Associates Discount Corp. v. Colonial Finance Co.

• Citation: 88 Ohio App. 205,98 N.E.2d 848
• Parties: , 44 O.O. 325 ASSOCIATES DISCOUNT CORP. v. COLONIAL FINANCE CO. et al.
• Decision Date: 28 March 1950
• Court: United States Court of Appeals (Ohio)

Page 205

88 Ohio App. 205

98 N.E.2d 848, 44 O.O. 325

ASSOCIATES DISCOUNT CORP. v. COLONIAL FINANCE CO. et al.

Court of Appeals of Ohio, Mahoning County.

March 28, 1950.

Syllabus by the Court.

1. The purpose of the Ohio Certificate of Title Act is to protect automobile owners against fraud.

2. Where a certificate of title is fraudulently procured by false representations it is void ab initio and the title of a subsequent holder for value which arises therefrom can have no greater solemnity than its source.

3. Where a resident of New York state purchased an automobile from another resident of that state, giving a note and conditional sales contract as security for part of the purchase price, which conditional sales contract was filed in the proper office in that state, and in violation of the conditional sales contract removed the automobile to Ohio and assigned the New York certificate of title to himself under an alias, and thereafter, falsely swore that there were no encumbrances on the New York title and by fraudulent means procured an Ohio certificate of title, the provisions of Section 6290-4, General Code, do not prevent the foreclosure of the conditional sales contract by a holder in due course of the note and conditional sales contract despite the fact that the automobile was purchased by an innocent holder for value in Ohio.

Morris Mendelssohn, Youngstown, for appellant.

Schermer, Goldstein & Millstone, Youngstown, for appellee.

GRIFFITH, Judge.

This is an appeal by defendant Colonial Finance Company, hereinafter called defendant, on questions of law from a judgment of the Municipal Court of Youngstown.

The action is one in foreclosure of a conditional sales contract on an automobile.

An answer and cross-petition was filed by the defendant, Colonial Finance Company, by virtue of a chattel mortgage which it holds on the same automobile.

On October 12, 1948, George Sanders purchased an automobile from the Midtown Dealers Corporation of New York, for which he agreed to pay $1,315. He made the required down payment and for the balance he executed a note and conditional sales contract for $930. The first installment was due on November 13, 1948, and the Midtown Dealers Corporation negotiated the note and conditional sales contract to the plaintiff, Associates Discount Corporation, which is the owner and holder in due course of the note and conditional sales contract. This conditional sales contract was duly filed with the city registrar on October 26, 1948, pursuant to the laws of the state of New York, the state where the purchaser resided at the time of this transaction. George Sanders obtained a New York state registration certificate which did not show the lien of plaintiff, nor did the New York law require it to be so shown. George Sanders then moved to Youngstown, Ohio, without permission of the plaintiff, and assigned the New York registration certificate to George Sevoko, Midway avenue, Youngstown, Ohio. It appears now that George Sanders and George Sevoko are one and the same person and he assigned this certificate to himself. George Sevoko made application for a certificate of title with the clerk of courts of Mahoning county, and obtained a title which did not show the lien of the Associates Discount Corporation.

George Sevoko sold the car to the Pool Motor Sales, and assigned the certificate accordingly.

The Pool Motor Sales obtained a certificate of title from the clerk's office, and sold the car to Honest George Motors.

Honest George Motors made application and obtained a certificate of title to the car in question and then sold it to Adolph Moses, who obtained a certificate of title to the car.

Adolph Moses, for the balance of the purchase price, executed a note and chattel mortgage to Honest George Motors for $1,000. This note and mortgage were sold and assigned to the defendant Colonial Finance Company, which is the owner and holder in due course of such note and mortgage. The lien was noted on the certificate of title of Adolph Moses.

Upon this state of facts the trial court found and held that the Associates Discount Corporation had the first and best lien on the car.

Defendant maintains that that judgment is contrary to law and ought to be reversed.

The Ohio Certificate of Title Act became effective January 1, 1938. Sections 6290-2 to 6295-2, inclusive, General Code.

Prior to that time the settled law of Ohio was clearly expressed in the case of Kanaga v. Taylor, 1857, 7 Ohio St. 134, as follows:

'Where K., residing in the state of New York, took a chattel mortgage from G., who resided in the same place, conditioned to secure part of the purchase money from the chattel which was the subject of the mortgage * * * and the mortgage was registered in the proper office of the same state * * * and G. afterward * * * removed into Ohio, taking with him the chattel, without the knowledge or consent of K., and there made sale of it to a third party, an action by the mortgagee will lie, in this state, to recover the value of the property from the purchaser, although he may have bought it without notice of the mortgage lien.'

The defendant recognizes this ancient and well established rule, but counters with the claim that the Certificate of Title Act does away with all this; that it is a radical change in the law as to the sale and transfer of motor vehicles and the registering of...