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In re Roser

July 20, 2010



The opinion of the court was delivered by: Hartz, Circuit Judge.


Chapter 7 Trustee,

Before TACHA, HOLLOWAY, and HARTZ, Circuit Judges.

On May 19, 2007, Sovereign Bank gave Robert James Roser a secured loan to purchase a motor vehicle, and he took possession of the vehicle that day. Nineteen days later, on June 7, the Bank filed its lien in compliance with the Colorado Certificate of Title Act (CCTA), Colo. Rev. Stat. § 42-6-121 (2007). Because the Colorado Uniform Commercial Code (Colorado UCC), which closely tracks the Uniform Commercial Code (UCC), gives priority over other security interests to a purchase-money security interest that is filed within 20 days of the purchaser's taking delivery of the collateral, see Colo. Rev. Stat. § 4-9-317(e) (2007), the Bank felt secure.

But there was a complication. On May 31 Roser filed a voluntary petition under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Colorado. Relying on the prior opinion of the Bankruptcy Appellate Panel for the Tenth Circuit (BAP) in In re O'Neill, 370 B.R. 332 (B.A.P. 10th Cir. 2007), the bankruptcy court held that the trustee in bankruptcy (the Trustee) could avoid the Bank's lien, see 11 U.S.C. § 544(a) (authorizing trustee to avoid certain liens). It noted that the CCTA supersedes the Colorado UCC with respect to perfection of motor-vehicle liens and held that Colorado UCC § 4-9-317(e) does not apply to the Bank's lien in this case. Because the Bank's lien was not perfected before the filing of Roser's bankruptcy petition, the court held that the Trustee's interest is superior to the Bank's lien. The court added that the Bank's post-petition perfection of its lien violated the automatic stay under 11 U.S.C. § 362(a). The district court affirmed.

The Bank appeals. See 28 U.S.C. § 158(d) (jurisdiction over bankruptcy appeals from the district courts). Rejecting O'Neill, we reverse. O'Neill misconstrued Colorado law. The CCTA does not supersede Colorado UCC § 4-9-317(e) because the provision does not govern the manner or timing of the perfection of liens. It governs only the priority of a lien and is not inconsistent with the CCTA. As a generally applicable law, § 4-9-317(e) gave the lien of the Bank priority over the Trustee's interest in Roser's vehicle. And the automatic stay did not prohibit the Bank from its post-petition perfection of its lien under the CCTA because such perfection is excepted from the stay by 11 U.S.C. § 362(b)(3).


"Our review of the bankruptcy court's decision is governed by the same standards of review that govern the district court's review of the bankruptcy court." In re Charles, 323 F.3d 841, 842 (10th Cir. 2003)(internal quotation marks omitted). Because this case presents no disputed factual issues but only matters of law, our review is de novo. See id.

A. Priority of Interests

The Bankruptcy Code gives the bankruptcy trustee the rights and powers of a hypothetical person who acquired a judicial lien on the debtor's property at the time that the bankruptcy petition was filed. See 11 U.S.C. § 544(a).*fn1 He can avoid any lien inferior to his interest in an asset of the bankruptcy estate. See In re Haberman, 516 F.3d 1207, 1210 (10th Cir. 2008) (trustee has "the power to avoid any transfer or obligation that a hypothetical creditor with an unsatisfied judicial lien on the debtor's property could avoid under relevant state non-bankruptcy law.").In general, the trustee can avoid liens that are unperfected when the petition for bankruptcy is filed. See In re Charles, 323 F.3d at 842. But in some circumstances a lien that is perfected after the bankruptcy filing may nevertheless have priority. Under § 546(b) of the Bankruptcy Code a trustee's avoidance rights "are subject to any generally applicable law that . . . permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of perfection." 11 U.S.C. § 546(b)(1)(A). The term generally applicable law "relates to those provisions of applicable law that apply both in bankruptcy cases and outside of bankruptcy cases." S. Rep. No. 95-989, at 86 (1978), as reprinted in 1978 U.S.C.C.A.N. 5787; see Makoroff v. City of Lockport, 916 F.2d 890, 892 (3d Cir. 1990); 5 Collier on Bankruptcy ¶ 546.03[2][a], at 546-23 (Lawrence P. King ed., 15th ed. rev. 2006). The applicable law in this case is the law of Colorado. See In re Charles, 323 F.3d at 842--43.

The Bank presents a straightforward argument why its lien would have priority under Colorado law over a lien of a judgment creditor who obtained judgment at the time Roser filed for bankruptcy. Under the Colorado UCC:

[I]f a person [1] files a financing statement [2] with respect to a purchase-money security interest [3] before or within twenty days after the debtor receives delivery of the collateral, the security interest takes priority over the rights of a buyer, lessee, or lien creditor which arise between the time the security interest attaches and the time of filing.

Colo. Rev. Stat. § 4-9-317(e) (2007). (As discussed below, this section was amended after Roser filed his petition.) There is no doubt that the Bank satisfied the requirements of this section. The filing of a lien under the CCTA constitutes the filing of a financing statement. See Colo. Rev. Stat. § 4-9-311(b) ("Compliance with the requirements of a [certificate-of-title statute] is equivalent to the filing of a financing statement.").*fn2 And there is no dispute that the Bank complied on June 7, 2007, with the requirements for filing a motor-vehicle lien under the CCTA. See id. § 42-6-121 (2007).Nor is there any dispute that the Bank held a purchase-money security interest in Roser's vehicle. See id. § 4-9-103(a) & (b) (defining purchase-money security interest). Thus, because the Bank filed its lien within 20 days of Roser's obtaining the vehicle, it contends that Colorado UCC § 4-9-317(e) gives its lien a priority over ...

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