IN RE INGRAM, (Bankr.D.Wyo. 1999)

PETER McNIFF, United States Bankruptcy Judge.

This case came before the court for hearing on September 14, 1999 on the plaintiff's Motion for Summary Judgment. The plaintiff, Randy L. Royal, brought his complaint seeking to avoid a transfer of a security interest to the defendant, Campco Federal Credit Union (Campco), through the avoidance powers found in 11 U.S.C. § 547(b).

JURISDICTION

The court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 157 and 1334. This is a core proceeding within the definition of 28 U.S.C. § 157(b)(2)(F). The trustee's motion is brought under Fed.R.Civ.P. 56, made applicable in adversary proceedings by Fed.R.Bankr.P. 7056.

Summary judgment is appropriate when there is no disputed issue of material fact and the moving party is entitled to judgment as a matter of law. In re Baum, 22 F.3d 1014, 1016 (10th Cir. 1994). Under Rule 56(c), summary judgment is proper only if the evidence, reviewed in the light most favorable to the party opposing the motion, demonstrates no genuine issue of any material fact. Frandsen v. Westinghouse Corp., 46 F.3d 975, 976 (10th Cir. 1995).

A material fact is one that could affect the outcome of the suit, and a genuine issue is one where the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Farthing v. City of Shawnee, Kan., 39 F.3d 1131, 1134 (10th Cir. 1994). The defendant argues there are genuine issues of material fact requiring a trial on the merits, but the court concludes that summary judgment is proper based on the facts introduced by both parties, viewing the evidence in the light most favorable to Campco.

FINDINGS OF FACT

A chronology of events is sufficient to resolve the issue before the court. Campco is a credit union located in Gillette, Wyoming. In May 1998, the debtors in the underlying bankruptcy case, Robert and Penny Ingram, submitted a loan application to Campco with the sticker from a 1999 Ford pickup which they hoped to purchase. On May 28, 1998, the Ingrams executed a promissory note to Campco in the amount of $31,000.

That same date, Campco deposited $17,820 in the debtors' share account and $13,179 to a loan account. The loan account funds were applied to pay off a note on a 1993 Suburban which Ingrams owned, and which was to be traded in on the 1999 Ford. Campco also gave the debtors a lien release on the Suburban.

When the loan proceeds were advanced, Campco was aware that the Ingrams were purchasing the Ford pickup from outside the Gillette area. On May 28, 1998, a Campco employee instructed the Ingrams to obtain a new title to the Ford pickup and provide it to Campco "as soon as possible."

Ingrams purchased the 1999 Ford pickup in Belle Fourche, South Dakota on May 29, 1998. They wrote a personal check to the dealer and signed over the title to the Suburban.

On both June 12, 1998 and July 8, 1998, Campco sent the Ingrams a letter requesting the title. The letters do not address the time considerations associated with acquiring the title. On July 6, 1998, Mrs. Ingram paid the registration and licensing fees at the Campbell County Clerk's office and was given a title to the Ford pickup. Only then did the debtors have sufficient funds to pay the licensing fees and sales tax due.

Mrs. Ingram mailed to or delivered the title to Campco, which was received on July 13, 1998. The Campco lien was recorded on the title on July 15, 1998.

On October 7, 1998, Ingrams filed their voluntary chapter 7 petition. The schedules show the Ingrams were insolvent on the date of filing. Campco does not dispute the presumption that Ingrams were insolvent on July 15, 1998. The Campco lien was recorded on the title to the Ford pickup within 90 days of the filing of the bankruptcy petition.

CONCLUSIONS OF LAW

The trustee seeks to avoid the perfection of Campco's lien as a preferential transfer pursuant to 11 U.S.C. § 547(b). The creation of a security interest in a vehicle is a transfer which, under § 547(e)(1)(B) (e)(2), occurs when it is perfected; that is, when the secured party has done all acts required to perfect its interest under state law. Fidelity Financial Services, Inc. v. Fink, 522 U.S. 211, 118 S.Ct. 651, (1998). Campco does not dispute that the elements of a preferential transfer are present in this case.

The Bankruptcy Code provides a twenty-day grace period during which a secured party can accomplish perfection of a purchase money security interest. 11 U.S.C. § 547(e)(2)(A) (c)(3)(B). Even though the Campco lien was recorded 48 days after the funds were advanced, Campco argues that an equitable exception to § 547 exists or that the contemporaneous exchange exception of § 547(c)(1) is applicable.

The law is settled that in the purchase money (enabling) loan context, § 547(c)(1) is not available to protect a lender from a § 547 avoidance action. See, e.g., In re Locklin, 101 F.3d 435, 443 (5th Cir. 1996); In re Holder, 892 F.2d 29 (4th Cir. 1989). All circuit courts ruling on this issue have held that § 547(c)(3) is the only exception available to a purchase money security interest lender. The Tenth Circuit has not ruled on the question, but did apply a strict statutory construction to § 547(c)(3) in In re Hesser, 984 F.2d 345, 348 (10th Cir. 1993).

In cases where the courts applied § 547(c)(1) to the perfection of a lien, the facts involve non-purchase money loans. In re Marino, 193 B.R. 907 (Bankr. 9th Cir. 1996), aff'd 117 F.3d 1425 (9th Cir. 1997). But, see, In re Arnette, 731 F.2d 358 (6th Cir. 1984) (section 547(c)(1) not applicable to either non-purchase interests or enabling loans).

Nevertheless, Campco argues it should not be held to the twenty-day perfection period in § 547(c)(3) because the delay in this case was caused by the debtors and by practices of the county clerk implementing Wyoming statutes. Campco also argues that part of this loan was not an enabling loan.

Even if there exists an equitable exception available to a creditor who fails to comply with § 547(c)(3), this case is not it. Wyoming law requires that every owner of an untitled vehicle, if required to be titled, shall apply for a certificate of title at the office of the county clerk. Wyo. Stat. Ann. § 31-2-101 (Michie 1999). The application for a title to a new vehicle must be accompanied by the manufacturer's certificate of origin. Wyo. Stat. Ann. § 31-2-103(a)(iii) (Michie 1999). At that time, any filed lien is recorded on the title.

However, even if true that the Campbell County clerk will not issue a certificate of title until sales tax and registration fees are paid, Campco was in complete control of the fund disbursement and lien release on the Suburban. Campco did not advise the debtors of the actual time limitations and considerations involved. Campco did not inquire as to who the dealer was, did not contact the dealer, did not take steps to have the debtors execute a title application at the time of the loan or the time of purchase, and did not make arrangements with the dealer that would have provided the necessary documents to insure protection of the security interest. In short, Campco carelessly relied on the debtors to perform tasks which were Campco's responsibility to protect its own interests, contrary to prudent lending practices.

Campco also argues that a portion of the loan proceeds is not attributable to a purchase money loan. The court disagrees. Part of the proceeds paid off a loan on the Suburban which the debtors traded in as part of the consideration for the new vehicle purchase. This was all part of a transaction which secured the new loan with a security interest in a new vehicle given specifically for that purpose.

There is no evidence of relevant facts which excuse Campco from the requirements of 11 U.S.C. § 547 (c)(3). The court will issue judgment for the plaintiff on his complaint.