Continental Credit Corp. v. Norman

• Decision Date: 15 May 1957
• Docket Number: No. 13101,13101
• Citation: 303 S.W.2d 449
• Parties: CONTINENTAL CREDIT CORPORATION, Appellant, v. Ruskin C. NORMAN et al., Appellees.
• Court: Texas Court of Appeals

Page 449

303 S.W.2d 449

CONTINENTAL CREDIT CORPORATION, Appellant, v. Ruskin C. NORMAN et al., Appellees.

No. 13101.

Court of Civil Appeals of Texas, San Antonio.

May 15, 1957.

Rehearing Denied June 12, 1957.

Russell S. Ponder, Moursund, Ball, Bergstrom & Barrow, San Antonio, for appellant.

Kampmann & Kampmann, Russell S. Ponder, T. P. Hull, San Antonio, for appellees.

POPE, Justice.

This is a double appeal. The first dispute concerns the conflicting claims between two purchasers of motor vehicles and Continental Credit Corporation, hereafter called Continental. The purchasers paid the dealer and received possession of the vehicles, but did not receive the manufacturer's certificates and did not register the vehicles. Subsequently the dealer, instead of delivering the manufacturer's certificates of the purchasers, borrowed money from Continental on the strength of the certificates, which showed that the described vehicles were free of liens. The trial court denied Continental's claim of a lien, and held that because the dealer was not the owner he could not mortgage the vehicles. Continental urges that the sale by the dealer to the two purchasers was void under the Certificate of Title Act, that the dealer retained ownership of the cars, and therefore could mortgage the vehicles.

Ernest A. Yanta was a Buick dealer in Cuero, Texas. On February 2, 1955, he delivered a car to Dr. Harold D. Buttery at a San Antonio warehouse. On February 4, 1955, he delivered another car to Dr Ruskin C. Norman. Both men paid the dealer and obtained possession of the vehicles. Each filled in an application for certificate of title and Yanta agreed to forward their applications to the tax collector. At that time neither of the purchasers obtained the manufacturer's certificate from Yanta. Yanta, the dealer, did not have the certificates at the time, and not until February 11th did receive them from General Motors Corporation. Instead of making application for certificates of title, as he had promised his two purchasers he would do for them, Yanta on February 14th went to Continental with the two manufacturer's certificates. The certificates were clear of liens on their face, and Yanta obtained a loan of $2,614 on the security of the vehicle already delivered to Dr. Buttery, and a loan of $2,124.71 on the security of the vehicle already delivered to Dr. Norman. Continental made no effort to determine the location or possession of the vehicles, but took a chattel mortgage on each vehicle, and on the back of the respective manufacturer's certificates wrote in the fact of the lien against each vehicle.

The Certificate of Title Act, Art. 1436-1, Vernon's Ann.Tex.Penal Code, distinguishes two kinds of vehicles, and the rules applicable to the two classes are entirely different. One kind of vehicle is classified as a 'New Car,' and that term is explained by Section 7. The other kind is called a 'Used Car,' and that term is explained in Section 8. A 'Used Car' is one which has been the subject of a 'subsequent sale,' which is defined to mean the sale of a vehicle which has been registered or licensed anywhere. Sec. 8. Section 33 prohibits the sale of a vehicle at a subsequent sale unless the owner designated in the certificate of title transfers the certificate of title, which will show, among other things, whether there are any liens. The sales of the two vehicles in question were not evidence by certificates of title, but a sale from a dealer to a purchaser of an unlicensed and unregistered vehicle is not a 'subsequent sale' which must be made under Section 33. So long as a car is a 'new car', that is, not a 'used car,' there may be repeated transfers without the need either to register the vehicle or apply for a certificate of title.

Continental reasons that the purported sales of the two vehicles without a transfer of the manufacturer's certificates, registration, and applications for certificates of title, rendered both sales void for all purposes. The point is not an open question; it has been settled by the Supreme Court against that contention. Motor Inv. Co. v. Konx City, 141 Tex. 530, 174 S.W.2d 482, 486. In that case a dealer sold a vehicle to Hedrick and delivered the manufacturer's certificate to him. Hedrick did not register the car nor apply for a certificate of title. Hedrick sold the car to Knox City, which paid the consideration, and he delivered possession. As in the instant case, he did not deliver the manufacturer's certificate to Knox City. Hedrick, as did Yanta in this case, then borrowed money on the strength of the manufacturer's certificate which he held, and the creditor noted the lien on the certificate. The Supreme Court held that the creditor's paper title did not prevail over the rights of Knox City, saying:

'The transfer of the vehicle from Hedrick to the City was not endorsed on the manufacturer's certificate, nor was the certificate delivered by Hedrick to the City at the time the City acquired the vehicle, but we find nothing in the Act which prescribes these steps as necessary prerequisites to the validity of such a sale. Sections 22 and 28 of the Act do require the presentment of of a manufacturer's certificate properly filled out, showing each previous transfer of the vehicle as a condition precedent to the right to receive a certificate of title from the State Highway Department, but there is no provision to the effect that a 'first sale' shall be invalid unless the manufacturer's certificate is transferred and delivered therewith. It is conceivable that one might buy such a vehicle from a dealer without any intention of ever putting it in operation upon a public highway, and so long as he did not so use it upon the public highway for purposes other than mere demonstration, there would be no necessity for the securing of a certificate of title, and therefore no necessity of presenting to the Highway Department the manufacturer's certificate properly filled out, as provided for in Section 22. The presentment of the manufacturer's certificate properly filled out is necessary only for the purpose of registering the car and the securing of a certificate of title. The transfer of the manufacturer's certificate is not essential to the validity of a first sale. We have examined the Act very carefully and have found no provision therein, and we have been cited to none, that would justify a holding that the transfer of the manufacturer's certificate is necessary to the validity of such a sale.

'It is true that Section 41 provides that no lien shall be valid on any motor vehicle unless there is noted on the manufacturer's certificate certain evidence of the existence of such a lien, and, by implication at least, such statute charges purchasers with notice of such a lien if it is so noted on the certificate. For this reason it is necessary for purchasers, in order to protect themselves against any outstanding liens shown on the certificate, to obtain such certificate before buying the vehicle; but the mere failure to obtain such a certificate on a first sale does not invalidate the sale, particularly where, as in this case, no evidence of any lien had been noted on the certificate at the time of the sale. * * *

'Since the sale from Hedrick to the City was a valid one, and it was accompanied by the delivery of the possession of the automobile, Hedrick, who had parted with both the title and possession of the vehicle, could not thereafter create a valid lien thereon in favor of Presley, even though Presley at the time he made his loan caused a notation thereof to be made on the duplicate or second manufacturer's certificate of title.'

A sale to an 'owner' as defined by Sec. 4, is still a first sale. Motor Inv. Co. v. Knox City, 141 Tex. 530, 174 S.W.2d 482, 484. A sale by an 'owner' is a subsequent sale. A sale by an 'owner' without making application for a certificate of title before the sale is governed by the Certificate of Title Act and is void. Secs. 27, 33. But a sale to an owner is governed by the rules governing ordinary sales of personal property. Nicewarner v. Alston, Tex.Civ.App., 228 S.W.2d 872, 874-875; Mills v. Clark, Tex.Civ.App., 257 S.W.2d 746, 750; Gerber v. Pike, Tex.Civ.App., 249 S.W.2d 90, 93; Jeter v. Radcliff Finance Corp., Tex.Civ.App., 247 S.W.2d 186; Mossler Acceptance Co. v. Johnson, D.C., 109 F.Supp. 157, 167-172.

When Yanta undertook to give a mortgage on the two vehicles more than a week after he sold and delivered possession to Doctors Buttery and Norman, under the rules governing ordinary sales of personal property, he did not own the vehicles and did not have the power to create the mortgages. Rhea Mortgage Co. v. Lemmerman, Tex.Com.App., 10 S.W.2d 690; Walker v. Security Loan Inv. Co., Tex.Civ.App., 259 S.W.2d 599; Wright Inv. Co. v. Powell, Tex.Civ.App., 27 S.W.2d 321; 33 Am.Jur., Liens, Sec. 9; 14 C.J.S. Chattel Mortgages Sec. 23; 53 C.J.S. Liens Sec. 7.

This part of the judgment we affirm.

General Motors Corporation

v.

Continental Credit Corporation

Another phase of the trial below is before us on appeal. Continental Credit Corporation also sued General Motors Corporation to enforce a mortgage upon another Buick automobile. Continental recovered judgment for the lien. The court's findings of fact reveal that Ernest A. Yanta was an authorized Buick dealer, but he was not the agent for General Motors Corporation. During the early part of February 1955, General Motors shipped four Buicks to Evetts Warehouse in San Antonio. Under its manner of transacting business the warehouse was agent for General Motors, and Yanta could take no Buick from the warehouse until he paid for the vehicle, even though he possessed the certificate. General Motors did not send the manufacturer's certificates with the Buicks, but on February 11th General Motors Corporation mailed Yanta certificates covering all four vehicles. Each of the certificates certified that the respective...