Commercial Credit Corp. v. Citizens Nat. Bank of Point Pleasant

• Decision Date: 17 December 1963
• Docket Number: No. 12224,12224
• Citation: 133 S.E.2d 720,148 W.Va. 198
• Court: West Virginia Supreme Court
• Parties: COMMERCIAL CREDIT CORPORATION, a Corporation, v. The CITIZENS NATIONAL BANK OF POINT PLEASANT, West Virginia, a Corporation.

Page 720

133 S.E.2d 720

148 W.Va. 198

COMMERCIAL CREDIT CORPORATION, a Corporation, v. The CITIZENS NATIONAL BANK OF POINT PLEASANT, West Virginia a Corporation.

No. 12224.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 24, 1963.

Decided Dec. 17, 1963.

Syllabus by the Court

1. Under the provisions of Code, 1931, Chapter 38, Article 15, as amended, designated Uniform Trust Receipts Act, the entruster is not the lienor of goods delivered to the trustee but is the real and actual owner thereof and, as such, can be divested of this ownership only by the payment by the trustee of his debt to the entruster or by a sale of the goods by the trustee to a buyer in the ordinary course of business.

2. 'In general no one can transfer a better title to a chattel than he himself has, even to a bona fide purchaser.' Point 1, Syllabus, Ullman, Einstein & Co. v. Biddle Bros., 53 W.Va. 415 .

3. A certificate of title is not conclusive proof of ownership but is merely evidence in establishing title which may be rebutted by other evidence.

4. A certificate of title issued pursuant to a false representation of ownership is void and the holder of such void certificate has no title to pass to a third person.

5. Statutes relating to different subjects are not in pari materia.

Carroll W. Casto, Point Pleasant, A. Maurice Foose, Huntington, for appellant.

Hyer & Littlepage, Samuel D. Littlepage, Point Pleasant, for appellee.

CAPLAN, Judge.

This is a declaratory judgment proceeding instituted in the Circuit Court of Mason County by Commercial Credit Corporation against The Citizens National Bank of Point Pleasant to obtain a judicial declaration of the rights of the parties to the proceeds from the sale of a certain automobile. The case was tried before the court in lieu of a jury on the complaint and amended complaint of the plaintiff, the answer of the defendant, the stipulation and amended stipulation of the parties, and upon the exhibits filed by plaintiff and defendant. From a judgment in favor of the defendant this Court, on March 25, 1963, granted an appeal and supersedeas.

In order to discuss the issues presented, it is necessary to state in some detail the facts which give rise to the controversy. On January 3, 1962, the Commercial Credit Corporation, referred to herein as Commercial, purchased from the Ford Motor Company a 1962 Ford Galaxie, serial 2G52X139214, for the sum of $2,386.82. This automobile was delivered to Somerville Motors, Inc., a corporation, hereinafter called Somerville, then owning and operating a Ford dealership in Point Pleasant. This delivery was made in accordance with a plan of trust receipt financing in which Commercial was engaged on behalf of Somerville.

Pursuant to the provisions of Code, 1931, Chapter 38, Article 15, as amended, Uniform Trust Receipts Act, Commercial, on June 6, 1961, filed with the Secretary of State of West Virginia its statement of trust receipt financing, signed by it and Somerville. In addition thereto Somerville, on January 3, 1962, executed a trust receipt on said vehicle to Commercial wherein the latter was described as 'Entruster' and Somerville was described as 'Trustee'. On the same date Somerville executed its negotiable note, payable to the order of Commercial in the sum of $4,448.47. This note and the trust receipt covered two vehicles but this action involves only the vehicle described above.

On January 17, 1962, without having discharged its obligation under the trust receipt to Commercial, Somerville borrowed $2,400.00 from the Citizens National Bank of Point Pleasant, hereinafter callled Bank. Somerville gave its promissory note to the Bank in the sum of the loan, and as security for the payment thereof executed a chattel deed of trust conveying the subject vehicle in trust for the benefit of the Bank.

Still not having discharged the aforesaid obligation to Commercial, Somerville on January 24, 1962, made application to the Department of Motor Vehicles for a certificate of title to this vehicle in its own name. In making its application Somerville, through its proper officer, stated under oath that the chattel trust deed in favor of the Bank was the first and only lien on this automobile. It requested that this lien be shown on the certificate of title. The application further revealed the name of the owner and seller of the Ford automobile to be Somerville Motors, Inc. and that the purchase was made by it for cash on January 3, 1962. The payment of consumers' sales tax was not required, inasmuch as the car was transferred for resale. Accordingly, the Department of Motor Vehicles issued its certificate of title on said car to Somerville showing thereon the lien in favor of the defendant Bank. The certificate was then mailed directly to the Bank as the owner and holder of the lien.

For its own protection Commercial, on January 8, 16 and 25, 1962, checked the subject car on the premises of Somerville, and determined on each occasion that it was still in the possession of the latter.

On January 27, 1962, the plaintiff repossessed the said automobile and later instituted this suit for a declaratory judgment. To prevent depreciation of the value of the car it was agreed by counsel, without waiving plaintiff's claim, that the automobile should be sold and the proceeds therefrom deposited with the clerk of the circuit court pending the outcome of this action. Accordingly, the vehicle was sold by the trustees named in the chattel trust deed. After deducting the costs of the sale, the proceeds therefrom amounted to $1,856.57, which is the sum in controversy.

The basic issue to be resolved in this proceeding is which of the parties is entitled to the $1,856.57, derived from the sale of the automobile involved herein.

The plaintiff, Commercial Credit Corporation, maintains that as the entruster under the trust receipt transaction in which it was engaged with Somerville, it was the actual owner of the vehicle, not a lienor, and that as such is entitled to the proceeds of the sale. Commercial further asserts that the fraudulent act of Somerville in obtaining a certificate of title to the vehicle as the owner thereof can not divest it, Commercial, of its ownership of the Ford automobile.

It is the position of the defendant, The Citizens National Bank of Point Pleasant, that it is entitled to the money in controversy by reason of its lien being noted on the certificate of title as the only claim or lien against the subject automobile. The Bank also contends that Commercial could have protected itself by obtaining a certificate of title with a notation of its lien thereon; that with respect o recording liens, it is fully protected by the provisions of Code, 1931, 17A-4A-3 and 5, as amended; that there is a conflict between Code, 1931, 17A-4A-3 and 5, as amended, and Code, 1931, 38-15-16, as amended; and that the former Code section, being specific, prevails over the latter.

The object of the Uniform Trust Receipts Act, adopted by our Legislature in 1961, is to standardize and protect the trust receipt method of financing the acquisition and resale of goods in their journey from producer to retailer. Its underlying purpose is to afford security to the lender or financing agency, known as the entruster, in trust receipt transactions. Although the act is couched in complex language, stripped of all technical verbiage, a trust receipt has been well defined as a useful and convenient method of financing commercial transactions by means of which title passes directly from the manufacturer or seller to the banker or lender who as owner delivers the goods to the dealer in whose behalf he is acting secondarily, and to whom title goes ultimately when the primary right of the lender has been satisfied. In re Chappell, D.C., 77 F.Supp. 573.

Applying this definition to the instant case, Commercial was the lender and as such was the owner of the automobile. Somerville was...