In re Sorsby

• Court: West Virginia Supreme Court
• Writing for the Court: DAVIS, Justice.
• Citation: In re Sorsby, 210 W. Va. 708, 559 S.E.2d 45 (W. Va. 2001)
• Decision Date: 07 December 2001
• Docket Number: No. 29697.,29697.
• Parties: In re: William F. SORSBY, III, Debtor. Martin P. Sheehan, Trustee, Plaintiff, v. WFS Financial, Inc., Defendant. and Ronald Burton Squires and Marsha Renea Squires, Debtors, Martin P. Sheehan, Trustee, Plaintiff, v. Mercedes-Benz Credit Corp., Defendant.

559 S.E.2d 45

210 W.Va. 708

In re: William F. SORSBY, III, Debtor.

Martin P. Sheehan, Trustee, Plaintiff, v. WFS Financial, Inc., Defendant. and Ronald Burton Squires and Marsha Renea Squires, Debtors, Martin P. Sheehan, Trustee, Plaintiff, v. Mercedes-Benz Credit Corp., Defendant.

No. 29697.

Supreme Court of Appeals of West Virginia.

Submitted October 3, 2001.

Decided December 7, 2001.

Dissenting Opinion of Chief Justice McGraw January 14, 2002.

Martin P. Sheehan, Sheehan & Nugent, PLLC, Wheeling, for the Trustee of the Estate of William Sorsby, III, et al.

Thomas L. Canary, Jr., Mapother & Mapother, Louisville, Kentucky, James D. Keffer, Mapother & Mapother, Huntington, for Defendant Mercedes-Benz Credit Corp.

James C. Gardill, Denise Knouse-Snyder, Bryan J. Warren, Phillips, Gardill, Kaiser & Altmeyer, Wheeling, Julia A. Chincheck, Sandra M. Murphy, Bowles, Rice, McDavid, Graff & Love, PLLC, Charleston, for Amici Curiae Westbanco Bank, Inc. and The West Virginia Banker's Association.

Thomas B. Miller, James A. Byrum, Jr., Schrader, Byrd & Companion, PLLC, Wheeling, for the Debtor, William F. Sorsby, III and Attorneys for the Defendant, WFS Financial, Inc.

Daniel T. Booth, Booth & McCarthy, Bridgeport, for Amicus Curiae Volvo Commercial Finance LLC the Americas, f/k/a/ Volvo Truck Finance North America.

DAVIS, Justice.

This case involves a question certified from the United States Bankruptcy Court for the Northern District of West Virginia that asks us to determine the proper treatment of motor vehicle liens perfected in states other than West Virginia in light of two apparently conflicting West Virginia statutes, W. Va. Code § 17A-4A-14 (1961) (Repl.Vol.2000), which is a provision of the West Virginia Motor Vehicle Code, and W. Va.Code § 46-9-103(2) (1996) (Supp.2000), which is part of the West Virginia Uniform Commercial Code (hereinafter "UCC"). We conclude that W. Va.Code § 46-9-103(2) controls.

I. FACTUAL AND PROCEDURAL HISTORY

Although our answer to the question herein certified is expected to impact numerous cases now pending or soon to be filed in the United States Bankruptcy Court for the Northern District of West Virginia, the affected cases fall into two basic factual scenarios, which are represented by the two cases presented for our consideration in answering the question.

A. Non-Resident moving to West Virginia and Failing to Obtain West Virginia Title

One type of case involves a non-resident of West Virginia who, after granting a security interest in a motor vehicle, moves into this state and fails to obtain a West Virginia certificate of title for the vehicle. This scenario is represented by a case involving debtor William Sorsby. Mr. Sorsby obtained a 1995 Monte Carlo while living in Ohio. In connection with this purchase, Mr. Sorsby granted a security interest in the automobile to WFS Financial, Inc. (hereinafter "WFS"). The lien was recorded on the Ohio motor vehicle certificate of title, and there is no dispute that this lien is validly perfected under the laws of Ohio. Mr. Sorsby then moved to West Virginia in December 1999. Although he brought the Monte Carlo automobile with him, he did not retitle or attempt to register the vehicle in this state. On July 20, 2000, Mr. Sorsby filed for relief, under Chapter 7 of the Bankruptcy Code, in the United States Bankruptcy Court for Northern District of West Virginia. Martin P. Sheehan was appointed as trustee. Mr. Sheehan (hereinafter "the Trustee"), asserting himself in his capacity as statutory lien creditor,¹ then filed an adversary proceeding against WFS alleging that WFS had failed to perfect its interest in the Monte Carlo within three months of removal of the vehicle to West Virginia as required by W. Va.Code § 17A-4A-14.² The Trustee contended that WFS's failure to comply with W. Va.Code § 17A-4A-14 caused its lien to be void as a matter of law as to the Trustee. WFS countered that W. Va.Code § 46-9-103(2)³ applied and that its perfected Ohio lien remained good against the Trustee. The Trustee asked that a question be certified to this Court to allow us to determine which of these two statutes was controlling in resolving this dispute. The bankruptcy court agreed and has taken the adversary proceeding between the Trustee and WFS under advisement pending this Court's answer to the question certified.

B. West Virginia Resident Titling Automobile in Another Jurisdiction

The second scenario involves a West Virginia resident who titles his or her motor vehicle in a jurisdiction other than West Virginia, an act that is prohibited by West Virginia law.⁴ In the representative case, Ronald Squires, a resident of Buckhannon, West Virginia, purchased, in March 1999, a used 1995 Freightliner tractor (used to pull trailers over the highways). To purchase the tractor, Mr. Squires entered into a retail installment contract with SelecTrucks of Atlanta. Selec-Trucks assigned the retail installment agreement to Mercedes-Benz Credit Corporation (hereinafter "Mercedes-Benz") on the same day. Mercedes-Benz and Ronald Squires then applied for a certificate of title in Oklahoma. The application identifies the owner as Ronald B. Squires of Buckhannon, West Virginia, and the secured party as Mercedes-Benz. Oklahoma issued the certificate of title to Ronald B. Squires and identified Mercedes-Benz as having a first lien or security interest on the vehicle.⁵

On October 8, 1999, Ronald B. Squires and Marsha Renea Squires filed for relief under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for Northern District of West Virginia. Mr. Sheehan was appointed as trustee. The Trustee, asserting himself in his capacity as statutory lien creditor,⁶ then filed an adversary proceeding against Mercedes-Benz seeking to set aside as void the security interest in the Freightliner tractor. Mercedes-Benz alleged that the lien was validly perfected under Oklahoma law and that W. Va.Code § 46-9-103(2) protects the lien until it is re-recorded.

The parties filed motions for summary judgment and, on February 7, 2001, the bankruptcy court entered judgment for Mercedes-Benz. The Trustee filed a motion to reconsider bringing to the bankruptcy court's attention W. Va.Code § 17A-4A-14. Because this statute differed from the law of the states relied upon by the bankruptcy court in granting summary judgment to Mercedes-Benz,⁷ the court agreed to reconsider its earlier decision and determined to certify a question regarding the conflict between W.Va. Code §§ 46-9-103(2) and 17A-4A-14 to this Court.

II.

CERTIFIED QUESTION

The question certified by the bankruptcy courts asks

[w]hether section 17A-4A-14 or section 46-9-103(2) of the West Virginia Code is controlling as to the perfection of a motor vehicle lien originating out-of-state so as to be good against judicial lien creditors.

The bankruptcy court concluded that W. Va.Code § 46-9-103(2) is controlling where the motor vehicle is covered by a certificate of title issued pursuant to the law of another jurisdiction that also requires that a security interest be perfected by notation on the certificate.⁸

III. STANDARD OF REVIEW

"This Court undertakes plenary review of legal issues presented by certified question from a federal district or appellate court." Syl. pt. 1, Bower v. Westinghouse Elec. Corp., 206 W.Va. 133, 522 S.E.2d 424 (1999). See also Syl. pt. 1, Light v. Allstate Ins. Co., 203 W.Va. 27, 506 S.E.2d 64 (1998) ("A de novo standard is applied by this Court in addressing the legal issues presented by a certified question from a federal district or appellate court.").

IV. DISCUSSION

The question certified in the instant case asks us to resolve a conflict between two statutes. As the bankruptcy court noted, W. Va.Code § 17A-4A-14 "is a statutory limit on the time to perfect an out-of-state lien in West Virginia, while [W. Va.Code § ] 46-9-103(2) is a choice of law rule." Nevertheless, both statutes pertain to the continued perfection of a security interest in a vehicle that has been granted in a jurisdiction other than West Virginia.

W. Va.Code § 17A-4A-14, requires that, after a vehicle that is subject to a lien or encumbrance due to the voluntary act of the owner is brought into this state, the lien or encumbrance is void as to certain parties,⁹ unless the lienholder files the requisite application with the Department of Motor Vehicles "within three months after the removal of [the] vehicle into this State or within ten days after [the] lienholder received notice of such removal, whichever period of time is least." This provision applies whether perfection is by notation on a certificate of title or by other means.

On the other hand, W. Va.Code § 46-9-103(2), which is part of the UCC, instructs that the effect of a perfected security interest in goods covered by a certificate of title obtained under the laws of a jurisdiction that requires indication of the security interest on the certificate is "governed by the law . . . of the jurisdiction issuing the certificate until four months after the goods are removed from that jurisdiction and thereafter until the goods are registered in another jurisdiction, but in any event not beyond surrender of the certificate." (Emphasis added). Other courts have interpreted the language "and thereafter until the goods are registered in another jurisdiction" to mean that the security interest remains governed by the law of the jurisdiction under which it was perfected indefinitely until the goods are registered in another jurisdiction or the certificate of title is surrendered. See In re Trotter, 264 B.R. 216, 219 (Bankr.D.Kan.2001) ("Debtor has never registered or titled the trailer in Kansas, nor has the Oklahoma title ever been surrendered. Thus, under the plain language of K.S.A. 84-9-103(2)(b), Oklahoma law determines whether CIT's security interest is still perfected."); In re Mireles, 255 B.R. 728, 730 (Bankr.S.D.Ohio 2000) (...