United States Court of Appeals,
Fifth Circuit.
No. 94-60127.
In the Matter of HEARD FAMILY TRUCKING, INC., Debtor.
ORIX CREDIT ALLIANCE, INC., Appellee,
v.
HEARD FAMILY TRUCKING, INC., and J.C. Bell, Jr., Appellants.
Jan. 10, 1995.
Appeal from the United States District Court for the Southern
District of Mississippi.
Before SMITH and EMILIO M. GARZA, Circuit Judges, and STAGG,
District Judge.*
JERRY E. SMITH, Circuit Judge:
Heard Family Trucking, Inc. ("Heard Family"), a chapter 7
debtor located in Mississippi, appeals the district court's ruling
that a creditor's lien on a Heard Family truck was perfected by the
issuance of an Alabama certificate of title. Heard Family argues
that, under Mississippi law, the exclusive means of perfecting a
security interest in a Mississippi vehicle is through a title
issued under that state's Motor Vehicle Titles Law. Concluding
that Mississippi law creates an exception for vehicles engaged in
interstate commerce that are titled properly in other states, we
affirm.
I.
In March 1990, Heard Family, a Mississippi corporation with
*
District Judge of the Western District of Louisiana,
sitting by designation.
1
its principal place of business in that state, purchased a tractor
trailer truck (the "Freightliner") from Columbus White Sales, Inc.
("Columbus"). The sale was made by a conditional sales contract
note between Heard Family and Columbus, and the note was assigned
to appellee Orix Credit Alliance, Inc. ("Orix"), on the day of the
sale. Pursuant to the contract, Orix was granted a security
interest in the Freightliner. Soon thereafter, the Alabama
Department of Revenue issued a certificate of title for the
Freightliner.1 In accordance with Alabama law, Orix's lien was
noted on the certificate; the title incorrectly listed Heard
Family's address as Kennedy, Alabama.
Heard Family business dealings took a downturn. By September
1991, it filed a bankruptcy petition under chapter 11, which
subsequently was converted to chapter 7. Meanwhile, Orix filed a
motion in the bankruptcy proceedings, seeking a lifting of the
automatic stay as to the Freightliner. Heard Family's trustee,
however, believed that the estate's interest in the truck was
superior to Orix's under the "strong-arm clause" of the Bankruptcy
Code. See 11 U.S.C. § 544 (1993). While disputing who was
entitled to the proceeds, the parties nonetheless agreed to the
sale of the Freightliner. Upon sale, Heard Family's trustee
deposited the proceeds, pending a determination of the validity of
Orix's lien.
The bankruptcy court held a hearing and concluded that Orix
1
The record does not provide an answer to how and why the
Freightliner was titled in Alabama. Because these facts are not
critical to our decision here, we do not address them.
2
did not have a perfected security interest in the Freightliner.
The court read MISS.CODE ANN. § 63-21-43 (1989) to require a proper
Mississippi title in order to perfect a security interest in the
Freightliner. Because the Freightliner did not have a Mississippi
title, the bankruptcy court ruled that the trustee's judicial lien
was superior, and the trustee was entitled to the proceeds of the
sale.
On appeal, the district court reversed, holding that
Mississippi law does not require the Freightliner, as a vehicle
engaged in interstate commerce, to have a Mississippi title. See
MISS.CODE ANN. § 63-21-11(d) (1989). As the court found that the
provisions of the Motor Vehicle Titles chapter did not apply, the
Mississippi perfection provisions of its Uniform Commercial Code,
MISS.CODE ANN. § 75-9-101 et seq. (1981 & Supp.1994) ("UCC"),
controlled. Under § 75-9-103(2), an interest perfected in another
state by issuance of a title remains perfected until a Mississippi
title is issued or the out-of-state title is surrendered. Since
neither predicate event had occurred here, the court held that
Orix's security interest remains in effect, and its interest in the
proceeds of the sale of the Freightliner is superior to those of
the trustee.
II.
A.
We first examine whether we have jurisdiction over this
appeal. Under 28 U.S.C. § 158(a) (1993), the district court has
jurisdiction to hear appeals from "final judgments, orders, and
3
decrees" issued by the bankruptcy court. Under 28 U.S.C. § 158(d),
the court of appeals has jurisdiction over the "final decisions,
judgments, orders, and decrees" issued by the district court under
either § 158(a) or (b). The Supreme Court has defined a "final
judgment" as used in 28 U.S.C. § 1291 as a decision that "ends the
litigation on the merits and leaves nothing for the court to do but
execute the judgment." Firestone Tire & Rubber Co. v. Risjord, 449
U.S. 368, 373-74, 101 S.Ct. 669, 673, 66 L.Ed.2d 571 (1981)
(citations omitted).
The bankruptcy court's decision on the validity of Orix's
security interest was but a small part of the ongoing bankruptcy
proceedings. This context, however, does not automatically divest
us of jurisdiction. The rule for appeals in bankruptcy cases is
necessarily more flexible than is the traditional rule under 28
U.S.C. § 1291. Accordingly, we have stated that "an order which
ends a discrete judicial unit in the larger case concludes a
bankruptcy proceeding and is a final judgment for the purposes of
section 158(d)." England v. FDIC (In re England), 975 F.2d 1168,
1171-72 (5th Cir.1992). We have tended to define such discrete
units as coterminous with adversary proceedings. Louisiana World
Exposition, Inc. v. Federal Ins. Co. (In re Louisiana World
Exposition, Inc.), 832 F.2d 1391, 1396 (5th Cir.1987).
Furthermore, we have held that a bankruptcy court's recognition of
a creditor's security interest was such a final order. See ITT
Diversified Credit Corp. v. Lift & Equip. Serv., Inc. (In re Lift
& Equipment Service, Inc.), 816 F.2d 1013, 1016 (5th Cir.), reh'g
4
on other grounds, 819 F.2d 546 (5th Cir.1987).
Here, the review of the district court's decision is proper,
as it disposes of a discrete unit within a larger case. The
bankruptcy and district courts determined the narrow question of
entitlement to the proceeds from the sale of the Freightliner. The
rulings at issue settle all questions concerning that sale and
eliminate Orix from the proceedings.2 A ruling by this court in
favor of either party leaves nothing for the lower court to do
except the ministerial task of directing payment of the proceeds.
Accordingly, the order in question is final, and we have appellate
jurisdiction.
B.
The district court held that a Mississippi certificate of
title was not necessary to perfect Orix's security interest in the
Freightliner, because Mississippi law provides an exception from
the state's title requirements for vehicles engaged in interstate
commerce. In reviewing the district court's affirmance of the
bankruptcy court's findings of fact, we strictly apply a clearly
erroneous standard to the bankruptcy court's findings. Perkins
Coie v. Sadkin (In re Sadkin), 36 F.3d 473, 475 (5th Cir.1994) (per
curiam). We review conclusions of law de novo. Id.
The Mississippi Motor Vehicle Titles Law, MISS.CODE ANN. § 63-
21-1 et seq. (1989 & Supp.1994), controls issuance of Mississippi
2
Orix also had security interests in two other trucks
purchased by Heard Family. Apparently the validity of these
interests was not contested, so any further involvement of Orix
would be limited to receipt of its property.
5
certificates of title for automobiles and the perfection of
security interests in those vehicles. Most security interests for
Mississippi vehicles are perfected under MISS.CODE ANN. § 63-21-43.
This section provides that:
(1) Unless excepted by section 63-21-41, a security interest
in a vehicle of a type which a certificate of title is
required is not valid against creditors of the owner or
subsequent transferees or lienholders of the vehicle unless
perfected as provided in this chapter.
(2) A security interest is perfected by the delivery to the
comptroller of the existing certificate of title, if any, an
application for a certificate of title containing the name and
address of the lienholder and the date of his security
agreement, and the required fee.
(3) If a vehicle is subject to a security interest when
brought into this state, the validity of the security interest
is determined by the law of the jurisdiction where the vehicle
was when the security interest attached, subject to the
following:
(a) If the parties understood at the time the security
interest attached that the vehicle would be kept in this state
and it was brought into this state within thirty (30) days
thereafter for purposes other than transportation through this
state, the validity of the security interest in this state is
determined by the law of this state.
Moreover, § 63-21-55 states that "the method provided in this
chapter of perfecting and giving notice of security interests
subject to this chapter is exclusive."
Not every vehicle physically within the state of Mississippi,
however, need be titled in the state. Mississippi law recognizes
numerous exceptions. The relevant exception here, provided by §
63-21-11(d), states that "[n]o certificate of title need be
obtained for: ... a vehicle regularly engaged in the interstate
transportation of persons or property for which a currently
effective certificate of title has been issued in another state."
6
Here, the district court found that the Freightliner engaged
in interstate traffic, and the Alabama certificate was valid. It
relied upon the testimony of Sam Heard, Jr., the president and sole
stockholder of Heard Family, who testified to the bankruptcy court
that the Freightliner made deliveries to Alabama, California, and
Florida. Moreover, there existed a certificate of title issued by
the State of Alabama, and the court found that there was no
evidence that it was invalid. This finding is not clearly
erroneous.
Heard Family's main legal argument is that Mississippi
precedent mandates that the exclusive means of perfecting a
security interest in a motor vehicle is through the Mississippi
Motor Vehicle Titles Law. It argues, therefore, that the district
court erred in applying the UCC's perfection provisions.
As it forthrightly admitted at oral argument, Heard Family's
assertion hinges predominately on one case, Memphis Bank & Trust
Co. v. Pate, 362 So.2d 1245 (Miss.1978), which involved a truck
purchased in Tennessee, where a lienholder perfected a security
interest. The truck, however, was sold at a sheriff's sale in
Tennessee to a Mississippi resident, who re-sold the truck to a
third party in his state. The lienholder later attempted to
enforce its security interest, relying upon the conflicts of laws
provision of Mississippi's version of the UCC. The Mississippi
Supreme Court, however, held that the Mississippi Motor Vehicle
Titles Law was the exclusive means for protecting the security
interest. Id. at 1248. Since no Mississippi title existed, the
7
security interest was not perfected under state law. Id. at 1248-
49.
Heard Family's reliance upon Pate is misplaced. The district
court in this case did apply the Mississippi Motor Vehicle Titles
Law when it looked to § 63-21-11(d). Under that section, a
Mississippi title is not necessary for vehicles engaged in
interstate commerce that have valid out-of-state titles.
No such exception applied in Pate. Here, this exception makes
the chapter and its perfection requirements inapplicable, as they
apply only to "vehicles of a type which a certificate of title is
required...." § 63-21-43(1). Moreover, the exclusivity provisions
of § 63-21-55 is itself limited to those security interests
"subject to this chapter."
Heard Family makes a corollary argument that § 63-21-11(d)
does not apply, because the Alabama title was not "currently
effective," as required by that section, as the address on the
title certificate was incorrect. Heard Family cites two sections
of Alabama's Uniform Certificate of Title and Antitheft Act,
ALA.CODE § 32-8-1 et seq. (1994), to support this argument. The
first, § 32-8-35(a), requires that "[t]he application for the first
certificate of title ... shall contain: ... [t]he name, current
residence and mailing address of the owner...." The second, § 32-
8-39(a), requires that "[e]ach certificate of title issued by the
department shall contain (1) [t]he date issued; [and] (2) [t]he
name and current address of the owner...."
A certificate of title in Alabama does not become invalid
8
simply because the owner's address changes or is incorrect; no
section of Alabama's law mandates such a result. Alabama law does
require a title holder to notify the state within thirty days when
he changes address. § 32-8-2(1). No explicit penalty is provided,
however. But see § 32-8-13(2) (mandating that willful violation to
mail or deliver title within ten days after time set in chapter is
a misdemeanor). Moreover, Alabama law makes it a felony to use a
"false or fictitious name or address ... in an application for a
certificate of title." § 32-8-12(4). It provides a means to
revoke erroneously or fraudulently issued titles. § 32-8-49.3
By implication, because the law creates a mechanism to
invalidate titles, the title must be valid until that process is
completed. Notably, Alabama's law also protects the validity of a
creditor's security interest even upon the suspension or revocation
of title. Id. This provision prevents debtors from defeating a
creditor's interests by means of the debtor's wrongdoing.4
3
This section, in relevant part, states:
(a) The Department shall suspend or revoke a
Certificate of Title, subject to the appeal provisions
of Chapter 2A of Title 40, when authorized by any other
provision of law, or if it finds:
1. The Certificate of Title was fraudulently
procured or erroneously issued; or
2. The vehicle has been scrapped, dismantled or
destroyed.
(b) suspension or revocation of a Certificate of Title
does not, in itself, affect the validity of a security
interest noted on it....
4
The purpose behind requiring the notation of a lien on the
face of a certificate of title is to provide notice to third
9
As the security interest provisions of the Motor Vehicle
Titles chapter did not apply to Freightliner because of MISS.CODE
ANN. § 63-11(d), the district court properly looked to the
provisions of the UCC as codified at MISS.CODE ANN. § 75-9-101 et
seq. The UCC states in relevant part:
(2) Certificate of Title.
(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 (4) 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....
§ 75-9-103(2).
Here, Alabama law governs the perfection of the security
interest, because it issued the certificate of title. Under
Alabama law, as Heard Family concedes, a security interest in an
automobile is perfected by having a valid certificate of title
reflecting the existence of the lien and the name of the
lienholder. See ALA.CODE § 32-8-61. The certificate in question
did both. Further, the Freightliner had not yet been registered in
Mississippi, and the security interest therefore continued to be in
effect. In sum, we hold that the security interest was perfected
parties. The invalidity of the debtor's address does not
diminish the value of notice of the security interest. See,
e.g., Yampolsky v. White Motor Credit Corp. (In re Angier), 684
F.2d 397, 399 (6th Cir.1982).
10
and remained so.
III.
Orix has requested sanctions under FED.R.APP.P. 38 and our
local rules. Because we find this appeal was not frivolous, that
request is DENIED. Based upon the findings and legal conclusions
discussed above, the judgment of the district court is AFFIRMED.
11