DEBTOR CASE NO. 92-60762







VS. ADV. NO. 93-6003









This matter is before the Court having been submitted for ruling on the record herein by Agreed Order dated September 7, 1993. The plaintiff and defendant Citizens National Bank ("the Bank") have filed their briefs. A default judgment was entered against defendant Linda Jasper on September 23, 1993. 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)(F).

The plaintiff filed a Complaint to Avoid Preferential Transfer on February 24, 1993. The Bank filed its Answer on March 18, 1993. Defendant Linda Jasper did not file an Answer. At a pre-trial conference conducted on May 10, 1993, trial was set for August 6, 1993. On June 25, 1993, the plaintiff filed a Motion to Submit on the Record, Set Aside Trial Date and Excuse Order for Trial. At a hearing conducted on July 15, 1993, the Court sustained that Motion.

Pursuant to the Court's ruling, an Order was entered on July 27, 1993, requiring the parties to stipulate all relevant facts and setting a briefing schedule. The parties filed their Joint Stipulation of Facts on August 2, 1993. The plaintiff filed his Memorandum in Support of Summary Judgment on August 11, 1993. The Bank filed its Memorandum on August 19, 1993. The plaintiff moved for default judgment against defendant Linda Jasper on August 24, 1993, and judgment was entered on September 23, 1993.

The Joint Stipulation of Facts sets out the following:

1. On or about November 25, 1991, Citizens National Bank, Somerset, Kentucky, refinanced a car loan for the debtor, sending the payoff to the First Rome Bank, Rome, Georgia.

2. On or about November 25, 1991, debtor signed a promissory note and security agreement which provided Citizens National Bank with the 1988 Toyota Corolla as collateral.

3. First Rome Bank sent the title and release directly to the debtor's residence, clearly not at the direction of Citizen's National Bank.

4. That Citizens National Bank's employees made numerous attempts to reach the debtor to bring the title in to the Bank.

5. On June 4, 1992, debtor obtained a "clean" Kentucky title by producing First Rome Bank's release to the Pulaski County Clerk's office.

6. After several more calls, the debtor finally brought in the title, and on August 18, 1992, Citizens National Bank's lien was duly noted.

7. Approximately 78 days later, on November 3, 1992, the debtor filed her bankruptcy petition.

The plaintiff contends that the perfecting of the Bank's lien within the ninety day preference period is a preferential transfer voidable by the trustee pursuant to 11 U.S.C. '547. As the plaintiff points out, the sole method of perfecting a lien on a motor vehicle is by notation on the certificate of title. See KRS 186A.190. As set out in the Joint Stipulation of Facts, such perfection did not occur until August 18, 1992, well within the ninety day period. The Bank's argument that '547 is inapplicable because there is no antecedent debt involved is not well taken, depending as it does on the idea that the security interest was transferred at the same time the debt was incurred.

A transfer is deemed a preference if it meets the requirements of '547(b) which provides in pertinent part as follows:

(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property--

(1) to or for the benefit of a creditor;

(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;

(3) made while the debtor was insolvent;

(4) made--

(A) on or within 90 days before the date of the filing of the petition;


(5) that enables such creditor to receive more than such creditor would receive if--

(A) the case were a case under Chapter 7 of this title;

(B) the transfer had not been made; and

(C) such creditor received payment of such debt to the extent provided by the provisions of this title.

Section 547(f) further provides that the debtor is presumed to have been insolvent on and during the ninety days immediately preceding the filing of the bankruptcy.

In the within matter, the transfer was to a creditor, the Bank, for an antecedent debt made while the debtor was presumed insolvent. The transfer enabled the Bank to receive more than it would have as an unsecured creditor in this case since, as the plaintiff states, no distribution to unsecureds would be possible. Therefore the requirements of '547 concerning preferences have been met herein and the plaintiff may avoid the transfer and preserve it for the benefit of the estate to the extent of the indebtedness on the date of filing of the petition. In conclusion, therefore, it is the opinion of this Court that the plaintiff should have Summary Judgment on his Complaint avoiding the pledging of and security interest in the subject automobile to defendant Citizens National Bank, preserving same for the benefit of the estate, and for all payments received from the debtor within ninety days prior to the filing of the debtor's bankruptcy petition.



By the Court -





Copies to:


James R. Westenhoefer, Esq., Trustee

Benny E. Hamm, Esq.