Many times debtors will purchase a vehicle on the eve of a bankruptcy, and often the bankruptcy happens within thirty days following the purchase. The creditor in Arizona that finances the purchase has a statutory safe harbor period to perfect its lien interest on the vehicle. The timing of a how and when a lien gets placed on a motor vehicle many times is the question in preference actions filed by chapter 7 trustees. Two recent cases in the District of Arizona offer guidance debtors, creditors, and trustees.
Judge Ballinger recently issued a minute entry opinion addressing the mechanics of perfection of a lien on a motor vehicle. This is the second opinion from this district in recent months. (See In re Lloyd 2:13-bk-21588-DPC). The case was S. William Manera, Trustee v. AmeriCredit Financial Services, Inc., 14-bk-06920-EPB. The timeline in this case was as follows:
– The Debtors purchased a vehicle on February 24, 2014, GM mailed the Title Application to the Motor Vehicle Department (the “MVD”) on March 6, 2014.
– The MVD logged receipt on March 11, 2014 but did not process and endorse the title documents until March 20, 2014.
– On May 8, 2014 the debtors filed their bankruptcy petition.
The sole question presented is whether GM’s lien interest was perfected on March 11 when the title application was received and logged by MVD, or on March 20 when it was processed and endorsed by MVD.
Until 2013, A.R.S. § 28-2133 (B) provided retroactive perfection only if it was both received and endorsed within 30 business days of execution. In 2013, the Arizona legislature amended A.R.S. § 28-2133 (B) to read “if the documents referred to in this article are delivered to a registering office or an authorized third party provider of the department within 30 days after the date of their execution, the constructive notice dates from the time of execution.”
The former statute read in part, “if the documents referred to in this article are received and filed.”
As acknowledged by the Bankruptcy Court, the 2013 statutory amendment was deemed to be substantial and served to distinguish any decision made under the previous statue. When there is no legitimate, material dispute that the MVD received a non-defective title application within thirty days of execution of the document creating the security interest referenced in an application, the applicant is entitled to the retroactive constructive notice granted by A.R.S. § 28-2133(B).
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