Court: United States Bankruptcy Court, D. Connecticut; September 14, 1987; Us Bankruptcy; United States Bankruptcy Court
Ford Motor Credit Company (FMCC) filed a motion seeking relief from the automatic stay imposed by the Bankruptcy Reform Act of 1978, aiming to enforce rights under a security agreement for a Ford automobile registered to R. S Machine Company, the debtor. The debtor contested the motion solely on the basis that FMCC lacked an enforceable security interest, acknowledging FMCC’s debt exceeded the vehicle's value and that adequate protection was absent.
The debtor, a machine shop, filed for Chapter 11 bankruptcy on January 9, 1987, with Edward LeBorious as president and sole stockholder. The dispute revolves around the circumstances of purchasing the automobile from Enfield Ford, Inc. On September 9, 1985, LeBorious purchased a vehicle for $15,644.75, intending to finance it with a $1,000 deposit. The dealer suggested that the loan be applied for in LeBorious's name, with him taking title. The loan for $13,500 was approved on September 11, 1985, with all documentation showing LeBorious as the purchaser and loan obligor. FMCC was listed as the first lienholder on the registration application.
Due to insurance registration issues, the car was ultimately registered in the name of the debtor, with LeBorious signing a second application. Although the dealer sent FMCC the necessary documents, the second registration application was not included. On June 21, 1986, the Connecticut Motor Vehicle Department issued a Certificate of Title showing both the debtor as the owner and FMCC as the first lienholder. However, FMCC had not noted that the original documents listed LeBorious as the owner. The debtor used the vehicle in its business and continued making payments to FMCC until the bankruptcy petition was filed. Initially, the debtor did not list the vehicle as an asset but later amended its schedules to include it. Only LeBorious testified at the hearings, while no dealer representatives provided clarifications on the documentation process, and FMCC was unaware of the second registration application until after the bankruptcy filing.
The debtor does not contest the adequacy of FMCC's security interest perfection under Connecticut's Uniform Motor Vehicle Certificate of Title and Anti-Theft Act. However, the debtor claims FMCC lacks a valid security interest because the debtor did not sign the Security Agreement, and the individual who did lacked rights in the collateral. The court finds these arguments without merit. Evidence shows that the debtor owned the vehicle, used it for business, and provided all funds for its purchase, intending to secure FMCC's lien. Testimony indicates that the transaction was meant to be corporate, and the debtor ratified the Security Agreement through its actions, despite not having signed it. The ruling cites relevant case law supporting that a security agreement can be established through multiple writings. Additionally, because the dealer and LeBorious signed all transfer and financing documents, LeBorious became the unrecorded owner of the vehicle, thus creating an enforceable security interest. When he later transferred title to the debtor, it was subject to FMCC's lien. Consequently, FMCC's motion for relief from stay to enforce its rights under the retail installment contract for the vehicle is granted.
