Opinion
Case No. 98-18979-SSM
February 5, 1999
Raymond Carignan, Esquire, The Law Offices of Raymond Carignan, P.C., Washington, DC, of Counsel for the debtor
MEMORANDUM OPINION
Before the court is a motion filed by the debtor on January 14, 1999, to avoid a nonpossessory, nonpurchase-money security interest of American General Finance, Inc. ("American General") in an automobile. No response has been filed by the lien-holder. The court notes, however, that the motion has not been properly served as required by the Federal Rules of Bankruptcy Procedure. Ordinarily, the court would simply decline to enter an order at this time without prejudice to the debtor's right to cure the defect in service. Upon review of the motion, however, it is clear that it simply does not state a claim for relief, since a nonpurchase-money security interest in an automobile, other than one that is exempt as a tool of the trade, cannot be avoided under § 522(f), Bankruptcy Code. Accordingly, the motion will be denied.
Background
Barry E. Fox ("the debtor") filed a voluntary petition under chapter 7 of the Bankruptcy Code in this court on December 21, 1998. On his schedules, he listed, and claimed exempt under Va. Code Ann. § 34-26(8), a 1991 Hyundai Excel automobile valued at $900.00. The automobile is listed as being subject to a nonpurchase-money security interest in favor of American General Finance to secure a claim in the amount of $3,363.00. No objection has been filed to the claim of exemption, but the time for objecting will not expire until February 22, 1999. On January 13, 1999, American General Finance, Inc., filed an entry of appearance by Diana Lynn Wintersteen, a staff attorney. The following day, the debtor filed the motion that is currently before the court to avoid American General's lien under § 522(f), Bankruptcy Code, as impairing the debtor's exemption. The motion was mailed to "American General Finance, P.O. Box 1190, Manassas, VA 20108."
Discussion A.
As noted, there has been no response filed to the motion. However, neither has there been proper service. Under F.R.Bankr.P. 4003(d), "[a] proceeding by the debtor to avoid a lien or other transfer of property exempt under § 522(f) of the Code shall be by motion in accordance with Rule 9014." Rule 9014 in turn requires that any such motion "shall be served in the manner provided for service of a summons and complaint by Rule 7004." Rule 7004 permits service by first-class mail, but for service upon "a domestic or foreign corporation or upon a partnership or other unincorporated association," requires that a copy be mailed "to the attention of an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process." In the present case, the motion was simply mailed to a post office box and not to the attention of a named officer, manager, or agent. Such service is insufficient and confers no jurisdiction over the respondent.
Because there has not been proper service, there can be no finding that American General is in default. But even had there been proper service, the court would not necessarily be compelled to grant the relief requested. When a defendant is in default, all well-pleaded facts in the complaint must be taken as established. Nevertheless, even in the face of a default, the court may examine the allegations of a complaint to determine whether the plaintiff is entitled to the relief requested. 10 Collier on Bankruptcy, ¶ 7055.02, p. 7055-5 (Lawrence P. King, ed., 15th ed. rev. 1997) ("Upon a default, the court is generally required to deem as true the well pleaded allegations of a complaint, but it is not required to agree that the pleaded facts constitute a valid cause of action. If it finds that no claim is stated, it may, in its discretion, refuse to enter the default judgment.").
B.
If the only defect were insufficiency of service, the court would simply direct the debtor to effect proper service. In the present case, however, even if the motion were properly served, the court would be unable to grant the relief requested.
Under § 522(f)(1), Bankruptcy Code, a debtor
may avoid the fixing of a lien upon the interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under [§ 522(b)], if such lien is —
* * *
(B) a nonpossessory, nonpurchase-money security interest in any —
(i) household furnishings, household goods, wearing apparel, appliances, books, animals, crops, musical instruments, or jewelry that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor;
(ii) implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor; or
(iii) professionally prescribed health aids for the debtor or a dependent of the debtor.
(emphasis added). Thus the plain language of the statute permits a consensual security interest to be avoided only in a limited class of assets, namely household goods and furnishings, professionally prescribed health aids, and tools of the trade. In re Clark, 217 B.R. 177, 179-80 (Bankr. E.D. Va. 1998).
In this respect a consensual security interest is fundamentally different from a judgment lien, which under § 522(f) can be avoided in any class of exempt asset.
For the purpose of this ruling, the court will assume that American General's lien is, as alleged in the motion, nonpossessory and nonpurchase-money. The court will also assume that Virginia law, and hence § 522(b), Bankruptcy Code, permits the debtor to hold up to $2,000.00 of the equity in a motor vehicle as exempt, and that the vehicle is worth no more than that amount. Va. Code Ann. 34-26(8). Since there is no suggestion in the motion that the automobile is a professionally-prescribed health aid or a tool of the trade, the question resolves to whether an automobile is included within the definition of "household furnishings," "household goods," or "appliances" that are "held primarily for the personal, family, or household use" of the debtor.
See In re Weinstein, 192 B.R. 133 (Bankr. E.D. Va. 1995).
It may be fairly assumed that the debtor's automobile is held for his personal use, since in fact most automobiles owned by individuals are held for such purpose. In any event, for the purpose of the present ruling, the court will assume that the automobile is held for the debtor's personal use. The problem is that an automobile does not fall within the common definition of a "household furnishing," "household good," or "appliance." Although not dispositive of the issue, the court notes that automobiles are listed under a different category (item 24) than household goods and furnishings (item 4) on the officially-prescribed schedule of assets required to be filed in a bankruptcy case (Official Form 6, Schedule B). The list of Federal exemptions in § 522(d) of the Bankruptcy Code likewise treats motor vehicles in subsection (2) as distinct from "household furnishings, household goods, [and] * * * appliances" in subsection (3). And, indeed, the reported cases have consistently held that a motor vehicle could not be treated as "household goods" for the purpose of § 522(f). Abt v. Household Finance Co. (In re Abt), 2 B.R. 323 (Bankr. E.D.Pa. 1980); Martinez v. Government Employees Credit Union (In re Martinez), 22 B.R. 7 (Bankr. D.N.M. 1982); Redding v. Signal Consumer Discount Co. (In re Redding), 34 B.R. 971 (Bankr. M.D.Pa. 1983); In re Lillard, 38 B.R. 433, 440 (Bankr. W.D.Ark. 1984) ("an automobile, unless it qualifies as a tool of the trade, lies beyond the reach of section 522(f)"); Ramey v. Dominion National Bank (In re Ramey), 45 B.R. 562, 563 (Bankr. W.D.Va. 1984) ("An automobile has never been held to constitute "household goods'"); In re Manalac, 1997 WL 775830 (Bankr. E.D. Va. 1997); Lorson v. Avco Financial Services Consumer Discount Co. One, 1997 WL 702982 (Bankr. MD.Pa. 1997).
The Federal exemptions in § 522(d) are unavailable to Virginia debtors, since § 522(b)(1) permits a state to opt out of the Federal exemption scheme, and Virginia has done precisely that. § 34-4.1, Code of Va. Nevertheless, the list of Federal exemptions is instructive as reflecting Congress's understanding that motor vehicles are a category of assets separate from household goods and furnishings.
Since the debtor's automobile does not fall within the limited class of assets with respect to which a nonpurchase-money security interest may be avoided, no legal basis has been stated for granting relief. A separate order will therefore be entered denying the motion.