Drown v. Perfect (In re Giaimo)

Summarized by Michael Coury , Glankler Brown, PLLC
15 years 2 months ago

Citation:

2010 FED App. 0011P (6th Cir.2010)

Tag(s):

6th Circuit

Ruling:

Applying Ohio law. the Bankruptcy Appellate Panel concluded that an application for certificate of title signed by the Debtor and which listed the Debtor's grandmother as the lienholder, coupled with the certificate of title noting such lien on the title, satisfied the requirement of a security agreement under Article 9 of the Uniform Commercial Code. Applying the "composite documents approach", the court found that the application for a certificate of title was signed and sworn to by the Debtor, identified the collateral by make, model and VIN number and listed the Debtor's grandmother as lienholder. The court distinguished these facts from cases which held that UCC financing statements were insufficient to constitute a security agreement since UCC financing statements may be recorded prior to the Debtor's acquisition of title to the identified collateral. By contrast, under Ohio law, an application for certificate of title may only be issued after the Debtor has acquired ownership of the vehicle. The BAP found that the Ohio Supreme Court, if presented with similar facts, would find that the application for certificate of title coupled with the certificate of title constituted a security agreement.

Procedural context:

Appeal from order of the bankruptcy court granting summary judgment in favor of the Chapter 7 trustee in an action to avoid a transfer pursuant to 11 U.S.C. section 544(a)(1).On appeal, the Bankruptcy Appellate Panel reversed the judgment of the trial court and granted judgment in favor of the Defendant.

Facts:

The debtor purchased a motor vehicle with funds loaned by her grandmother. No formal note or security agreement was entered into between the Debtor and her grandmother. The Debtor did, however, submit an application for certificate of title which identified the vehicle and listed the grandmother as the lienholder. The State of Ohio subsequently issued a certificate of title listing the grandmother as the lienholder on the vehicle. Subsequent to the Debtor's Chapter 7 petition, the Chapter 7 trustee filed an adversary proceeding seeking to avoid the transfer of a lien to the grandmother pursuant to 11 U.S.C. section 544(1)(1). The trustee filed a motion for summary judgment contending that the grandmother's lien noted on the certificate of title was unenforceable because of the lack of an Article 9 security agreement. The bankruptcy court granted the trustee's motion for summary judgment and the Bankruptcy Appellate Panel reversed.

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