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Under Ohio law, perfection of a security interest is generally accomplished through the filing of a financing statement. However, this method of perfection is inapplicable in the case of motor vehicles. Under Ohio's Certificate of Motor Vehicle Title Act, except for vehicles held as inventory, the notation of a lien on the vehicle's certificate of title is the exclusive manner by which a security interest is perfected in a motor vehicle.
On June 11, 2009, Evonne M. Giaimo ("Debtor") filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code. Listed on the Debtor's schedules of assets was a 2008 Toyota RAV 4. The Debtor purchased the vehicle in February 2008, with an interest free loan from her grandmother, Veronica O'Keefe ("O'Keefe"). The Debtor and O'Keefe did not execute any formal loan documents. William Todd Drown ("Trustee") was appointed chapter 7 trustee of the Debtor's bankruptcy estate. The Debtor provided the Trustee with the Application for the Certificate of Title prepared by the dealership where the vehicle was purchased. The application contained a description of the vehicle, identified O'Keefe as the lienholder, and was signed by the Debtor. The Debtor also provided the Trustee with the Ohio Certificate of Title to the vehicle which also identified O'Keefe as lienholder. At the meeting of creditors, the Debtor testified that these are the only documents regarding O'Keefe's lien and security interest in the vehicle. Apart from these two documents, there is no evidence of a written security agreement between the Debtor and O'Keefe. On August 9, 2009, the Trustee filed an adversary complaint, pursuant to 11 U.S.C. § 544, seeking to avoid O'Keefe's purported security interest and lien on the ground that there was no written security agreement between the Debtor and O'Keefe as required by Ohio law to create a valid security interest in the vehicle. O'Keefe asserted, however, that the application and certificate of title were sufficient. She further asserted that there is no requirement to produce a written security agreement because, pursuant to Ohio Revised Code § 4505.13(B), once the clerk of court noted the lien on the vehicle's certificate of title, it was valid against all creditors of the Debtor. On February 22, 2010, the bankruptcy court heard argument on the Trustee's motion for summary judgment. Counsel for both parties agreed that the facts were not in dispute. The bankruptcy court agreed with the Trustee that Ohio law requires a written security agreement, and that because no such agreement was presented, the Trustee was entitled to summary judgment. On February 25, 2010, the bankruptcy court entered a written order granting summary judgment in favor of the Trustee. On March 8, 2010, O'Keefe filed a motion pursuant to Federal Rule of Bankruptcy Procedure 7052(b) requesting that the bankruptcy court make findings of fact and conclusions of law on the Trustee's motion for summary judgment. On March 16, 2010, O'Keefe filed a motion to stay the execution and enforcement of the order avoiding her lien including any requirement that the vehicle be turned over. On April 19, 2010, the court issued separate orders denying each of these motions because sufficient basis for the requested relief was not provided. On April 27, 2010, O'Keefe timely filed a notice of appeal seeking reversal of the bankruptcy court's order granting the Trustee's motion for summary judgment.
Are application for certificate of title to a motor vehicle and a certificate of title, both identifying the lienholder, sufficient under Ohio law to create a security interest in a vehicle?
The bankruptcy appellate panel held that, while the Certificate of Title Act governing perfection of a lien did not apply to establish the creation of a security interest, the application for certificate of title and certificate of title indicated that the debtor and the creditor intended to create a security interest and constituted a security agreement within the meaning of § 1309.203. The application for a certificate of title was a writing signed by the debtor and sworn to and subscribed in the presence of a notary, the application specifically identified the vehicle as the collateral, and the application expressly requested issuance of a certificate of title showing the creditor as a lienholder.