## Facts

- On June 26, 1998, Richard and Terry Abruzzese purchased a Dodge van and financed part of the purchase price through the selling dealer.
- The Abruzzeses took possession of the van on June 26, 1998.
- The dealer later assigned the retail installment contract and the related security interest in the van to Mercury Finance Company of Virginia (Mercury).
- On July 22, 1998, the dealer filed an application for a certificate of title with the Virginia Department of Motor Vehicles (DMV) that identified Mercury as lienholder.
- The Abruzzeses had past-due obligations to the DMV, and the DMV did not issue the certificate of title until October 15, 1998.
- On November 13, 1998, the Abruzzeses filed a Chapter 7 bankruptcy petition.
- The Chapter 7 trustee (Huennekens) filed an adversary complaint seeking to avoid Mercury’s lien as a preferential transfer under 11 U.S.C. § 547(b), contending the lien was not perfected until the DMV issued the title on October 15, 1998.
- Mercury argued that perfection occurred on July 22, 1998, when the title application listing Mercury as lienholder was filed with the DMV.
- The court held a trial on the trustee’s complaint.

## Issues

1. For purposes of 11 U.S.C. § 547(b) and § 547(e), is a Virginia motor-vehicle lien perfected when a proper title application listing the lienholder is filed with the DMV, or only when the DMV later issues the certificate of title?

## Decision

- The court held that Mercury’s security interest was perfected on July 22, 1998, when the title application identifying Mercury as lienholder was filed with the Virginia DMV.
- The later issuance of the certificate of title on October 15, 1998, delayed by the debtors’ past-due DMV obligations, did not change the perfection date for preference analysis.
- Because the transfer (as measured by perfection) occurred more than 90 days before the November 13, 1998 bankruptcy filing, the trustee could not avoid Mercury’s lien under § 547(b).
- Judgment was entered for Mercury, and the trustee’s preference claim was denied.

## Legal Principles

- A trustee may avoid a transfer as preferential under 11 U.S.C. § 547(b) only if the transfer was made within the statutory look-back period (generally 90 days before the petition date for non-insiders).
- Under 11 U.S.C. § 547(e), the time a transfer is made depends on when the transfer is perfected; perfection is determined by applicable nonbankruptcy law and asks when a later judicial lien creditor could no longer obtain priority over the transferee.
- Under Virginia’s certificate-of-title system for motor vehicles, a lien is perfected when the required title application (showing the lienholder) is delivered to the DMV in proper form; the DMV’s later processing and issuance of the paper certificate of title is not the event that sets the perfection date.
- A delay in issuance of title attributable to the debtor’s separate DMV-related debts does not postpone perfection if the secured party (or its assignor) has timely submitted the proper application reflecting the lien.

## Conclusion

In *In re Abruzzese*, the bankruptcy court held that Mercury’s vehicle lien was perfected when the dealer filed the title application with the Virginia DMV listing Mercury as lienholder, not when the DMV later issued the title after resolving the debtors’ past-due DMV obligations. Because that filing date occurred more than 90 days before the Chapter 7 petition, the trustee could not avoid the lien as a preference under § 547(b).


In re Abruzzese, 252 B.R. 341 (1999)