Opinion
No. 19-1082
11-17-2020
Martin P. SHEEHAN, Trustee, Petitioner v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., WEI Mortgage Corporation, and Seneca Trustees, Inc., Respondents
Martin P. Sheehan, Esq., Sheehan & Associates, PLLC, Wheeling, West Virginia, Trustee for the Bankruptcy Estate of Ronald L. Lancaster and Jamie L. Lancaster. Christopher A. Dawson, Esq., Reisenfeld & Associates LLC, Cincinnati, Ohio, Counsel for Respondents, Mortgage Electronic Registration Systems, Inc. and WEI Mortgage Corporation.
Martin P. Sheehan, Esq., Sheehan & Associates, PLLC, Wheeling, West Virginia, Trustee for the Bankruptcy Estate of Ronald L. Lancaster and Jamie L. Lancaster.
Christopher A. Dawson, Esq., Reisenfeld & Associates LLC, Cincinnati, Ohio, Counsel for Respondents, Mortgage Electronic Registration Systems, Inc. and WEI Mortgage Corporation.
WALKER, Justice: The Bankruptcy Court for the Northern District of West Virginia certifies a question to this Court about perfecting a security interest on a manufactured home by deed of trust when that manufactured home still maintains a motor vehicle title. Essentially, that court asks how, under West Virginia law, does one perfect a security interest upon a manufactured home that maintains both personal and real property characteristics? We conclude that a manufactured home with a title issued by the Division of Motor Vehicles (DMV) may become affixed, and therefore legally converted to real property, by operation of common law, even if the home's owners have not cancelled the DMV title under the cancellation procedure of West Virginia Code § 17A-3-12b(a). So, because the title cancellation procedure is not the exclusive means of conversion, perfection of a security interest may be made by deed of trust. We therefore answer the certified question in the affirmative.
I. FACTS AND PROCEDURAL HISTORY
In the course of managing the Chapter 7 bankruptcy proceedings of Debtors Ronald and Jamie Lancaster, Petitioner and Bankruptcy Trustee Martin P. Sheehan (Bankruptcy Trustee) uncovered an issue with one of Debtors’ assets, a "Double wide with land," that, while listed as one asset, appeared to be two separate assets. Respondent WEI Mortgage Corporation (WEI Mortgage) had recorded a deed of trust that would have perfected a security interest in the land and the manufactured home, but the manufactured home also had a DMV certificate of title that did not show WEI Mortgage's lien.
The terms "double wide," "mobile home," and "manufactured home" are used synonymously. To the extent possible, we use the term "manufactured home." Nothing in this opinion is intended to affect manufactured homes situated on land owned by someone other than the owner of the manufactured home.
Bankruptcy Trustee filed a complaint to obtain an order from the Bankruptcy Court of the Northern District of West Virginia (Bankruptcy Court) finding that WEI Mortgage did not have a perfected security interest in the Debtors’ manufactured home. WEI Mortgage did not necessarily dispute the factual allegations underlying the complaint, but took issue with the relief sought, as it asserted that it had a perfected security interest in the manufactured home because the manufactured home was affixed to real estate and it had perfected its security interest by recorded deed of trust. The Bankruptcy Trustee moved for summary judgment.
Under 11 U.S.C. § 544(a)(3) and 11 U.S.C. § 544(a)(2), at the time of the filing of the bankruptcy petition, the Bankruptcy Trustee is afforded the status of a bona fide purchaser for value concerning real estate assets, and a judicial lien creditor concerning personalty.
In the course of consideration of Bankruptcy Trustee's motion for summary judgment, the Bankruptcy Court concluded that the issue turned on an unanswered point of West Virginia law and agreed, at the request of Bankruptcy Trustee, to certify the following question in relation to this dispute:
Does a creditor have a perfected security interest in a manufactured home that has been affixed to real estate based on the factors of Snuffer v. Spangler , 79 W. Va. 628, 92 S.E. 106 (1917) when it properly records a deed of trust that describes both the real estate and the manufactured home, even though the manufactured home has an active certificate of title issued by the West Virginia Department of Motor Vehicles pursuant to W. Va. Code § 17A-3-12, which certificate of title 1) has not been cancelled pursuant to W. Va. Code § 17A-3-12b and 2) does not show the creditor's lien on its face, particularly in light of W. Va. Code § 46-9-303(b) to cause the manufactured home to be treated as a fixture?
We address that question first by providing the parties’ stipulated facts as a backdrop:
This case arises out of the Bankruptcy Trustee's challenge to whether there is a perfected lien applicable to a manufactured home. Originally, Debtors’ mortgage loan was obtained from Embrace Home Loans, Inc., on or about June 4, 2015. The loan is secured by a Deed of Trust held by MERS, with WEI [Mortgage] as the nominee/beneficiary, encumbering the real estate commonly known as 2307 St. Johns Road, Colliers, West Virginia 26035, together with all improvements erected on the property and fixtures that are a part of the property. A true and correct copy of that document is attached to the Complaint in this matter as Exhibit B. The legal description attached to the Deed of Trust contains a proper metes and bounds description and also makes reference to a 2003 Fairmont 8028 mobile home with HUD certification 1388320 1388321 and VIN MY0457930ABK. Said Deed of Trust was recorded on June 23, 2015, in Book 542, at Page 626, in the office of the Clerk of the Brooke County Commission. There is no dispute that the recording of the Deed of Trust perfected a security interest in the real estate. The dispute is whether the manufactured home is part of the real estate and so whether the Deed of Trust perfects the lien on that component of property.
The West Virginia Division of Motor Vehicles issued two titles for the 2004 double wide bearing VINs MY04579320AK and MY04579320BK, respectively. No lien is on record on the titles according to the records of the West Virginia Division of Motor Vehicles. The titles remain active and have not been cancelled pursuant to the procedure set forth in [W. Va.] Code § 17A-3-12B. The DMV-2-TR form, used to implement the aforesaid section of the West Virginia Code, has not been filed with the West Virginia Division of Motor Vehicles nor recorded in the office of the Clerk of the Brooke County Commission.
For purpose of the Certification of Legal Question and the pending Motion for Summary Judgment, MERS and WEI [Mortgage] contend the manufactured home is physically affixed to the real estate for all intents and purposes. The Trustee does not contest that contention at this time.
II. STANDARD OF REVIEW
Consistent with our de novo review of questions certified by a circuit court, "[t]his Court undertakes plenary review of legal issues presented by certified question from a federal district or appellate court."
See Syl. Pt. 1, Gallapoo v. Wal-Mart Stores, Inc. , 197 W. Va. 172, 475 S.E.2d 172 (1996) ("The appellate standard of review of questions of law answered and certified by a circuit court is de novo. ").
Syl. Pt. 1, Bower v. Westinghouse Elec. Corp. , 206 W. Va. 133, 522 S.E.2d 424 (1999). See also , Syl. Pt. 1, Light v. Allstate Ins. Co. , 203 W. Va. 27, 506 S.E.2d 64 (1998) ("A de novo standard is applied by this Court in addressing the legal issues presented by a certified question from a federal district or appellate court.").
III. DISCUSSION
We begin by paring down the certified question into the basic inquiry that ultimately resolves the dispute: is the manufactured home personalty or has it been legally converted to real property? Given the parties’ stipulations, if the manufactured home is personalty (i.e., still a "vehicle"), WEI Mortgage does not have a secured interest in it because it has not complied with the lien perfection procedures contained in West Virginia Code § 17A-4-3 ; but, if it is real property, the deed of trust suffices to perfect WEI Mortgage's security interest. That much is beyond dispute of these particular parties. The complicated inquiry is ascertaining the means by which the legal character of a manufactured home may be converted from personalty to real estate. And, more pointedly, whether there is more than one way. The answer to that question alone dictates the perfection requirements under these stipulated facts.
Property, generally speaking, is either real or personal; real property includes both the land and things affixed to that land. Manufactured homes, by virtue of requiring title under our Motor Vehicle Code, are considered personal property until they are affixed to the land. To answer the question we've been tasked with, we analyze whether manufactured homes become affixed to the land—and are thereby converted from personal to real property for legal purposes—when they meet the common law requirements for affixation as espoused by this Court, or when the homeowner complies with the statutory scheme to cancel title under the Motor Vehicle Code.
See Real Property , Black's Law Dictionary (11th ed. 2019). See also Mixed Property , Black's Law Dictionary (11th ed. 2019).
So, we analyze two apparently competing schemes which may serve to convert the legal character of a manufactured home from personalty to real estate: the common law scheme and the statutory scheme. The common law scheme is derived from Snuffer v. Spangler . In that 1917 case, this Court set forth three factors that determine whether personal property used in connection with real estate becomes part of the realty:
79 W. Va. 628, 92 S.E. 106 (1917).
From the foregoing authorities we conclude that personal property used in connection with real estate is fixtures and part of the realty, when the following conditions concur: First, [i]t must be attached to the real estate, and by this we do not mean that it has to become so attached as to do serious damage to the realty, or to the property itself in order to remove it, but that it must be so attached as that the two, the real estate and the fixtures, work together to one end; second, it must be reasonably necessary and adapted to the purposes for which the real estate is being used; and, third, it must be the intention of the party placing such property upon the real estate to make it a part thereof. If the first two of these elements concur–that is, its attachment to the real estate and it adaptability to the purposes for which the real estate is being used–it will be presumed that the party attaching it intended that it should be a part of the real estate, unless a contrary intention appears from the conduct of the parties in relation to it.[ ]
Id. at 632, 92 S.E. at 110.
But, Snuffer is an old case. Since then, the Uniform Commercial Code (UCC) and the Motor Vehicle Code have been enacted. The Bankruptcy Trustee argues that the scheme derived from these statutes has abrogated the applicability of Snuffer in the context of manufactured homes, and that the procedures of the Motor Vehicle Code are now the exclusive means by which a manufactured home may be converted to real property such that a lien could be perfected by deed of trust.
West Virginia Code §§ 46-1-101, et seq.
West Virginia Code §§ 17A-1-1, et seq.
Specifically, West Virginia Code § 46-9-303 (2000), part of the UCC, relates to "perfection and priority of security interests in goods covered by a certificate of title" and addresses first at subsection (b) how goods are covered by a certificate of title:
When goods covered by certificate of title. Goods become covered by a certificate of title when a valid application for the certificate of title and the applicable fee are delivered to the appropriate authority.
Goods cease to be covered by a certificate of title at the earlier of the time the certificate of title ceases to be effective under the law of the issuing jurisdiction or the time the goods become covered subsequently by a certificate of title issued by another jurisdiction.
And, at subsection (c), addresses choice of law:
Applicable law. The local law of the jurisdiction under whose certificate of title the goods are covered governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in goods covered by a certificate of title from the time the goods become covered by the certificate of title until the goods cease to be covered by the certificate of title.
This choice of law provision simply states that the law of the local jurisdiction that issues the certificate of title for goods governs lien perfection on those goods. Bankruptcy Trustee argues that under the UCC, the Motor Vehicle Code provisions are controlling, and exclusive, as far as they dictate a procedure for cancelling manufactured home titles when they become affixed to real estate to allow for conversion of the legal character by operation of statute, and conversely reinstate DMV title when the manufactured home becomes unaffixed. That code provision, West Virginia Code § 17A-3-12b, states:
The comments to § 46-9-303 confirm that subsection (c) is "the basic choice-of-law rule" relating to the governing jurisdiction as opposed to a substantive rule.
(a) The commissioner may cancel a certificate of title for a mobile or manufactured home affixed to the real property of the owner of the mobile or manufactured home. The person requesting the cancellation shall submit to the commissioner an application for cancellation together with the certificate of title. The application shall be on a form prescribed by the commissioner. The commissioner shall return one copy of the cancellation certificate to the owner and shall send a copy of the cancellation certificate to the clerk of the county commission to be recorded and indexed in the same manner as a deed, with the owner's name being indexed in the grantor index. The commissioner shall charge a fee of $10 per certificate of title canceled. The clerk shall return a copy of the recorded cancellation certificate to the owner, unless there is a lien attached to the mobile or manufactured home, in which case the copy of the recorded cancellation certificate shall be returned to the lienholder. Upon its recording in the county clerk's office, the mobile or manufactured home shall be treated for all purposes as an appurtenance to the real estate to which it is affixed and be transferred only as real estate and the ownership interest in the mobile or manufactured home, together with all liens and encumbrances on the home, shall be transferred to and shall encumber the real property to which the mobile or manufactured home has become affixed.
(b) The commissioner shall reinstate and reissue any title for a mobile home or manufactured home which was previously titled in this state and for which the title was canceled pursuant to this section when the owner of the mobile or manufactured home seeks to sever the home from the real property and applies for a certificate of title in accordance with the provisions of this section. For purposes of this subsection, "owner" means the owner, secured lender of foreclosed or surrendered property, owner of real property who takes possession of an abandoned manufactured home on the property or other person who has the legal right to the manufactured home through legal process.
(1) The owner shall file with the clerk of the county commission where the real property is located an affidavit that includes or provides for all of the following information:
(A) The manufacturer and, if applicable, the model name of the mobile or manufactured home;
(B) The vehicle identification number and serial number of the mobile or manufactured home;
(C) The legal description of the real property on which the mobile or manufactured home is or was placed, stating that the
owner of the mobile home or manufactured home also owns the real property;
(D) Certification that there are no security interests in the mobile home or manufactured home that have not been released by the secured party; and
(E) A statement by the owner that the home has been or will be physically severed from the real property.
(2) The owner must submit the following to the commissioner:
(A) A copy of the affidavit filed in accordance with subdivision (1) of this subsection; and
(B) Verification that the manufactured home has been severed from the real property. Confirmation of severance by the assessor where the real property is located is acceptable evidence that the unit has been severed from the real property.
(3) Upon receipt of the information required in subdivision (2) of this subsection, together with a title application and required fee, the commissioner shall issue a new title for the manufactured home.
It is undisputed that the Debtors in this case did not apply to have their certificate of title cancelled under these provisions. So, Bankruptcy Trustee argues that the property was never converted to real property so as to permit WEI Mortgage to perfect its security interest by the deed of trust. And, because the manufactured home remains personal property (a "vehicle" under the Motor Vehicle Code), the deed of trust cannot perfect a security interest in the manufactured home because WEI Mortgage did not comply with West Virginia Code § 17A-4A-3 by causing a lien to be listed on the motor vehicle title.
West Virginia Code § 17A-4A-3(a) provides:
A certificate of title, when issued by the division showing a lien or encumbrance, shall be considered from and after the filing with the division of the application therefor or the notice of lien authorized in section four of this article adequate notice to the state and its agencies, boards and commissions, to the United States government and its agencies, boards and commissions, to creditors and to purchasers that a lien against the vehicle exists.
Bankruptcy Trustee does not dispute that the manufactured home at issue in this case satisfies the requirements of Snuffer . And, Bankruptcy Trustee does not appear to dispute that under the common law scheme of conversion, the manufactured home is real property and the deed of trust would suffice to perfect WEI Mortgage's lien. Bankruptcy Trustee's argument, rather, is that the common law, as it pertains to manufactured home titles and liens thereon, has been abrogated because the Legislature enacted a procedure to cancel a title to a manufactured home.
See W. Va. Code § 38-1-1a (1965).
In other words, Bankruptcy Trustee argues that the existence of the statutory procedure to cancel a title to a manufactured home and convert it to real property definitively provides the only means by which manufactured homes may be converted from personalty to real property. It follows, according to the Bankruptcy Trustee, that the perfection of a lien on a manufactured home may only be made through notation on the face of the DMV certificate of title under West Virginia Code § 17A-4A-3 if the titleholder has not cancelled the title under § 17A-3-12b(a).
We do not read that statute so restrictively. Notably absent from § 17A-3-12b is any explicit statement of exclusivity. Likewise, we grasp at straws to read into the statute an implicit indication that the Legislature intended this title cancellation procedure to be the exclusive means of converting a manufactured home from personal to real property.
Compare Va. Stat. § 46.2-653.1 (2016): "... the provisions of this section constitute the only manner by which a manufactured home owner may convert a manufactured home to real property."
Our statute provides that a manufactured homeowner may request a cancellation of title, which the commissioner may cancel and, if approved, the property will be treated as real estate for all purposes. It does not provide that the manufactured home is personal property unless and until the application is approved by the commissioner. Compare our cancellation statute with North Carolina's. N.C. Gen. Stat. § 20-109.2(a) (2016) provides,
If a certificate of title has been issued for a manufactured home, the owner listed on the title has the title, and the manufactured home qualifies as real property as defined in G.S. 105-273(13), the owner listed on the title shall submit an affidavit to the Division that the manufactured home meets this definition and surrender the certificate of title to the Division.
Even that statute's shall submit and surrender scheme has not been held to be exclusive: "[t]he lack of surrender of the MH Title and the lack of filing of an affidavit is not conclusive evidence that the provisions of N.C. Gen. Stat. § 105-273(13) have not been met. That determination must be made by a review of the evidence and an analysis of the case law."
In re Tillman , 565 B.R. 586, 598 (Bankr. E.D.N.C. 2016).
Our title cancellation statute has been examined in two cases, and neither found the cancellation procedure to be the exclusive means of converting a manufactured home from personal to real property. In Sanders v. Brown , this Court examined a conveyance of real estate where it was disputed whether the manufactured home had been conveyed with the land given the failure to cancel title pursuant to West Virginia Code § 17A-3-12b. We reasoned that there was "no error in the circuit court's refusal to find that West Virginia Code § 17A-3-12b (2004) is dispositive[,]" applied Snuffer , and affirmed the circuit court's order that the manufactured home was affixed to the land. Granted, in that case, the facts involved a familial dispute rather than perfection of a lien by a creditor. But, we nonetheless find it instructive here because, given the stipulations of the parties, the certified question is dependent only upon the legal character of the manufactured home as real or personal property, not the commercial character of the encumbrance.
No. 18-0017, 2018 WL 6119215, at *4 (W. Va. Nov. 21, 2018).
Id. at *5.
In 2017, the Bankruptcy Court of the Southern District of West Virginia looked at this issue in a similar context to the case before us, and also applied Snuffer in evaluating the legal character of a manufactured home. In that case, the bankruptcy debtors (Weikles) were arguing against the validity of a deed of trust. The bankruptcy court in Weikle applied the common law rule after considering the lack of statutory authority. Specifically, the bankruptcy court discussed that "[t]he Weikles appear to assert that, inasmuch as they did not cancel their manufactured home vehicle title in accordance with a West Virginia statute, the home necessarily could not be a fixture." In rejecting that argument, the bankruptcy court concluded that West Virginia Code § 17A-3-12b(a) "speaks only to the condition precedent to canceling a certificate of title on a manufactured home and the consequences resulting[,]" and that if the Legislature intended the categorical and far-reaching result advocated by the Weikles, "it would have unquestionably used more sweeping language."
In re Weikle , No. 1:17-BK-10001, 2017 WL 4127994, at *2-3 (Bankr. S.D.W. Va. Sept. 13, 2017).
Id.
Id. at *3 n.3.
Id.
The Weikle court also found the corresponding tax provisions telling:
a corresponding measure, West Virginia Code section 11-5-12, provides that a "mobile home" permanently attached to the owner's real estate may not be classified as personal property if the owner has complied with section 17A-3-12b(a). The immediately preceding observation by the Court concerning the Legislature's approach applies to this measure as well. Additionally, section 17A-3-12b(a) offers no guidance concerning whether a manufactured home becomes a fixture to the land for all purposes. This appears so inasmuch as the statute, like its many counterparts in Chapter 11 of the West Virginia Code, are
concerned only with the proper levy and collection of tax revenue.[ ]
Id.
And, it ultimately concluded in light of these statutes, that "[t]hese provisions, whether apart or in combination do not purport to prescribe the only means by which a manufactured home becomes part of an owner's real property." It certainly would have been a simpler analysis to state that if the DMV title had been cancelled, the manufactured home is considered real property; and if it had not been cancelled, it was still personal property.
Id.
A review of the legislative materials leading to the enactment and amendments to West Virginia Code § 17A-3-12b do not persuade us to find exclusivity either. Rather, the legislative history indicates the Legislature's intent to clarify that, if the cancellation procedures were met, manufactured homes may not be treated as personal property for legal purposes, presumably taxation and DMV fees. That is a marked distinction from a legislative intent that manufactured homes may only be affixed and legally considered real property if the homeowner complies with the cancellation procedures.
See W. Va. Code § 11-5-12 (2014) ("A mobile home permanently attached to the real estate of the owner may not be classified as personal property if the owner has filed a canceled certificate of title ...."). See also , W. Va. S.B. 574, 2014 81st Leg., Reg. Sess. (W. Va. 2014); W. Va. S.B. 320, 2004 West Virginia Legislative Wrap-Up, 5/4/2004 ("The purpose of the legislation is to provide a procedure to permit owners of mobile or manufactured homes that are affixed to the real property of the home owner to obtain cancellation of certificates of title.... In addition, the measure provides that those mobile homes permanently attached to real estate of the owner may not be classified as ‘personal’ property but instead, real property.").
And, while taxation of property is its own beast, we do find the tax provision § 11-5-12 helpful as far as it references and sheds light on § 17A-3-12b. That code provision states, "[a] mobile home permanently attached to the real estate of the owner may not be classified as personal property if the owner has filed a canceled certificate of title with the clerk of the county commission and the clerk has recorded it in the same manner as deeds are recorded and indexed." The Legislature, in enacting § 11-5-12 to the tax code with reference to the cancellation procedures, clearly provided that if a manufactured home is attached to the real estate of the owner and that homeowner complies with the cancellation statute, the manufactured home may not be assessed as personal property. Implicit in that rule is that if a homeowner does not comply with the title cancellation procedures, the manufactured home may still be taxed as either real or personal property at the discretion of the assessor – and, as a practical matter, it is often taxed as real property. The taxation of manufactured homes as real property underscores the lack of exclusivity in this statute. If the Legislature had intended an exclusive conversion scheme, § 11-5-12, in corresponding with § 17A-3-12b(a) would provide that manufactured homes are taxed as personal property and only as personal property unless and until the homeowner complied with the cancellation procedure because until that point, it could not be considered real property for legal purposes.
See, e.g. , Mobile Homes , Fayette County , West Virginia Assessor , https://fayettecounty.wv.gov/assessor/personalproperty/Pages/Mobile-Homes.aspx ("Mobile homes are assessed as either real estate or personal property depending on the situation .... If your mobile home is located on land that you own it is considered real estate and the taxes will be included on your real estate tax bill."); Mobile Homes as Real Property , Berkeley County Assessor's Office , http://www.theassessor.org/mobilehomes.html ("If you own a mobile home and also own the land on which it sits, your mobile home will be assessed as real property."); Personal Property , Kanawha County Assessor , https://kanawhacountyassessor.com/personalproperty, ("Mobile home can be assessed as Personal Property or Real Property.... If you do own the land the mobile home is sitting on it can be assessed as Real Property.").
We conclude that given the statute's language that compliance with the cancellation procedure alters the legal character for all purposes, the Legislature contemplated that it would be one mechanism by which a manufactured home may be converted from personal to real property. Bankruptcy Trustee appears to advocate that the procedure is exclusive purely because it exists. But, for the reasons set forth above, we decline to adopt that view given the language employed, and conversely, not employed, by the Legislature in drafting this statute, and disagree that the statute provides the exclusive means to accomplish conversion of a manufactured home to real property.
However, Bankruptcy Trustee raises important policy concerns: the efficiency and transparency of a single titling system which, undoubtedly, would serve to benefit lenders and bona fide purchasers alike, not to mention the correlative lowering of costs associated with lending, and the ever-alluring benefit of circumventing litigation. Those concerns do not fall on deaf ears; we simply find that if this statutory scheme were enacted, as Bankruptcy Trustee suggests, to accomplish an exclusive means of conversion for manufactured homes, it fails in that purpose. And, we believe the exclusivity of the cancellation statute should be made plain before we may apply it as such. Had the Legislature intended such a strict application, it would have said so.
As it stands, the cancellation statute provides manufactured homeowners with the means to have their manufactured home declared real property, to the exclusion of personal property, by operation of statute. From a practical perspective, we believe that process is the preferable, but not exclusive means to convert a manufactured home property to real property. The statutory scheme provides notice to creditors that the property may not be considered personal property and provides a single means to perfect a lien, and for those reasons dissuades litigation. A manufactured home may also be converted to real property by operation of common law, but reaching that result may require costly litigation, which is a risk associated with the failure to apply for cancellation of title under § 17A-3-12b(a). So, a lender who does not require compliance with the statutory cancellation procedure or neglects to complete a DMV title search before encumbering a manufactured home does so at its own risk. In other words, the lender who encumbers a manufactured home as though it is real property in the eyes of the law risks that its priority may be usurped if, through litigation, the manufactured home is deemed unaffixed under the common law or there is a prior lien on the motor vehicle title.
Under the stipulation of these parties as presented to this Court, the perfection of a security lien in the manufactured home at issue rests on its legal classification as real or personal property. We therefore hold that satisfying the requirements of Snuffer v. Spangler , 79 W. Va. 628, 92 S.E. 106 (1917), converts the legal character of a manufactured home from personal to real property such that a lien on that property may be perfected by deed of trust even if the homeowner has not cancelled title under the provisions of West Virginia Code § 17A-3-12b(a). Accordingly, we answer the certified question in the affirmative.
IV. CONCLUSION
For the foregoing reasons, we answer the question certified by the Bankruptcy Court for the Northern District of West Virginia in the affirmative.
Certified Question Answered.
CHIEF JUSTICE ARMSTEAD and JUSTICE WORKMAN dissent and reserve the right to file separate opinions.
Workman, Justice, dissenting:
The majority's holding that allows a security interest for a lien on a manufactured home to be perfected by "[s]atisfying the requirements of Snuffer v. Spangler , 79 W. Va. 628, 92 S.E. 106 (1917) [ ]" is in direct conflict with, and ignores, the Legislature's establishment of a single means to perfect such security interest. Specifically, under the Uniform Commercial Code, West Virginia Code § 46-9-303 (2007) and West Virginia Code § 46-9-311(b) (2007 & Supp. 2020), where the manufactured home is registered with and has a certificate of title issued by the West Virginia Division of Motor Vehicles ("DMV"), the sole means of perfecting a security interest in a manufactured home against third parties is to have the lien placed on the vehicle's certificate of title pursuant to West Virginia Code § 17A-4A-1 (2017). In this case, despite the respondent creditors’ (hereinafter "the respondents") argument that their lien interest in the manufactured home was perfected by the recording of a Deed of Trust referencing the property "together with all improvements erected on the property and fixtures that are a part of the property[,]" the respondent simply failed to follow the applicable statutes discussed in greater detail infra. This failure to properly record their lien interest in the manufactured home on the certificates of title was fatal to the respondents’ claim that they have any perfected security interest under the salient statutes. As such, they are not entitled to a superior priority as a creditor in the bankruptcy proceeding.
The respondent creditors are Mortgage Electronic Registration Systems, Inc., WEI Mortgage Corporation, and Seneca Trustees, Inc.
It is an undisputed fact for the purposes of this case that the manufactured home is physically affixed to the real estate.
The titles remain active and have not been cancelled pursuant to the procedure set forth in West Virginia Code § 17A-3-12b (2017), which is discussed in greater detail infra.
To find otherwise, as the majority has done, allows the respondents, who are sophisticated lenders, to benefit from their failure to follow the legislatively prescribed methods for lien perfection on a manufactured home. The result will necessarily increase the transaction costs for other parties, including consumers, engaging in these types of transactions because rather than searching for a lien in the place prescribed by the statute, a search will also have to be conducted in other locations where a lien might be recorded.
A fundamental precept of any secured transaction is that for a lender to acquire a valid interest in collateral against third parties, the claim against the collateral must be perfected. To ascertain the appropriate means for perfecting a lien interest against collateral one must determine the type of collateral at issue, which, in this case, is a double wide manufactured home.
This Court recognized in Daniel v. Stevens , 183 W. Va. 95, 394 S.E.2d 79 (1990), that
[o]ne of the purposes of the filing requirements of article 9 of the Uniform Commercial Code, like that of any recording statute, is to protect third parties by providing notice of the existing interest in the collateral to subsequent potential creditors of and purchasers from the debtor. A concomitant purpose is to protect the creditor who has perfected a security interest, by giving such creditor priority over almost all subsequent third-party claimants to the collateral, because the creditor has taken action which would put a reasonably diligent searcher on notice of the prior interest in the collateral. Landon v. Stroud , 147 Ariz. 208, 211, 709 P.2d 565, 568 (Ct. App. 1985), review denied (Ariz. Nov. 13, 1985). See also syl. pt. 2, American National Bank & Trust Co. v. National Cash Register Co. , 473 P.2d 234 (Okla. 1970) (framers of Uniform Commercial Code, by adopting "notice filing" system, intended to protect perfected security interests and at the same time give subsequent potential creditors and other interested persons general information and procedures adequate to enable ascertainment of factual details) ....
183 W. Va. at 100-101, 394 S.E.2d at 84-85 (emphasis added).
Critical to any analysis of whether a perfected security interest exists on this manufactured home is the fact that certificate of titles were issued by the DMV for the double wide manufactured home. For purposes of perfecting a security interest in goods covered by a certificate of title, under the UCC, "[e]xcept as otherwise provided in sections 9-303 through 9-306, the following rules determine the law governing perfection, the effect of perfection or nonperfection and the priority of a security interest in collateral ...." W. Va. Code § 46-9-301 (2007). Specifically, West Virginia Code § 46-9-303 "applies to goods covered by a certificate of title" and provides:
Because it was a double wide manufactured home, two separate certificates of title were issued by the DMV.
It is important to note that neither party argues that the statutes involved are ambiguous. This Court has held that in deciding the meaning of a statutory provision, "[w]e look first to the statute's language. If the text, given its plain meaning, answers the interpretive question, the language must prevail and further inquiry is foreclosed." Appalachian Power Co. v. State Tax Dep't of W. Va. , 195 W. Va. 573, 587, 466 S.E.2d 424, 438 (1995) ;
(b) When goods covered by certificate of title . Goods become covered by a certificate of title when a valid application for the certificate of title and the applicable fee are delivered to the appropriate authority.
Goods cease to be covered by a certificate of title at the earlier of the time the certificate of title ceases to be effective under the law of the issuing jurisdiction or the time the goods become covered subsequently by a certificate of title issued by another jurisdiction.
(c) Applicable law . The local law of the jurisdiction under whose certificate of title the goods are covered governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in goods covered by a certificate of title from the time the goods become covered by the certificate of title until the goods cease to be covered by the certificate of title.
(Some emphasis added). The majority's examination of the applicable UCC provisions ends here.
The majority fails to examine West Virginia Code § 46-9-311(b) (2020 Supp.), which provides that "a security interest in property subject to a statute, regulation or treaty described in subsection (a) may be perfected only by compliance with those requirements , and a security interest so perfected remains perfected notwithstanding a change in the use or transfer of possession of the collateral." (emphasis and footnote added). Neither party cited, discussed or relied upon this statute; however, its unequivocal meaning is that the failure to follow the relevant statutory requirements for perfecting a security interest is fatal to the perfection. The majority's decision that complying with these statutory provisions was not the exclusive means for perfection of a security interest is legally incorrect.
West Virginia Code § 46-9-311(a) includes property such as manufactured homes.
Following the directive of the UCC, see W. Va. Code § 46-9-311(b), in examining the specific statutes that govern perfecting a security interest in a manufactured home, our focus turns to the provisions of West Virginia Code § 17A-4A-1 to - 16 (2017), entitled "Liens and Encumbrances on Vehicle to be Shown on Certificate of Title; Notice to Creditors and Purchasers." West Virginia Code § 17A-4A-1 requires the DMV to show all liens and encumbrances on the face of any certificate of title it issues as follows:
The parties and the bankruptcy court describe the "vehicle" at issue as a "manufactured home." A "manufactured home" clearly falls within any of the following statutory definitions of a motor vehicle provided in West Virginia Code § 17A-1-1 (2017 & Supp. 2020), including: a factory-built home as defined in West Virginia Code § 17A-1-1(pp) ; a manufactured home as defined in West Virginia Code § 17A-1-1(qq) ; a mobile home as defined in West Virginia Code § 17A-1-1(rr) ; or a house trailer as defined in West Virginia Code § 17A-1-1(ss). The respondents’ suggestion that the manufactured home at issue is not a vehicle within the confines of the foregoing statutory definitions is legally untenable.
The division upon receiving an application for a certificate of title to a vehicle, trailer, semitrailer, pole trailer, factory-built home or recreational vehicle for which a certificate of title is required under article three of this chapter , all of which are hereinafter in this article referred to as vehicles, showing liens or encumbrances upon the vehicle , shall , upon issuing to the owner thereof a certificate of title therefor, show upon the face of the certificate of title all liens or encumbrances disclosed by the application.
(Emphasis added). West Virginia Code § 17A-4A-4(a) further establishes that
[a] purchase money lien or encumbrance upon any vehicle shall be perfected on the date and at time of delivery to the division of motor vehicles of either the application for a certificate of title with all supporting documents, or a completed notice of lien form in a format determined by the division.
(Emphasis added).
According to West Virginia Code § 17A-4A-3(a) and (b) :
a) A certificate of title, when issued by the division showing a lien or encumbrance, shall be considered from and after the filing with the division of the application therefor or the notice of lien authorized in section four of this article adequate notice to the state and its agencies, boards and commissions, to the United States government and its agencies, boards and commissions,
to creditors and to purchasers that a lien against the vehicle exists.
(b) Notwithstanding any other provision of this code to the contrary, and subject to the provisions of subsection (c) of this section, any lien or encumbrance placed on a vehicle by the voluntary act of the owner shall be void as against: (i) Any lien creditor who, without knowledge of the lien, acquires by attachment, levy or otherwise a lien thereupon, unless the lien or encumbrance is noted on the certificate of title , a filed application for certificate of title or the notice of lien authorized in section four of this article; and (ii) any purchaser who, without knowledge of the lien or encumbrance, purchases the vehicle, unless the lien or encumbrance is noted on the certificate of title , a filed application for certificate of title or the notice of lien authorized in section four of this article: Provided, That a purchaser under this subsection who purchases the vehicle without knowledge of the lien or encumbrance and contemporaneously obtains actual physical possession of the vehicle and the certificate of title for the vehicle without the lien or encumbrance noted on the certificate of title , receives the vehicle free and clear of the lien or encumbrance.
(Emphasis added).
The import of the foregoing statutory language is that the only way to perfect a secured interest in a lien on a manufactured home is through a certificate of title issued by the DMV showing the lien, which provides "adequate notice to ... creditors and to purchasers that a lien against the vehicle exists." Id.; see In re Johnson , 105 B.R. 352, 356 (Bkrtcy.S.D.W.Va. 1989) (finding that a mobile home was a "motor vehicle" within the meaning of West Virginia title registration statutes and holding that "the sole effective means of perfecting a security interest in such a mobile home against third parties is to have the lien placed on the vehicle's certificate of title pursuant to § 17A-4A-1. ") (emphasis added)). When a lien is perfected according to the relevant DMV statutes, it has priority over all other liens involving the vehicle. See W. Va. Code § 17A-4A-5 (2017) (declaring that "[t]he liens shown upon a certificate of title issued by the department pursuant to applications for same shall have priority over any other liens against such vehicle , however created and recorded , except as otherwise provided in this article." (emphasis added)); see also Ford Motor Credit Co., LLC v. Hicks , No. 5:10-cv-00811, 2012 WL 1906419, at *9 (S.D. W. Va. May 25, 2012) (district court, on review of bankruptcy court decision, recognized that "[w]ith respect to perfection , goods covered by a certificate of title, like the motor vehicle in this case, ‘become covered by a certificate of title when a valid application for the certificate of title and the applicable fee are delivered to the appropriate authority.’ W. Va. Code § 46-9-303(b) ; see also W. Va. Code §§ 46-9-309(1), 46-9-311(a).") (emphasis added).
Having established that there is only one way to perfect a security interest in a lien on a manufactured home, the question becomes: what occurs when the manufactured home becomes affixed to real property? That this can and does occur was contemplated by the Legislature when it enacted West Virginia Code § 17A-3-12b(a). The statute provides, in relevant part:
The commissioner may cancel a certificate of title for a mobile or manufactured home affixed to the real property of the owner of the mobile or manufactured home. The person requesting the cancellation shall submit to the commissioner an application for cancellation together with the certificate of title.... The commissioner shall return one copy of the cancellation certificate to the owner and shall send a copy of the cancellation certificate to the clerk of the county commission to be recorded and indexed in the same manner as a deed, with the owner's name being indexed in the grantor index.... The clerk shall return a copy of the recorded cancellation certificate to the owner, unless there is a lien attached to the mobile or manufactured home, in which case the copy of the recorded cancellation certificate shall be returned to the lienholder. Upon its recording in the county clerk's office, the mobile or manufactured home shall be treated for all purposes as an appurtenance to the real estate to which it is affixed and be transferred only as real
estate and the ownership interest in the mobile or manufactured home, together with all liens and encumbrances on the home, shall be transferred to and shall encumber the real property to which the mobile or manufactured home has become affixed.
By providing for the cancellation of the certificate of title, the Legislature provided a way for personal property, i.e., a manufactured home affixed to real property, to cease being treated as personal property under the DMV statutes, and instead to be treated as real property governed by the rules for securing liens to real estate. See W. Va. Code § 38-1-1a (2011) (providing for deed of trust used for lien on real estate) and W. Va. Code § 40-1-9 (2019) (providing that deeds of trust are invalid as to creditors and subsequent purchasers for valuable consideration until recorded). Had the certificate of title issued by the DMV been cancelled, there would be no question that lien interest in the manufactured home could have been secured by the relevant Deed of Trust – but these are not the facts in the instant case.
Here, there was no compliance (or even attempted compliance) by the respondents with any of the foregoing statutes. The certificates of title issued on the manufactured home remain active, having never been cancelled. The majority ignores the respondents’ lack of compliance, choosing to embrace the respondents’ argument that they did not comply with these statutes for three reasons. First, the respondents argue that there is no statute that specifically provides that following the statutory scheme embraced in the UCC and DMV statutes is the sole way to perfect a security interest in a manufactured home. This argument wholly disregards W. Va. Code § 46-9-311(b), which provides, in no uncertain terms, that "a security interest in property subject to a statute ... described in subsection (a) [which includes manufactured homes] may be perfected only by compliance with those requirements ...." (Emphasis added).
Second, the respondents contend in a rather circular argument that because the manufactured home is physically affixed to real estate it is no longer a "vehicle" as defined by West Virginia Code § 17A-1-1. This argument, however, completely overlooks the facts in this case that two certificates of title were issued on the manufactured home, no liens were ever recorded on the certificates of title, and both certificates of title remain active, having never been cancelled. See W. Va. Code § 17A-3-12b. According to the respondents, none of these facts matter. The respondents essentially argue that the entire statutory scheme for perfecting a lien on the double wide manufactured home can be wholly disregarded simply by affixing the manufactured home to real property, because then the manufactured home is no longer a "vehicle" and, presumably, the DMV certificates of title magically disappear.
Third, the respondents contend that because West Virginia Code § 17A-3-12b provides that "[t]he [DMV] commissioner may cancel a certificate of title for a mobile or manufactured home affixed to the real property of the owner of the mobile or manufactured home[,]" suggests that "the process is optional while the reference to a manufactured home already ‘affixed’ to real estate indicates that cancellation of the title is not necessary for affixing a manufactured home to real estate." This very narrow reading of the statute is premised upon the respondents’ assumption that
[i]f notation of a lien on a certificate of title is not required for perfection of a security interest in a manufactured home that is not a vehicle as defined by WV Code § 17A-1-1(a), it follows that cancellation of the certificate of title under WV Code § 17A-3-12b(a) is not required for the manufactured home to be affixed.
However, this assumption clearly ignores the express language of West Virginia Code § 17A-3-12b and the UCC provisions governing perfection of a security interest in such property.
It is unfortunate that the majority chooses to embrace the respondents’ arguments that the statutory law in West Virginia does not dictate only one means for perfecting a security interest in a manufactured home. Relying upon case law from 1917 to rectify the respondents’ failings, the majority adopts the respondents’ argument that the manufactured home can also be considered affixed to the real estate through application of West Virginia common law as set forth in Snuffer. See 79 W. Va. 628, 92 S.E. 106. Thus, according to the majority, a security interest in a lien on a manufactured home affixed to the real estate can also be secured by the recording the deed of trust under common law.
In Snuffer , decided long before enactment of the UCC and the DMV statutes, the Court developed the following test in order to determine whether certain machinery located on property in Raleigh County and used in the operation of a woolen factory was part of the real estate or "mere personal chattel":
we conclude that personal property used in connection with real estate is fixtures and part of the realty, when the following conditions concur: First[,] [i]t must be attached to the real estate, and by this we do not mean that it has to become so attached as to do serious damage to the realty, or to the property itself in order to remove it, but that it must be so attached as that the two, the real estate and the fixtures, work together to one end; second[,] [i]t must be reasonably necessary and adapted to the purposes for which the real estate is being used; and, [t]hird[,] [i]t must be the intention of the party placing such property upon the real estate to make it a part thereof. If the first two of these elements concur—that is, its attachment to the real estate and it adaptability to the purposes for which the real estate is being used—it will be presumed that the party attaching it intended that it should be a part of the real estate, unles[s] a contrary intention appears from the conduct of the parties in relation to it.
Id. at 634, 637-38, 92 S.E. at 109 and 110.
This Court continued to adhere to the principles of Snuffer recently in a memorandum decision. See Sanders v. Brown , No. 18-0017, 2018 WL 6119215 (W. Va. Nov. 21, 2018). In Sanders , like its predecessor Snuffer , the issue before the Court did not involve secured transactions and priority of secured interests in liens. Instead, the issue in Sanders was who owned the manufactured home that was affixed to the real estate at issue in the case.
The problem with the majority's reliance upon Snuffer to resolve the current issue is that neither Snuffer , nor the Sanders memorandum decision referenced infra , involved perfection of a secured interest, i.e. a secured transaction. Undoubtedly the principles enunciated by the Court in Snuffer are still viable where the issues do not involve areas expressly governed by specific statutes, in this case the UCC and DMV statutes concerning perfection and priority of a security interest in a manufactured home. However, this Court has consistently held that "[i]t has been a mainstay of Anglo-American jurisprudence that the common law gives way to a specific statute that is inconsistent with it; when a statute is designed as a revision of a whole body of law applicable to a given subject, it supersedes the common law." State ex rel. Riffle v. Ranson , 195 W.Va. 121, 128, 464 S.E.2d 763, 770 (1995). It is clear that the common law has been superceded by the statutes as discussed supra. Therefore, the majority's holding, excusing respondents’ noncompliance with the statutory scheme for perfecting a security interest in a manufactured home affixed to real estate, undermines relevant UCC and DMV statutes and is plainly wrong.
For the foregoing reasons, I respectfully dissent, and I have been authorized to state that Chief Justice Armstead joins me in dissenting from the majority's decision.