Fidelity Financial Services, Inc. v. Fink

Diane Beasley borrowed money from Fidelity Financial Services, Inc. (Fidelity) (plaintiff) to buy a truck. Beasley gave Fidelity a lien on the truck as security for the loan. Twenty-one days after Beasley received the truck, Fidelity mailed an application to the Missouri Department of Revenue, as required to perfect its lien. Two months later, Beasley filed for bankruptcy. The bankruptcy trustee, Richard V. Fink (defendant), sought to avoid Fidelity’s lien as a voidable preference. Fidelity argued that its lien fell within 11 U.S.C § 547(c)(3), known as the enabling loan exception, which prevented Fink from avoiding purchase-money security interests that were perfected within 20 days after the debtor received the property. Though Fidelity mailed the application on the 21st day, Fidelity maintained that its interest was perfected within 20 days because of a relation-back provision under Missouri law. If a creditor filed the necessary paperwork within 30 days after the debtor took possession of the property, then Missouri law related the perfection-date back to the date of the lien’s creation. The bankruptcy court ruled for Fink and held that Missouri’s relation-back provision could not extend the Bankruptcy Code’s 20-day grace-period. The appellate court affirmed and held that the interest was perfected when Fidelity took the last step required by state law to perfect the security interest. The United States Supreme Court granted certiorari.