The opinion of the court was delivered by: Michael P. McCUSKEY Chief U.S. District Judge
This is an appeal from an Order entered by the United States Bankruptcy Court for the Central District of Illinois (Bankruptcy Case No. 09-92131) brought pursuant to 28 U.S.C. § 158(a). Following this court's careful review, this court reverses the Order of the Bankruptcy Court.
On July 17, 2007, Debtors, Donald V. Robinson and Suzette Y. Robinson, entered a loan agreement with Appellant, American General Financial Services of Illinois, Inc. (American General). As part of the loan agreement, American General obtained a security interest in a 1997 Toyota Avalon (1997 Avalon) owned by the Debtors. The Debtors obtained a loan of $3584.35 with an annual percentage rate of 22.39%. On December 19, 2007, this loan was "paid by renewal" and the Debtors entered into a new loan agreement on December 20, 1997. Under the December 2007 loan agreement, the Debtors financed $4037.63 with an annual percentage rate of 21.38%. The Debtors again paid this loan "by renewal" and entered into a third loan agreement on July 18, 2008. Under the terms of the third loan agreement, the Debtors financed $4665.93 with an annual percentage rate of 26.95%. Under the terms of the July 18, 2008, agreement, the Debtors agreed to pay 37 monthly installments of $187.00 beginning August 18, 2008.
On October 9, 2009, the Debtors filed their Voluntary Petition for Relief under Chapter 7 of the United States Bankruptcy Code. The Debtors listed the 1997 Avalon on Schedule B of their bankruptcy petition and stated that the vehicle had a current value of $2,825.00. American General was listed as a creditor on the Debtors' Schedules for this vehicle.
On February 10, 2010, American General filed its Motion for Relief from Automatic Stay, seeking to obtain possession of the vehicle. American General stated it was the owner of a Loan Agreement and Disclosure Statement executed on the 1997 Avalon. American General stated that the Loan Agreement and Disclosure Statement were "a valid lien" on the vehicle. American General further stated that the Debtors were currently in default on the terms of the loan and owed the total amount of $3,996.04. American General sought an order terminating the automatic stay as it applied to it. American General attached a copy of the loan agreement and disclosure statement entered on July 18, 2008. American General also attached a copy of the title for the 1997 Avalon which listed American General as the lien holder.
On February 26, 2010, the Debtors filed an Objection to American General's Motion for Relief from Automatic Stay. The Debtors argued that American General's lien interfered with their exemptions. On March 3, 2010, the Debtors filed a Motion to Avoid Non-possessory, Nonpurchase-Money Security Interest. The Debtors argued that the property was claimed as fully exempt in the bankruptcy case and the lien impaired the Debtors' exemption for "tools of the trade."
On March 18, 2010, the Bankruptcy Court conducted a hearing on the matter. American General has not provided this court with a transcript of the evidence presented at the hearing before the Bankruptcy Court. However, the parties agree that the evidence showed that Debtor Donald Robinson (Robinson) uses the 1997 Avalon in connection with his duties as a Region Merchandising Manager for W. Newell & Company. There does not seem to be any dispute that Robinson uses the vehicle mainly as transportation to and from work. However, according to the Debtors, Robinson explained at the hearing that he was required to use his vehicle to meet monthly with store managers and produce managers. These meetings were for the purpose of visiting face-to-face to ensure satisfaction with the company's products. Robinson also occasionally needs his vehicle to deliver products to stores directly or to get to and from the airport for business visits. The Debtors introduced a copy of an email dated September 14, 2008, from John R. Aune, the Vice President of National Operations at W. Newell & Company, which directs Pam Talbott, position unknown, to "[a]sk each of my direct reports to commit a minimum of one day per period to visit customers."
Following the hearing, the Bankruptcy Court ordered the parties to submit memoranda of law for the Court's review. On March 31, 2010, the Debtors submitted a Memorandum of Law in Support of Amended Motion to Avoid Non-possessory Nonpurchase-Money Security Interest and Amended Objection to Motion for Relief from Automatic Stay. The Debtors recounted the facts regarding the three loan agreements they entered into with American General. The Debtors stated that American General delivered an application to the Secretary of State on August 14, 2007, thus perfecting the lien on the vehicle for the loan agreement created on July 17, 2007. The Debtors stated that this loan was paid on December 19, 2007, and they entered into a second and third loan agreement on December 20, 2007, and July 18, 2008. The Debtors argued that no certificate of title was applied for or issued for either of these loan agreements. The Debtors argued that, under Illinois law, American General was required to file and pay the Secretary of State each time a previous contract is paid off and a new contract is formed. The Debtors therefore argued that American General does not have a valid lien on the Debtors' 1997 Avalon. The Debtors also again argued that they could claim an exemption for their 1997 Avalon under the tools of the trade exemption.
On April 7, 2010, American General filed its Response to Debtors' Memorandum of Law. American General argued that it has a security interest in the 1997 Avalon which was perfected by its lien on the vehicle in accordance with § 3-202 of the Illinois Vehicle Code. American General argued that its "properly perfected security interest in the vehicle continues to be perfected through both the December 2007 and July 2008 renewals of the original Loan Agreement and Disclosure Statement." American General further pointed out that the "Security Agreement" section of the original Loan Agreement and Disclosure Statement, and each subsequent renewal Loan Agreement and Disclosure Statement, states that the "Lender's security interest shall remain in effect until the borrower has paid in full all amounts due under the Agreement and subject to any modifications, renewals, extensions, and future advances thereof." American General also argued that the 1997 Avalon was not subject to the exemption for a tool of the trade.
On April 14, 2010, the Bankruptcy Court issued its Opinion. The Court did not make a finding regarding the perfection issue but did state that American General "claims a properly perfected security interest in the Debtors' 1997 Toyota pursuant to a loan agreement with the Debtors and its listing as a lienholder on the Certificate of Title to the subject vehicle." The Court then found that the 1997 Avalon was exempt under the tools of the trade exemption. The Court stated:
In the instant case, the Debtors have shown that the automobile in question is not just necessary for his transportation to and from work. The automobile in question is essential to his employment. The Debtor, Donald V. Robinson, is required to supply his own vehicle to visit customers and to deliver product.
The Court further stated that it found that the vehicle in question was of modest value and its possession and use by Robinson was necessary to his continuing employment. The Court therefore found that American General's lien was avoided in its entirety pursuant to 11 U.S.C. § 522(f). The Court entered an Order on April 14, 2010, which stated that the Debtors' Motion to Avoid Non-possessory, Nonpurchase-Money Security Interest was ALLOWED and American General's Motion for Relief from Automatic Stay was DENIED. American General filed a Notice of Appeal.