VS. ADV. NO. 89-0203






This matter is before the Court on the Motion of defendant Credithrift of America, Inc., for Summary Judgment that the lien it holds on several items of the plaintiffs' property is valid under KRS 427.010(4), or, alternatively, that the lien is not avoidable since the items are not household goods. 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 plaintiffs herein, Bobby James Hall and Debbie Jean Hall, filed a Complaint to Determine Validity of Lien, or, in the Alternative, Complaint to Avoid Lien on Exempt Property, on September 14, 1989, alleging that a non-possessory, non-purchase money security interest which the defendant took on certain items of their property impaired their interest in property of a kind described in 11 U.S.C. '522(f)(2)(A)(B) or (C). In the alternative, plaintiffs allege that the referenced lien is of the kind and nature which 16 CFR 444.2(a)(4) holds to be an unfair practice under the Federal Trade Commission Act and as such should be declared null and void. The defendant filed its Answer on October 27, 1989, and on August 29, 1990, its Motion for Summary Judgment. The plaintiffs filed their Response to Motion for Summary Judgment on September 17, 1990.

Pleadings submitted in this case indicate that the defendant holds a claim against the plaintiffs in the approximate amount of $2720.50, based on a note and security agreement executed on November 29, 1988, according to the plaintiffs, or January 12, 1989, according to the defendant, whereby defendant took a non-possessory, non-purchase money security interest in property of the plaintiffs, namely a Homelite chainsaw, tent 3-man size, Coleman stove, Coleman lantern, Emerson stereo, and Panasonic videocassette recorder/player.

In re Pine, 717 F.2d 281 (6th Cir. 1983), is controlling in this matter. The Pine court, in considering "opt-out" statutes in Tennessee and Georgia, held that '522(f) cannot be utilized independently of '522(d), and that debtors may avoid liens only on that property which the states have declared to be exempt. At 284. The decision was cited in a Kentucky case, In re Estep, 96 B.R. 87 (Bkrtcy E.D. Ky 1988), wherein Judge Roberts ruled that a creditor was entitled to retain its voluntary non-possessory, non-purchase money lien on the debtors' property under KRS 427.010(4) despite the exemptions outlined in '522(f). At 88.

The plaintiffs rely on Vaughn v. Heights Finance Corporation, 67 B.R. 140 (Bkrtcy C.D. Ill. 1986), to support their contention that the non-possessory, non-purchase money security interest should be declared null and void. The Vaughn court held that a lien is voidable under '522(f) if it impairs an exemption to which the debtor would have been entitled but for the lien. The court determined that the Illinois exemption statute did not preclude the application of the lien avoidance provision of '522(f), and that the only remaining issue was whether the piece of property in question, a stereo, was "household goods" within the meaning of '522(f)(2)(A). The Kentucky statute, KRS 427.010(4), however, does preclude the application of '522(f) as it explicitly conserves liens. Consequently, this Court declines to follow the ruling in Vaughn.

The only other question raised is whether 16 CFR 444.2(a)(4) operates to invalidate the lien on plaintiffs' property. That rule states that it is an unfair act or practice within the meaning of the Federal Trade Commission Act for a lender or retail installment seller directly or indirectly to take from a consumer an obligation that constitutes or contains a non-possessory security interest in what it defines as household goods, other than a purchase money security interest. Since none of the items set forth herein conform to the FTC definition of household goods, this Court finds that 16 CFR 444.2(a)(4) does not operate to invalidate the lien on any of the subject property.

The initial burden of the movant for Summary Judgment is to show that there is no basis in the record for findings of fact that might determine a result of the case in favor of the non-movant. Such a showing would satisfy the movant's burden under FRCP 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 v. Liberty Lobby, Inc., 477 U.S. 242, at 251, 106 S.Ct. 2505, at 2510, 91 L.Ed. 202, at 214. This Court finds that the defendant has satisfied its burden. The plaintiffs, in their Response to Motion for Summary Judgment, do not set forth specific facts showing that there is a genuine issue for trial, as required by FRCP 56, in defense of the Motion for Summary Judgment. No genuine issue as to any material fact having been presented, therefore, and the Court having determined that there is no just reason for delay, the defendant is entitled to judgment as a matter of law.



By the Court -





Copies to:

Timothy Crawford, Esq.

C. Edward Daniel, Esq.