Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnb-1_19-ap-40012/USCOURTS-alnb-1_19-ap-40012-0/pdf.json

Parties Involved:
Karen H. Carden
Plaintiff
Ditech Financial, LLC
Defendant
Linda Baker Gore
Trustee

Document Text:

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF ALABAMA 

EASTERN DIVISION 

IN RE: } 

 Karen H. Carden, } 

 } CASE NO. 19-40458-JJR13 

 Debtor. } 

Karen H. Carden and } 

Linda Baker Gore, Chapter 13 Trustee, } 

 } 

 Plaintiffs, } 

v. } AP No. 19-40012-JJR 

 } 

Ditech Financial, LLC, } 

 } 

Defendant. } 

MEMORANDUM OPINION 

Introduction 

The Debtor and the Chapter 13 Trustee (the “Plaintiffs”) commenced this adversary 

proceeding against Ditech Financial, LLC (“Ditech”) pursuant to Bankruptcy Code (the “Code”) 

§ 544(a)(1) and (a)(2) to avoid a security interest Ditech claims in the Debtor’s double-wide 1996 

Fleetwood mobile home (the “Mobile Home”).1 Those Code sections read as follows: 

1 The adversary complaint does not specify whether the Plaintiffs are proceeding under 

Code § 544(a)(1), (a)(2), (a)(3), or (b), and it repeatedly uses the phrase “hypothetical lien 

creditor,” which would only be applicable under § 544(a)(1) and (a)(2). In their briefs, the 

Plaintiffs and Ditech at times discuss notice issues as though constructive notice were an issue, as 

it would be if the Trustee were acting as a hypothetical, bona fide purchaser under § 544(a)(3) and 

the Mobile Home were real property. As admitted in their reply brief (Doc. 22), despite much 

discussion of notice and real property principles, the Plaintiffs do not claim bona fide purchaser 

status and admit the Mobile Home remains personal property. Thus, the court concludes that the 

Plaintiffs are proceeding under § 544(a)(1) and possibly (a)(2) as well. 

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(a) The trustee shall have, as of the commencement of the case, and without regard 

to any knowledge of the trustee or any creditor, the rights and powers of, or may 

avoid any transfer of property of the debtor or any obligation incurred by the 

debtor that is voidable by— 

(1) a creditor that extends credit to the debtor at the time of the commencement 

of the case, and that obtains, at such time and with respect to such credit, a 

judicial lien on all property on which a creditor on a simple contract could 

have obtained such a judicial lien, whether or not such a creditor exists; 

(2) a creditor that extends credit to the debtor at the time of the commencement 

of the case, and obtains, at such time and with respect to such credit, an 

execution against the debtor that is returned unsatisfied at such time, 

whether or not such a creditor exists . . . . 

Code § 541(a)(1) and (2). The Debtor is also seeking a valuation of the Mobile Home under Code 

§ 506(a) in the event Ditech’s lien is not avoided. Ditech objects to the avoidance of its lien, and 

disputes the value proposed by the Debtor. 

The parties filed cross-motions for summary judgment (AP Docs. 18 and 19 and herein, 

the “Motions”) under Fed. R. Bankr. P. 7056. The court took the Motions under advisement 

following the submission of briefs. Confirmation of the Debtor’s proposed plan in the underlying 

chapter 13 case has been continued pending a ruling on the Motions. After considering the 

Motions and submissions in support thereof, the parties’ briefs and arguments, the undisputed 

facts, and the applicable law, the court has determined that Ditech’s Motion is due to be granted, 

and the Plaintiffs’ Motion denied, with respect to the issue of whether Ditech’s security interest 

may be avoided by the Trustee under Code § 544(a). Material facts remain in dispute regarding 

the Mobile Home’s value, and both Motions will be denied to the extent they seek to establish such 

value. While Fed. R. Bankr. P. 7052 expressly provides that the court is not required to state 

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separate findings and conclusions in ruling on a motion under Fed. R. Bankr. P. 7056, the court 

has, nonetheless, set out its findings and conclusions herein.2

 

Summary Judgment Standard 

A motion for summary judgment on the merits of the complaint is controlled by Fed. R. 

Bankr. P. 7056, which provides that Fed. R. Civ. P. 56 applies in bankruptcy adversary 

proceedings. The court may grant summary judgment to a moving party when that party 

demonstrates “there is no genuine issue as to any material facts and . . . the moving party is entitled 

to judgment as a matter of law.” Fed. R. Civ. P. 56(c). In considering the merits of a motion for 

summary judgment, the court’s role is not to determine the truth of the matter asserted or the weight 

of the evidence, but to determine whether the factual disputes, if any, raise genuine issues for 

trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). In making this determination, 

the facts are to be considered in a light most favorable to the non-moving party. Id.; Celotex Corp. 

v. Catrett, 477 U.S. 317, 323 (1986); Allen v. Board of Public Educ., 495 F.3d 1306 (11th Cir. 

2007). 

This standard can be met by the movant, in a case in which the ultimate burden of 

persuasion at trial rests on the nonmovant, either by submitting affirmative 

evidence negating an essential element of the nonmovant's claim, or by 

demonstrating that the nonmovant's evidence itself is insufficient to establish an 

essential element of his or her claim. The burden then shifts to the nonmovant to 

make a showing sufficient to establish the existence of an essential element to his 

claims, and on which he bears the burden of proof at trial. To satisfy this burden, 

the nonmovant cannot rest on the pleadings, but must by affidavit or other 

appropriate means, set forth specific facts showing that there is a genuine issue for 

trial. Fed. R. Civ. P. 56(e). The court's function in deciding a motion for summary 

judgment is to determine whether there exist genuine, material issues of fact to be 

tried, and if not, whether the movant is entitled to a judgment as a matter of law. It 

2

This court has jurisdiction to hear this matter pursuant to 28 U.S.C. §§ 157 and 1334, and 

the General Order of Reference, as amended, entered by the United States District Court for the 

Northern District of Alabama. This is a core proceeding under 28 U.S.C. § 157(b)(2)(B) and 

(b)(2)(K), and both parties have appeared and consented to this court’s jurisdiction. Therefore, the 

court has authority to enter a final order. 

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is the substantive law that identifies those facts which are material on motions for 

summary judgment. 

When the court considers a motion for summary judgment it must refrain from 

deciding any material factual issues. All the evidence and the inferences from the 

underlying facts must be viewed in the light most favorable to the nonmovant. The 

movant bears “the exacting burden of demonstrating that there is no dispute as to 

any material fact in the case.” 

 

Brown v. Mendel, 864 F. Supp. 1138, 1142–43 (M.D. Ala. 1994), aff'd sub nom. Brown v. Enstar 

Grp., Inc., 84 F.3d 393 (11th Cir. 1996) (internal citations omitted). “Cross-motions must be 

considered separately, as each movant bears the burden of establishing that no genuine issue of 

material fact exists and that it is entitled to judgment as a matter of law. If there is no genuine issue 

and one of the parties is entitled to prevail as a matter of law, the court may render summary 

judgment.” Shaw Constructors v. ICF Kaiser Engineers, Inc., 395 F.3d 533, 538–39 (5th Cir. 

2004). 

Findings of Fact 

The facts are not in dispute, at least regarding the lien avoidance issue, and are set out in 

detail in the adversary pleadings, the Debtor’s chapter 13 petition and schedules in the instant case 

as well as in her previous bankruptcy cases, and the Motions with their supporting affidavits and 

evidentiary submissions. Thus, to rule on the § 544(a) lien avoidance issue raised in the Motions, 

the court must answer only questions of law. However, a material question of fact remains 

unanswered regarding valuation of the Mobile Home pursuant to Code § 506(a). 

On November 15, 1995, the Debtor and her former husband purchased the Mobile Home 

with the proceeds of a loan from Green Tree Financial Corp-Alabama, Ditech’s predecessor before 

a series of mergers and name changes. The loan is evidenced by a Manufactured Home Retail 

Installment Contract and Security Agreement signed by the Debtor and her former husband. The 

Agreement granted Ditech’s predecessor a security interest in the Mobile Home, and that security 

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interest was properly noted on the Mobile Home’s certificates of title.3 Ditech filed an in rem claim 

in this case for $27,324.45 purportedly secured by the Mobile Home (claim 2-2). The parties do 

not dispute that Ditech has not been paid in full and that the certificates of title show Green Tree 

as lienholder, and that the lien has not been voluntarily released. The Debtor and her husband 

divorced in 2004 and the Debtor became the Mobile Home’s sole owner. (Doc. 18, Carden Aff. ¶ 

3 and Ex. 1.) 

The Debtor received a discharge in a prior chapter 7 case (Case No. 01-41405-JSS7) in 

which Ditech requested and was granted relief from the automatic stay. (01-41405-JSS7 Doc. 9.) 

The Debtor did not reaffirm the obligation secured by the Mobile Home in that case and, therefore, 

her personal liability owing to Ditech for the Mobile Home loan was discharged. Following the 

discharge, the Debtor defaulted and Ditech obtained a judgment for possession of the Mobile 

Home from a state court in October 2013. (Doc. 19, Dropper Aff. Ex. G.) Ditech had not 

dispossessed the Debtor when she filed her second chapter 7 case in August 2018 (Case No. 18-

41380-JJR7) in which the Debtor indicated her intent to redeem the Mobile Home for $15,500, its 

alleged value in her Statement of Intent. (18-41380-JJR7 Doc. 9.) However, in that case the 

Debtor claimed in Schedule A/B that the Mobile Home’s value was only $8,000 due to water 

damage. (18-41380-JJR7 Doc. 1 p. 15, part 7.) Whatever its value, the Debtor never moved to 

redeem nor tendered any redemption price, and the case discharged and closed without the 

redemption. 

3

 The Mobile Home is a “double-wide” and there are two certificates of title, one for each 

of its two sides. 

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Soon thereafter, the Debtor filed the instant chapter 13 case, in which she is not eligible for 

another discharge.4

 In this case, the Debtor scheduled Ditech as a creditor holding a secured claim 

of $8,000 (again reducing the value of the Mobile Home from $15,500 due to needed repairs, as 

shown on BK Doc. 1 p. 15) and an unsecured claim of $20,861.12 designated as disputed in 

Schedule D. (BK Doc. 1 p. 19.) Ditech was unable to inspect the Mobile Home and alleged it has 

a retail value of between $28,262.88 and $19,784.02 depending upon its condition. (Droppers Aff. 

¶ 10.) 

In the instant case the Debtor scheduled one unsecured claim for $1,500. (BK Doc. 1 p. 

23.) However, the claimholder has not filed a proof of claim and the claims bar date has expired. 

An unscheduled creditor, 1st Franklin Financial, did file a timely claim (claim 1), but it appears to 

be ripe for disallowance because it was discharged in the Debtor’s most recent prior chapter 7 case. 

And remember the Debtor’s personal liability to Ditech was likewise discharged in a previous 

chapter 7 case. Thus, although the Trustee is the nominal party in interest and asserts she has 

standing to bring this avoidance action, the benefit of avoiding Ditech’s lien would inure not to 

unsecured creditors—there appear to be none holding allowable claims—but entirely to the Debtor 

who, if the Plaintiffs are successful in this proceeding, will own the Mobile Home free and clear 

of Ditech’s security interest without any obligation to account for its value through her chapter 13 

plan. 

After the Plaintiffs filed this adversary proceeding, Ditech requested and received Certified 

Record Responses (the “DOR Responses”) from the Alabama Department of Revenue (the 

“DOR”) in respect to the title of the Mobile Home. (Droppers Aff. Ex. K.) At the bottom of the 

4

 The Debtor received a discharge in her most recent chapter 7 case, which was filed less 

than four years ago. Code § 1328(f)(1) disallows a discharge in a chapter 13 case if the debtor 

received a discharge in a chapter 7 case filed within the preceding four years. 

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first page of DOR Responses were boxes DOR had checked that stated: “Notation here certifies 

that the Motor Vehicle Division databases of the Alabama Department of Revenue reflect no 

record for the vehicle identified in this printout.” (As discussed below, the DOR is no longer 

required to maintain records for mobile homes that are over 20 years old.) However, attached to 

the DOR Responses were “Title Application Snapshots” that disclosed the Mobile Home’s title 

numbers; issue date; purchase date; VINs; make, model, and year; the owners’ names—the Debtor 

and her former husband—together with their address; the lienholder’s name—Green Tree 

(Ditech’s predecessor)—together with its address; and the lien date—11/15/1995. Although not 

material to the court’s ruling in this proceeding—constructive notice not being an issue—the 

information provided by the Snapshots appeared to conflict with the notation at the bottom of the 

DOR Responses that DOR’s databases reflected no record for the Mobile Home. 

Applicable Law and Analysis 

Although there are several exceptions, Alabama’s Uniform Commercial Code, codified in 

Title 7 of the Alabama Code (1975) (herein cited as “Ala. Code”), states the general rule that “a 

financing statement must be filed to perfect all security interests . . .” § 7-9A-310(a). The most 

common exception is noted in § 7-9A-311(a)(2), which provides that “the filing of a financing 

statement is not necessary or effective to perfect a security interest in property subject to . . . 

Chapter 8 or Chapter 20 of Title 32 [Ala. Code] . . . which provides for a security interest to be 

indicated on a certificate of title as a condition or result of the security interest’s obtaining priority 

over the rights of a lien creditor with respect to the collateral . . . .” 

At the time the Debtor and her husband purchased the Mobile Home in 1995 (before the 

adoption of the Manufactured Home Certificate of Title Act, effective January 2010, infra), the 

DOR issued certificates of title covering the Mobile Home as then required by §§ 32-8-30 and -

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39,5 and because the purchase was financed with the proceeds of a loan provided by Ditech’s 

predecessor, its purchase-money security interest was duly recorded—perfected—on the 

certificates of title in accordance with § 32-8-61, which states: 

(a) Unless excepted by this section, a security interest in a vehicle for which a 

certificate of title is required by the terms of this chapter is not valid against 

creditors of the owner or subsequent transferees or lienholders of the vehicle unless 

perfected as provided in this article. 

(b) A security interest is perfected by the delivery to the [DOR] of the existing 

certificate of title, if any, an application for a certificate of title containing the name 

and address of the lienholder and the date of his security agreement and the required 

fee. It is perfected as of the time of its creation if the delivery is completed within 

30 days thereafter, otherwise, as of the time of the delivery. 

In 2009 Alabama adopted the Alabama Manufactured Home Certificate of Title Act (Ala. 

Code § 32-20-1, et seq., and herein the “MHT Act”). The MHT Act became effective January 1, 

2010 and thereafter certificates of title for manufactured homes could no longer be issued under 

Chapter 8 of Title 32,6

 but were required to be issued under the MHT Act. § 32-20-20.7 

Nonetheless, the requirements for the issuance of certificates of title under the MHT Act are 

virtually the same as those previously required under Chapter 8 (compare § 32-20-20, et seq., with

§ 32-8-30, et seq.), and the same is true with respect to causing security interests to be recorded—

5 Section 32-8-31(10) was amended in 2009, effective January 1, 2010, to prohibit the 

further issuance of certificates of title for manufactured homes under Chapter 8 of Title 32 for liens 

entered into from that date forward. Thereafter, all such certificates of title were to be issued under 

the Manufactured Home Certificate of Title Act, codified at Chapter 20 of Title 32, infra. 

6 See n. 5, supra. 

7 Other than exceptions that do not apply in this proceeding, the MHT Act requires that 

“every owner of a manufactured home which is in this state and for which no certificate of title 

has been issued by the [DOR], shall make application . . . for a certificate of title . . . .” § 32-20-

20(a) (emphasis added). As mentioned, certificates of title for the Debtor’s Mobile Home were 

issued by the DOR in 1995, before the MHT Act became effective. 

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perfected—on certificates of title (compare § 32-20-40, et seq., with § 32-8-60, et seq.). In fact, 

security interests previously perfected under Chapter 8 are expressly recognized as retaining their 

validity and priority under the MHT Act: “[A] security interest in a manufactured home for which 

a certificate of title is required by the terms of this chapter is not valid against creditors of the 

owner or subsequent transferees or lienholders . . . unless perfected as provided in this article or 

previously perfected under the terms of Chapter 8 of this title.” § 32-20-41(a) (emphasis added). 

Ordinarily, when a manufactured home is sold or becomes subject to a new security 

interest, the new owner or lienholder applies to the DOR for a new certificate of title on which the 

name of the new owner or new lienholder will be recorded. §§ 32-20-30,-33,-41,-42. But the MHT 

Act specifically prohibits the issuance of certificates of title for manufactured homes “designated 

1999 and prior year models . . . .” § 32-20-21(4) (amended eff. Jan. 1, 2020 to replace a reference 

to “more than 20 model years old” with “1999 and prior year models”). Thus, because the Mobile 

Home is a 1996 model, it is no longer eligible for the issuance of new certificates of title on which 

a new owner or new secured party may record their ownership or security interest. But the MHT 

Act made no mention of invalidating security interests recorded on existing certificates of title for 

manufactured homes that, because of their age, are no longer eligible for new certificates of title. 

To the contrary—as quoted in the preceding paragraph—the MHT Act expressly recognizes the 

continued validity of security interests perfected on certificates of title originally issued under 

Chapter 8. § 32-20-41(a), supra.

8

 

Further, the MHT Act at § 32-20-29 allows the DOR to issue a “replacement” for a 

certificate of title issued under Chapter 20 or Chapter 8 of Title 32 that was “lost, stolen, mutilated, 

8 See also §§ 32-20-26(c) and 32-8-39(d), both of which provide that “[a] certificate of title 

issued by the [DOR] is prima facie evidence of the facts appearing on it.” 

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or destroyed or becomes illegible . . . .”9 There is no restriction on issuing replacements—as 

opposed to new certificates of title—for manufactured homes not eligible for new certificates of 

title due to their age. Logically, if a replacement for a certificate of title may be issued for a 

manufactured home originally titled under Chapter 8, the Alabama legislature must have intended 

that existing certificates of title for manufactured homes, regardless of their age, would remain 

valid and effective, even though no new certificate of title—as opposed to a replacement—may be 

issued for such a home. 

Not only are new certificates of title no longer issued by the DOR for manufactured homes 

designated 1999 and prior year models (Ala. Code 32-20-21(4)), the DOR stopped maintaining 

title records for manufactured homes of that age: 

(5) No title records will be maintained by the [DOR] for any motor vehicle or 

manufactured home exempted from titling under the provisions of Chapters 8 or 20 

of Title 32, Code of Ala. 1975, or any rules promulgated thereunder. 

Example: As of January 1, 2012, the title records for the following motor vehicles 

will no longer be maintained due to the motor vehicles being exempt from titling 

by statute or rules promulgated thereunder: . . . 

2. Manufactured homes more than twenty (20) model years old which would 

include all 1991 and prior year manufactured homes. . . . 

Ala. Admin. Code r. 810-5-75-.68(5).10 

Another section of Chapter 8 confirms the continued perfection of Ditech’s security 

interest. Alabama Code § 32-8-64.111 provides that “any lien or security interests shall be 

9 Section 32-8-43 is virtually identical to § 32-20-29. 

10 This Administrative Code provision is apparently the reason the DOR’s Responses to 

Ditech’s request for title information for the Mobile Home stated, “that the Motor Vehicle Division 

databases of the Alabama Department of Revenue reflect no record for the vehicle identified in 

this printout.” Nonetheless, the DOR did respond by sending Ditech “Title Application Snapshots” 

which disclosed the Mobile Home’s initial title information, including the name of the lienholder. 

11 Except for liens and security interests listed on certificates of title for 

manufactured homes, travel trailers, or vehicles that weigh more than 12,000 

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considered satisfied and releases shall not be required after 12 years from the date of the security 

agreement as recorded on the certificate of title.”12 Security interests in manufactured homes (and 

travel trailers and vehicles that weigh more than 12,000 pounds) are expressly exempt from the 

12-year lapse provision of § 32-8-64.1. Indeed, § 32-8-64.1 confirms that security interests in 

manufactured homes “shall be satisfied only in conformity with Section 32-8-64 . . .” (emphasis 

added), which in turn provides that “[u]pon the satisfaction of a security interest . . . the lienholder 

. . . shall . . . execute a release of his or her security interest, in the space provide therefor on the 

certificate or as the [DOR] prescribes . . . .” § 32-8-64(a). Neither Ditech nor its predecessor 

executed a release on the Mobile Home’s certificates of title.13 

pounds gross weight, which shall be satisfied only in conformity with Section 32-

8-64, any lien or security interest shall be considered satisfied and release shall not 

be required after 12 years from the date of the security agreement as recorded on 

the certificate of title. Nothing in this section shall preclude the perfection of a lien 

or security agreement, or the perfection of an extension of a lien or security 

agreement beyond a period of 12 years, by application for a new certificate of title 

on which the lien or security agreement is listed. In order to provide for the 

continuous perfection of a lien or security interest originally entered into for a 

period of more than 12 years for a vehicle other than a manufactured home, travel 

trailer, or vehicle that weighs more than 12,000 pounds gross vehicle weight, an 

application for a second title on which the lien or security interest is listed shall be 

submitted to the designated agent before 12 years from the date of the security 

agreement as recorded on the original title. Otherwise, the lien or security interest 

shall be perfected as provided by Section 32-8-61. 

Ala. Code § 32-8-64.1 (emphasis added). 

12 Section 32-8-64.1 allows a creditor to extend its security interest and perfection thereof 

beyond 12 years by applying, before the 12 years expires, for a new certificate of title on which 

the lien will again recorded. 

13 Section 32-8-64.2 was added to Chapter 8 in 2011 and thereafter amended in 2013. It is 

similar to § 32-8-64.1 except it provides for liens and security interests to be considered satisfied 

four years (amended from five to four years in 2013) from the date of the security agreement as 

recorded on the certificate of title for vehicles which are 12 or more model years old. As with § 

32-8-64.1, a lienholder may extend its perfection before the expiration of four years by applying 

for a new certificate of title on which the lien will again be listed. Section 32-8-64.2 exempts 

travel trailers and vehicles weighing more than 12,000 pounds from its 4-year lapse provision 

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Under Bankruptcy Code § 544(a), a bankruptcy trustee has the “strong-arm” power to 

avoid any transfer of property or obligation incurred by a debtor if the transfer or obligation (in 

this case, Ditech’s security interest) would be avoidable by a hypothetical creditor whose judicial 

lien or execution against all property of the debtor sprang into existence when the debtor’s 

bankruptcy petition was filed. “Basically, this means that a trustee can avoid the security interest 

of a creditor if the security interest was not properly perfected.” Matter of Patterson, 185 B.R. 354, 

357 (Bankr. N.D. Ala. 1995) (Caddell, Bankr. J.). “In the typical bankruptcy case, the trustee will 

invoke section 544(a) to avoid any interest inferior to h[er] own.” Old W. Annuity & Life Ins. Co. 

v. Apollo Grp., 605 F.3d 856, 864 (11th Cir. 2010). The trustee is the only party with standing to 

pursue the avoidance as a “hypothetical lien creditor” under Code § 544(a)(1). American General 

Fin., Inc. v. Tippins (In re Tippins), 221 B.R. 11, 17 (Bankr. N.D. Ala. 1998).14 

Thus, the question becomes whether under the provisions of the Alabama Code discussed 

above, the Mobile Home’s certificates of title remained effective to preserve the perfection of 

Ditech’s security interest even though no new certificates of title will be issued in the future for 

new owners or new lienholders, and the DOR is no longer required to maintain title records for the 

Mobile Home. If the existing certificates of title on which Ditech’s security interest is recorded 

remain effective, then Ditech was perfected on the day the Debtor filed her petition for relief under 

regardless of their age, but unlike § 32-8-64.1, there is no mention of an exemption for 

manufactured homes, but for good reason. The MHT Act amended the definitions in § 32-8-2, 

applicable to Chapter 8, by removing references to a “manufactured home.” “The 2009 amendment 

by Act 2009, No. 09-746, effective January 1, 2010, deleted ‘or manufactured home’ preceding 

‘vehicle’ or variants throughout the section . . . .” Editor’s comments to Ala. Code § 32-8-64.2. 

Thus, § 32-8-64.2 is not applicable to manufactured homes. 

 

14 Ditech did not question the Debtor’s standing to join the Trustee as a party plaintiff in 

this adversary proceeding. If Ditech had successfully challenged the Debtor’s standing, the result 

of the court’s ruling with respect to the Trustee would not have been different. 

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chapter 13 and its security interest may not be avoided. If not, then the Trustee may avoid the 

security interest. 

The Plaintiffs cite examples of Alabama Code provisions establishing presumed 

satisfaction of liens: 20 years from the maturity of the debt secured by a real estate mortgages— § 

35-10-20; five years from the date of filing for most UCC financing statements, unless continuation

statements are filed (without regard to the age of either the lien or the collateral)— § 7-9A-515(a); 

30 years from the filing date for an initial financing statement filed in conjunction with a 

“manufactured-home transaction” (without regard to the age of the lien or the age of the 

manufactured home)15— § 7-9A-515(b); and, as discussed above, 12 years from the date of the 

security agreement as recorded on the certificate of title for many types of vehicles, other than 

manufactured homes, travel trailers, or vehicles that weighs more than 12,000 pounds (without 

regard to the age of the vehicle or the date the title was issued)— § 32-8-64.1. Despite this 

demonstration that the Alabama legislature knows how to provide for a lapse of lien perfection 

when that was its intent, the Plaintiffs have not cited any Alabama statute that provides for the 

presumed satisfaction of a lien against a manufactured home due to either the age of the lien or the 

age of the home. 

15 Section 7-9A-102(54) defines “manufactured-home transaction” as “a secured 

transaction: (A) that creates a purchase-money security interest in a manufactured home, other 

than a manufactured home held as inventory; or (B) in which a manufactured home, other than a 

manufactured home held as inventory, is the primary collateral.” Section 32-20-21(4) provides 

that “[n]o certificate of title shall be issued for any . . . [m]anufactured home designated 1999 

and prior year models.” Thus, any secured lender, whose collateral is a 1999 or older 

manufactured home would presumably perfect a new lien by filing a manufactured home 

financing statement because the provisions of Chapter 8 of Title 32 would not apply (see § 

32-8-60(5), which says Chapter 8 does not apply to liens created in manufactured homes after 

January 1, 2010), and because Chapter 20 of Title 32 says no certificate of title will be issued for 

manufactured homes manufactured in 1999 or prior (see § 32-20-21(4)). 

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The Plaintiffs rely on § 7-9A-303(b) which provides that “[g]oods cease to be covered by 

a certificate of title . . . [at] the time the certificate of title ceases to be effective under the law of 

the issuing jurisdiction (emphasis added).” But § 7-9A-303(b) applies only when a certificate of 

title ceases to be effective. There is no explicit statutory or case-law authority supporting the 

Plaintiffs’ argument that the existing certificates of title for the Debtor’s Mobile Home “ceased to 

be effective.” To the contrary, the MHT Act, as noted above, expressly preserves the validity and 

effectiveness of certificates of title issued under Chapter 8 of Title 32, and before a security interest 

in a manufactured home may be released, § 32-8-64 requires that the secured party formally 

execute a release on the face of the certificate of title. Nonetheless, the Plaintiffs urge the court to 

adopt their argument for three reasons. First, a third party can no longer rely on the perfection and 

priority rules of the certificate of title statutes (presumably because the DOR regulations provide 

that it will no longer maintain “title records” for manufactured homes over 20 years old under 

Alabama Admin. Code r. 810-5-75-.68). Second, an owner-seller cannot use the existing 

certificate of title to transfer ownership because no new certificate of title will be issued to the 

purchaser under § 32-20-21(4) because of the Mobile Home’s age. Third, a new secured party 

cannot perfect its security interest via submission of an application to the DOR for new certificates 

of title on which to record its security interest because no new titles will be issued for the Mobile 

Home because of its age under § 32-20-21(4). 

But the Plaintiffs’ arguments are flawed. At least for the Debtor’s Mobile Home, the DOR 

does appear to maintain and did provide partial title records—the DOR Responses showing the 

initial title information— which gave constructive notice of Ditech’s lien. But notice issues are a 

red herring in any event, because the suggestion that “notice” to third parties is required for a 

certificate of title to be effective is not relevant, and the Plaintiffs admit as much. Rather, their 

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primary argument is that Ditech’s security interest ceased to be perfected because the certificates

of title ceased to be effective for any purpose, including continued perfection of Ditech’s existing 

lien, the moment the Mobile Home, because of its age, became ineligible for new certificates of 

title. According to the Plaintiffs, Ditech’s security interest then fell under the UCC’s perfection 

rules for a manufactured home transaction,16 which would require that a financing statement be 

properly filed to continue perfection. Because Ditech did not file a UCC financing statement 

covering the Mobile Home, the Plaintiffs contend perfection of Ditech’s security interest lapsed 

because of the Mobile Home’s age, and thereupon would have become subordinate to a judgment 

lien creditor and likewise subject to avoidance by a trustee under Code § 544(a). The Plaintiffs’ 

arguments conflate the issuance of a new certificate of title with the effectiveness of an existing 

certificate of title. The Plaintiffs have cited no provision of the Alabama Code, and no Alabama 

case law, and the court’s research has found none, that would support a ruling that existing 

certificates of title become ineffective based on a manufactured home’s age or based upon the age 

of a security interest recorded on its certificate of title. 

To the contrary, § 32-8-64.1, supra, dictates that security interests in manufactured homes 

can be satisfied only by following the procedure prescribed in § 32-8-64, which requires that the 

lienholder formally satisfy its lien by executing a release in the space provided therefor on the 

certificate of title and delivering the certificate and release to the next lienholder or, if none, to the 

owner. If the Alabama legislature intended for liens encumbering manufactured homes to ageout like those encumbering many other vehicles, it would not have excepted manufactured homes. 

16 See n.15, supra. This argument would also require the court to read the word 

“transaction” to include the continuation of perfection for a transaction that actually took place 

years earlier, so that such a continuation would fall under the definition of a “manufactured home 

transaction,” which is a result not covered by the plain language of the definition in § 7-9A102(54). 

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And although new certificates of title—to evidence transfer of title or lien perfection—are no 

longer issued by the DOR for 1999 and older model year manufactured homes, there is no authority 

supporting the argument that existing certificates of title for such manufactured homes cease to be 

effective for the purpose of continuing the perfection of existing security interests recorded 

thereon. 

Sections 32-20-26(c) and 32-8-39(d) are identical, and state that “[a] certificate of title 

issued by the [DOR] is prima facie evidence of the facts appearing on it.”17 Thus, third parties—

buyers, secured lenders, and judgment lien creditors—dealing with 1999 and older model year 

manufactured homes continue to be charged with whatever title information is disclosed on the 

existing certificates of title that were issued by the DOR for those homes. Those certificates of 

17 The Alabama legislature dealt extensively with manufactured homes, and the 2009 

amendments to § 32-8-60 provide that chapter 8 (which is the Alabama Uniform Certificate of 

Title and Antitheft Act) does not apply to a lien on a manufactured home that was exempted under 

that chapter when the lien was created or to a lien that was created after January 1, 2010. § 32-8-

60(5). The 2009 amendment recognized that from January 1, 2010 forward, liens created in 

manufactured homes are covered not by Chapter 8 but instead by Chapter 20 (the MHT Act). By 

its terms, Chapter 8 would still apply to Ditech’s security interest because it was created before 

January 1, 2010. However, the Plaintiffs posit that Chapter 20, not Chapter 8, governs the issue 

of Ditech’s continued perfection, because nothing in Chapter 20 excludes from its coverage liens 

created under Chapter 8, such as Ditech’s. (Doc. 18 p.5 n.4.) The court disagrees, and finds the 

more logical reading is that the Mobile Home continues to be titled under Chapter 8 based on the 

language of § 32-8-60(5). Section 32-8-60(5) was added to the Alabama Code at the same time 

as § 32-20-46, which provides in subsection (c) that “[s]ecurity interests in manufactured homes 

not required to be titled under this chapter or not titled under the terms hereof, which are perfected 

under any other applicable laws of this state [such as Ditech’s lien that was perfected instead under 

Chapter 8 of Title 32] shall not be affected by this chapter but shall continue in all respects to be 

governed by such other laws of this state [which would include the provision in Chapter 8 that 

titles are prima facie evidence of the information shown thereon and that liens against 

manufactured homes, created under that chapter as Ditech’s was, can only be released in 

accordance with § 32-8-64].” The fact that these provisions were enacted as part of the same 

legislation in 2009 shows the Alabama legislature knew that some manufactured home certificates 

of title would continue to be governed by Chapter 8 and not by Chapter 20 and did not intend to 

bring every existing certificate of title under the control of Chapter 20. 

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title remain fully effective for all purposes except two: (1) obtaining a new certificate of title to 

show new ownership and (2) obtaining a new certificate of title to perfect a new security interest. 

Virtually all secured lenders maintain possession of the certificates of title covering their collateral, 

and indeed such possession is contemplated in § 32-8-64, and third parties, whether creditors or 

purchasers, proceed at their own peril without first demanding to see the certificate of title 

regardless of the manufactured home’s age. 

If a new security interest were to be created in the Debtor’s Mobile Home, for instance, the 

UCC’s provisions that require filing a financing statement would indeed govern perfection because 

that new secured transaction would be beyond the scope of § 32-20-20 insofar as no new title 

would be issued due to the age of the Mobile Home. But the existing certificates of title showing 

the existence of Ditech’s security interest do not cease to be “effective” nor cease to maintain 

perfection as against a lien creditor simply because no new titles would be issued to a new secured 

party or purchaser, nor because the DOR does not keep ongoing records or copies of the existing 

title of the Mobile Home because of its age. Ditech’s security interest was neither clandestine nor 

undiscoverable, nor was it ever released voluntarily or by operation of law. 

Conclusion 

The court concludes that Ditech’s security interest in the Mobile Home continues to be 

perfected and that a judgment lien creditor on the petition date of the Debtor’s bankruptcy case 

would not take priority over Ditech’s security interest. Therefore, the Trustee cannot avoid 

Ditech’s security interest under Code § 544(a)(1) or (a)(2), and to that extent, Ditech’s Motion (AP 

Doc. 19) is due to be GRANTED and the Plaintiffs’ Motion (AP Doc. 18) is due to be DENIED.18 

18 Ditech raised a judicial estoppel defense to the Plaintiffs’ lien avoidance claims based 

on the Debtor’s commitment to redeem the Mobile Home in her previous chapter 7 case. Of course 

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As previously mentioned, the Debtor’s personal liability for the debt owing to Ditech was 

discharged in her first chapter 7 case. Therefore, the only claim Ditech can have in this case is a 

secured claim (secured by the Mobile Home as property of the estate) and the value of the Mobile 

Home will determine the extent of Ditech’s claim pursuant to Bankruptcy Code §506(a). The 

evidence presented in support of the Motions did not establish the value of the Mobile Home, 

therefore, there exists a material issue of fact—that issue being the value of the Mobile Home—

and the Motions are each DENIED to the extent they seek to establish that value. An evidentiary 

hearing will be scheduled in due course for the court to determine the Mobile Home’s value and 

the amount of Ditech’s secured claim.19 A separate order conforming to this opinion will be issued 

by the court. 

Done this 14th day of February 2020. 

 /s/ James J. Robinson 

 JAMES J. ROBINSON 

 CHIEF U.S. BANKRUPTCY JUDGE 

the Trustee was not a party in that previous case. Nonetheless, the court has not addressed that 

defense and related issues in this opinion. 

19 The parties are encouraged to exchange information about the condition of the Mobile 

Home and its value, and reach an agreement if at all possible prior to the next plan confirmation 

hearing. 

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