UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

COVINGTON DIVISION

IN RE:

CUNNINGHAM USED CARS, INC.

DEBTOR CASE NO. 94-20491

EAGLE FINANCE CORPORATIONS PLAINTIFF

and ROBERT BARNES

VS. ADV. NO. 94-2019

CUNNINGHAM USED CARS, INC.;

AUTOMOTIVE FINANCE CORPORATION;

AUTO DEALERS EXCHANGE CINCINNATI-

DAYTON, INC. n/k/a Adesa-Ohio, Inc. DEFENDANTS

MEMORANDUM OPINION

The plaintiffs initiated this matter by the filing of their Complaint on March 30, 1995. Defendants Automotive Finance Corporation ("AFC") and Auto Dealers Exchange Cincinnati-Dayton, Inc. ("ADE") filed their Answers on May 2, 1995. By Order of this Court entered on June 20, 1995, the parties were allotted time within which to file Motions for Summary Judgment and a briefing schedule was set. At the end of the briefing period the parties were to file Joint Stipulations of Fact and tender an Order of Submission. The parties filed their respectiveMotions for Summary Judgment as set out above. On November 13, 1995, AFC and ADE filed a "Notice of Filing," which represented that they were submitting a "Joint Stipulation of Fact" signed on behalf of AFC. An actual Joint Stipulation of Fact, signed by counsel for the plaintiffs as well as the answering defendants was never tendered. An Order of Submission was entered on December 4, 1995.

The record in this case reveals that plaintiff Robert Barnes ("Barnes") purchased a certain motor vehicle, a 1993 Isuzu pickup truck, from the debtor on September 9, 1994, by way of a purchase agreement of the same date. Based upon the purchase agreement, Barnes and plaintiff Eagle Financial Corporation ("Eagle") entered into a loan financing agreement by which Barnes was provided sufficient funds to complete the purchase of the vehicle. Barnes took delivery of the vehicle, but did not receive a Certificate of Title or an executed Vehicle Transaction Record. AFC retains the title pursuant to its security interest against the vehicle arising from its floor plan financing arrangement with the debtor. The debtor has never paid AFC the amount it owed for the vehicle.

The plaintiffs argue that Barnes is a buyer in the ordinary course of business ("BOCB") from the debtor as set out in KRS 355.9-307, and that as such he takes goods free and clear of a security interest created by his seller. KRS 355.9-307(1) provides in pertinent part: "A buyer in ordinary course of business, ....takes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence." The definition of a BOCB is found at KRS 355.1-201(9), which provides that the term means:

In the absence of the requirements of the Certificate of Title Act, Barnes would obviously qualify as a BOCB.

Procedures for transferring ownership of a vehicle are set out in KRS 186A.215, which provides:

The requirements for a buyer upon purchase of a vehicle are also set forth in KRS 186A.220(5):

These requirements were not satisfied when Barnes purchased the vehicle from the debtor.

Similar arguments concerning the applicability of U.C.C. provisions concerning the purchaser's status as a BOCB were made to this Court by the plaintiff in a previous adversary proceeding in this case, "SCT Motor Cars, Inc. v. ADE of Lexington, et al.", Adv. No. 94-2041 (E.D.Ky., May 10, 1995). That matter involved a similar controversy over the transfer of title to a vehicle, except that the entity which had purchased the vehicle and not received title to it was another auto dealership, not an individual. The plaintiffs maintain that a different result should obtain here because Barnes is an individual consumer and not a dealer. This Court is of the opinion, however, that the same reasoning applies herein as did in the previous matter. Consideration of whether Barnes was a BOCB must begin with the basic question of whether he ever attained the status of buyer, or in the alternative, whether a sale occurred.

In this regard, the question of whether transfer of title provisions govern the determination of whether a sale has occurred is considered at length in In re Superior Ground Support, Inc., 140 B.R. 878 (Bkrtcy.W.D.Mich. 1992). There the court applied the Michigan Vehicle Code which contains definitions and requirements similar to those found in KRS Chapters 186 and 186A, to determine that

.........

At page 883.

This Court agrees with this interpretation and finds it applicable in this matter. Statutory duties concerning transfer of title were not performed, and therefore there was no sale completed by the debtor to the plaintiff. Two salient facts allow the Court to resolve this matter in AFC's favor: title to the vehicle was never transferred to plaintiff Barnes, and AFC had a perfected security interest in it.

The initial burden of the movant for Summary Judgment is to show that there is no basis in the record for findings of facts that might determine a result of the case in favor of the non-movant. Such a showing would satisfy the movant's burden under Federal Rule of Civil Procedure 56(c) that there are no genuine issues as to any material fact. In re Calisoff, 92 B.R. 346 (Bkrtcy N.D. Ill. 1988), citing Anderson vs. Liberty Lobby, Inc., 477 U.S. 242, at 251, 106 S.Ct. 2505, at 2510, 91 L.Ed. 202, at 214. The Court finds that the defendants have satisfied their burden, and the plaintiffs have not. The defendants are therefore entitled to judgment as a matter of law. An order in conformity with this opinion will be entered separately.

Dated:

By the Court -

___________________________

Judge

Copies to:

Debtor

Taft A. McKinstry, Esq.

Dennis R. Williams, Esq.