OCTOBER TERM, 1997
Syllabus
FIDELITY FINANCIAL SERVICES, INC.
v.
FINK, TRUSTEE
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH
CIRCUIT
No. 96-1370. Argued November 3, 1997-Decided January 13,
1998
Diane Beasley purchased a new car and gave petitioner, Fidelity
Financial Services, Inc., a promissory note for the purchase price,
secured by the car. Twenty-one days later, Fidelity mailed the
application necessary to perfect its security interest under
Missouri law. Beasley later filed for bankruptcy, and the trustee
of her bankruptcy estate, respondent Fink, moved to set aside
Fidelity's security interest on the ground that the lien was a
voidable preference under 11 U. S. C. § 547(b). Section
547(c)(3)(B) prohibits the avoidance of a security interest for a
loan used to acquire property if, among other things, the security
interest is "perfected on or before 20 days after the debtor
receives possession of such property." Fink argued that this
"enabling loan" exception was inapposite because Fidelity had not
perfected its interest within the 20-day period. Fidelity responded
that Missouri law treats a motor vehicle lien as having been
"perfected" on the date of its creation (in this case, within the
20-day period), if the creditor files the necessary documents
within 30 days after the debtor takes possession. The Bankruptcy
Court set aside the lien as a voidable preference, holding that
Missouri's relation-back provision could not extend §
547(c)(3)(B)'s 20-day perfection period. The District Court
affirmed on substantially the same grounds, as did the Eighth
Circuit, holding a transfer to be perfected when the transferee
takes the last step required by state law to perfect its security
interest.
Held: A transfer of a security interest is "perfected"
under § 547(c)(3)(B) on the date that the secured party has
completed the steps necessary to perfect its interest, so that a
creditor may invoke the enabling loan exception only by satisfying
state-law perfection requirements within the 20-day period provided
by the federal statute. Section 547(e)(I)(B) provides that "a
transfer of ... property ... is perfected when a creditor on a
simple contract cannot acquire a judicial lien that is superior to
the interest of the transferee." This definition implies that a
transfer is "perfected" only when the secured party has done all
the acts required to perfect its interest, not at the moment as of
which state law may retroactively deem that perfection effective. A
variety of considerations support this conclusion, including § 546,
which raises a negative
212
implication that Congress did not intend state relation-back
provisions or grace periods to control a trustee's power to avoid
preferences, and the fact that, under Fidelity's reading, the net
effect of the 1994 amendment extending the § 547(c)(3)(B)
perfection period from 10 to 20 days would be merely to benefit a
class of creditors in only 10 jurisdictions. Indeed, the broader
statutory history of the preference provisions persuasively
suggests that Congress intended § 547(c)(3)(B) to establish a
uniform federal perfection period immune to alteration by state
laws permitting relation back. Thus, the statutory text, structure,
and history lead to the understanding that a creditor may invoke
the enabling loan exception only by acting to perfect its security
interest within 20 days after the debtor takes possession of its
property. Pp. 214-221.
102 F.3d
334, affirmed.
SOUTER, J., delivered the opinion for a unanimous Court.
Michael P. Gaughen argued the cause and filed a brief for
petitioner.
Richard v:
Fink, respondent,
pro se, argued
the cause and filed a brief. *
JUSTICE SOUTER delivered the opinion of the Court. Although
certain transfers made before the filing of a petition in
bankruptcy may be avoided as impermissibly preferential, a trustee
may not so displace a security interest for a loan used to acquire
the encumbered property if, among other things, the security
interest is "perfected on or before 20 days after the debtor
receives possession of such property." 11 U. S. C. § 547(c)(3)(B).
The question in this case is whether a creditor may invoke this
"enabling loan" exception if it performs the acts necessary to
perfect its security interest more than 20 days after the debtor
receives the property, but within a relation-back or grace period
provided by the otherwise applicable state law. We answer no and
hold that a transfer of a security interest is "perfected" under §
547(c)(3)(B) on the date that the secured party has
* James A. Pardo, Jr., filed a brief for the
American Automobile Manufacturers Association et al. as
amici
curiae urging reversal.
213
completed the steps necessary to perfect its interest, so that a
creditor may invoke the enabling loan exception only by satisfying
state-law perfection requirements within the 20day period provided
by the federal statute.
I
On August 17, 1994, Diane Beasley purchased a 1994 Ford and gave
petitioner, Fidelity Financial Services, Inc., a promissory note
for the purchase price, secured by the new car. Twenty-one days
later, on September 7, 1994, Fidelity mailed the application
necessary to perfect its security interest addressed to the
Missouri Department of Revenue. See Mo. Rev. Stat. § 301.600(2)
(1994).1
Two months after that, Beasley sought relief under Chapter 7 of
the Bankruptcy Code. After the proceeding had been converted to one
under Chapter 13, respondent, Richard V. Fink, the trustee of
Beasley's bankruptcy estate, moved to set aside Fidelity's security
interest. He argued that the lien was a voidable preference, the
enabling loan exception being inapposite because Fidelity had
failed to perfect its interest within 20 days after Beasley
received the car. Fidelity responded that Missouri law treats a
lien on a motor vehicle as having been "perfected" on the date of
its creation (in this case, within the 20-day period), if the
creditor files the necessary documents within 30 days after the
debtor takes possession. Mo. Rev. Stat. § 301.600(2) (1994).
The Bankruptcy Court set aside the lien as a voidable
preference, holding that Missouri's relation-back provision
1 Whether the mailing was sufficient to perfect the interest is
an issue of state law not raised by this case. In speaking below of
acts necessary to perfect a security interest under state law, we
mean whatever acts must be done to effect perfection under the
terms of the applicable state statute, whether those be acts of a
creditor or acts of a governmental employee delivering or
responding to a creditor's application. As will be seen, the time
within which those acts must be done is governed by federal, not
state, law, when the issue is the voidability of a preference under
the Bankruptcy Code.
214
could not extend the 20-day perfection period imposed by §
547(c)(3)(B).
In re Beasley, 183 B. R. 857 (Bkrtcy. Ct. WD
Mo. 1995). Fidelity appealed to the United States District Court
for the Western District of Missouri, which affirmed on
substantially the same grounds, as did the Court of Appeals for the
Eighth Circuit, holding a transfer to be perfected "when the
transferee takes the last step required by state law to perfect its
security interest."
102 F.3d
334, 335 (1996)
(per curiam) (internal quotation marks
omitted).
We granted certiorari, 520 U. S. 1209 (1997), to resolve a
conflict among the Circuits over the question when a transfer is
"perfected" under § 547(c)(3)(B).2 We affirm.
II
Without regard to whether Fidelity's lien is a preference under
§ 547(b), Fink cannot avoid the lien if it falls within the
enabling loan exception of § 547(c)(3), one requirement of which is
that the transfer of the interest securing the lien be "perfected
on or before 20 days after the debtor receives possession." 11 U.
S. C. § 547(c)(3)(B). Perfection turns on the definition provided
by § 547(e)(1)(B), that "a transfer of ... property other than real
property is perfected when a creditor on a simple contract cannot
acquire a judicial lien that is superior to the interest of the
transferee."
Like the Courts of Appeals that have adopted its position, see
n. 2,
supra, Fidelity sees in subsection (c)(3)(B) not only
a federal guarantee that a creditor will have 20 days to act, but
also a reflection of state law that deems perfection within
2 Compare
In re Locklin, 101 F.3d
435, 442
(CA5 1996) (holding that § 547(c)(3)(B)
perfection period prevails over a longer grace period provided by
state law);
In re Walker, 77 F.3d
322, 323-324
(CA9 1996) (same); and
In re
Hamilton, 892 F.2d
1230, 1234-1235
(CA5 1990) (same), with
In re
Hesser, 984 F.2d
345, 348-349 (CAlO 1993) (holding that a transfer is perfected
under § 547(c)(3)(B) as of the date that the creditor's lien has
priority under state law), and
In re Busenlehner, 918 F.2d
928, 930-931 (CA111990) (same), cert. denied
sub nom.
Moister v.
General Motors Acceptance Corp., 500 U. S.
949 (1991).
215
a statutory grace or relation-back period to be perfection as of
the creation of the underlying security interest. Under Missouri
law, for example, a "lien or encumbrance on a motor vehicle ... is
perfected by the delivery [of specified documents] to the director
of revenue," Mo. Rev. Stat. § 301.600(2) (1994), but the date of
the lien's perfection is "as of the time of its creation if the
delivery of the aforesaid to the director of revenue is completed
within thirty days thereafter, otherwise as of the time of the
delivery."
Ibid. Thus, Fidelity contends that although it
delivered the required documents more than 20 days after Beasley
received the car, its lien must be treated as perfected on the day
of its creation because it delivered the papers within the 30 days
allowed by state law to qualify for the relation-back advantage. If
this is sound reasoning, Fidelity's lien was perfected on August
17, 1994, the very day that Beasley drove away in her Ford, and
Fidelity may invoke § 547(c)(3)'s enabling loan exception.3
The assumption that the term "perfected" as used in subsection
(c)(3)(B) and defined in subsection (e)(l)(B) may refer to the
relation-back date is not to be made so easily, however. It is
quite certain, to begin with, that in the relevant context Congress
sometimes used the word "perfection" to mean the legal conclusion
that for such purposes as calculating priorities perfection of a
lien should be treated as if it had occurred on a particular date,
and sometimes used it to refer to the acts necessary to support
that conclusion. Section 546(b)(1)(A) speaks of state laws that
permit "perfection ... to be effective ... before the date of
perfection." 11 U. S. C.
3 As Fidelity suggested in passing at oral argument, see Tr. of
Oral Arg. 22-23, its reading of the term "perfected" in §
547(e)(1)(B) would carry another consequence. If the lien were
"perfected" under that provision as of the date of its creation,
the transfer would presumably be treated as having taken place on
that date, 11 U. S. C. § 547(e)(2)(A), outside the 90day preference
period set forth in § 547(b)(4)(A), and would not have been a
voidable preference at all.
216
§ 546(b)(1)(A). The distinction implicit in speaking of
"perfection" antecedent to the "date of perfection" shows that
Congress was thinking about the difference between the legal
conclusion that may be entailed by applying a relationback rule
and, on the other hand, the acts taken to trigger an application of
the rule.
Knowing that Congress understood "perfection" in these two
different senses, one can see how Fidelity's construction of §
547(e)(1)(B) is a poor fit with the text. Although Fidelity and two
Courts of Appeals have thought this provision means that a transfer
is perfected as of whatever date an enabling creditor could claim
in a priority fight with a contract creditor armed with a judicial
lien, the statute does not speak in such terms. Rather, it says
that a transfer is perfected "when" a contract creditor "cannot
acquire" a superior lien. "[W]hen" and "cannot acquire" are
ostensibly straightforward references to time and action in the
real world, not tipoffs (like the terms "as if" and "deemed") that
the clock is being turned back in some legal universe. A creditor
"can" acquire such a lien at any time until the secured party
performs the acts sufficient to perfect its interest. Such a lien
would, of course, lose its priority if, during the relation-back
period, the secured party performed those acts; such a possibility
does not mean that a contract creditor "cannot" acquire such a
lien, however, but merely that its superiority may be fleeting. Not
until the secured party actually performs the final act that will
perfect its interest can other creditors be foreclosed conclusively
from obtaining a superior lien. It is only then that they "cannot"
acquire such a lien. Thus, the terms of § 547(e)(1)(B) apparently
imply that a transfer is "perfected" only when the secured party
has done all the acts required to perfect its interest, not at the
moment as of which state law may retroactively deem that perfection
effective.
A variety of considerations support this conclusion.
First, a related provision of the Bankruptcy Code raises a
217
negative implication to the effect that Congress did not intend
state relation-back provisions or grace periods to control a
trustee's power to avoid preferences. Section 546 of the Code puts
certain limits on the avoidance powers set forth elsewhere, as in
the provision of § 546(b)(1)(A) that the "rights and powers of a
trustee under sections 544, 545, and 549 of this title are subject
to any generally applicable law that ... permits perfection of an
interest in property to be effective against an entity that
acquires rights in such property before the date of perfection."
Not only does the series skip from §545 to §549, but the omission
of §547 becomes all the more pointed when read against the other
subsections of § 546, all of which refer explicitly to powers and
proceedings under § 547. See 11 U. S. C. §§ 546(a), (c)-(g). So, it
is hard to resist the implication that Congress quite specifically
intended a trustee's power to avoid prepetition preferences to
prevail over any state rules permitting relation back.
There is further support for this reading in the circumstances
of the 1994 amendment to the Bankruptcy Code that extended the
perfection period under § 547(c)(3)(B) from 10 to 20 days. See
Bankruptcy Reform Act of 1994, § 203(1), Pub. L. 103-394, 108 Stat.
4122. At the time this legislation was passed, most States had some
version of Article 9-301(2) of the Uniform Commercial Code, which
provides that
"[i]f the secured party files with respect to a purchase money
security interest before or within ten days after the debtor
receives possession of the collateral, he takes priority over the
rights of a transferee in bulk or of a lien creditor which arise
between the time the security interest attaches and the time of
filing." Uniform Commercial Code § 9-301(2), 3A U. L. A. 10
(1992).
Forty-two States had adopted modifications extending the grace
period to 20 days or more after the debtor's first possession of
the collateral. See Uniform Commercial Code § 9-301, 3A U. L. A.
10, 14-15 (1992 and Supp. 1997); Cal.
218
Com. Code Ann. § 9301(2) (West Supp. 1997); R. 1. Gen. Laws §
6A-9-301(2) (1992).
Under Fidelity's view of the way § 547(c)(3) acts together with
state law, a creditor in any of those States could have perfected
its security interest between the 10th and the 20th day and still
have complied with the 10-day deadline in the pre-1994 version of
the Bankruptcy Code. Indeed, on Fidelity's view, the only States in
which antecedent perfection would not have been recognized under
the old federal10-day period would have been States with no
relation-back period at all (of which there was none), or States in
which relation back went only to the 11th (or a later) day after
creation (of which, it is not surprising to learn, there also was
none), or States in which the time for acting under the
relation-back rule was less than 20 days (of which there were only
eight, plus Guam and the District of Columbia). If Congress had
shared Fidelity's view of the federal 10-day provision, then the
1994 amendment would have accomplished very little, extending the
period only in those few States that lacked a 20-day grace period.
And, of course, it is hard to understand why Congress would have
wanted to do that. The change would not have brought uniformity to
federal bankruptcy practice, for on Fidelity's view a State could
have chosen a longer period (and, in the context of motor vehicles,
at least some have done so, see,
e. g., W. Va. Code §
17 A-4A4(a) (1996) (providing 60-day period)). The net effect of
the 1994 amendment would thus have been merely to benefit a class
of creditors in only eight States, Guam, and the District of
Columbia, jurisdictions which could have looked out for their own
creditors if they had chosen to do so. It is not easy to imagine
that Congress meant to accomplish nothing more, and nothing
uniform, by its effort.
Driven to the last ditch, Fidelity relies on an isolated piece
of legislative history. On the floor of the Senate one day in April
1994, during consideration of the Bankruptcy Reform Act of 1993, a
bill which was never enacted but which had a
219
provision identical to the 1994 amendment that extended the §
547(c)(3)(B) perfection period to 20 days, Senators Heflin and
Sasser appeared to address the issue now before us.4 During their
colloquy, the Senators agreed that "although there is no statutory
language to codify [the Eleventh Circuit's decision in
In re
Busenlehner and the Tenth Circuit's decision in
In re
Hesser], they are consistent with Federal bankruptcy law." 140
Congo Rec. 8035 (1994) (remarks of Sen. Sasser). Senator Heflin
thought it "appropriate at this time for the Senate to state its
intent to confirm the interpretations of these circuits."
Ibid. Fidelity takes this exchange as indicating that in
passing the 1994 amendment Congress meant to enact the holdings of
the Tenth and Eleventh Circuits that the term "perfected" in §
547(c)(3)(B) may refer to the conclusion provided by a
relation-back rule, not only to the creditor's act of filing.
But the colloquy supports no such argument. Senator Heflin began
it by describing the enabling loan exception and noting that the
proposed amendment would extend the "[f]ederal time period from 10
to 20 days."
Ibid. Senator Sasser responded that he thought
it "advisable to clarify a related issue that has caused
unnecessary litigation throughout the country."
Ibid.
Senator Sasser later stated that he was "[c]larifying that
'relation back' statutes are consistent with the Federal law."
Ibid. These remarks reflect the Senators' understanding that
they were not discussing the effect of any legislative proposal
before them. Indeed, as we have seen, "perfection" is defined
elsewhere and the Senate was not addressing the definition
provision. The Senators were simply using the occasion to offer
their own views on existing law, a conclusion underscored by
Senator Sasser's observation that "there is no statutory language
to codify these court cases."
Ibid.
4 We say "appeared" because the colloquy is not free of
ambiguity. See 140 Congo Rec. 8035 (1994). For the sake of
argument, we treat it in the light most favorable to Fidelity.
220
Whatever weight some Members of this Court might accord to floor
statements about proposals actually under consideration, remarks
that purport to clarify "related" areas of the law can have little
persuasive force, and in this case none at all. For the Senators'
remarks were not only at odds with the governing text but also with
the current of the broader statutory history of the preference
provisions, which persuasively suggests that Congress intended §
547(c)(3)(B) to establish a uniform federal perfection period
immune to alteration by state laws permitting relation back. The
former version of the preference provisions, § 60 of the previous
Bankruptcy Act, referred explicitly to state law in determining
when a transfer occurred. It first provided a general rule that a
transfer of an interest in personal property occurred "when it
became so far perfected that no subsequent lien upon such property
obtainable by legal or equitable proceedings on a simple contract
could become superior to the rights of the transferee." 11 U. S. C.
§ 96(a)(2) (1964 ed.). But it then subjected this general rule to
the exceptions that
"[w]here (A) the applicable law specifies a stated period of
time of not more than twenty-one days after the transfer within
which recording, delivery, or some other act is required, and
compliance therewith is had within such stated period of time; or
where (B) the applicable law specifies no such stated period of
time or where such stated period of time is more than twentyone
days, and compliance therewith is had within twenty-one days after
the transfer, the transfer shall be deemed to be made or suffered
at the time of the transfer." § 96(a)(7)(I).
Thus, a transfer was deemed to have occurred on the date of the
transaction that gave rise to it, not on the later date of
"recording, delivery, or ... other act," so long as the creditor
had complied with state relation-back law within 21 days. But even
this former version of the Act, which explicitly
221
looked to state-law rules to determine the effective date of
transfer, did not allow those rules to extend the creditor's
opportunity to act beyond the uniform outer time limit that it
provided. In light of this history, we see no basis to say that
subsequent amendments removing references to statelaw options had
the counterintuitive effect of deferring to such options even
beyond what the old law would have done.
In short, the text, structure, and history of the preference
provisions lead to the understanding that a creditor may invoke the
enabling loan exception of § 547(c)(3) only by acting to perfect
its security interest within 20 days after the debtor takes
possession of its property.
***
Accordingly, we affirm the judgment of the Court of Appeals for
the Eighth Circuit.
It is so ordered.
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