IN RE GENEVA YATES       CASE NO.  99-51267     ADV. NO.  00-5006 MEMO SUMMARY JUDGMENTS

  UNITED STATES BANKRUPTCY COURT

     EASTERN DISTRICT OF KENTUCKY

LEXINGTON

 IN RE:

 GENEVA YATES                                                                        CASE NO.  99-51267

 DEBTOR

ANNA C. JOHNSON, Trustee                                                PLAINTIFF

5.                                                                                                      ADV. NO.  00-5006

 GE CUSTOMIZED AUTO CREDIT

  SERVICES, INC., et al.                                                            DEFENDANTS

 and

GE CUSTOMIZED AUTO CREDIT

  SERVICES, INC., et al.                                                            THIRD PARTY PLAINTIFF

V.

PAUL MILLER FORD, INC.                                                THIRD PARTY DEFENDANT

  MEMORANDUM OPINION AND ORDER

The court makes the following findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure and the court’s ruling at the hearing held June 7, 2000 on cross-motions of the plaintiff-trustee, Anna C. Johnson (“Johnson”), and the defendant GE Customized Auto Credit Services, Inc. (“GE Auto Credit”), for summary judgment (Document # 37).

FINDINGS OF FACT:

1.  On March 30, 1999 the debtor, Geneva Yates (“Yates”), purchased a 1999 Ford Escort, Identification # 3FAKP1139XR134833, from Paul Miller Ford, Inc. (“Paul Miller Ford”) and granted Paul Miller Ford a security interest in the automobile pursuant to a retail installment contract.  (Document # 20, attachment to Exhibit A).

2.  On March 30, 1999 the debtor signed a title lien statement showing “GE Capital Customized Auto” as secured party on the Ford automobile and signed an application for a certificate of title showing “GE Capital Customized Auto” as the only lienholder in the automobile.  (Document # 20, attachment to Exhibit A).

3.   On March 30, 1999 Yates took possession of the automobile.  (Document # 20, Exhibit A).

4.  On March 30, 1999 Paul Miller Ford assigned the contract to “Customized Auto Credit Services, Inc.”  (Document # 20, Retail Installment Contract as attachment to Exhibit A). 

5.  On April 20, 1999 the Title Lien Statement regarding the Ford automobile showing “GE Capital Customized Auto” as the secured party was filed in the Fayette County Clerk’s Office.  (Document # 20, attachment to Exhibit A).

6.  The Certificate of Title regarding the Ford automobile notes the first lien of “GE Capital Customize” as filed on April 20, 1999.  (Also marked as Exhibit A to Document # 20).

7.  On May 24, 1999 Geneva Yates filed a petition in this court for relief under chapter 7.

Anna C. Johnson was duly appointed and qualified as trustee.

8.  The trustee states that the claims of creditors exceed the assets of Yates available to creditors and that the trustee has insufficient funds to pay the unsecured creditors in full.   (Document # 20, Exhibit B).

CONCLUSIONS OF LAW:

1.  Chapter 11, Section 547(c)(3)(B) of the U.S. Bankruptcy Code (“USC”)  provides that a transfer may not be avoided as preferential to the extent it secures new value given in connection with the security agreement enabling the debtor to acquire the collateral and is perfected on or before 20 days after the debtor takes possession of the property.

2.  Possession means physical control or custody of the collateral.  In re Trott, 91 B.R. 808, 811 (Bankr. S.D. Ohio, 1988).

3.  Kentucky Revised Statute (“KRS”) 355.9-203 provides that there are three conditions which must be fulfilled before a security interest is enforceable and attaches: the debtor has signed a security agreement containing a description of the collateral, value has been given, and the debtor has rights in the collateral.

4.  The sole means of perfecting a security interest in a vehicle is by notation of the lien on the Certificate of Title.  KRS 186A.190.

5.  KRS 186A.195(5) provides that a security interest attaches at the time of purchase and that perfection occurs at the time of attachment if, for first title, within ten days of purchase the secured party tenders the required fees and submits to the appropriate county clerk a properly completed title lien statement and application for title.  If the process is not completed within ten days of purchase, perfection occurs at the time of completion of the process.

6.  The federal relation-back period of twenty days prevails.  In re Smallwood, 204 B.R. 519, 520 (Bankr. E.D.Ky. 1997).

7.  Filing an application for title is not the equivalent of filing a title lien statement.

8.  Because the Title Lien Statement in this case was filed in the Fayette County Clerk’s office on April 20, 1999 and that date also appears on the Certificate of Title as the date the lien was filed, April 20, 1999 is the date the security interest of GE Auto Credit was perfected.  In re Johnny and Ruth Smith (Maxie Higgason, trustee v. General Motors Acceptance Corporation, et al., Case No. 97-60041, Adv. No. 98-6020 (Bankr. E.D.Ky. April 28, 1999).

9.  Since the security interest was not perfected within the twenty-day time period provided in 11 U.S.C. § 547(c)(3)(B) and the presumptive insolvency of the debtors during the preferential conveyance has not been challenged, 11 USC § 547(f), the belated perfection of the lien of GE Auto Credit was a preferential conveyance and is avoidable by the trustee.

IT IS ORDERED that the motion of the trustee for summary judgment is granted, and the motion of GE Auto Credit for summary judgment is overruled.  This is a final and appealable order.

Dated:

By the court –

____________________________

JOSEPH M. SCOTT, JR.

U. S. BANKRUPTCY JUDGE

Copies to:

Ann E. Samani, Esq.

John T. Hamilton, Esq.

Carroll M. Redford, III, Esq.

Geneva Yates