## Facts

- On June 2, 2006, George McAlmont (Debtor) purchased a 1998 Suzuki motorcycle from Ackers Inc., d/b/a ASK (ASK).
- The Debtor and ASK executed a retail installment contract under which the Debtor agreed to pay in installments and granted ASK a purchase-money security interest in the motorcycle.
- The Debtor took possession of the motorcycle on June 2, 2006.
- On the same day, ASK assigned the installment contract and related security interest to Guardian Finance Company (Guardian).
- Guardian did not have its lien noted on the motorcycle’s Ohio certificate of title until July 1, 2006—29 days after the Debtor received possession.
- The Debtor later filed a Chapter 7 bankruptcy petition after Guardian’s lien appeared on the certificate of title.
- The Chapter 7 trustee, Frederick M. Luper (Trustee), filed an adversary proceeding to avoid Guardian’s interest, asserting avoidance theories under 11 U.S.C. § 547 (preference) and 11 U.S.C. § 544 (strong-arm).
- The Trustee moved for summary judgment only on the § 544 count, arguing the lien was not perfected because notation occurred outside the 20-day period referenced in U.C.C. § 9-324.
- The parties submitted the dispute on stipulated facts.

## Issues

1. Whether, under 11 U.S.C. § 544(a), a Chapter 7 trustee may avoid a creditor’s security interest in an Ohio motor vehicle when the lien is noted on the certificate of title before the bankruptcy petition date but more than 20 days after the debtor received possession.
2. Whether the 20-day timing referenced in U.C.C. § 9-324 (purchase-money priority) affects perfection, for § 544 purposes, where Ohio law perfects motor-vehicle liens by title notation.

## Decision

- The court denied the Trustee’s motion for summary judgment on the § 544 count.
- The court entered judgment in favor of Guardian on Count II (the § 544 claim).
- Guardian’s security interest was perfected under Ohio law when it was noted on the certificate of title, and that notation occurred before the petition date.
- The court rejected the Trustee’s argument that failure to notate within 20 days under U.C.C. § 9-324 rendered the lien unperfected and avoidable under § 544.
- The court explained that, for post-BAPCPA cases, § 547(c)(3)(B) provides a 30-day window for perfection of an enabling loan; Guardian’s title notation on day 29 fit within that window, so § 544 could not be used to reach a result inconsistent with the Bankruptcy Code’s purchase-money timing scheme.

## Legal Principles

- Under 11 U.S.C. § 544(a), a trustee has the rights of a hypothetical lien creditor (and certain purchasers) as of the petition date and may avoid interests that would be subordinate under applicable nonbankruptcy law at that time.
- In Ohio, a security interest in a motor vehicle is perfected by compliance with the Certificate of Motor Vehicle Title Act—generally, by notation of the lien on the certificate of title. Ohio Rev. Code § 4505.13(B).
- U.C.C. Article 9 recognizes that where a certificate-of-title statute governs perfection, perfection is achieved through the title statute rather than by filing a financing statement. See U.C.C. § 9-311.
- U.C.C. § 9-324’s 20-day rule addresses purchase-money priority contests; it does not define whether a vehicle lien is perfected against a judicial lien creditor when the lien has been noted on the certificate of title.
- In cases commenced after BAPCPA’s effective date, 11 U.S.C. § 547(c)(3)(B) provides that a trustee may not avoid, as a preference, a purchase-money security interest that is perfected on or before 30 days after the debtor receives possession of the collateral; this statutory timing informs the court’s analysis of avoidance efforts directed at enabling-loan liens.

## Conclusion

Because Guardian’s lien was noted on the motorcycle’s Ohio certificate of title before the bankruptcy filing (and within 30 days after the Debtor received possession), Guardian held a perfected security interest as of the petition date, and the Trustee could not avoid that interest under § 544 based on the 20-day timing language in U.C.C. § 9-324.


In re McAlmont, 385 B.R. 191 (2008)