Case Title: IN RE: GREGORY

Citation: 

Docket Number: 97741

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2004-07-06T00:00:00Z

Document:
IN RE: GREGORY  IN RE: GREGORY 2004 OK 57 97 P.3d 639 Case Number: 97741 Decided: 07/06/2004 THE SUPREME COURT OF THE STATE OF OKLAHOMA IN RE: GEORGE LEE GREGORY and BILLIE RUTH GREGORY, Debtors. SUSAN MANCHESTER, Trustee, Plaintiff, v. GREEN TREE FINANCIAL SERVICING CORPORATION and CONSECO FINANCE SERVICING CORPORATION, Defendants. CERTIFIED QUESTION OF LAW FROM THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF OKLAHOMA ¶0 United States Bankruptcy Judge for the Western District of Oklahoma, Richard L. Bohanon, certified the following question of law to this Court pursuant to the Revised Uniform Certification of Questions of Law Act, CERTIFIED QUESTION ANSWERED. Susan Manchester of Taylor & Manchester, Oklahoma City, Oklahoma, for Plaintiff. Sandy L. Schovanec of Phillips McFall McCaffrey McVay & Murrah, P.C., Oklahoma City, Oklahoma, for Defendant Conseco Finance Servicing Corporation. Jennifer H. Kirkpatrick of Phillips McFall McCaffrey McVay & Murrah, P.C., Oklahoma City, Oklahoma, for Green Tree Servicing, L.L.C., substituted successor Defendant to Conseco Finance Servicing Corporation. LAVENDER, J.: ¶1 This Court has been presented with a question of law certified from the United States Bankruptcy Court for the Western District of Oklahoma, Judge Richard L. Bohanon, pursuant to the Revised Uniform Certification of Questions of Law Act, [u]nder Oklahoma law, did the [d]efendants, who are creditors of the [d]ebtors, fail to properly perfect their security interest in the [d]ebtors' mobile home when they filed a lien entry form and application for a certificate of title containing the incorrect vehicle identification number (hereinafter "VIN") and where the VIN [] was incorrect by only one digit? Our answer to the question is as follows: if the existence of the lien was not readily ascertainable from a reasonably diligent/prudent search of the Oklahoma Tax Commission (OTC) records as a result of the creditor's one digit error in the vehicle's VIN on a lien entry form and application for a certificate of title submitted to the OTC or one of its motor license agents because it is assumed the applicable vehicle lien records of the OTC were filed/indexed solely according to a vehicle's VIN at the time of submission, the creditor's security interest in the vehicle would not be deemed properly perfected under Oklahoma law. PART I. FACTS AND PROCEDURAL HISTORY. ¶2 The debtors, George Lee Gregory and Billie Ruth Gregory, purchased a 1997 Cavalier Mobile Home from Sunbelt Homes. The correct vehicle identification number (VIN) of the mobile home is: ALCA0696680S40117. (Bolding and underlining added.) ¶3 The instant case has been subject to a stay order since March 2003, said Order issued by the Chief Justice, after this Court was notified by Conseco's March 11, 2003 filing that it had itself filed for bankruptcy protection in the Northern District of Illinois, Eastern Division. Although the stay remains in effect as to Conseco, the stay was dissolved in other respects by the Chief Justice's Order of June 9, 2004 after the Court was informed by filings herein that, consistent with developments in Conseco's Illinois bankruptcy, the bankruptcy judge in the Gregory Western District of Oklahoma bankruptcy had substituted an entity named Green Tree Servicing, L.L.C. (Green Tree, L.L.C.) as successor defendant to Conseco in the Gregory Oklahoma bankruptcy. In June 2004 Green Tree, L.L.C. formerly adopted as its own the brief in chief of Conseco previously filed with this Court and the matter is, thus, now ripe for decision. We also note, at places in this opinion we continue to refer to Conseco, notwithstanding our recognition that Green Tree, L.L.C. has been substituted as defendant for Conseco in the Western District of Oklahoma federal bankruptcy proceeding. ¶4 On or about July 3, 1996 Green Tree Corp. submitted three documents to and had them filed with an Oklahoma motor license agent in regard to perfecting a security interest in the mobile home and generating a certificate of title for it. The documents were: (1) a lien entry form showing the VIN for the mobile home as ALCA0696680540117; (2) an application for an Oklahoma certificate of title for a vehicle (i.e., the mobile home) showing the VIN as ALCA0696680540117; and (3) a manufacturer's statement or certificate of origin to a manufactured home (i.e., the mobile home) showing the VIN as ALCA0696680S40117. (Bolding and underlining added.) Obviously, (1) and (2) showed wrong VINs and (3) showed the correct VIN. ¶5 Also, separate lien and title receipts issued on or about July 3, 1996. Both the lien receipt and the title receipt, on their faces, show VINs. The lien receipt VIN matched the incorrect one contained on (1) and (2) above. The title receipt had the correct VIN. Furthermore, the lien receipt had a receipt number on it, to wit: 961857230A7962. (Bolding and underlining added.) The title receipt had a receipt number on it, 961857230A7967 (bolding and underlining added), that did not match the lien receipt number, but did match a number shown on the actual certificate of title that issued. The title receipt did not reflect any lien. ¶6 Subsequently, debtors filed their Chapter 7 bankruptcy petition in April 2001. At the time debtors filed for bankruptcy, the certificate of title that had been issued for the mobile home did not show a lien in favor of Green Tree Corp. or Conseco, or, for that matter, a lien at all. Further, the certificate of title had the correct VIN on it, apparently, the source document used for its preparation being the manufacturer's statement or certificate of origin to a manufactured home (i.e., the involved mobile home), said document being the one submitted to the agent by Green Tree Corp. in July 1996 that did contain the correct VIN. ¶7 On or about September 14, 2001 - i.e., after debtors filed for bankruptcy - a corrected lien form was filed (i.e., one containing the correct VIN) and a new lien receipt issued. Both of said documents (on their faces) appear to be an attempt to relate the effectiveness of the lien back to the July 1996 date that Green Tree Corp. initially submitted a lien entry form to the motor license agent with an incorrect VIN. ¶8 In the Oklahoma federal bankruptcy proceeding the trustee and Conseco both moved for summary judgment. The federal court concluded it was necessary to have this Court answer the certified question in order to properly determine whether the trustee or Conseco is entitled to summary judgment. In essence, the trustee asserts the one digit error in the VIN renders Conseco's security interest unperfected because another creditor would have had no notice of the lien in that the pertinent title and lien documents are indexed by OTC by VIN instead of by the name of the debtor and, thus, a reasonably diligent/prudent search of the OTC records would not reveal the existence of the lien. Conseco, in effect, asserts the one digit error is minor, that substantial compliance with necessary filing requirements to perfect the security interest occurred, and it was the duty of the license agent to have caught the error in the VIN. PART II. ANALYSIS. ¶9 Title A. 1. Except for a security interest in vehicles held by a dealer for sale or lease ... and a vehicle being registered in this state which was previously registered in another state and which title contains the name of a secured party on the face of the other state certificate or title, a security interest . . . in a vehicle as to which a certificate of title may be properly issued by the Oklahoma Tax Commission shall be perfected only when a lien entry form prescribed by the [OTC], and the existing certificate of title, if any, or application for a certificate of title and manufacturer's certificate of origin containing the name and address of the secured party and the date of the security agreement and the required fee are delivered to the [OTC] or to a motor license agent. . . . . The filing and duration of perfection of a security interest, pursuant to the provisions of Title 12A of the Oklahoma Statutes . . . shall not be applicable to perfection of security interests in vehicles as to which a certificate of title may be properly issued by the [OTC], except as to vehicles held by a dealer for sale or lease . . . . In all other respects Title 12A of the Oklahoma Statutes shall be applicable to such security interests in vehicles as to which a certificate of title may be properly issued by the [OTC]. 2. Whenever a person creates a security interest in a vehicle, such person shall surrender to the secured party the certificate of title or the signed application for a new certificate of title, on the form prescribed by the [OTC], and the manufacturer's certificate of origin. The secured party shall deliver the lien entry form and the required lien filing fee within twenty (20) days as provided hereafter with certificate of title or the application for certificate of title and the manufacturer's certificate of origin to the [OTC] or to a motor license agent. If the lien entry form, the lien filing fee and the certificate of title or application for certificate of title and the manufacturer's certificate of origin are delivered to the [OTC] or to a motor license agent within twenty (20) days after the date of the lien entry form, perfection of the security interest shall begin from the date of the execution of the lien entry form, but otherwise, perfection of the security interest shall begin from the date of the delivery to the [OTC] or to a motor license agent. * * * 7. The [OTC] shall have the duty to record the lien upon the face of the certificate of title issued at the time of registering and paying all fees and taxes due on the vehicle. (Emphasis added.) ¶10 In July 1996 (as today) the perfection of a security interest in a vehicle was primarily controlled by the above provisions. The filing of a financing statement under the Uniform Commercial Code (U.C.C.), Article 9, Secured Transactions (found in Oklahoma Statutes, Title 12A) is not necessary or effective to perfect a security interest in a vehicle covered by § 1110, the latter providing for central filing with the OTC, either directly or through one of its motor license agents. § 1110(A)(1)-(2); see Funnell, Secured Transactions: Certificates of Title - Delivery or Notation? The Lender's Dilemma, 37 Okla.L.Rev. 618, 619 (1984); ¶11 Although the Legislature obviously intended that notation/indication of the security interest on the certificate of title would be a mechanism by which to provide notice of a security interest in a vehicle to subsequent potential purchasers or creditors, the Legislature also sought to ensure that such other persons or entities would have a means to become aware of a security interest even when the security interest was not so noted on the certificate of title. Liberty Nat. Bank and Trust Co. of Oklahoma City v. Garcia, C. The [OTC] shall file and index certificates of title so that at all times it will be possible to trace a certificate of title to the vehicle designated therein, identify the lien entry form, and the names and addresses of secured parties, or their assignees, so that all or any part of such information may be made readily available to those who make legitimate inquiry of the [OTC] as to the existence or nonexistence of security interest in the vehicle. ¶12 As we read § 1110(C), particularly the clause of the sentence before the first comma - "[t]he [OTC] shall file and index certificates of title so that at all times it will be possible to trace a certificate of title to the vehicle designated therein" - the only method to comply with its dictates (i.e., the only way to trace the title to a specific vehicle) is to use the VIN as the filing/indexing criterion. Although there may be certain cross-indexing techniques used by OTC (e.g. receipt number, title number, or debtor name), the record presented with the certified question does not reveal or detail such alternative cross-indexing mechanisms; thus, for our answer to the certified question we must assume the applicable filing/indexing scheme used by OTC is by VIN. ¶13 In In Re Cook, supra, this Court held that whether the filing requirements under the motor vehicle lien statutes have been substantially complied with so as to give the requisite notice to other creditors depends on the facts of each case. ¶14 Almost thirty (30) years ago in the case of Central Nat. Bank. & Trust Co. of Enid v. Community Bank & Trust, ¶15 Our answer to the certified question is, therefore, as follows: if the existence of the lien was not readily ascertainable from a reasonably diligent/prudent search of the Oklahoma Tax Commission (OTC) records as a result of the creditor's one digit error in the vehicle's VIN on a lien entry form and application for a certificate of title submitted to the OTC or one of its motor license agents because it is assumed the applicable vehicle lien records of the OTC were filed/indexed solely according to a vehicle's VIN at the time of submission, the creditor's security interest in the vehicle would not be deemed properly perfected under Oklahoma law. CERTIFIED QUESTION ANSWERED. ¶16 OPALA, V.C.J., HODGES, LAVENDER, HARGRAVE, KAUGER, BOUDREAU, WINCHESTER and EDMONDSON, JJ., concur. ¶17 WATT, C.J., dissents. FOOT