MEMORANDUM OPINION

JAMES J. ROBINSON, Chief Bankruptcy Judge.

Introduction

The Debtor and the Chapter 13 Trustee (the "Plaintiffs") commenced this adversary proceeding against Ditech Financial, LLC ("Ditech") pursuant to Bankruptcy Code (the "Code") § 544(a)(1) and (a)(2) to avoid a security interest Ditech claims in the Debtor's double-wide 1996 Fleetwood mobile home (the "Mobile Home").1 Those Code sections read as follows:

Code § 541(a)(1) and (2). The Debtor is also seeking a valuation of the Mobile Home under Code § 506(a) in the event Ditech's lien is not avoided. Ditech objects to the avoidance of its lien, and disputes the value proposed by the Debtor.

The parties filed cross-motions for summary judgment (AP Docs. 18 and 19 and herein, the "Motions") under Fed. R. Bankr. P. 7056. The court took the Motions under advisement following the submission of briefs. Confirmation of the Debtor's proposed plan in the underlying chapter 13 case has been continued pending a ruling on the Motions. After considering the Motions and submissions in support thereof, the parties' briefs and arguments, the undisputed facts, and the applicable law, the court has determined that Ditech's Motion is due to be granted, and the Plaintiffs' Motion denied, with respect to the issue of whether Ditech's security interest may be avoided by the Trustee under Code § 544(a). Material facts remain in dispute regarding the Mobile Home's value, and both Motions will be denied to the extent they seek to establish such value. While Fed. R. Bankr. P. 7052 expressly provides that the court is not required to state separate findings and conclusions in ruling on a motion under Fed. R. Bankr. P. 7056, the court has, nonetheless, set out its findings and conclusions herein.2

Summary Judgment Standard

A motion for summary judgment on the merits of the complaint is controlled by Fed. R. Bankr. P. 7056, which provides that Fed. R. Civ. P. 56 applies in bankruptcy adversary proceedings. The court may grant summary judgment to a moving party when that party demonstrates "there is no genuine issue as to any material facts and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In considering the merits of a motion for summary judgment, the court's role is not to determine the truth of the matter asserted or the weight of the evidence, but to determine whether the factual disputes, if any, raise genuine issues for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). In making this determination, the facts are to be considered in a light most favorable to the non-moving party. Id.; Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Allen v. Board of Public Educ., 495 F.3d 1306 (11th Cir. 2007).

Brown v. Mendel, 864 F.Supp. 1138, 1142-43 (M.D. Ala. 1994), aff'd sub nom. Brown v. Enstar Grp., Inc., 84 F.3d 393 (11th Cir. 1996) (internal citations omitted). "Cross-motions must be considered separately, as each movant bears the burden of establishing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. If there is no genuine issue and one of the parties is entitled to prevail as a matter of law, the court may render summary judgment." Shaw Constructors v. ICF Kaiser Engineers, Inc., 395 F.3d 533, 538-39 (5th Cir. 2004).

Findings of Fact

The facts are not in dispute, at least regarding the lien avoidance issue, and are set out in detail in the adversary pleadings, the Debtor's chapter 13 petition and schedules in the instant case as well as in her previous bankruptcy cases, and the Motions with their supporting affidavits and evidentiary submissions. Thus, to rule on the § 544(a) lien avoidance issue raised in the Motions, the court must answer only questions of law. However, a material question of fact remains unanswered regarding valuation of the Mobile Home pursuant to Code § 506(a).

On November 15, 1995, the Debtor and her former husband purchased the Mobile Home with the proceeds of a loan from Green Tree Financial Corp-Alabama, Ditech's predecessor before a series of mergers and name changes. The loan is evidenced by a Manufactured Home Retail Installment Contract and Security Agreement signed by the Debtor and her former husband. The Agreement granted Ditech's predecessor a security interest in the Mobile Home, and that security interest was properly noted on the Mobile Home's certificates of title.3 Ditech filed an in rem claim in this case for $27,324.45 purportedly secured by the Mobile Home (claim 2-2). The parties do not dispute that Ditech has not been paid in full and that the certificates of title show Green Tree as lienholder, and that the lien has not been voluntarily released. The Debtor and her husband divorced in 2004 and the Debtor became the Mobile Home's sole owner. (Doc. 18, Carden Aff. ¶ 3 and Ex. 1.)

The Debtor received a discharge in a prior chapter 7 case (Case No. 01-41405-JSS7) in which Ditech requested and was granted relief from the automatic stay. (01-41405-JSS7 Doc. 9.) The Debtor did not reaffirm the obligation secured by the Mobile Home in that case and, therefore, her personal liability owing to Ditech for the Mobile Home loan was discharged. Following the discharge, the Debtor defaulted and Ditech obtained a judgment for possession of the Mobile Home from a state court in October 2013. (Doc. 19, Dropper Aff. Ex. G.) Ditech had not dispossessed the Debtor when she filed her second chapter 7 case in August 2018 (Case No. 18-41380-JJR7) in which the Debtor indicated her intent to redeem the Mobile Home for $15,500, its alleged value in her Statement of Intent. (18-41380-JJR7 Doc. 9.) However, in that case the Debtor claimed in Schedule A/B that the Mobile Home's value was only $8,000 due to water damage. (18-41380-JJR7 Doc. 1 p. 15, part 7.) Whatever its value, the Debtor never moved to redeem nor tendered any redemption price, and the case discharged and closed without the redemption.

Soon thereafter, the Debtor filed the instant chapter 13 case, in which she is not eligible for another discharge.4 In this case, the Debtor scheduled Ditech as a creditor holding a secured claim of $8,000 (again reducing the value of the Mobile Home from $15,500 due to needed repairs, as shown on BK Doc. 1 p. 15) and an unsecured claim of $20,861.12 designated as disputed in Schedule D. (BK Doc. 1 p. 19.) Ditech was unable to inspect the Mobile Home and alleged it has a retail value of between $28,262.88 and $19,784.02 depending upon its condition. (Droppers Aff. ¶ 10.)

In the instant case the Debtor scheduled one unsecured claim for $1,500. (BK Doc. 1 p. 23.) However, the claimholder has not filed a proof of claim and the claims bar date has expired. An unscheduled creditor, 1st Franklin Financial, did file a timely claim (claim 1), but it appears to be ripe for disallowance because it was discharged in the Debtor's most recent prior chapter 7 case. And remember the Debtor's personal liability to Ditech was likewise discharged in a previous chapter 7 case. Thus, although the Trustee is the nominal party in interest and asserts she has standing to bring this avoidance action, the benefit of avoiding Ditech's lien would inure not to unsecured creditors—there appear to be none holding allowable claims—but entirely to the Debtor who, if the Plaintiffs are successful in this proceeding, will own the Mobile Home free and clear of Ditech's security interest without any obligation to account for its value through her chapter 13 plan.

After the Plaintiffs filed this adversary proceeding, Ditech requested and received Certified Record Responses (the "DOR Responses") from the Alabama Department of Revenue (the "DOR") in respect to the title of the Mobile Home. (Droppers Aff. Ex. K.) At the bottom of the first page of DOR Responses were boxes DOR had checked that stated: "Notation here certifies that the Motor Vehicle Division databases of the Alabama Department of Revenue reflect no record for the vehicle identified in this printout." (As discussed below, the DOR is no longer required to maintain records for mobile homes that are over 20 years old.) However, attached to the DOR Responses were "Title Application Snapshots" that disclosed the Mobile Home's title numbers; issue date; purchase date; VINs; make, model, and year; the owners' names—the Debtor and her former husband—together with their address; the lienholder's name—Green Tree (Ditech's predecessor)—together with its address; and the lien date—11/15/1995. Although not material to the court's ruling in this proceeding—constructive notice not being an issue—the information provided by the Snapshots appeared to conflict with the notation at the bottom of the DOR Responses that DOR's databases reflected no record for the Mobile Home.

Applicable Law and Analysis

Although there are several exceptions, Alabama's Uniform Commercial Code, codified in Title 7 of the Alabama Code (1975) (herein cited as "Ala. Code"), states the general rule that "a financing statement must be filed to perfect all security interests . . ." § 7-9A-310(a). The most common exception is noted in § 7-9A-311(a)(2), which provides that "the filing of a financing statement is not necessary or effective to perfect a security interest in property subject to . . . Chapter 8 or Chapter 20 of Title 32 [Ala. Code] . . . which provides for a security interest to be indicated on a certificate of title as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral . . . ."

At the time the Debtor and her husband purchased the Mobile Home in 1995 (before the adoption of the Manufactured Home Certificate of Title Act, effective January 2010, infra), the DOR issued certificates of title covering the Mobile Home as then required by §§ 32-8-30 and— 39,5 and because the purchase was financed with the proceeds of a loan provided by Ditech's predecessor, its purchase-money security interest was duly recorded—perfected—on the certificates of title in accordance with § 32-8-61, which states:

In 2009 Alabama adopted the Alabama Manufactured Home Certificate of Title Act (Ala. Code § 32-20-1, et seq., and herein the "MHT Act"). The MHT Act became effective January 1, 2010 and thereafter certificates of title for manufactured homes could no longer be issued under Chapter 8 of Title 32,6 but were required to be issued under the MHT Act. § 32-20-20.7 Nonetheless, the requirements for the issuance of certificates of title under the MHT Act are virtually the same as those previously required under Chapter 8 (compare § 32-20-20, et seq., with § 32-8-30, et seq.), and the same is true with respect to causing security interests to be recorded— perfected—on certificates of title (compare § 32-20-40, et seq., with § 32-8-60, et seq.). In fact, security interests previously perfected under Chapter 8 are expressly recognized as retaining their validity and priority under the MHT Act: "[A] security interest in a manufactured home for which a certificate of title is required by the terms of this chapter is not valid against creditors of the owner or subsequent transferees or lienholders . . . unless perfected as provided in this article or previously perfected under the terms of Chapter 8 of this title." § 32-20-41(a) (emphasis added).

Ordinarily, when a manufactured home is sold or becomes subject to a new security interest, the new owner or lienholder applies to the DOR for a new certificate of title on which the name of the new owner or new lienholder will be recorded. §§ 32-20-30, -33, -41, -42. But the MHT Act specifically prohibits the issuance of certificates of title for manufactured homes "designated 1999 and prior year models . . . ." § 32-20-21(4) (amended eff. Jan. 1, 2020 to replace a reference to "more than 20 model years old" with "1999 and prior year models"). Thus, because the Mobile Home is a 1996 model, it is no longer eligible for the issuance of new certificates of title on which a new owner or new secured party may record their ownership or security interest. But the MHT Act made no mention of invalidating security interests recorded on existing certificates of title for manufactured homes that, because of their age, are no longer eligible for new certificates of title. To the contrary—as quoted in the preceding paragraph—the MHT Act expressly recognizes the continued validity of security interests perfected on certificates of title originally issued under Chapter 8. § 32-20-41(a), supra.8

Further, the MHT Act at § 32-20-29 allows the DOR to issue a "replacement" for a certificate of title issued under Chapter 20 or Chapter 8 of Title 32 that was "lost, stolen, mutilated, or destroyed or becomes illegible . . . ."9 There is no restriction on issuing replacements —as opposed to new certificates of title—for manufactured homes not eligible for new certificates of title due to their age. Logically, if a replacement for a certificate of title may be issued for a manufactured home originally titled under Chapter 8, the Alabama legislature must have intended that existing certificates of title for manufactured homes, regardless of their age, would remain valid and effective, even though no new certificate of title—as opposed to a replacement—may be issued for such a home.

Not only are new certificates of title no longer issued by the DOR for manufactured homes designated 1999 and prior year models (Ala. Code 32-20-21(4)), the DOR stopped maintaining title records for manufactured homes of that age:

Ala. Admin. Code r. 810-5-75-68(5).10

Another section of Chapter 8 confirms the continued perfection of Ditech's security interest. Alabama Code § 32-8-64.111 provides that "any lien or security interests shall be considered satisfied and releases shall not be required after 12 years from the date of the security agreement as recorded on the certificate of title."12 Security interests in manufactured homes (and travel trailers and vehicles that weigh more than 12,000 pounds) are expressly exempt from the 12-year lapse provision of § 32-8-64.1. Indeed, § 32-8-64.1 confirms that security interests in manufactured homes "shall be satisfied only in conformity with Section 32-8-64 . . ." (emphasis added), which in turn provides that "[u]pon the satisfaction of a security interest . . . the lienholder . . . shall . . . execute a release of his or her security interest, in the space provide therefor on the certificate or as the [DOR] prescribes . . . ." § 32-8-64(a). Neither Ditech nor its predecessor executed a release on the Mobile Home's certificates of title.13

Under Bankruptcy Code § 544(a), a bankruptcy trustee has the "strong-arm" power to avoid any transfer of property or obligation incurred by a debtor if the transfer or obligation (in this case, Ditech's security interest) would be avoidable by a hypothetical creditor whose judicial lien or execution against all property of the debtor sprang into existence when the debtor's bankruptcy petition was filed. "Basically, this means that a trustee can avoid the security interest of a creditor if the security interest was not properly perfected." Matter of Patterson, 185 B.R. 354, 357 (Bankr. N.D. Ala. 1995) (Caddell, Bankr. J.). "In the typical bankruptcy case, the trustee will invoke section 544(a) to avoid any interest inferior to h[er] own." Old W. Annuity & Life Ins. Co. v. Apollo Grp., 605 F.3d 856, 864 (11th Cir. 2010). The trustee is the only party with standing to pursue the avoidance as a "hypothetical lien creditor" under Code § 544(a)(1). American General Fin., Inc. v. Tippins (In re Tippins), 221 B.R. 11, 17 (Bankr. N.D. Ala. 1998).14

Thus, the question becomes whether under the provisions of the Alabama Code discussed above, the Mobile Home's certificates of title remained effective to preserve the perfection of Ditech's security interest even though no new certificates of title will be issued in the future for new owners or new lienholders, and the DOR is no longer required to maintain title records for the Mobile Home. If the existing certificates of title on which Ditech's security interest is recorded remain effective, then Ditech was perfected on the day the Debtor filed her petition for relief under chapter 13 and its security interest may not be avoided. If not, then the Trustee may avoid the security interest.

The Plaintiffs cite examples of Alabama Code provisions establishing presumed satisfaction of liens: 20 years from the maturity of the debt secured by a real estate mortgages— § 35-10-20; five years from the date of filing for most UCC financing statements, unless continuation statements are filed (without regard to the age of either the lien or the collateral)— § 7-9A-515(a); 30 years from the filing date for an initial financing statement filed in conjunction with a "manufactured-home transaction" (without regard to the age of the lien or the age of the manufactured home)15— § 7-9A-515(b); and, as discussed above, 12 years from the date of the security agreement as recorded on the certificate of title for many types of vehicles, other than manufactured homes, travel trailers, or vehicles that weighs more than 12,000 pounds (without regard to the age of the vehicle or the date the title was issued)— § 32-8-64.1. Despite this demonstration that the Alabama legislature knows how to provide for a lapse of lien perfection when that was its intent, the Plaintiffs have not cited any Alabama statute that provides for the presumed satisfaction of a lien against a manufactured home due to either the age of the lien or the age of the home.

The Plaintiffs rely on § 7-9A-303(b) which provides that "[g]oods cease to be covered by a certificate of title . . . [at] the time the certificate of title ceases to be effective under the law of the issuing jurisdiction (emphasis added)." But § 7-9A-303(b) applies only when a certificate of title ceases to be effective. There is no explicit statutory or case-law authority supporting the Plaintiffs' argument that the existing certificates of title for the Debtor's Mobile Home "ceased to be effective." To the contrary, the MHT Act, as noted above, expressly preserves the validity and effectiveness of certificates of title issued under Chapter 8 of Title 32, and before a security interest in a manufactured home may be released, § 32-8-64 requires that the secured party formally execute a release on the face of the certificate of title. Nonetheless, the Plaintiffs urge the court to adopt their argument for three reasons. First, a third party can no longer rely on the perfection and priority rules of the certificate of title statutes (presumably because the DOR regulations provide that it will no longer maintain "title records" for manufactured homes over 20 years old under Alabama Admin. Code r. 810-5-75-68). Second, an owner-seller cannot use the existing certificate of title to transfer ownership because no new certificate of title will be issued to the purchaser under § 32-20-21(4) because of the Mobile Home's age. Third, a new secured party cannot perfect its security interest via submission of an application to the DOR for new certificates of title on which to record its security interest because no new titles will be issued for the Mobile Home because of its age under § 32-20-21(4).

But the Plaintiffs' arguments are flawed. At least for the Debtor's Mobile Home, the DOR does appear to maintain and did provide partial title records—the DOR Responses showing the initial title information— which gave constructive notice of Ditech's lien. But notice issues are a red herring in any event, because the suggestion that "notice" to third parties is required for a certificate of title to be effective is not relevant, and the Plaintiffs admit as much. Rather, their primary argument is that Ditech's security interest ceased to be perfected because the certificates of title ceased to be effective for any purpose, including continued perfection of Ditech's existing lien, the moment the Mobile Home, because of its age, became ineligible for new certificates of title. According to the Plaintiffs, Ditech's security interest then fell under the UCC's perfection rules for a manufactured home transaction,16 which would require that a financing statement be properly filed to continue perfection. Because Ditech did not file a UCC financing statement covering the Mobile Home, the Plaintiffs contend perfection of Ditech's security interest lapsed because of the Mobile Home's age, and thereupon would have become subordinate to a judgment lien creditor and likewise subject to avoidance by a trustee under Code § 544(a). The Plaintiffs' arguments conflate the issuance of a new certificate of title with the effectiveness of an existing certificate of title. The Plaintiffs have cited no provision of the Alabama Code, and no Alabama case law, and the court's research has found none, that would support a ruling that existing certificates of title become ineffective based on a manufactured home's age or based upon the age of a security interest recorded on its certificate of title.

To the contrary, § 32-8-64.1, supra, dictates that security interests in manufactured homes can be satisfied only by following the procedure prescribed in § 32-8-64, which requires that the lienholder formally satisfy its lien by executing a release in the space provided therefor on the certificate of title and delivering the certificate and release to the next lienholder or, if none, to the owner. If the Alabama legislature intended for liens encumbering manufactured homes to age-out like those encumbering many other vehicles, it would not have excepted manufactured homes. And although new certificates of title—to evidence transfer of title or lien perfection—are no longer issued by the DOR for 1999 and older model year manufactured homes, there is no authority supporting the argument that existing certificates of title for such manufactured homes cease to be effective for the purpose of continuing the perfection of existing security interests recorded thereon.

Sections 32-20-26(c) and 32-8-39(d) are identical, and state that "[a] certificate of title issued by the [DOR] is prima facie evidence of the facts appearing on it."17 Thus, third parties— buyers, secured lenders, and judgment lien creditors—dealing with 1999 and older model year manufactured homes continue to be charged with whatever title information is disclosed on the existing certificates of title that were issued by the DOR for those homes. Those certificates of title remain fully effective for all purposes except two: (1) obtaining a new certificate of title to show new ownership and (2) obtaining a new certificate of title to perfect a new security interest. Virtually all secured lenders maintain possession of the certificates of title covering their collateral, and indeed such possession is contemplated in § 32-8-64, and third parties, whether creditors or purchasers, proceed at their own peril without first demanding to see the certificate of title regardless of the manufactured home's age.

If a new security interest were to be created in the Debtor's Mobile Home, for instance, the UCC's provisions that require filing a financing statement would indeed govern perfection because that new secured transaction would be beyond the scope of § 32-20-20 insofar as no new title would be issued due to the age of the Mobile Home. But the existing certificates of title showing the existence of Ditech's security interest do not cease to be "effective" nor cease to maintain perfection as against a lien creditor simply because no new titles would be issued to a new secured party or purchaser, nor because the DOR does not keep ongoing records or copies of the existing title of the Mobile Home because of its age. Ditech's security interest was neither clandestine nor undiscoverable, nor was it ever released voluntarily or by operation of law.

Conclusion

The court concludes that Ditech's security interest in the Mobile Home continues to be perfected and that a judgment lien creditor on the petition date of the Debtor's bankruptcy case would not take priority over Ditech's security interest. Therefore, the Trustee cannot avoid Ditech's security interest under Code § 544(a)(1) or (a)(2), and to that extent, Ditech's Motion (AP Doc. 19) is due to be GRANTED and the Plaintiffs' Motion (AP Doc. 18) is due to be DENIED.18

As previously mentioned, the Debtor's personal liability for the debt owing to Ditech was discharged in her first chapter 7 case. Therefore, the only claim Ditech can have in this case is a secured claim (secured by the Mobile Home as property of the estate) and the value of the Mobile Home will determine the extent of Ditech's claim pursuant to Bankruptcy Code §506(a). The evidence presented in support of the Motions did not establish the value of the Mobile Home, therefore, there exists a material issue of fact—that issue being the value of the Mobile Home— and the Motions are each DENIED to the extent they seek to establish that value. An evidentiary hearing will be scheduled in due course for the court to determine the Mobile Home's value and the amount of Ditech's secured claim.19 A separate order conforming to this opinion will be issued by the court.