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Tenth Circuit Says Tribal Certificate of Title Not Valid to Perfect Security Interest January 29, 2008

Posted by rezjudicata in 10th Circuit, Federal Circuits.
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In re Harper, No. 07-5016 (10th Cir. Jan. 24, 2008)

Issue(s): Bankruptcy > Security Interests; UCC > Secured Transactions >> Perfection >>> Oklahoma Law; UCC > Secured Transactions >> Certificates of Title >>> Priority under Tribal Law

After purchasing a truck, Harper granted a security interest to the credit union for a loan to pay off the dealer’s financing loan. The credit union noted its interest on a Muscogee (Creek) Nation certificate of title. Bankruptcy ensued and the trustee claimed that the union’s security interest was unperfected and therefore not entitled to satisfaction in the bankruptcy. Did the Nation’s certificate of title perfect the credit union’s security interest?

The Tenth Circuit said no. Security interests perfected under tribal law qualify as perfected security interests under Oklahoma law. And where certificates of title are concerned, the Uniform Commercial Code says that the law of the issuing jurisdiction applies to perfection issues. In both instances here, these would be the laws of the Muscogee (Creek) Nation. The Nation, however, does not have a law specifically addressing perfection issues in the context of certificates of title. Because of this gap, the Court reasoned, the credit union’s interest was not validly perfected under tribal law. Therefore, the interest went unperfected under Oklahoma law.

According to the Court, this apparent legal void also disposed of the UCC issue. To trigger the UCC provision, a statute of the issuing jurisdiction must call for a lien notation on the certificate of title. The statute must also explain the effect of the notation on priorties of security interests. The Court could find no such statute in the Nation’s code. Without a statute, the credit union’s notation on the title did not fall within the UCC’s “certificate of title” rule. Thus, the Tenth Circuit held that Oklahoma law–not Creek law–applied. As a result, the Nation’s certificate of title could not perfect the credit union’s security interest.

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