UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

COVINGTON DIVISION

IN RE:

DENNIS ROY DANIEL

CINDY LOUISE DANIEL

DEBTORS CASE NO. 91-00039

COMMERCIAL CREDIT CORPORATION PLAINTIFF

VS. ADV. NO. 91-0124

DENNIS ROY DANIEL, CINDY

LOUISE DANIEL, GREENTREE

ACCEPTANCE, INC. and JAMES

A. NOLAN, TRUSTEE DEFENDANTS

MEMORANDUM OPINION

This matter is before the Court on the plaintiff's Motion for Summary Judgment. The plaintiff, a creditor of the debtors, seeks a determination of priority of liens. This Court has jurisdiction of this matter pursuant to 28 U.S.C. '1334(b); it is a core proceeding pursuant to 28 U.S.C. '157(b)(2)(K).

The record in this case reveals that the debtors filed their joint petition in this Court on January 10, 1991. Their Schedule A-2 lists both the plaintiff and defendant Greentree Acceptance, Inc. ("Greentree") as secured creditors, the security of each being the same mobile home. On April 18, 1991, Greentree moved this Court for relief from the automatic stay so that it might "recover and dispose of its collateral, a 1984 Fairmont Mobile Home". On May 28, 1991, the plaintiff initiated this matter by filing a Complaint Objecting to Secured Claim and Requesting Determination of Secured Claim.

Greentree filed its Answer in this matter on July 2, 1991. By Order dated July 16, 1991, this Court overruled without prejudice Greentree's Motion for Relief from the Automatic Stay. Trial in this matter was set for September 30, 1991. On September 26, 1991, the plaintiff filed its Motion for Summary Judgment. Greentree filed a Motion to Deny Summary Judgment on September 27, 1991. On September 30, 1991, the trial was continued to December 2, 1991. Greentree filed its response to the plaintiff's Motion for Summary Judgment on October 21, 1991, and at a hearing on the Motion on November 5, 1991, the December 2 trial date was set aside and the Motion was taken under advisement. On November 19, 1991, this Court ordered the matter submitted for decision on the record.

The plaintiff and Greentree have jointly stipulated that as of the date of filing of the bankruptcy petition the Certificate of Title issued on October 25, 1983, by the Kentucky Transportation Cabinet for the subject mobile home, reflected a lien to Peoples Liberty Bank and to the plaintiff. It did not at that time, nor has it ever, reflected a lien to Greentree. It is also stipulated that on September 23, 1983, Greentree filed a UCC-1 financing statement in the Campbell County Clerk's Office, but never filed a continuation statement. It is further stipulated that Greentree has never requested that the Transportation Cabinet cancel the Certificate of Title originally issued on October 25, 1983, and issue a new one denoting its claimed lien, all as provided in KRS 186A.197(2).

The issue in this matter is whether Greentree's lien on the subject mobile home was and is perfected. The plaintiff contends, pursuant to relevant provisions of KRS Chapter 186A, that it is not, because Greentree's lien has never been noted on the Certificate of Title. KRS 186A.190 does indeed provide that "[t]he perfection and discharge of a security interest in any property for which has been issued a Kentucky certificate of title shall be by notation on the certificate of title" and that this is the "sole means of perfecting and discharging a security interest in property for which a certificate of title is required..." A certificate of title is required for a mobile home pursuant to KRS 186A.070.

Chapter 186A became effective on July 15, 1982. Therefore Greentree was subject to the chapter's provisions concerning the perfection of its security interest in the subject mobile home in October 1983. As pointed out by Judge Unthank in Vanderbilt Mortgage and Finance, Inc. v. Robert Douglas Griggs and Linda Helen Griggs, an unreported 1991 District Court case cited by Greentree, "...conversion to this system caused problems for the county clerks who were responsible for noting the liens on the title certificates and ... on numerous occasions, the liens were not noted, thereby preventing the perfection of the intended security interests." This is, of course, what happened to Greentree.

As Judge Unthank goes on to point out, the Kentucky legislature's response to this problem was the passage of KRS 186A.197 which provides:

If a Kentucky certificate of title is outstanding as of March 31, 1988, without the notation of a valid lien representing a security interest perfected under this chapter, the transportation cabinet upon application of either the secured party or the debtor shall cancel the current certificate of title and issue a new certificate of title with the lien noted thereon. The security interest represented by the lien shall be considered perfected as of the original date of filing of the title lien statement or financing statement.

KRS 186A.197(1). Greentree argues that the last sentence of this provision perfects its security interest in the mobile home, without Greentree's having to apply for the cancellation of the original certificate and the issuance of a new one.

This Court does not agree, and the Vanderbilt Mortgage case does not support Greentree's position in this regard. The creditor in that case applied for a new certificate of title, as Greentree has not, and, in fact, the issue in that case was whether KRS 186A.197 was "generally applicable law" which would allow the creditor to seek a correction of the certificate of title and have the date of perfection relate back to the original filing of the financing statement. Judge Unthank ruled that the section was "generally applicable law", and that the creditor could correct the certificate of title and perfect its lien pursuant to its provisions. The Vanderbilt Mortgage case does not stand for the proposition that KRS 186A.197 automatically perfects a lien which does not appear on a certificate of title.

It is therefore apparent that Greentree was at the time it filed its original financing statement, and still is, subject to the provisions of KRS Chapter 186A, which require the notation of a lien on a certificate of title to accomplish perfection of a security interest in a mobile home. The absence of such notation on the debtors' Certificate of Title could have been corrected pursuant to KRS 186A.197(1), but it was not. At the time of the filing of the debtors' bankruptcy petition, the only liens noted were those of the plaintiff and Peoples Liberty Bank. The security interest of Peoples Liberty Bank has apparently been released. The debtors' petition does not list Peoples Liberty Bank as a creditor, nor did Peoples Liberty Bank file a claim in the case. The plaintiff's lien is therefore a valid, subsisting and prior lien.

In consideration of all of the foregoing, it is therefore the opinion of this Court that the plaintiff has carried forward its burden of demonstrating that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. The plaintiff's Motion for Summary Judgment will therefore be sustained by separate Order of this Court.

Entered this _____ day of February, 1992.

By the Court -

___________________________________

Judge

Copies to:

Dennis R. Williams, Esq.

David M. Andrews, Esq.

Carl Turner, Esq.

James A. Nolan, Esq., Trustee

U.S. Trustee

mdaniel.opi