Knox City v. Motor Inv. Co.

BOND, Chief Justice. This is an appeal from the judgment of a district court of Dallas County, Texas, in favor of appellee, Motor Investment Company, for debt and foreclosure of an alleged chattel mortgage lien on a Ford motor vehicle, a truck chassis, alleged to have been, on August 5, 1940, executed by appellee R. M. Hedrick to appellee J. Earl Presley and thereafter in due course assigned to the Motor Investment Company. At the institution of this suit appellant, City of Knox City, was in legal possession of the truck under a purported sale from Hedrick. From the judgment, appellant alone appealed, assigning appropriate assignments of error. Appellees Motor Investment Company and J. Earl Presley, in briefs, countered with the' proposition for damages against Wm. P. Boling and King H. Duggan, individually and as partners doing business as Boling-Duggan, only in the event they could not recover a judicial foreclosure of the chattel mortgage as to the City of Knox City. Boling-Duggan are not made parties to this appeal. The facts are undisputed and, as we view the record, the controlling question centers on the application of the Act of the 46th Legislature, now Art. 1436 — 1, Vernon’s. Ann. Texas Penal Code, known as the “Certificate of Title Act,” to the facts of the case. In so far as the Article affects liens and the registration of chattel mortgage liens on motor vehicles, we will not burden this opinion with setting out the Article in full, as pertinent sections of same appear in recent opinions of appellate courts of this state. Elder Chevrolet Co. v. Bailey County Motor Co., Tex.Civ.App., 151 S.W.2d 938; Commercial Credit Co. v. American Mfg. Co., Tex.Civ.App., 155 S.W.2d 834. This statute (§ 1) relates the purposes and intent of the Legislature, the public policy of the state, to lessen and prevent theft of motor vehicles and to. regulate the sale of encumbered motor vehicles and the enforced disclosure to the purchaser of any and all liens for which any such motor vehicle stands as security. In all the transactions by which the rights of the parties here are claimed to have been affected, there was an entire disregard or failure to comply with the statute. The motor vehicle involved was new when sold on March 6, 1940, by the manufacturer, Ford Motor Company, to the dealer Boling-Duggan. The transfer was affected by the manufacturer executing to the dealer a “Manufacturer’s Certificate” in conformity with Section 22 of the Act, evidencing no reservation of liens. On March 7, 1940, Boling-Duggan sold the vehicle to R. M. Hedrick, without its having previously been registered or licensed with the State Highway Department of the State of Texas, delivering to him the original manufacturer’s certificate. On April 28, 1940, Hedrick took the vehicle to Knox City, Texas, with the manufacturer’s certificate, and began the negotiation for its transfer to the City, exhibiting the certificate which showed no liens on the vehicle; and, on April 30, 1940, consummated the sale. The record shows that, at the time of the sale to the City, the note in suit and the chattel mortgage sought to be foreclosed were not in existence, had not been executed, and no lien or reservation of title or interest was of record and [247] none brought to the notice of the purchaser. The City purchased the vehicle solely on the representations of Hedrick and the disclosures in the manufacturer’s certificate. On July 17, 1940, R. M. Hedrick represented to Boling-Duggan that the original manufacturer’s certificate, on which the sale of the truck to Knox City was consummated, had been lost and that he desired a second, or, as designated in the record, a “Duplicate Manufacturer’s Certificate.” Thus, in obedience to this request, Boling-Duggan secured from Ford Motor Company the duplicate or second manufacturer’s certificate, which also showed no lien on the vehicle described. Then on August 5, 1940, Hedrick assigned the second or duplicate certificate and executed the note and mortgage in suit to appellee J. Earl Presley for $759; and on November 13, 1940, another note to Presley for $876. These notes and mortgages were subsequently assigned to Motor Investment Company who instituted this suit. Under the provision of the Act (§ 24), the owner of any new motor vehicle, other than the manufacturer thereof, before selling or disposing of same, is required to register the vehicle and secure a “Certificate of Title” from the State Highway Department of Texas, which certificate shall show the date, make, motor and serial number of the vehicle, the number on the license plate currently assigned thereto, and “the names and addresses and dates of any liens on the motor vehicle, in chronological order of recordation.” The statute (§ 33) further provides that no subsequent sale or transfer of such vehicle shall be made by the owner without the certificate of title having been issued showing that he is the owner and that there are no liens against such motor vehicle except such as are shown thereon; § 42 provides that “No lien on any motor vehicle shall be valid as against third parties without actual knowledge thereof or enforceable against the motor vehicle of any such third parties as the issuance of a certificate of title thereof, unless an application for a new title is made as prescribed in this Act and all first and subsequent liens noted by the Department thereon.”; § 44, that “No lien on any motor vehicle to which a receipt or certificate of title has been issued shall be valid as .against third parties without actual knowledge thereof, or enforceable against the motor vehicle of any such third parties, unless the notation of said lien shall have been caused to be made on receipts and certificates of title on said motor vehicle, as provided in this Act.”; and § 46, that “Only liens noted on a receipt or certificate of title shall be valid as against creditors of the mortgagor in so far as concerns the motor vehicle.” Under the express provisions of this statute, and the undisputed facts, we think the purported chattel mortgage lien cannot be enforced against the motor vehicle in question; it was void ab initio because of the failure of title, and the lack of possession of the mortgaged chattel in the grantor. Hedrick acquired no legal, title from the first purchaser Boling-Dug-gan, and had parted with possession before the lien transaction became a reality. The statute (§ 53)' provides: “All sales made in violation of this Act shall be void and no title shall pass until the provisions of this Act have been complied with.” Thus it will be seen that the legal title to the vehicle in question vested in Boling-Dug-gan by virtue of the ‘“Manufacturer’s Certificate,” and none passed to the subsequent purchaser Hedrick because of the lack of “Certificate of Title.” If the mortgagor had no title to the vehicle, manifestly he could not pass title, or create a valid lien against the property until the provisions of the Act be complied with. The certificate of title evidences title after the motor vehicle has been sold for the first time, and all outstanding liens must be shown thereon, otherwise, they are void. While indirectly the title to the vehicle in question is involved here, yet the primary issue is the enforcement of the chattel mortgage. Assuming without deciding that the municipal corporation, Knox City, under §§ 4, 11 and 60 of the Act, was not exempt from the Act as to registration of automobiles used by governmental agencies, and its title had failed, yet the City was invested with the right of possession; hence Hedrick and those claiming a right or interest in the vehicle by, through or under him, could not deprive the City of that right without adjustment of equities. Elder Chevrolet Co. v. Bailey County Motor Co., Tex.Civ.App., 151 S.W.2d 938. Hedrick having no title, we fail to see how the mortgagee J. Earl Presley and his assignee, Motor Investment Company, have a claim for damages [248] against Boling-Duggan because of their assistance in securing the second or duplicate Manufacturer’s Certificate, which reflected only the title from the first sale. ■ The judgment of the court below is affirmed, other than the foreclosure of the chattel mortgage on the vehicle in possession of appellant City of Knox City; and as against appellant, the judgment is reversed and here rendered in its favor. Affirmed in part; reversed and rendered in part.