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#2288 signed 12-31-96

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS




In Re:

RHONDA M. SNODGRASS,

MICHAEL D. SNODGRASS,

DEBTOR(S).





CASE NO. 95-41138-7

CHAPTER 7



DARCY D. WILLIAMSON,


PLAINTIFF(S),

v. ADV. NO. 96-7054


MICHAEL D. SNODGRASS,

RHONDA M. SNODGRASS,

FIRST STATE BANK OF NESS CITY,

DEFENDANT(S).





MEMORANDUM OF DECISION

This proceeding is before the Court for resolution of a legal issue based on agreed facts. The plaintiff-trustee Darcy D. Williamson appears pro se. The defendants all appear by counsel R.L. Leslie. The Court has reviewed the relevant pleadings and is now ready to rule.

The debtors own a 1991 Kenworth truck-tractor which they have not claimed as exempt. Although the certificate of title shows they jointly own the tractor, only one of them signed a promissory note and security agreement which gave the First State Bank of Ness City (the Bank) a lien on it. Both the debtors and the Bank were located in Kansas, but the debtors obtained a Nebraska title which showed the Bank's lien. Perhaps they did this because the previous owner was in Nebraska. In April 1995, the debtors registered the tractor with the Kansas Corporation Commission. They have never obtained a Kansas certificate of title.

The Bank concedes its lien attached to only an undivided one-half interest in the tractor since only one of the co-owners pledged it to the Bank. The trustee contends she can avoid the Bank's lien on the other half-interest under K.S.A. 1995 Supp. 84-9-103(2). While the lien was perfected through the notation on the Nebraska certificate of title, the trustee argues the perfection lapsed because more than four months have passed since the debtors brought the tractor to Kansas and registered it here.

K.S.A. 1995 Supp. 84-9-103(2) provides in pertinent part:

(a) This subsection applies to goods covered by a certificate of title issued under a statute of this state or of another jurisdiction under the law of which indication of a security interest on the certificate is required as a condition of perfection.

(b) Except as otherwise provided in this subsection, perfection and the effect of perfection or nonperfection of the security interest are governed by the law (including the conflict of laws rules) of the jurisdiction issuing the certificate until four months after the goods are removed from that jurisdiction and thereafter until the goods are registered in another jurisdiction, but in any event not beyond surrender of the certificate. After the expiration of that period, the goods are not covered by the certificate of title within the meaning of this section.(1)

(Emphasis added.) The word "registered" in subsection (b) provides the sole basis for the trustee's argument. However, the 1983 Kansas Comment about subsection (2) of 84-9-103 says, "[A] security interest perfected by notation of the lien on the title remains perfected when the vehicle is taken to another state and not retitled, even beyond the four-month period which would apply under [subsection (1)]." In a case different from this one only because it was decided under Utah's version of UCC §9-103(2)(b)--which at least at the time was essentially identical to the Kansas version--the Tenth Circuit rejected the argument the trustee asserts here and ruled that, as used in that provision, "registered" requires issuance of a certificate of title as well as registration for a vehicle license. GMAC v. Rupp, 951 F.2d 283, 285-87 (10th Cir. 1991); see also Barkley Clark, The Law of Secured Transactions Under the Uniform Commercial Code, ¶12.03[2][a], pp. 12-16 to -17 (Rev. Ed. 1993) (discussing Rupp) and 1996 Cumulative Supp. at pp. S12-8 to -10 (discussing Chrysler Credit Corp. v. Religa (In re Males), 999 F.2d 607 (2d Cir. 1993) which, applying New York law, reached the same conclusion as Rupp). These authorities make clear that the perfection of the Bank's lien on the tractor did not lapse even though the debtors obtained a Kansas license plate for it. Instead, since no Kansas certificate of title was ever issued, the notation on the Nebraska title continued to perfect the lien. The trustee may not avoid the Bank's lien on an undivided one-half of the truck-tractor.

The foregoing constitutes Findings of Fact and Conclusions of Law under Rule 7052 of the Federal Rules of Bankruptcy Procedure and Rule 52(a) of the Federal Rules of Civil Procedure. A judgment based on this ruling will be entered on a separate document as required by FRBP 9021 and FRCP 58.

Dated at Topeka, Kansas, this 31st day of December, 1996.











_________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE







IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS










In Re:

RHONDA M. SNODGRASS,

MICHAEL D. SNODGRASS,

DEBTOR(S).





CASE NO. 95-41138-7

CHAPTER 7



DARCY D. WILLIAMSON,


PLAINTIFF(S),

v. ADV. NO. 96-7054


MICHAEL D. SNODGRASS,

RHONDA M. SNODGRASS,

FIRST STATE BANK OF NESS CITY,

DEFENDANT(S).





JUDGMENT ON DECISION

This proceeding was before the Court for resolution of a legal issue based on agreed facts. The plaintiff-trustee Darcy D. Williamson appeared pro se. The defendants all appeared by counsel R.L. Leslie. The Court has now issued its Memorandum of Decision resolving the issue.

For the reasons stated in the Memorandum, judgment is hereby entered declaring that the debtors' bankruptcy estate's interest in an undivided one-half of the debtors' 1991 Kenworth truck-tractor is superior to the defendants' interests, but that the First State Bank of Ness City has a properly perfected, unavoidable security interest in the other one-half which is superior to the estate's interest in that half.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this 31st day of December, 1996.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

1. Neither the 1986 nor the 1996 amendment to 84-9-103 changed these provisions. See 1986 Kan.Sess.L., ch. 399, §61; 1996 Kan.Sess.L., ch. 202, §22.

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