## Facts

- Michael and Melissa Nutgrass were a married couple who filed a Chapter 7 bankruptcy petition in Kentucky.
- At the time of filing, the Nutgrasses lived in a manufactured home owned by Melissa Nutgrass.
- Melissa Nutgrass also owned the real property on which the manufactured home sat.
- The manufactured home had a certificate of title showing a lien in favor of Green Tree, a lending company.
- CitiFinancial Services (Citi) was a creditor with a lien interest connected to the real property and asserted a lien interest in the manufactured home as well.
- Citi was not listed as a lienholder on the manufactured home’s certificate of title.
- In the bankruptcy case, the Nutgrasses did not claim a homestead exemption in either the manufactured home or the real property.
- Citi argued it held a secured interest in the manufactured home because the home should be treated as a fixture to the real property.

## Issues

1. Whether Citi could enforce a secured interest in the manufactured home on a fixture theory, even though Citi’s lien was not noted on the home’s certificate of title.
2. Whether the lien noted on the manufactured home’s certificate of title (Green Tree’s lien) had priority over Citi’s asserted interest in the home.

## Decision

- The court treated the manufactured home as titled property subject to Kentucky’s certificate-of-title lien system.
- The court rejected Citi’s attempt to treat its real-property lien as a perfected lien against the manufactured home based only on fixture status.
- Because Citi was not shown as a lienholder on the manufactured home’s certificate of title, Citi did not have a perfected lien in the manufactured home as against competing claimants.
- Green Tree’s lien, reflected on the certificate of title, was recognized as perfected with respect to the manufactured home.

## Legal Principles

- A manufactured home that remains subject to Kentucky’s certificate-of-title regime is generally treated as personal property for lien-perfection purposes.
- For titled manufactured homes, perfection of a lien is ordinarily accomplished through notation of the lien on the certificate of title, not by recording a real estate mortgage.
- A creditor’s assertion that a manufactured home is a fixture to the debtor’s land does not, by itself, supply perfection where the state titling statute requires title notation.
- In bankruptcy, an unperfected lien is vulnerable when the estate’s representative or other parties assert rights that defeat unperfected security interests.

## Conclusion

In In re Nutgrass, the bankruptcy court held that Citi could not rely on a fixture theory tied to its real-property lien to establish a perfected secured interest in the debtors’ manufactured home when Citi was not listed on the home’s certificate of title; the lien noted on the title (Green Tree’s) was treated as perfected and superior as to the manufactured home.


In re Nutgrass, 79 UCC Rep. Serv. 2d 672 (2013)