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Keywords

jurisdictionstatutetrustwillbankruptcycorporationliens
jurisdictiontrustwillbankruptcy

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In re Sorsby, 210 W.Va. 708, 559 S.E.2d 45, 46 UCC Rep.Serv.2d 847

Facts

The case arose from two scenarios involving motor vehicle liens. In the first, William Sorsby, who had a lien on a vehicle perfected in Ohio, moved to West Virginia without retitling the vehicle. The trustee in his bankruptcy case argued that the lien was void under West Virginia law. In the second scenario, Ronald Squires, a West Virginia resident, purchased a vehicle and titled it in Oklahoma, which was prohibited by West Virginia law. The trustee also sought to void this lien, but the lienholder argued it was valid under Oklahoma law. Both cases raised the question of which West Virginia statute governed the perfection of these out-of-state liens.

One type of case involves a non-resident of West Virginia who, after granting a security interest in a motor vehicle, moves into this state and fails to obtain a West Virginia certificate of title for the vehicle. This scenario is represented by a case involving debtor William Sorsby. Mr. Sorsby obtained a 1995 Monte Carlo while living in Ohio. In connection with this purchase, Mr. Sorsby granted a security interest in the automobile to WFS Financial, Inc. (hereinafter “WFS”). The lien was recorded on the Ohio motor vehicle certificate of title, and there is no dispute that this lien is validly perfected under the laws of Ohio. Mr. Sorsby then moved to West Virginia in December 1999. Although he brought the Monte Carlo automobile with him, he did not retitle or attempt to register the vehicle in this state.

Issue

Whether W. Va.Code § 17A–4A–14 or W. Va.Code § 46–9–103(2) is controlling as to the perfection of a motor vehicle lien originating out-of-state so as to be good against judicial lien creditors.

The question certified by the bankruptcy courts asks [w]hether section 17A–4A–14 or section 46–9–103(2) of the West Virginia Code is controlling as to the perfection of a motor vehicle lien originating out-of-state so as to be good against judicial lien creditors.

Rule

The determination of the continued perfection of any lien noted on a certificate of title is governed by the Uniform Commercial Code (UCC), specifically W. Va.Code § 46–9–103(2), rather than W. Va.Code § 17A–4A–14.

Where a motor vehicle owned by a West Virginia resident is titled in another jurisdiction, and that jurisdiction requires notation of a security interest on the certificate of title as a condition of perfection, the determination of the continued perfection of any lien so noted is governed by the UCC, as opposed to W. Va.Code § 17A–4A–14 (1961) (Repl.Vol.2000).

Analysis

The court analyzed the conflict between the two statutes, noting that W. Va.Code § 17A–4A–14 imposes a strict time limit for perfecting out-of-state liens, while W. Va.Code § 46–9–103(2) provides a more lenient framework that allows for continued perfection of liens as long as the vehicle is not registered in another jurisdiction. The court emphasized that the UCC was designed to simplify and modernize the law governing commercial transactions, and thus should apply in this case.

The bankruptcy court concluded that W. Va.Code § 46–9–103(2) is controlling where the motor vehicle is covered by a certificate of title issued pursuant to the law of another jurisdiction that also requires that a security interest be perfected by notation on the certificate.

Conclusion

The court concluded that the UCC governs the continued perfection of motor vehicle liens noted on certificates of title issued by jurisdictions other than West Virginia, thereby affirming the validity of the liens in question.

Accordingly, we hold that where a motor vehicle owned by a West Virginia resident is titled in another jurisdiction, and that jurisdiction requires notation of a security interest on the certificate of title as a condition of perfection, the determination of the continued perfection of any lien so noted is governed by the UCC, as opposed to W. Va.Code § 17A–4A–14 (1961) (Repl.Vol.2000).

Who won?

WFS Financial, Inc. and Mercedes-Benz Credit Corporation prevailed in the case as the court ruled that their liens remained valid under the UCC despite the challenges posed by the trustee.

The bankruptcy court agreed and has taken the adversary proceeding between the Trustee and WFS under advisement pending this Court's answer to the question certified.

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