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Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 

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OFFICE OF THE CLERK 

United States Court of Appeals for the Tenth Circuit 

C~404 United States Courthouse 

1929 Stout Street 

Denver Colorado 80294 

January 25, 1993 

TO: ALL RECIPIENTS OF THE CAPTIONED OPINION 

RE: 91-6342, Webb v. GMAC 

Filed January 19, 1993 by Judge Campos 

Please disregard the captioned opinion as mailed January 

19, 1993. A corrected copy is attached. 

Attachment 

Very truly yours, 

ROBERT L. HOECKER, Clerk 

Barbara Schermerhorn 

Deputy Clerk 

Appellate Case: 91-6342 Document: 010110159225 Date Filed: 01/25/1993 Page: 1 
P U B L I S B 

- ··tnnTED STATES COURT OF APPEALS 

TENTH CIRCUIT 

In Re: 

JAMES KNITTLE HESSER AND 

DORIS MARIE HESSER, 

Debtors, 

WILLIAM N. WEBB, Trustee, 

Plaintiff/Appellee, 

vs. 

GENERAL MOTORS ACCEPTANCE 

CORPORATION, a New York 

corporation, 

Defendant/Appellant. 

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FIL.L...J 

United States Court of Appeal." Tenth Circuit 

JAN 19 1993 

ROBERT L. HOECKER 

Clerk 

No. 91-6342 

Appeal from the United States District Court 

for the Western District of Oklahoma 

(D.C. No. CIV-91-701-T) 

Anthony L. Jackson, of Brockett, Jackson & Spaeth, Oklahoma City, Oklahoma, for Plaintiff/Appellee. 

James A. Pardo, of King & Spalding, Atlanta, Georgia (John J. Love 

and James H. Bellingham, of McClelland, Collins, Bailey, Bailey & 

Bellingham, Oklahoma City, Oklahoma, with him on the brief), for 

Defendant/Appellant. 

Douglas G. Eason, of Fuller, Tubb & Pomeroy, Oklahoma City, Oklahoma, for Amicus Curiae Oklahoma Credit Union League. 

Thomas G. Marsh, of Marsh, Sutton & Shacklett, Tulsa, Oklahoma, for 

Amicus curiae Oklahoma Automobile Dealers' Association. 

Appellate Case: 91-6342 Document: 010110159225 Date Filed: 01/25/1993 Page: 2 
Before MOORE and SETH, Circuit Judges, and CAMPOS, District Judge* 

CAMPOS, District Judge 

In this appeal we are required to construe 11 u.s.c. S 547 of 

the Bankruptcy Code to determine the applicable method and timing 

of the perfection of a security interest for purposes of 

preferences in bankruptcy. The Bankruptcy Court entered judgment 

for the Trustee and, on appeal, the District Court affirmed. It 

held that the ten-day grace period provided in SS 547(c) (3) and 

(e) (2) overrides S 547(e)(l) which directs that the date and method 

of perfection is as provided in state statutes. We disagree and 

reverse. 

I. STATEMENT OF THE CASE 

The relevant facts are undisputed. On April 16, 1990, James 

and Doris Hesser (the "Debtors") purchased a new 1990 Toyota and 

received possession the same day. At the same time, they entered 

into a Retail Installment Sale Contract and Security Agreement with 

Northcutt Chevrolet-Buick Company ("Northcutt"). on the same day, 

Northcutt, as required by Oklahoma law, executed a Lien Entry Form 

and sent it to the motor license agent. Oklahoma law provides that 

*The Honorable Santiago E. Campos, United States District 

Judge for the District of New Mexico, sitting by designation. 

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Appellate Case: 91-6342 Document: 010110159225 Date Filed: 01/25/1993 Page: 3 
when a Lien Entry Form is presented to the Oklahoma Tax Commission 

or its agent within fifteen days after execution of the Lien Entry 

Form, the perfection of the security interest relates back to the 

date of the execution of the security agreement. Okla. Stat. Ann. 

47 S 1110.A.2 (1981 & Supp. 1991). Pursuant to the Oklahoma 

statute, the Lien Entry Form was delivered to the Commission or its 

agent on May 1, 1990, the fifteenth day after execution of the Lien 

Entry Form. The security interest in the truck was thus perfected, 

according to Oklahoma law, as of April 16, 1990, the date of the 

execution of the security agreement. 

Northcutt then assigned the Retail Installment Sale Contract 

to General Motors Acceptance Corporation ("GMAC") . On May 18, 1990 

the Debtors filed for Chapter 7 bankruptcy. Plaintiff/appellee 

Webb was appointed trustee of the Debtors' estate ("Trustee"). on 

October 26, 1990, the Trustee sought to set aside the transfer of 

the security interest to GMAC as a preference pursuant to 11 u.s.c. 

S 547(b). The parties filed cross-motions for summary judgment. 

The Trustee argued that GMAC's security interest in the 

Debtors' truck can and should be set aside pursuant to 11 u.s.c. 

S 547(b). The only contested element regarding the avoidance was 

whether the transfer of the security interest to GMAC was "for or 

on account of an antecedent debt owed by the debtor before such 

transfer was made." 11 u.s.c. S 547{b) (2). The Trustee maintained 

that the definition of "when a transfer is made" is contained in 

11 u.s.c. S 547{e) (2) which provides, in pertinent part, that a 

transfer takes effect within ten days of the transfer or perfection 

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Appellate Case: 91-6342 Document: 010110159225 Date Filed: 01/25/1993 Page: 4 
of the transfer. 1 He argued that GMAC's security interest was 

perfected on May 1, 1990, more than ten days after the execution of 

the security agreement, and that the creation of the debt therefore 

occurred prior to, and not contemporaneously with, the transfer of 

the security interest. Thus, the Trustee argued the transfer was 

"for or on account of an antecedent debt" and the elements 

necessary for the Trustee to avoid the transfer are satisfied. 

GMAC responded that, according to S 547(e) (1) (B), the proper 

date of perfection was April 16, 1990, as provided by state law. 

Therefore, the transfer was contemporaneous with the creation of 

the debt and there was no transfer "for or on account of an 

antecedent debt." Furthermore, because GMAC's security interest 

was perfected on April 16, 1990, GMAC claimed protection under 

S547(c) (3), which provides, in pertinent part, that a trustee may 

not avoid a transfer of a security interest in property acquired by 

the debtor if the security interest secures new value, is given to 

enable the debtor to acquire the property, and is perfected on or 

before ten days after the debtor receives possession of such 

11 u.s.c. S 547(e) (2) provides: 

(e) (2) For the purposes of this section, except as provided 

in paragraph (3) of this subsection, a transfer is made--

(A) at the time such transfer takes effect between the 

transferor and the transferee, if such transfer is 

perfected at, or within 10 days after, such time; 

(B) at the time such transfer is perfected, if such transfer 

is perfected after such 10 days; or 

(C) immediately before the date of the filing of the 

petition, if such transfer is not perfected at the later 

of--

(i) 

(ii) 

the commencement of the case; and 

10 days after such transfer takes effect between 

the transferor and the transferee. 

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Appellate Case: 91-6342 Document: 010110159225 Date Filed: 01/25/1993 Page: 5 
property. 2 Because GMAC's security interest in the truck was 

perfected on April 16, which is on or before ten days after the 

debtor received possession of the truck, GMAC argues that the 

transfer cannot be avoided by the Trustee. 

on April 12, 1991, the Bankruptcy court granted the Trustee's 

Motion for Summary Judgment and ordered that GMAC's lien be avoided 

in favor of the Trustee. On appeal to the United States District 

Court, the District Court affirmed the Bankruptcy Court. 

II. ANALYSIS 

This appeal raises a question concerning the interpretation 

and application of the Bankruptcy Code, which is subject to de novo 

review by this Court. In Re Chase & Sanborn Corp., 904 F.2d 588 

(11th Cir. 1990). The sole issue in dispute is the appropriate 

timing and method of the perfection of a security interest provided 

for in S 547 of the Bankruptcy Code. We agree with the Eleventh 

2 11 u.s. c. S 547(c) (3) provides: 

(c} The trustee may not avoid under this section a transfer--

CJ} of a security interest in property acquired by the 

debtor--

(A} to the extent such security interest secures new 

value that was--

(i) given at or after the signing of a 

security agreement that contains a description 

of such property as collateral; 

(ii} given by or on behalf of the secured party 

under such agreement; 

(iii) given to enable the debtor to acquire such 

property; and 

(iv) in fact used by the debtor to acquire such 

property; and 

(B) that is perfected on or before 10 days after the 

debtor receives possession of such property. 

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Appellate Case: 91-6342 Document: 010110159225 Date Filed: 01/25/1993 Page: 6 
Circuit that the Bankruptcy Code adopts state law to determine the 

date of perfection under S 547(e) (1) (B). In Re Busenlehner, 918 

F.2d 928 (11th Cir. 1990), cert. denied, __ U.S. __ , 111 s.ct. 

2251, 114 L.Ed.2d 492 (1991). 

Sections 547(e) (1) (A) and (B) provide for the means of 

determining the date of perfection of a transfer for purposes of 

preference actions. Subsection (A) applies to the perfection of a 

transfer of real property other than fixtures. Subsection ( B) 

applies to the perfection of a transfer of a fixture or property 

other than real property and provides: 

For purposes of this section a transfer of a 

fixture or property other than real property 

is perfected when a creditor on a simple 

contract cannot acquire a judicial lien that 

is superior to the interest of the transferee. 

(emphasis added) 

Thus, in order to determine the date of perfection, it is necessary 

to determine when the perfected security interest can beat a 

judicial lien in a priority battle. In Re Busenlehner, 918 F.2d at 

930. This determination is made by reference to state law. l9.:..i 

see also E.F. Corp. v. Smith, 496 F.2d 826, 830 (10th Cir. 1974) 

("the time of transfer is determined by federal law, but state law 

determines the perfection of the right"). 

After the date of perfection is determined, the time of the 

transfer must be ascertained and must fit within the ten-day grace 

period provided in§ 547(e) (2). This grace period is the period 

of time in which an unperfected security interest takes precedence 

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Appellate Case: 91-6342 Document: 010110159225 Date Filed: 01/25/1993 Page: 7 
over other creditors, including the trustee in bankruptcy. 3 Thus 

S 547(e) provides for a two-step process: first, determine the 

date of perfection according to state law pursuant to 

SS 547(e) (1) (A) or (B), and second, determine the time of transfer 

pursuant to S 547(e) (2), 

Because under Oklahoma law GMAC's security interest was 

perfected on April 16, April 16 is also the date that GMAC' s 

security interest was perfected for purposes of S 547 because it is 

the date on which "a creditor on a simple contract cannot acquire 

a judicial lien that is superior" to the secured creditor, GMAC. 

11 U.S.C. S 547(e) (1) (B). Because the date of the perfection 

coincides with the date on which the security interest was granted, 

the transfer of the security interest was not "for or on account of 

an antecedent debt," 11 u.s.c. S 547 (b) (2), and also was "perfected 

on or before 10 days after the debtor receive(d] possession of the 

property." 11 U.S.C. S 547(c)(3)(B). Therefore, because the 

Trustee cannot meet all the elements necessary to avoid the 

transfer pursuant to S 547 (b) and furthermore, GMAC can claim 

protection under S 547(c)(3), the transfer cannot be avoided by the 

Trustee. 

3 The District Court relied on In re Hamilton, 892 F.2d 1230 

(5th Cir.1990). However, the issue addressed in Hamilton is 

different than the issue presented in the present case. The issue 

in Hamilton was the conflict between the 20-day grace period in 

Texas and the ten-day grace period in S 547; the case did not deal 

with the date of perfection. The debtor in Hamilton signed a 

promissory note on March 2nd, took possession of the car on 

March 8th and the lien was perfected on March 19th. There was no 

dispute as to the date of perfection. 

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Appellate Case: 91-6342 Document: 010110159225 Date Filed: 01/25/1993 Page: 8 
We agree with the Busenlehner court that this conclusion is 

supported by the policies underlying preference law: 

The goal of the drafters of this provision of 

the 1978 Bankruptcy Reform Act was to bring 

preference law 'more into conformity with 

commercial practices and the Uniform 

Commercial Law.' S.Rep. No. 989, 95th Cong., 

2d Sess. 87 (1977), reprinted in 1978 U.S. 

Code Cong. & Admin. News 5787, 5873. 

Creditors are encouraged by our legal system 

to secure their loans. The general message to 

creditors is that should they follow state 

commercial law their secured loans will be 

protected in bankruptcy. . • . The creditor, 

moreover, [lends] the money in the expectation 

the creditor's compliance with state law [is] 

sufficient to protect the loan. Debtors 

should not be given the ability to surprise 

and upset established commercial practices by 

filing for bankruptcy and avoiding this 

otherwise acceptable security interest. 

In Re Busenlehner, 918 F.2d at 931. 

III. CONCLUSION 

For the foregoing reasons, we reverse the judgment of the 

District Court. We remand to the District Court with instructions 

to remand to the Bankruptcy Court to enter judgment in favor of 

GMAC. 

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