Hardy Rawls Enterprises, LLC (“HRE”) appeals the district court’s order affirming the bankruptcy court’s denial of its proof of claim.
The Trustee filed an objection to HRE’s claim, arguing: (1) that HRE had failed to provide documentation supporting the amounts due on its claim; (2) that HRE had failed to perfect its interest in the vehicles because it did not file a UCC financing statement; and (3) that HRE’s claim to the vehicles did not comply with the statute of frauds. AFC also filed an objection to HRE’s proof of claim, asserting that it had a security agreement and UCC-1 financing statements covering all the vehicles in which HRE claimed an interest. AFC also filed a motion to compel the Trustee to turn over 158 certificates of vehicle title that HRE had given the Trustee, arguing that it had a first priority security interest. HRE filed an opposition to AFC’s motion, arguing that it had a superior security interest in the vehicle titles.
In July 2009, the bankruptcy court rejected HRE’s proof of claim, holding that HRE did not have a perfected security interest in the vehicles under the law of the case.
HRE appealed the bankruptcy court’s order to the district court, raising two arguments. HRE first argued that the bankruptcy court violated Bankruptcy Rules 3007 and 7001 and denied it due process by failing to conduct an evidentiary hearing or trial before denying its proof of claim. It also argued that it had a secured interest in the vehicles because “UCC § 9-311 permits a creditor to comply with a state certificate of title act in lieu of filing a UCC financing statement.”
The district court rejected HRE’s arguments. It held that: (1) any violation of the Bankruptcy Rules was harmless in light of the bankruptcy court’s full consideration of HRE’s evidence and arguments during the August hearing; (2) the August hearing satisfied HRE’s due process rights; and (3) the UCC did not permit HRE to perfect its interest in the vehicle inventory through title possession.
Affirmed.