Bankruptcy/Debtor-Creditor Rights Blog

TWO VIN NUMBERS, ONE VEHILCLE – COUSIN EDDIE’S RV

Posted August 27, 2010

Author: Alex T. Gray

In Arkansas, to perfect a security interest in a vehicle a secured party must have an (1) authenticated security agreement that reasonably describes the collateral, (2) must have given value, (3) the debtor must have rights in the collateral, and (4) the security interest must be noted on the certificate of title for the vehicle.  To avoid a misleading description, the vehicle identification number (“VIN”) of the vehicle should always be a part of the collateral description. 

A recent Eastern District of Arkansas bankruptcy case proved just how important a VIN can be to a secured party’s interest.  In In re Johnson, 422 B.R. 183 (Bankr. E.D. Ark. 2010), the trustee objected to relief from stay being granted to a secured party because the description of the collateral in the security agreement did not match the description on the certificate of title.  While the VIN was accurately reflected on both documents, the description on the security agreement stated “2004 R-Vision Condor 1351 Recreational Vehicle,” while the description on the certificate of title was “2003 Ford F-5 MH.”  Id. at 184.  The trustee argued that these two descriptions were inconsistent and therefore the secured party was not perfected.  Id.   The court found, however, that because the VIN was the same on both documents and there was a logical explanation for the inconsistency of the two descriptions, the secured party was perfected.  Id. at 185.  An expert explained that the 2004 R-Vision Condor motor home was mounted by the manufacturer onto a 2003 Ford Chassis; thus, the security agreement described the top half of the vehicle and the certificate of title described the bottom half.  Id. at 184.  Because the VIN was accurately reflected on both documents, the otherwise misleading description was rectified. 

As a VIN is a unique identifier of a vehicle, it provides an accurate way to describe such collateral.  Lenders, however, should always be aware of what the VIN number on their loan documents actually describes.

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