IN RE: WILLIAM MICHAEL BIBB d/b/a Bibb Construction CASE NO. 92-52246
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
WILLIAM MICHAEL BIBB
d/b/a Bibb Construction CASE NO. 92-52246
a/k/a Billy Bibb, Bill Bibb
STEPHEN PALMER, TRUSTEE PLAINTIFF
v. ADV. NO. 94-5093
FIFTH THIRD BANK DEFENDANT
This matter is before the court on the motion of the plaintiff chapter 7 trustee for judgment on the pleadings and the response of the defendant Fifth Third Bank to the motion.
The issue is whether on the date of bankruptch the defendant bank held a perfected security interest in a 1989 Stratos 2000 boat with inboard motor.
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During its 1988 session the Kentucky General Assembly had enacted House Bill 654, which was approved March 31, 1988, to take effect January 1, 1990. . . . The bill enacted a new section of KRS Chapter 186A, dealing with the registration and titling of motor vehicles, to provide that the titling and registration of motorboats, as defined in KRS 235.010, shall be administred through the automated motor vehicle and trailer registration system developed under the provisions of KRS 186A.010. KRS 186A.105.
Prior to amendment of the applicable statutes by H.B. 654, motorboat "registrations" were handled by the offices of the circuit court clerk in each county. KRS 235.050. "Registrations" expired on April 30th of each year and were required to be renewed annually. KRS 235.170. The new law transferred responsibility for "registration" and "titling" of motorboats from the circuit court clerks to the county clerks to facilitate taxation and titling of motorboats in the same manner as for motor vehicles.
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The bank was on notice that on and after January 1, 1990 the procedure for perfection of a security interest in a motorboat would be the same as the procedure for perfecting a security interest in a motor vehicle. IRS 235.055. In other words, in order to be perfected the lien would have to be noted on the certificate of title issued by the county clerk for the motorboat. KRS 186A.190.
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Regardless of the probems encountered by the Department of Transportation and the county clerk's offices in implementing the new law, it is clear from the applicable statutes that it is the duty of the secured party and not the debtor to see that a lien is properly noted on the title to a motorboat. KRS 186A.190(5). Fifth Third Bank and not the debtor is responsible for the failure to reperfect the bank's lien in accordance with the new law.
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Counsel for Fifth Third Bank argues Kentucky law prohibits retroactive application of the statutory changes made by H.B. 654. KRS 446.080(3).
The problem with this argument is the statutes are not being applied retroactively. The statutes are being applied as they were in effect on the date of bankruptcy.
Counsel for Fifth Third Bank further argues that titling requirements imposed by H.B. 654 impair the contract between the bank and the debtor in violation of Article I, Section 10 of the Constitution of the United States. The changes in the law effected by H.B. 654 did not in any manner impair the obligations of the bank and the debtor under the Installment Contract and Security Agreement dated August 12, 1988. The changes in law affect only the enforceability of the agreement against third parties unless the lien created by the agreement is noted on the certificate of title to a motorboat.
The motion of the trustee in bankruptcy for judgment on the pleadings shall be sustained. The rights of the trustee as a judicial lienholder under 11 U.S.C. § 544(a) take precedence over the unperfected security interest of the bank in the motorboat and the proceeds of sale of the motorboat. In re Marlene Pence, Case No. 92-50842(opinion by Judge Lee, July 30, 1993); In re Hafley, Case No. 91-50041 (opinion by Judge Bare, May 3, 1992); Brown v. Garrison, Adv. No. 91-0139 (opinion by Judge Bare, October 21, 1991).
Dated: January 11, 1995.
By the court -
Joe Lee, Chief Judge
William Miles Arvin