Opinion ID: 3065480
Heading Depth: 3
Heading Rank: 1

Heading: The Purchase

Text: On August 30, 2005, David and Linda Taylor, a married couple, purchased and took possession of a 2006 Toyota Camry from Gresham Toyota, Inc. (“Gresham”), a dealership in Portland, Oregon. The Taylors purchased the car for $19,500. USAA loaned the Taylors $18,020; the Taylors in turn paid the $18,020 to Gresham. The amount of the loan was equal to the purchase price of the car less the agreed trade-in value of the Taylors’ 1992 Lincoln Town Car, which the Taylors sold to Gresham as part of the purchase of the Camry. In September 2005, the Taylors began to make monthly payments on their loan to USAA.3 The Taylors, as part of the loan agreement, granted USAA a “purchase money security interest” in the car.4 Under the 3 The record does not show the amount of the monthly payment. Following the Taylors’s petition in bankruptcy, they arranged to continue to pay the loan from their post-petition income that was not part of the estate; therefore, they did not default. It is not clear on the record before us if any payments came from the estate itself. 4 A purchase-money security interest is: “A security interest that is created when a buyer uses the lender’s money to make the purchase and 3102 IN RE TAYLOR Bankruptcy Code, a security interest is a lien created by an agreement (as opposed to by statute). 11 U.S.C. § 101(51).5 A “lien . . . means [a] charge against or interest in property to secure payment of a debt or performance of an obligation.” 11 U.S.C. § 101(37). To satisfy pre-existing debts, a trustee can avoid transfers that take place within the 90 days before bankruptcy is filed. 11 U.S.C. § 547(b). There is an exception to this rule, however, for creditors who perfect a security interest within 20 days after a transfer for new value. 11 U.S.C. § 547(c)(3). A security interest is perfected when the creditor has satisfied the requirements of perfection under state law. Fidelity Financial Services, Inc. v. Fink, 522 U.S. 211, 214 (1998). Thus, USAA had to satisfy all the requirements set out in Idaho Code Sections 28-9-310 through 28-9-316 within 20 days after the Taylors took possession of the Camry. Idaho Code 29-9-308(a); 11 U.S.C. 547 (c). USAA, however, made the crucial mistake of being one day late in perfecting its security interest. Accordingly, USAA failed to exempt the transfer from being avoidable under the Bankruptcy Code. USAA failed to perfect the security interest within 20 days because it filed its initial application for title without a signed affidavit of inspection, as required under Idaho law. See Idaho Code Ann. § 49-510. On September 20, 2005, an inspection officer from the Idaho Transportation Department inspected immediately gives the lender security by using the purchased property as collateral (UCC § 9-103); a security interest that is either (1) taken or retained by the seller of the collateral to secure all or part of its price or (2) taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if that value is in fact so used. If a buyer’s purchase of a boat, for example, is financed by a bank that loans the amount of the purchase price, the bank’s security interest in the boat that secures the loan is a purchasemoney security interest.” BLACK’S LAW DICTIONARY (9th ed. 2009). 5 All future references to “Section” or “§ “ are to the Bankruptcy Code, 11 U.S.C. § 101, et seq., unless otherwise noted. IN RE TAYLOR 3103 the car and signed an affidavit of inspection. The same day, an Application for Certificate of Title and the affidavit of inspection were filed with the Idaho Transportation Department. USAA’s security interest was thus perfected under Idaho law only on September 20, 2005—21 days after the Taylors took possession of the car on August 30, 2005. Despite the fact that USAA’s security interest was perfected under state law, the bankruptcy trustee could still avoid the transfer of the security interest because USAA failed to meet the federal 20-day perfection requirement under § 547(c)(3).6