In Re Sanders

Decision on Objection by Ford Motor Credit to Confirmation of Chapter 13 Plan

CAME ON for hearing on August 16, 2007 the foregoing matter. Ford Motor Credit Company LLC objected to confirmation, on grounds that the plan did not accord to it proper treatment of its secured claim on a motor vehicle under the hanging paragraph to section 1325(a).

Background Facts

The facts are not in material dispute, and are largely set out in a single exhibit. The debtors filed their bankruptcy case on March 30, 2007. The debtors purchased a 2005 Ford Explorer from a local dealer on December 4, 2004, 846 days before their bankruptcy case. They financed their purchase with Ford Motor Credit (FMC), using a Texas Simple Interest Motor Vehicle Retail Installment Sales Contract (a form whose format and disclosures are mandated in part by the Texas Finance Code, discussed in further detail infra). According to the contract, the cash price for the vehicle was $26,523.05.

Also, according the contract, the debtors traded in to the dealer their previous vehicle (a Chevy Tahoe), at a trade-in value of $8,000. Unfortunately, the payoff due the lien holder on the trade-in vehicle was $10,324.13, leaving the debtors “negative” on their trade-in by $2,324.13. The trade-in thus contributed nothing to the purchase price of the new Explorer. To the contrary, the trade-in was a liability to the transaction. The dealer of course wanted to sell the vehicle, and so had an interest in facilitating the purchase. The debtors, as buyers, needed to “off-load” the liability associated with the old vehicle in order to buy a new vehicle. The dealer meanwhile needed to pay off the previous lien in order to acquire clear title to the trade-in vehicle, in order to be able to re-sell that vehicle.

The dealer could have absorbed the payoff as a cost of doing business, or the dealer could have required the debtors, as buyers, to come out of pocket up front to pay off the remaining balance due. The deal that was struck, however, has become relatively common in the industry: the dealer arranged 1 for the debtors to reim *841 burse the dealer for the cost of paying off the negative equity, by having the debtors borrow the needed money from the vehicle financer (FMC), and having the debtors pledge the vehicle as collateral for this advance. This advance to pay off the “negative equity” was thus included in the principal balance ultimately financed in this transaction.

The debtors were then credited with a $2,500 rebate from Ford through the dealer, yielding what the retail installment contract calls a down payment of $175.87. Added to the amount to be financed were the dealer’s inventory tax, sales tax, registration fees, a certificate of title fee, and document preparation fee, all totaling $1,183.32. This amount was added to what the retail installment contract identifies as the “cash price.” The small down payment was subtracted to come up with a principal balance of $27,530.60. The “principal balance” is the amount financed in retail installment contracts in this state, and this contract imposed a finance charge of $583.35 (in this contract, an annual percentage rate of 9%). The total payments due under the contract to repay this total was $28,223.85, to be paid out in 35 payments of $361.61, and a final payment in December 2007 of $15,457.50. 2

After the bankruptcy filing, FMC filed a proof of claim on April 10, 2007 for the net balance owing of $19,731.28. The debtors in June 2007 amended their chapter 13 plan. With respect to FMC, the plan recognizes the amount of the claim, but bifurcates the claim into two parts- — -a secured claim based on the debtors’ estimate of current value of the vehicle at $16,225.00, and an unsecured claim for the remaining deficiency in the amount of $3,506.00. The plan then proposes to pay FMC’s secured claim at the rate of $394.02 per month, and at an interest rate of 10%. In short, the debtors treat FMC consistent with section 1325(a)(5), and without regard to the hanging paragraph appended to the end of section 1325(a), believing that FMC’s claim does not qualify as a “910-day” claim under that hanging paragraph. FMC, of course, objected, on grounds that, in their opinion, their claim does qualify as a “910-day” claim under that hanging paragraph.

Both parties argued their positions to the court at the confirmation hearing, presenting both briefing and cases. The chapter 13 trustee took no position on the matter, instead choosing to await the court’s ruling on the question, and to then evaluate whether the plan would be feasible depending on that ruling. The court reset the matter for ruling for October 18, 2007.

Positions of the Parties

FMC claims that its claim qualifies for exclusion from “cram down” because it qualifies as a “910-day” claim under the hanging paragraph which concludes section 1325(a), hereinafter referred to in this decision as the 910-day provision, the “hanging paragraph,” or section 1325(a)(*). 3 If a claim qualifies as a 910- *842 day claim, then it is excluded from the bifurcation effect of section 506 and so must be handled in a chapter 13 plan as a fully secured claim, regardless the value of the collateral. See 11 U.S.C. § 1325(a)(:!:); see generally In re Pajot, 371 B.R. 139 (Bankr.E.D.Va.2007) (setting out an extensive and scholarly analysis of the statute and its operation). The debtors say that the claim in question does not qualify as a 910-day claim, even though the vehicle in question was purchased within 910 days of the bankruptcy filing. The debtors base their position on the language of the subsection, which applies the special treatment only if the creditor “has a purchase money security interest securing the debt that is the subject of the claim ... and the collateral for that debt consists of a motor vehicle....” See 11 U.S.C. § 1326(a)(*). Granted, say the debtors, the creditor in this case lent money for the purchase of the vehicle in question, but it also lent money as an advance to pay off the remaining debt owing to the previous creditor that had a security interest on the vehicle used as a trade-in. The latter portion of the loan, say the debtors, was not a purchase money loan. Thus, say the debtors, because the debt owed FMC is not entirely purchase money, the debt does not qualify for the 910-day exclusion from section 506. FMC’s claim (or perhaps some portion of it) can therefore be “crammed down” under section 1325(a)(5).

The debtors’ argument relies in part on section 9.103(f) of the Uniform Commercial Code, as adopted in Texas, 4 which addresses purchase money security interests in general. That section states that a purchase money security interest does not lose its status even if the purchase money collateral also secures an obligation that is not a purchase money obligation — -but limits that protection to “a transaction other than a consumer-goods transaction....” See Tex. Bus. & Comm. Code' § 9.103(f)(1) (emphasis added). The debtors argue that the highlighted language means that, in the consumer context (including consumer purchases of motor vehicles), purchase money status is an all- or-nothing proposition. They then argue that, because the bankruptcy statute uses a term of art informed by state law, this same all-or-nothing status applies to the term as used there, so that a creditor whose claim includes non-purchase money debt (such as, for example, an advance to pay off negative equity from a trade-in) does not qualify for the 910-day exclusion. Alternatively, and understanding that state common law might permit a court to accord “dual status” in the consumer con text — i.e., purchase money status for the portion of the loan representing purchase money, and non-purchase money status for the portion of the loan that does not — the debtors argue that FMC’s claim is only a *843 910-day claim to the extent that the debt is attributable to the purchase money portion of the loan. See In re Pajot, 371 B.R. at 157-58.

FMC counters that state law actually favors treating all of its debt as purchase money in nature, including the part used to pay off negative equity from the trade-in. FMC asks the court to focus on that aspect of section 9.103(a) of the UCC that defines a purchase money obligation as “an obligation ... incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.” See Tex. Bus. & Comm Code § 9.103(a)(2) (emphasis added). Though with somewhat less enthusiasm, FMC also points to the murkier definition of “purchase money security interest” offered in subsection (b)(1), which explains that “a security interest is a purchase money security interest (1) to the extent that the goods are purchase-money collateral with respect to that security interest.” Id. § 9.103(b)(1) (emphasis added). FMC notes that, in this case, no one disputes that at least part of the debt in this case was incurred for the purpose of enabling the debtors here to acquire the Explorer. FMC maintains as its primary argument, however, that all of the debt was incurred for that purpose, because the debtors here would not have been able to purchase the new vehicle unless they were able to trade in their old vehicle — and that could not have happened unless the previous creditor released its security interest, which in turn could only have occurred if the previous creditor’s debt was paid in full. 5

Armed with this interpretation, FMC too argues that “purchase money security interest” used in section 1325(a)(*) of the Bankruptcy Code, not otherwise defined in the Code, must be read to import state law interpretation of the term of art — though the interpretation offered by FMC is very different. FMC says that the negative equity advance does not in any way undercut or limit FMC’s purchase money security interest status under the hanging paragraph to section 1325(a). To the contrary, FMC says that state law indicates that the term of art should be read to include the advance for negative equity such that the advance has no negative effect on its status as a 910-day claim.

FMC has additional arguments as well. FMC points to the Texas Finance Code, which has a section devoted to “Motor Vehicle Installment Sales.” See Tex. Fin. Code §§ 348.001 et Seq. (Vernon 2006). FMC says that this state enactment should be read in pari materia with Article 9 of the UCC, and when it is, says FMC, the Finance Code’s provisions lend further support to FMC’s version of the meaning and extent of the term of art, “purchase money security interest.”

Next, FMC points to the manner in which security interests in motor vehicles may be perfected. In Texas, as in most states, there is a Certificate of Title Act which provides the exclusive method for perfecting security interests in motor vehicles. See Tex. TRAnsp. Code § 501.111 *844 (Vernon 2007). Once a lender has taken a security interest in a vehicle to collateralize the finance obligation of the principal balance owed under a retail installment contract, that security interest can only be perfected by a notation on the Certificate of Title issued for that vehicle. No other security interest can be recognized other than those noted on this certificate. See Tex. Bus. & CommlCode § 9.109(c)(2). Competing liens not recorded on the certificate of title cannot be enforced. Thus, says FMC, all of the security interest must perforce be purchase money, as there could be no other junior liens anyway.

Analysis

The 910-day provision found in the flush paragraph at the end of section 1325(a) was enacted as part of the Bankruptcy Abuse and Consumer Protection Act of 2005 (BAPCPA), which substantially amended the consumer provisions of the Bankruptcy Code. Section 1325(a) of the Code governs the prerequisites for confirmation of a chapter 13 plan for individual debtors, and has long included a provision with respect to the treatment of secured creditors, mirroring the “cram down” provisions in chapter 11 with respect to such creditors. The mechanics are simple: a creditor with a security interest is only secured to the extent of the value of its collateral, while the balance is to be treated as a separate unsecured claim. See 11 U.S.C. § 506(a). With respect to the secured part of the claim, the debtor’s plan can be confirmed so long as the plan gives to that creditor a stream of payments with a present value equal to the value of the creditor’s collateral (with the collateral continuing to secure that part of the claim). See 11 U.S.C. § 1325(a)(5)(B)(ii). This gives the debtor a powerful weapon with which to deal with car creditors because, as a practical matter, such creditors usually find that what they are owed exceeds the value of the car that secures the claim. Outside of bankruptcy, of course, a car creditor’s being underwater only matters if the creditor actually has to repossess and sell the car to satisfy its claim. So long as the debtor wants to keep the car, however, the only way for the debtor to get a release of the security interest on the car is to pay off the car debt in full. Inside bankruptcy, however, the debtor is permitted to “mimic” what would happen in the event the lender sold the vehicle to satisfy the debt, but without the consequences of actually losing the car. A court rules what that value would be, without actually exposing the vehicle to sale, and the resulting number becomes the number that ends up being “financed” by way of section 1325(a)(5)(B)(ii). 6 The balance of any debt owed the creditor is then separately treated as unsecured debt, paid pro rata along with other unsecured creditors.

Prior to the enactment of BAPC-PA, the effect of this “cram down” or “strip down” forced car lenders to swallow a deficiency loss (unsecured claims in most chapter 13 cases are paid only a small fraction, if at all) while also forcing them to wait for a payout on a now-reduced loan balance, with all the attendant risks of *845 default that accompanied the original loan. In addition, they were faced with the prospect that, at the end of the day, the debtor might still default, leaving the lender with a much-depreciated asset years down the road. One remedy that Congress enacted in apparent response 7 to car lender complaints is evident in the hanging paragraph under discussion here. That provision, set forth in footnote below, 8 eliminates bifurcation and the resulting cram down in value with respect to car creditors if the car was purchased within 910 days of the filing of the case, and “if the creditor has a purchase money security interest securing the debt that is the subject of the claim.” See 11 U.S.C. § 1325(a)(*)- If this special provision applies, then a debtor’s plan must treat the entire claim of the creditor as secured, regardless the value of the collateral (though there is some disagreement in the cases regarding whether the interest rate in the agreement can be adjusted).

There is a lively dispute in the case law regarding the application of the requirement that the creditor have a “purchase money security interest securing the debt that is the subject of the claim.... ” See id. The parties have framed the dispute in their arguments and briefing to the court, and their arguments fairly accurately depict the scope of the dispute in the case law. See generally In re Pajot, 371 B.R. 139 (Bankr.E.D.Va.2007) (collecting and summarizing cases and the scope of the dispute). One line of cases (including Pajot) concludes that “purchase money security interest” does not include funds advanced to pay off negative equity resulting from the trade-in of the debtor’s old vehicle, and, as a result, the 910-day provision does not protect claims which include those funds. See In re Peaslee, 358 B.R. 545 (Bankr.W.D.N.Y.2006) [In re Peaslee I], rev’d by 373 B.R. 252 (W.D.N.Y.2007) [In re Peaslee II]; In re Price, 363 B.R. 734 (Bankr.E.D.N.C.2007); In re Westfall, 365 B.R. 755 (Bankr.N.D.Ohio 2007), supplemented by 376 B.R. 210 (Bankr.N.D.Ohio 2007); In re Bray, 365 B.R. 850 (Bankr.W.D.Tenn.2007); In re Acaya, 369 B.R. 564 (Bankr.N.D.Cal.2007); see also In re Huddle, 2007 WL 2332390 (Bankr.E.D.Va. August 13, 2007) (holding that purchase money status was lost completely when loan was refinanced to pay off original purchase money loan and also to purchase a motorcycle). Another case, which was affirmed at the district court level, holds that the “purchase money” in “purchase money security interest” may include funds advanced to pay off that negative equity, so that the claim is not thereby disqualified from inclusion as a 910-day claim. See In re Graupner, 356 B.R. 907 (Bankr.M.D.Ga.2006) [In re Graupner I], aff'd, 2007 WL 1858291 (M.D.Ga. June 26, 2007) [In re Graupner II]; see also In re Petrocci, 370 B.R. 489 (Bankr.N.D.N.Y.2007); In re Cohrs, 373 B.R. 107 (Bankr.E.D.Cal.2007).

Both lines of cases acknowledge that the Bankruptcy Code does not itself *846 define “purchase money security interest,” though the phrase is used both here in section 1325(a)(*) and in section 522(f) (relating to the avoidance of liens that are not purchase money security interests). However, Congress is deemed to understand the context in which terms of art are used, and to intend the term to take on its ordinary meaning within that context. Envtl. Def. v. Duke Energy Corp., — U.S. -, 127 S.Ct. 1423, 1437, 167 L.Ed.2d 295 (2007) (“When Congress repeats the same word in a different statutory context, it is possible that Congress might have intended the context to alter the meaning of the word.”) (citation omitted). Context is important because it gives courts insight into the meaning Congress may have intended. In addition, when a statutory term is undefined within a given piece of legislation, that term is normally expected to be given its ordinary and generally understood meaning within the statutory context. See 2a NORMAN J. SlNGER, STATUTES & STATUTORY Construction § 47:27 et Seq. at 443-86 (7th ed. rev.2007) (“There is a presumption that the legislature intended to use the actual words it utilizes in the statute, which in turn, as noted, are intended to be utilized in the ordinary and common meanings.”) This is especially so when Congress employs a term of art that has acquired a meaning in the non-bankruptcy context. See id. § 47:27, at 448-55.

“Purchase money security interest,” or “PMSI,” is a term of art used in Article 9 of the Uniform Commercial Code, and it is fair to conclude that Congress was aware of this usage when it employed the term in the Bankruptcy Code. It is thus appropriate to examine UCC law to see what PMSI means in that context and to counsel our understanding of the meaning of PMSI within the context of this section of the Bankruptcy Code.

We do so, however, with a couple of caveats. First of all, while section 9.103 of the Texas Business and Commercial Code (the UCC as enacted in Texas) sets out the general definition of PMSI, section 9.103(h) warns that the definitions in section 9.103 may be applied somewhat differently in consumer transactions, especially when the facts indicate that not all of the loan proceeds were used as purchase money for the collateral. Secondly, the Official Comment to 9.103 warns that:

Whether a security interest is a “purchase money security interest” under other law is determined by that law. For example, decisions under Bankruptcy Code Section 522(f) have applied both the dual-status and the transformation rules.[ 9 ] The Bankruptcy Code does not expressly adopt the state law definition of “purchase money security interest.” Where federal law does not defer to this Article, this Article does not, and could not, determine a question of federal law.

Tex. Bus. & Comm.Code § 9.103, Comment 8 (emphasis added). Thus, while state law (especially Article 9 of the UCC) furnishes an appropriate starting point, Article 9 itself warns that its definitions (and, by extension, state decisions construing those definitions) are not binding on the federal courts when they construe the term as used in a given federal enactment. The importance of this observation will become clearer later in this decision. For now, however, we explore what the term of art means in Texas in order to better under *847 stand what the term might mean as it is used in section 1325(a)(*).

How Does Texas Law Defíne “Purchase Money Security Interests?”

Section 9.103 of the Texas Business and Commercial Code is, on its face, straightforward. First, 10 we are told that a “purchase money obligation” is an obligation of the borrower incurred (1) as all or part of the price of the collateral or (2) for value given to enable the debtor to acquire rights in the collateral, if the value is in fact so used. Tex. Bus. & Comm.Code § 9.103(a)(2) (emphasis added). Next, it tells us that “purchase money collateral” means goods that secure a purchase money obligation. Id. § 9.103(a)(1). Finally, a security interest is a “purchase money security interest” with respect to goods to the extent that the goods are purchase money collateral (one of the defined terms). Id. § 9.103(b)(1).

If there is ambiguity in this formulation, it is to be found in two phrases, “price” and “value given to enable,” both used in the definition of “purchase money obligation.” In apparent anticipation, the Official Comment offers the following insight into how these terms ought to be considered:

As used in subsection (a)(2), the definition of “purchase-money obligation,” the “price” of collateral or the “value given to enable” includes obligations for expenses incurred in connection with acquiring rights in the collateral, sales taxes, duties, finance charges, interest, freight charges, costs of storage in transit, demurrage, administrative charges, expenses of collection and enforcement, attorney’s fees, and other similar obligations.

Id., Comment 3. The Comment adds that the concept of “purchase money security interest” requires a close nexus between the acquisition of collateral and the secured obligation. Id. Figuring out what counts as “price” or “value given to enable” tells us what part of the loan counts as purchase money. For our purposes, the important question is this: does that portion of the loan used to pay off the negative equity nonetheless count as part of the “price of the collateral,” or as “value given to enable the debtor to acquire rights in the collateral”?

Does the “Price of the Collateral” include Neyative Equity?

First, we focus on the meaning of the “price of the collateral” as that terminology is used in the UCC. The case law grappling with this question has reached opposite conclusions when trying to decide whether the term could include negative equity payoffs.

The bankruptcy court in Graupner, applying Georgia law, 11 concluded that “price” was an ambiguous term, because “... in the context of the statute [i.e., UCC § 9-103], the extent or reach of the term is uncertain.” In re Graupner I, 356 B.R. at 919. That court then elected to examine other state statutes to see whether they might shed light on how to interpret it, including in particular Georgia’s statute regulating vehicle sales financing. It did so in part in reliance on Georgia Supreme Court authority explaining the circumstances under which the interpretative doctrine of in pari materia might be used to allow one statutory enactment to *848 inform the interpretation of an ambiguous term in another statutory enactment. Id. at 920. Texas permits use of that doctrine as well, under certain circumstances discussed more fully infra. See Tex. Gov’t Code, § 311.026(a) (Vernon 2005) {“If a general provision conflicts with a special or local provision, the provisions should be construed, if possible, so that effect is given to both.”) (emphasis added).

On the other hand, the Pajot court (and a number of other decisions) found no ambiguity in the phrase “price of the collateral,” concluding that the term “means nothing more than ‘the actual price of the collateral being acquired.’ ” Pajot, 371 B.R. at 149 (quoting In re Peaslee I, 358 B.R. at 556). But exactly what constitutes the “actual price” is precisely what is problematic. Even the Official Comment to section 9.103 acknowledges that “price” is not in fact simply the “actual price” of the collateral itself, offering a listing of “obligations for expenses incurred in connection with acquiring rights in the collateral” that can also be considered part of the “price of the collateral.” Tex. Bus. & Comm. Code § 9.103, Comment 3. Thus, there is at least some question at the margins of the definition where it is at least legitimate to ask how far the “price net” can be cast.

FMC invites the court here to examine other statutes for assistance. However, in Texas, the application of the doctrine of in pari materia has three preconditions that must first be met: the statutes to be construed together must (1) concern the same subject matter; (2) relate to the same person or class of persons; or (3) have the same object or purpose. See In re J.M.R., 149 S.W.3d 289, 292 (Tex.App.-Austin 2004, no pet.). If these preconditions apply, then the doctrine of in pari materia permits a court to construe the statutes in question together, with the goal of harmonizing them if possible. Only if they cannot be harmonized will the specific statute then control over the general. See id.

We can quickly dispose of one statute as a candidate for application of the in pari materia doctrine. FMC relies on Texas’ Certificate of Title Act as one statute which ought to inform our understanding of the term “price of the collateral.” That statute makes notation on a certificate of title the exclusive means for perfecting a security interest in a vehicle. See Tex. TRANSp. Code § 501.111 (Vernon 2007). FMC argues that this exclusive means of perfection means that it is always completely perfected as against other lien claimants by its notation on the title, so the entire loan must perforce be secured by its “purchase money security interest.”

But the argument proves too much. In Graupner, on which FMC relies, that court observed that “[t]he effect of this statutory scheme was, therefore, to render the purchase money status of a security interest in a motor vehicle irrelevant given that the priority of competing liens is determined solely by the notations appearing on the vehicle’s certificate of title and not by special priority and perfection rules regarding purchase money security interests.” Graupner, 356 B.R. at 919. Precisely because the perfection scheme — the same scheme as enacted in Texas — makes the purchase money status of the lien irrelevant, the Certificate of Title Act has nothing to say about the purchase money status of the lien. That Act thus offers no assistance to our interpretative task because it does not concern the same subject matter, or have the same object or purpose. See J.M.R., supra. What is more, even if it were a candidate, it would offer no assistance, because it does not address the question of what constitutes a purchase money security interest, much less *849 what constitutes the precise question with which we are dealing here, namely, what is included in the “price of the collateral.”

FMC has also argued that the court should look to chapter 348 of the Texas Finance Code as another candidate for in pari materia. That chapter regulates Motor Vehicle Installment Sales contracts. FMC claims that the definition of “principal balance” in section 348.006 of the Finance Code should inform the court’s interpretation of “price of the collateral” as used in section 9.103(a)(2) of the Texas Business and Commercial Code, when applied to a consumer’s purchase of a motor vehicle.

FMC admits that the Finance Code never actually uses the term “purchase money security interest.” In fact, the chapter does not in any meaningful way address the question of security interests, their nature, or their extent. Instead, the Finance Code addresses the unique issues regarding what may be financed, how finance charges are to be computed, and how financing and charges are to be disclosed to retail purchasers of motor vehicles. In short, it is a consumer protection statute. See Ford Motor Credit Co. v. Blocker, 558 S.W.2d 493, 497-98 (Tex.Civ.App.-El Paso, 1977, writ ref'd n.r.e.) (predecessor statute’s purpose was to protect buyers by preventing abusive and deceptive trade practices by both sellers and creditors of motor vehicles in ordinary credit transactions); O.R. Mitchell Motors, Inc. v. Bell, 528 S.W.2d 856, 859-60 (Tex.Civ.App.-San Antonio 1974, writ ref'd n.r.e.) (purpose of predecessor statute was to impose duties on sellers or persons who, in ordinary course of business, present a buyer a document ready for buyer’s signature). Moreover, section 348.008(b) of the Finance Code itself states that “[ejxcept as provided by this chapter, an applicable statute, including Title 1, Business and Commerce Code [i.e., the Uniform Commercial Code as adopted in Texas], or a principle of common law continues to apply to a retail installment transaction unless it is displaced by this chapter.” Tex. Fin.Code, § 348.008(b) (Vernon 2006).

The statute does contain an extensive discussion of “price,” not so much in the context of what may be secured, but rather, in the context of what may be financed when a consumer purchaser buys a motor vehicle and finances it as part of that purchase transaction. Bearing in mind that the statute’s primary purpose differs from that of the UCC, it is nonetheless fair to say that it does deal with essentially the same subject matter, at least insofar as how one determines the “price” of a vehicle for financing purposes. But far from conflicting with the UCC, it harmonizes with it. If anything, in fact, chapter 348 of the Finance Code supports the conclusion that “price of the collateral” in all likelihood does not include monies advanced to pay off negative equity.

Section 348.006 is the section in chapter 348 that defines what may be included in the “principal balance,” for financing and disclosure purposes. FMC wants the court to equate “principal balance” in this section with “price of the collateral” as used in the UCC, but the structure of section 348.006, if anything, demonstrates that the two concepts should not be equated. 12 Subsection 348.006(a)(1) defines *850 what items are includable in the total “principal balance” of a retail installment contract. The first item on the list is the “cash price of the motor vehicle,” a number readily identifiable as the price of the vehicle itself. Id. § 348.006(a)(1)(A). If there were any doubt about that conclusion, “cash price” is itself a defined term in chapter 348. Section 348.004(a) defines it as “the price at which the retail seller offers in the ordinary course of business to sell for cash the goods or services that are the subject of the transaction.” See id. § 348.004(a). 13 After “cash price of the motor vehicle,” the statute says that the principal balance may also include each amount for “an itemized charge,” an acknowledgment that the “principal balance” may include other items in addition to the “cash price of the vehicle.” See id. § 348.006(a)(1)(B). One can quickly see from the structure of subsection (a), then, that “principal balance” is certainly not equivalent to “cash price of the motor vehicle,” lending support to the conclusion that it is also not equivalent to “price of the collateral” as used in article 9.103 of Texas’ version of the UCC.

Even more telling for the facts of our case is that negative equity financing is nowhere mentioned in subsection (a). It is also nowhere mentioned in the definition of “cash price” in section 348.004. In fact, it is only indirectly referenced in a separate subsection (b) of section 348.006. 14 The Finance Code thus allows financing for the payoff of negative equity from the trade-in to be included in the principal balance — -but not in subsection (a), where the term “cash price” is found. Instead, negative equity is listed indirectly in subsection (b), after a “toting-up” of items more logically connected to the price of the vehicle itself (cash price of the vehicle, plus itemized charges of the sort that could, at the seller’s option, be included in the cash price of the vehicle, plus a document fee relating to putting together the retail installment contract, and less the down payment). Compare id. § 348.006(a) with id. § 348.006(b). In other words, in addition to authorizing the financing of the net cost

*851 of the vehicle after subtracting the down payment, the statute separately authorizes inclusion in the principal balance the amount used to pay off negative equity from the trade-in. See id. Were this second item thought by the legislature to be part of the price of the vehicle, one would have expected it to have been included as a third item under subsection 348.006(a), rather than as a separate item under its own subsection (b). The structure of section 348.006 employed by the Texas legislature thus favors the debtors’ view rather than FMC’s — a retail installment contract may include (and properly disclose) financing for two separate items: (1) the price of the vehicle being purchased, and (2) the cost of paying off any negative equity from the trade-in. That, in turn, favors a conclusion that “price of the collateral,” roughly equivalent to “cash price of the motor vehicle,” does not include the amount advanced to pay off negative equity, even though that amount is allowed to be financed.

This analysis of the structure of section 348.006 takes on additional force when we recall the primary purpose of the Motor Vehicle Installment Sales chapter in the Finance Code — to regulate retail sellers, both for the protection of the buyer and the protection of any entity that may ultimately purchase the retail installment sales contract from the retail seller (such as, for example, Ford Motor Credit). From a disclosure point of view, both buyers and financers want to know how much of the ultimate balance to be paid over time is actually derived from the price of the vehicle being purchased, and how much is derived from other costs and charges associated with the transaction. That very differentiation cuts against the claim by FMC that “principal balance” should be construed to mean essentially the same thing as “price of the collateral.”

Texas’ Code Construction Act counsels that the first step in applying the doctrine of in pari materia (assuming the court has found that the prerequisites for its use have otherwise been met) is to determine whether different statutory provisions even conflict. In re J.M.R., 149 S.W.3d at 292; Tex. Gov’t Code, § 311.026(a) (Vernon 2005) (“If a general provision conflicts with a special or local provision, the provisions should be construed, if possible, so that effect is given to both.”) (emphasis added). If such a conflict is found, the next step is for a court to harmonize the two so as to give effect to both, if possible. There is no conflict presented here between the Finance Code’s use of “cash price” and the UCC’s reference to “price of the collateral.” To the contrary, the two statutory enactments are remarkably complementary. Even were one to imagine a conflict (and one would have to be driven to arrive at one’s conclusion in order to get there, in this court’s view 15 ), the two provisions are easily harmonized. The more sensible (and harmonizing) conclusion is that “price of the collateral” as used in the UCC corresponds with “cash price” as used in the Finance Code. Without a conflict, it is not only unnecessary but inappropriate to resort to the “specific over general” rule.

If seeking to resolve the ultimate question of what should and should not count as includable in the “price of the collateral” *852 as used in the context of consumer purchases of motor vehicles, then, the doctrine of in pari materia offers little assistance, other than to confirm that “price of the collateral” does not include negative equity. If anything there appears to be a close correspondence between the Finance Code and the UCC on how to think about the notion of “price of the collateral,” as distinct from other items that might also be financed and secured. Absent resort to the in pari materia doctrine, we must look to other, more conventional sources for guidance. See Tex. Gov’t Code, § 311.003 (Vernon 2005) (Code construction rules are not exclusive, and are offered primarily to guide construction).

One long-held rule of construction in Texas, to borrow from the observation of another Texas bankruptcy court, is that courts are to be governed by rules of common sense. In re Amber’s Stores, Inc., 205 B.R. 828 (Bankr.N.D.Tex.1997); see also Fitzgerald v. Advanced Spine Fixation Systems, Inc., 996 S.W.2d 864 (Tex.1999) (answering a certified question by counseling that Texas courts should construe statutes by first looking to the plain and common meaning of the statutory language); Bouldin v. Bexar County Sheriff’s Civil Service Comm’n, 12 S.W.3d 527 (Tex.App.-San Antonio 1999) (instructing that words in a statute have their ordinary meaning unless the statute defines them or they are connected with or used with reference to a particular trade or subject matter or are a term of art); Ex parte Anderson, 902 S.W.2d 695 (Tex.App.-Austin 1995) (noting that, absent special definitions, language attacked as vague is to be measured under common understanding or practices or construed in the sense the language is generally understood). While reasonable minds could dither over whether “price of the collateral” ought to include accessories or the tax, title, and license fees associated with the purchase of the vehicle in question, the person on the street might be surprised to learn that a court had concluded that the cost of paying off the excess loan on the trade-in should also count as “the price” of the vehicle itself. When the transaction is teased apart, it becomes readily obvious that a portion of this loan is actually an advance (in legal effect to the debtor, but in practical effect to the dealer) to pay off the negative equity from the trade-in. Retiring this overhang from the old vehicle may effectuate the transaction, but effectuating the transaction does not make this portion of the transaction part of the purchase price of the new vehicle that the debtors in this case purchased. Indeed, chapter 348 of the Finance Code supports this economic view of the transaction. Section 384.404(b), the subsec