UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

ASHLAND DIVISION

IN RE:

JEREMY LEE SKEANS

JESSICA DAWN SKEANS

DEBTORS CASE NO. 02-14431

MEMORANDUM OPINION

This matter is before the court on creditor Classic Bank's ("the bank") objection to the trustee's notice of intent to sell two all-terrain vehicles ("ATVs"), a Yamaha 350 Warrior and a Honda 300. A copy of the bank's proof of claim in this case shows that it was owed $8,524.03 as of February 24, 2003, and that its claim was secured by the two subject ATVs. According to the bank, it first loaned money to the debtors in December 2000, and filed a UCC-1 in regard to the Yamaha ATV on December 6, 2000. A certificate of title was issued for the Yamaha ATV on February 1, 2001. The debtors then executed a promissory note on August 7, 2001 in the amount of $10,500.00. They also executed a security agreement giving the bank a security interest in the Yamaha and the Honda ATVs on the same date. A certificate of title for the Honda ATV was issued on September 27, 2001. The bank's lien is not noted on either certificate of title. The bank filed a UCC financing statement covering both the ATVs on March 20, 2002. The debtors filed their Chapter 7 petition on December 16, 2002.

The bank contends that it has properly perfected security interests in both ATVs, notwithstanding its failure to note the liens on the ATVs on their respective certificates of title, because they are "off-road vehicles" which are exempt from titling and lien notation requirements set out in various Kentucky statutes. The registration and title requirements for vehicles are set out in KRS 186A.070, which states in pertinent part: "Except as otherwise provided, the state resident owner of a vehicle as defined in KRS 186.010(8)(a), . . ., shall within fifteen (15) days apply for and obtain a certificate of title in his name."

As stated in KRS 186.010(8)(a),

"Vehicle," as used in KRS 186.020 to 186.260, includes all agencies for the transportation of persons or property over or upon the public highways of this Commonwealth and all vehicles passing over or upon said highways, excepting road rollers, road graders, farm tractors, vehicles on which power shovels are mounted, such other construction equipment customarily used only on the site of construction and which is not practical for the transportation of persons or property upon the highway, such vehicles as travel exclusively upon rails, and such vehicles as are propelled by electric power obtained from overhead wires while being operated within any municipality or where said vehicles do not travel more than five (5) miles beyond the city limit of any municipality.

Vehicles which are exempt from title and registration requirements are set out in KRS 186A.080:

(1) A vehicle owned by the United States unless it is registered in this state;

(2) A vehicle owned by a nonresident of this state, principally operated in another state, properly and currently registered and titled in another state;

(3) A vehicle regularly engaged in the interstate transportation of persons or property for which a currently effective lawful certificate of title has been issued in another state;

(4) A vehicle moved solely by animal power;

(5) An implement of husbandry;

(6) Special mobile equipment;

(7) A self-propelled wheelchair or invalid tricycle;

(8) A pole trailer;

(9) A motor vehicle engaged in the transportation of passengers for hire operating under a currently valid certificate of convenience and necessity; and

(10) A moped.

The bank contends that certain restrictions on the operation of ATVs on public highways set out in KRS 189.515 operate to except ATVs from the definition of "vehicle," and also bring them within the purview of the exemption statute. KRS 189.515 provides in pertinent part:

(1) Except for vehicles authorized to operate on a public highway as of July 15, 1998, and except as provided in subsection (6) of this section, a person shall not operate an all-terrain vehicle upon any public highway or roadway or upon any right-of-way of any public highway or roadway.

(6)(a) A person may operate an all-terrain vehicle on any two (2) lane public highway in order to cross the highway. In crossing the highway under this paragraph, the operator shall cross the highway at as close to a ninety (90) degree angle as is practical and safe, and shall not travel on the highway more than two-tenths (2/10) of a mile.

(b) A person may operate an all-terrain vehicle on any two (2) lane public highway, if the operator is engaged in farm or agricultural related activities, construction, road maintenance, or snow removal.

The bank concludes that KRS 189.515(6)(a) and (b) makes ATVs comparable to "road rollers, road graders, farm tractors, vehicles on which power shovels are mounted" and the like so as to except them from the definition of "vehicle" in KRS 186.010(8)(a), and make them exempt under KRS 186A.080. This court agrees.

In an analogous case, the Court of Appeals of Kentucky ruled in Manies v. Croan, 977 S.W.2d 22 (1998), that the failure to include ATVs on the list of vehicles excepted from the definition of "motor vehicle" does not make an ATV a "motor vehicle" for purposes of the Motor Vehicle Reparations Act (KRS 304.39-101 - 304.39-350). The definition of "motor vehicle" in KRS 304.39-020(7) is similar to the definition of "vehicle" in KRS 186.010(8)(a) in that the list of equipment excepted is essentially the same.

The Manies court, in addressing the plaintiff's argument that ATVs were motor vehicles, stated:

Manies argues that this list of exceptions implies a legislative intent to include within the definition all those types of motor vehicle, such as ATVs, not expressly excluded. We disagree.

We construe statutes within their context and strive to give consistent meaning to related statutory provisions. . . . The definition of "motor vehicle" relied upon by Manies cannot be construed without consideration of the remainder of the MVRA. That act focuses upon automobiles and seeks to mitigate to some extent the high cost of automobile accidents on our society.

Id., at 23. The context in which this court is considering the nature of an ATV is similar in that the titling and lien notation requirements relied upon by the trustee are part of a statute directed to vehicles which travel over the highways of the Commonwealth. As set out above, an ATV is not such a vehicle, and the fact that certificates of title were issued for both the ATVs is not dispositive in this instance.

The trustee therefore may not sell the ATVs pursuant to his notice of sale unless it appears that the sale price exceeds the amount of the indebtedness secured by the perfected lien in favor of Classic Bank. An order in conformity with this opinion will be entered separately.

Copies to:

Matthew J. Wixsom, Esq.

Donald L. Frailie, Esq., Trustee