIT ASSOCIATION, Greenbrier Valley National Bank, Pendleton County Bank, and Jesse O. Guills, as Special Commissioner, Defendants.

Bankruptcy No. 90-21027, Adv. No. 91-2030.

United States Bankruptcy Court, N.D. West Virginia, Elkins Division.

July 3, 1991.

Robert G. Durnal, Buckhannon, W.Va., Trustee.

James Martin Jr., Clarksburg, W.Va., for Roanoke Prod.

James Matish, Bridgeport, W.Va., for Pendleton County Bank.

Martin Saffer, Marlington, W.Va., for Greenbriar Valley Nat. Bank.

Michael Bray, Clarksburg, W.Va., for Eugene Simmons.

MEMORANDUM OPINION AND ORDER

L. EDWARD FRIEND, II, Bankruptcy Judge.

This adversary proceeding was initiated by the Debtor, seeking to avoid certain security interests in the Debtor's property held by Roanoke Production Credit Association ("Roanoke"), Greenbrier Valley National Bank ("Greenbrier") and Pendleton County Bank ("Pendleton") (collectively referred to as "Defendants"), and seeking to direct Jesse O. Guills, as Special Commissioner, to pay over to the Debtor, the proceeds of certain of the Debtor's cattle which were sold pre-petition. Mr. Guills deposited the proceeds into an escrow account because there were competing claims to the funds. This case was initiated as a Chapter 11 proceeding on November 27, 1990, and was converted to a case under Chapter 7 of the Code after the filing of the Complaint in this adversary proceeding. On May 17, 1991, this Court entered an order substituting the Trustee as party-plaintiff in place of the Debtor.

Plaintiff alleges that Defendants' security interest in certain property of the estate is voidable under Section 544 of the Code because they failed to file financing statements to perfect said interests in the Office of the Secretary of State. The disputed collateral consists of cattle and farming equipment. While it is undisputed that none of the Defendants filed financing statements with the Secretary of State, when the relevant security interests were granted to Defendants by the Debtor, the West Virginia Code required a creditor acquiring an interest in farm equipment and cattle to file financing statements only in the county of the debtor's residence in order to properly perfect its security interest in the collateral. The Debtor resides in Pocahontas County. The financing statements of Greenbrier and Roanoke and Pendleton were respectively filed with the Clerk of the County Commission of Pocahontas County, West Virginia, on February 18, 1986, February 13, 1987, and December 11, 1987. W.Va.Code § 46-9-403(2) provides that a filed financing statement is effective for a period of five years from the date of its filing. In July of 1989, W.Va. Code § 46-9-401 was amended to require financing statements to be filed in the Office of the Secretary of State in order to perfect a security interest in any collateral other than consumer goods, timber, mineral or fixtures.

The Debtor filed his bankruptcy petition on November 26, 1990. The Trustee now asserts that, absent a savings clause in W.Va.Code § 46-9-401 as amended, the 1989 change to the West Virginia Code renders security interests in farm equipment and products, which had previously been properly perfected by the filing of financing statements in the county of the Debtor's residence, subject to avoidance by the Trustee.

The Trustee's argument in unpersuasive. The creation of a security interest gives a creditor a valuable property right. It would be both inequitable and a violation of due process to strip a creditor of such a vested right by a change in legislation during the period in which a creditor had relied on and properly complied with a previously existing statute to establish such interest. Furthermore, it is generally accepted under West Virginia law that a newly-enacted statute will be presumed to operate prospectively, rather than retroactively, unless the legislative intent to apply retroactive effect to the statute is clearly indicated by the strong and imperative language of the statute or otherwise by necessary implication. W.Va.Code § 2-2-10(bb); State v. Bannister, 162 W.Va. 447, 250 S.E.2d 53 (1978); Shanholtz v. Monongahela Power Co., 165 W.Va. 305, 270 S.E.2d 178 (1980). Since there is no language or necessary implication that the 1989 version of W.Va. Code § 46-9-401 was intended by the legislature to operate retroactively, the Court does not find that the mere absence of a savings clause would necessitate such an interpretation.

Furthermore, Defendants have cited cases decided by both the Fourth Circuit Court of Appeals and the West Virginia Supreme Court which support the position that the 1989 version of W.Va.Code § 46-9-401 can only be interpreted to operate prospectively. In Farish v. Courion Indus., Inc., 754 F.2d 1111, 1114-15 (4th Cir. 1985), the Fourth...