               ELECTRONIC CITATION: 2011 FED App. 0016P (6th Cir.)
                            File Name: 11b0016p.06

          BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

In re: GARY D. BARBEE,                    )
                                          )
                  Debtor.                 )
                                          )          No. 10-8074
                                          )
______________________________________    )
                                          )
U.S. BANK NATIONAL ASSOCIATION            )
AS TRUSTEE FOR THE TRUMAN FHA             )
TRUST 2008-1, BY AND THROUGH ITS          )
MORTGAGE SERVICING AGENT BAC              )
HOME LOAN SERVICING,                      )
                                          )
                  Appellant,              )
                                          )
      v.                                  )
                                          )
GARY D. BARBEE,                           )
                                          )
                  Appellee.               )
__________________________________________)

                    Appeal from the United States Bankruptcy Court
                         for the Eastern District of Kentucky
                            Bankruptcy Case No. 09-53591

                              Argued: November 2, 2011

                         Decided and Filed: December 12, 2011

      Before: BOSWELL, HARRIS, and McIVOR, Bankruptcy Appellate Panel Judges.

                               ____________________

                                     COUNSEL

ARGUED: John P. Brice, WYATT, TARRANT & COMBS, LLP, Lexington, Kentucky, for
Appellant. Jon Jay Lieberman, ATKINSON, SIMMS & KERMODE, PLLC, Lexington, Kentucky,
for Appellee. ON BRIEF: John P. Brice, WYATT, TARRANT & COMBS, LLP, Lexington,
Kentucky, for Appellant. John M. Simms, ATKINSON, SIMMS & KERMODE, PLLC, Lexington,
Kentucky, for Appellee.
                                   ____________________

                                            OPINION
                                      ____________________

       ARTHUR I. HARRIS, Bankruptcy Appellate Panel Judge. The chapter 13 debtor, Gary D.
Barbee (“Debtor”), instituted an adversary proceeding against U.S. Bank National Association as
trustee for the Truman FHA Trust 2008-1, by and through its mortgage servicing agent BAC Home
Loan Servicing (“Bank”) seeking to avoid the Bank’s interest in his manufactured home pursuant
to 11 U.S.C. § 544. The parties filed cross-motions for summary judgment on stipulated facts.
Appellant appeals the bankruptcy court’s September 17, 2010, order granting summary judgment
in favor of Debtor. For the reasons that follow, the Panel AFFIRMS the bankruptcy court’s order.

                                     I. ISSUES ON APPEAL

       The issue presented by this appeal is whether the bankruptcy court erred in granting summary
judgment in favor of Debtor. Underlying this issue is whether the court correctly concluded that
Debtor has standing to pursue an avoidance action, and whether the court correctly concluded that
the Bank’s lien on Debtor’s manufactured home was not perfected, and therefore avoidable, because
there was no notation of the lien on the certificate of title and the home was never converted from
personal to real property.

                     II. JURISDICTION AND STANDARD OF REVIEW

       The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal.
The United States District Court for the Eastern District of Kentucky has authorized appeals to the
Panel, and neither party has timely elected to have this appeal heard by the district court.
28 U.S.C. § 158(b)(6) and (c)(1). A final order of the bankruptcy court may be appealed as of right
pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, an order is final if it “ends the litigation
on the merits and leaves nothing for the court to do but execute the judgment.” Midland Asphalt
Corp. v. United States, 489 U.S. 794, 798, 109 S. Ct. 1484, 1497 (1989) (citations omitted). An


                                                  2
order granting summary judgment is a final order. Drown v. Nat’l City Bank (In re Ingersoll),
420 B.R. 414, 414-15 (B.A.P. 6th Cir. 2009).

       The bankruptcy court’s final order granting Debtor’s motion for summary judgment is
reviewed de novo. See Int’l Dairy Foods Ass’n v. Boggs, 622 F.3d 628, 635 (6th Cir. 2010).
“ ‘Under a de novo standard of review, the reviewing court decides an issue independently of, and
without deference to, the trial court’s determination.’ ” In re Ingersoll, 420 B.R. at 415 (quoting
Buckeye Check Cashing, Inc. v. Meadows (In re Meadows), 396 B.R. 485 (B.A.P. 6th Cir. 2008)).

                                            III. FACTS

       The relevant facts in this case are undisputed. On November 15, 1999, Debtor and Rebecca
Ruth Gaunce (“Gaunce”) borrowed $75,558.93 from Countrywide Home Loans, Inc.
(“Countrywide”), repayment of which was secured by the grant of a mortgage lien in favor of
Countrywide. The mortgage granted to Countrywide is dated November 15, 1999, and was recorded
in the office of the Bourbon County Clerk on December 1, 1999. That mortgage encumbered the
real property and all improvements and fixtures located at 106 Vimont Street, Millersburg,
Kentucky. On October 22, 2009, the note and mortgage were assigned to the Bank.

       Debtor and Gaunce used the proceeds of the loan to acquire the real property from the Estate
of Joseph F. O’Nan. Located on the property is Debtor and Gaunce’s manufactured home. Attached
to the home is a metal plate that states:

               As evidenced by this label No. NTA 213282 the manufacturer
               certifies to the best of the manufacturer’s knowledge and belief that
               this manufactured home has been inspected in accordance with the
               requirements of the Department of Housing and Urban Development
               and is constructed in conformance with the federal manufactured
               home construction and safety standards in effect at the date of
               manufacture.

(Adv. Proc. Doc. #13, Ex. 8.) Also in the record is a letter from a loan officer to Countrywide
regarding Debtor’s loan from Countrywide advising that “[i]n 1997, this double wide mobile home
was gutted and rebuild (sic) as an actual house.” (Adv. Proc. Doc. #6-1, at 22.) Debtor and Gaunce


                                                3
did not acquire a separate title to the manufactured home; however, the record is unclear as to
whether a certificate of title has ever been issued for the manufactured home.

       On November 11, 2009, Debtor filed a petition for relief under chapter 13 of the Bankruptcy
Code.1 On April 16, 2010, Debtor filed a motion seeking derivative standing to file an adversary
proceeding to avoid the Bank’s lien on the manufactured home. On May 17, 2010, the bankruptcy
court granted Debtor’s motion.

       Debtor filed his adversary complaint on May 23, 2010. In his complaint, Debtor asserted that
as a hypothetical lien creditor, he has superior title to the manufactured home located on the
property, and that any interest the Bank has in the home is avoidable pursuant to 11 U.S.C. § 544
because the Bank failed to perfect its lien on the manufactured home pursuant to Kentucky law.2

       The Bank and Debtor filed cross-motions for summary judgment. The Bank asserted that
Debtor did not have standing to bring the avoidance action, and that he did not acquire title to the
home pursuant to Kentucky Revised Statute § 186A.215. The Bank claimed that the home does not
constitute an asset of the estate because Debtor acquired no interest in the home apart from its status
as an improvement to real property or a fixture. Additionally, the Bank argued that Debtor’s claims
were barred by 11 U.S.C. §§ 1322(b)(2) and 1325(a)(5) in that Debtor may not modify the Bank’s
rights as the holder of a mortgage secured solely by his residence.3

       The bankruptcy court heard oral argument on September 13, 2010. The parties agreed that
there were no genuine issues of material fact and that disposition of the cross-motions for summary
judgment would fully adjudicate all claims. On September 17, 2010, the bankruptcy court issued

       1
         Also on November 11, 2009, Gaunce filed a separate chapter 13 petition. Her chapter 13
plan proposed to treat the Bank’s $79,000 claim as having a secured value of only $7,500 according
to 11 U.S.C. § 506(a). Her plan was confirmed on March 22, 2010, without objection.
       2
         Debtor’s complaint also asserted that the order confirming Gaunce’s chapter 13 plan has
res judicata effect as to the non-existence of a lien on the home. The bankruptcy court rejected this
contention, and Debtor has not filed a cross-appeal on this issue.
       3
       The bankruptcy court rejected the Bank’s argument regarding §§ 1322(b)(2) and 1325(a)(5);
however, the Bank has not raised this argument on appeal.

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an order granting summary judgment in favor of Debtor and denying the Bank’s motion for summary
judgment. The bankruptcy court held that Debtor has standing to bring the avoidance action, and
that the Bank’s lien on the manufactured home was avoidable because the lien was not noted on the
certificate of title, nor had the home been converted to real property.

                                         IV. DISCUSSION

A. Derivative Standing of Debtor to Pursue Lien Avoidance Under 11 U.S.C. § 544

       Citing to the Sixth Circuit Bankruptcy Appellate Panel’s decision in Countrywide Home
Loans v. Dickson (In re Dickson), 427 B.R. 399 (B.A.P. 6th Cir. 2010), the bankruptcy court held
that Debtor has derivative standing to pursue the lien avoidance under § 544. The Bank argues that
Debtor lacked standing to bring the avoidance action because a debtor cannot be granted derivative
standing to exercise the trustee’s strong arm powers with regard to consensual liens. Debtor asserts
that he has derivative standing to pursue lien avoidance under § 544 pursuant to the Bankruptcy
Appellate Panel’s decision in Dickson.

       In Dickson, Countrywide Home Loans asserted that a chapter 13 debtor lacked standing to
pursue avoidance of the lien on her manufactured home. The bankruptcy court in that case
concluded that the debtor had derivative standing to avoid Countrywide’s lien under either § 544 or
§ 547. In addressing the issue, the Bankruptcy Appellate Panel acknowledged that courts are split
on whether a chapter 13 debtor may be granted derivative standing to bring an avoidance action. See
Realty Portfolio, Inc. v. Hamilton (In re Hamilton), 125 F.3d 292 (5th Cir. 1997) (discussing split
in cases with some courts granting standing by emphasizing “reality” of chapter 13 bankruptcies,
limited role of chapter 13 trustees, and perceived unfairness to chapter 13 debtors of denying
standing under § 544, and other courts refusing to grant standing based on lack of explicit statutory
foundation for debtor to seek avoidance and relying on plain language of Code). The Dickson Panel
concluded that the bankruptcy court had properly granted the debtor derivative standing to pursue
lien avoidance. Dickson, 427 B.R. at 406.

       In Dickson, the Bankruptcy Appellate Panel based its conclusion, in part, on the decision of
the Sixth Circuit Court of Appeals in Hyundai Translead, Inc. v. Jackson Truck & Trailer Repair,

                                                  5
Inc. (In re Trailer Source, Inc.), 555 F.3d 231 (6th Cir. 2009). In In re Trailer Source, the Sixth
Circuit held that the Bankruptcy Code allows courts to grant derivative standing to creditors to bring
avoidance actions on behalf of the bankruptcy estate in chapter 11 and chapter 7 proceedings where
the trustee refuses to do so. “Although the case was decided in the specific context of a Chapter 7
bankruptcy case wherein a creditor sought to avoid a fraudulent transfer, the Sixth Circuit in Hyundai
Translead relied upon principles generally applicable to Chapter 13 debtors and lien avoidance under
11 U.S.C. §§ 544 and 547.” In re Dickson, 427 B.R. at 404. The Dickson Panel explained that the
realities of chapter 13 bankruptcies “make it imperative for a debtor to be able to pursue avoidance
claims if the Chapter 13 trustee refuses to do so.” Id. at 405. Those realities identified by the
Bankruptcy Appellate Panel in Dickson included the chapter 13 trustee’s lack of resources to pursue
meritorious avoidance claims, the need for the chapter 13 debtor’s plan to comply with § 1325(a)(4),
and the possibility of a debtor being accused of proposing a plan in bad faith if his plan does not
contemplate avoidance of an obviously avoidable lien. Id.

       While acknowledging the Bankruptcy Appellate Panel’s holding in Dickson, the Bank argues
that Debtor lacked standing to pursue avoidance of the lien based upon the plain language of the
Bankruptcy Code and the reasoning of courts which have found that a chapter 13 debtor lacks
standing to exercise the trustee’s avoidance powers. At the time the Bank filed its brief in this
appeal, an appeal of the decision in Dickson was pending before the Sixth Circuit Court of Appeals.
Therefore, the Panel issued an order holding this appeal in abeyance pending a decision of the Sixth
Circuit in Dickson.

       The Sixth Circuit issued a decision in Dickson on August 26, 2011; however, the Court of
Appeals never reached the issue of derivative standing. Instead, the Sixth Circuit held that the
transfer at issue in Dickson was involuntary, so that the debtor had direct, statutory standing to seek
avoidance of the creditor’s lien under 11 U.S.C. § 522(h). Thus, the Sixth Circuit concluded: “In
view of our holding that Dickson possesses direct standing, it is unnecessary for us to address the
issue of whether she possesses ‘derivative standing’ as found by the BAP.” Countrywide Home
Loans v. Dickson (In re Dickson), 655 F.3d 585, 593 (6th Cir. 2011) (citation omitted).




                                                  6
       Without deciding whether a later panel must always follow the precedent of a prior panel,
we see no reason in this case to break with the principles of stare decisis and therefore follow the
holding of the Bankruptcy Appellate Panel’s decision in Dickson. Adhering to precedent promotes
uniformity of case law throughout the Circuit and promotes “the goals of ‘stability’ and
‘predictability’ that the doctrine of statutory stare decisis aims to ensure.” CSX Transp., Inc. v.
McBride, __U.S.__, 131 S. Ct. 2630, 2641 (2011) (quoting Hilton v. S.C. Public Rys. Comm’n, 502
U.S. 197, 202, 112 S. Ct. 560 (1991). Furthermore, the Bank is free to seek review of our decision
in the Court of Appeals, which is not bound by decisions of Bankruptcy Appellate Panels. See Phar-
Mor, Inc. v. McKesson Corp. (In re Phar-Mor, Inc.), 534 F.3d 502, 507 (6th Cir. 2008). Therefore,
we will follow the holding of the Bankruptcy Appellate Panel’s decision in Dickson and affirm the
bankruptcy court’s determination that Debtor has derivative standing to avoid the Bank’s lien
pursuant to § 544.

B. Perfection of the Bank’s Lien On Debtor’s Manufactured Home

       1. The manufactured home is property of Debtor’s estate.

       Before the bankruptcy court, the Bank argued that Debtor never acquired title to the
manufactured home pursuant to Kentucky Revised Statute § 186A.215, and therefore, never acquired
an interest in the home apart from its status as an improvement to real property or fixture. The Bank
asserts that the home either does not constitute an asset of the estate or is an improvement to real
property and therefore subject to the Bank’s mortgage lien.

       Kentucky Revised Statute § 186A.215 provides, in pertinent part:

               (1) If an owner transfers his interest in a vehicle, he shall, at the time
               of the delivery of the vehicle, execute an assignment and warranty of
               title to the transferee in the space provided therefor on the certificate
               of title . . . The transferor shall cause the application with the
               certificate of title attached to be delivered to the transferee.
               ....
               (3) The application with its supporting documentation attached shall
               promptly be submitted to the county clerk . . . .


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“The adoption of K.R.S. 186A.010 et seq. changed Kentucky from an equitable title state to a
certificate of title state wherein the legal titleholder is considered the owner of a vehicle in the
absence of a valid conditional sales or lease agreement.” Potts v. Draper, 864 S.W.2d 896, 900
(Ky. 1993) (citing Ky. Rev. Stat. Ann. § 186.010(7)).

          The Bankruptcy Code defines property of the estate as “all legal or equitable interests of the
debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). “This definition
is unquestionably broad, its main purpose being to ‘bring anything of value that the debtors have into
the [bankruptcy] estate.’ ” Lyon v. Eiseman (In re Forbes), 372 B.R. 321, 330 (B.A.P. 6th Cir. 2007)
(quoting Booth v. Vaughan (In re Booth), 260 B.R. 281, 284-85 (B.A.P. 6th Cir. 2001)). As the
bankruptcy court here found, Debtor “clearly has an interest in the property that would fall under the
definition as set forth in 11 U.S.C. § 541.” (Adv. Proc. Doc. #22, Order, at 5.) Debtor has, at a
minimum, an equitable interest in the manufactured home. Therefore, the manufactured home is
property of Debtor’s bankruptcy estate.

        2. Debtor’s manufactured home is personal property, and any lien encumbering it can be
perfected only by a notation on the certificate of title.

          The Bank’s assertion that the manufactured home is subject to the Bank’s mortgage lien as
an improvement to real property is incorrect. Property interests are created and defined by state law
unless some federal interest requires a different result. Butner v. United States, 440 U.S. 48, 55,
99 S. Ct. 914, 918 (1979). In Kentucky, a manufactured home is personal property for which a
certificate of title is required. See Ky. Rev. Stat. Ann. § 186A.070(1); see also Citizens Nat’l Bank
of Jessamine Cnty. v. Washington Mut. Bank, 309 S.W.3d 792, 796 (Ky. Ct. App. 2010). In order
to perfect a lien on personal property, the lien must be noted on the certificate of title. See Ky. Rev.
Stat. Ann. § 186A.190(2) (“[T]he sole means of perfecting and discharging a security interest in
property for which a certificate of title is required by this chapter is by notation on the property’s
certificate of title. . . .”); see also In re Dickson, 655 F.3d at 590; Citizens Nat’l Bank, 309 S.W.3d
at 796.     “However, a manufactured home may be converted from personal property to an
improvement to real estate, KRS § 186A.297, thereby allowing perfection through first recording
without notice, KRS § 382.110.” In re Dickson, 655 F.3d at 590. By filing an affidavit of

                                                    8
conversion to real estate and surrendering the Kentucky certificate of title, a manufactured home will
be deemed “ ‘an improvement to the real estate upon which it is located.’ ” PHH Mortgage Servs.
v. Higgason, 345 B.R. 584, 586-87 (E.D. Ky. 2006) (quoting Ky. Rev. Stat. Ann. § 186A.297).

        In Dickson, the Sixth Circuit held that a creditor can also obtain a perfected lien on a
manufactured home by obtaining a state court order converting the manufactured home to an
improvement to real property. See Dickson, 655 F.3d at 590-91. Thus, a creditor who is unable to
obtain a lien on the certificate of title or an affidavit of conversion of the manufactured home to real
property in accordance with Kentucky Revised Statute § 186A.297(1), can still obtain a perfected
lien through the state court procedure used by the creditor in Dickson. It is undisputed that Debtor
did not comply with Kentucky Revised Statute § 186A.297 by filing an affidavit of conversion and
surrendering the certificate of title or by seeking a court order converting the property. Therefore,
the manufactured home remained personal property, and the sole means of perfecting a lien on the
home was by placing a notation of the lien on the certificate of title. It is undisputed that the Bank’s
lien was not noted on the certificate of title. Therefore, the Bank did not perfect its lien on Debtor’s
manufactured home.

        In support of its position that the manufactured home is a fixture encumbered by the “plain
language” of its mortgage, the Bank cites, for the first time on appeal, to the unpublished decision
of Whisman v. Whisman, 2007-CA-002534-MR, 2009 WL 2971552 (Ky. Ct. App. Sept. 18, 2009).
The Bank’s reliance on Whisman is misplaced as it does not advance the Bank’s position that its
interest in Debtor’s manufactured home is not avoidable pursuant to 11 U.S.C. § 544. Whisman was
a case involving a Kentucky divorce proceeding and a court-ordered sale of real property upon which
a manufactured home was located. The appellant contended that the manufactured home was not
a part of the land for purposes of the sale because there was no certificate of title in the record, nor
had an affidavit affixing the home to the property been recorded with the county clerk. The issue
before the court was “whether the trailer was affixed to the property and passed with the
commissioner’s sale or is the personal property of [the appellant].” Id. at *2.

        In support of her position, the appellant in Whisman relied on PHH Mortgage
Servs. v. Higgason for the proposition that because no certificate of title was surrendered to the

                                                   9
county clerk, and no affidavit of conversion to real property was filed in compliance with Kentucky
Revised Statute § 186A.297(1), the trailer did not become permanently affixed to the land so as to
pass with the sale of the property. Whisman, 2009 WL 2971552, at *3 (citing PHH Mortg. Servs.,
345 B.R. at 587-88). The Whisman court explained that such reliance was misplaced because that
case, as well as the earlier case of Hiers v. Bank One, 946 S.W.2d 196 (Ky. Ct. App. 1996), “dealt
with perfection of security interests in a manufactured home as against other creditors. Although
both are somewhat analogous to the present issue, and thus somewhat instructive, neither decides
this particular issue.” Whisman, 2009 WL 2971552, at *3.

       The Whisman court reasoned:

               [W]e are without evidence indicating to whom the trailer belonged,
               when it was purchased or whether it was permanently affixed to the
               property. Despite [the appellant’s] contention that the trailer was
               personal property and not a permanent fixture, [the appellant]
               presented no evidence to support her position . . . . By contrast, . . .
               [the appellee] submitted photographs of the trailer in question. After
               reviewing the evidence presented, the court ruled that the trailer was
               permanently affixed to the property and sold at the master
               commissioner’s sale. Based upon the only evidence presented, we
               cannot find that the court’s finding of fact on this issue was clearly
               erroneous. We therefore uphold the trial court’s determination that
               the trailer was permanently affixed to the property.

Id. The Whisman court, therefore, held only that an affixed manufactured home without a title may
be conveyed by deed. See also In re Starks, No. 10-22108, 2011 WL 248521 (Bankr. E.D. Ky.
Jan. 24, 2011) (rejecting reliance upon Whisman by mortgagee objecting to chapter 13 plan
confirmation). The current case is distinguishable from Whisman for the same reason PHH
Mortgage Services and Hiers were. Here, the issue is perfection of a security interest in a
manufactured home as against other creditors.

       The Sixth Circuit’s discussion in Dickson regarding the failure of Countrywide’s mortgage
to grant a lien on the debtor’s manufactured home further illuminates the Bank’s misplaced reliance
upon Whisman. In Dickson, the Sixth Circuit explained:



                                                 10
                       In the case at bar, the plain language of the mortgage contract
               did not grant Countrywide a lien on Dickson’s manufactured home as
               personal property. Rather, the mortgage grants Countrywide a lien on
               the real estate and “all improvements now or hereafter erected on the
               property, and all easements, appurtenances, and fixtures now or
               hereafter a part of that property.” Accordingly, unless converted to
               an improvement to real estate, Countrywide did not obtain a security
               interest in the manufactured home through the mortgage contract.
                        Moreover, even if Countrywide obtained a lien against the
               manufactured home by way of the mortgage contract, it is undisputed
               that Countrywide did not note this security interest on the certificate
               of title . . . . Accordingly . . . Countrywide did not have a perfected
               lien on Dickson’s manufactured home.

Dickson, 655 F.3d at 590 (footnotes and internal citations omitted). Similarly, even if the Bank were
correct in its position that it obtained a lien against the manufactured home by way of its mortgage,
it did not perfect that lien. Therefore, the lien is avoidable pursuant to § 544.

       The Bank next argues that the priority scheme set forth in Article 9 of Kentucky’s version
of the Uniform Commercial Code provides a mechanism for a mortgage to have priority over a
security interest in a manufactured home—in particular, Kentucky Revised Statute
§ 355.9-334(5)(d). The Bank asserts that the priority scheme in § 355.9-334 provides that a
mortgage is a method of perfecting a lien on a manufactured home that is a fixture. However, the
Bank makes this argument for the first time on appeal. Therefore, it is waived. See Bailey v. Floyd
Cnty. Bd. of Educ., 106 F.3d 135, 143 (6th Cir. 1997) (“It is well-settled that this court will not
consider arguments raised for the first time on appeal unless our failure to consider the issue will
result in a plain miscarriage of justice.”). As the Panel sees no reason for departing from this well-
settled policy, the Panel declines to consider the Bank’s argument based on Kentucky Revised
Statute § 355.9-334(5)(d), which is raised for the first time on appeal.

                                        V. CONCLUSION

       For the foregoing reasons, the Panel AFFIRMS the order of the bankruptcy court.




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