First Nat. Bank of El Campo, Tx v. Buss

• Decision Date: 27 August 2004
• Docket Number: No. 13-02-210-CV.,13-02-210-CV.
• Citation: 143 S.W.3d 915
• Parties: THE FIRST NATIONAL BANK OF EL CAMPO, TEXAS, Appellant, v. Michael W. BUSS, Tiffany Riha, Anthony Ott and Faltisek Paving, Inc., Appellees.
• Court: Texas Court of Appeals

143 S.W.3d 915

THE FIRST NATIONAL BANK OF EL CAMPO, TEXAS, Appellant, v. Michael W. BUSS, Tiffany Riha, Anthony Ott and Faltisek Paving, Inc., Appellees.

No. 13-02-210-CV.

Court of Appeals of Texas, Corpus Christi-Edinburg.

August 27, 2004.

Appeal from the 329th District Court, Wharton County, Daniel R. Sklar, J Ronald B. Collins, Duckett, Bouligny, & Collins, Attorneys At Law, El Campo, for Appellant.

Darryl W. Malone, Attorney At Law, Houston, for Appellees.

Before Justices HINOJOSA, CASTILLO, and CHAVEZ¹.

OPINION

Opinion by Justice CASTILLO.

Appellant First National Bank of El Campo, Texas ("FNB") appeals a summary judgment in favor of appellees Michael Buss, Tiffany Riha, Anthony Ott, and Faltisek Paving, Inc. (collectively, the "Buyers"). By a single issue, FNB asserts that an automobile dealer's sale of inventory vehicles to the Buyers did not cut off its perfected lien on the inventory. We affirm.

I. BACKGROUND

Greg Dota, d/b/a Greg's Auto Sales ("Dota"), is a used car dealer. On December 31, 1999, FNB renewed an existing floor-plan loan agreement with Dota to finance his inventory. Dota signed a "Security Agreement and Financing Statement" that gave FNB a first lien on all current and subsequently acquired inventory he held on his used car lot. Under this floor-plan loan agreement, FNB retained possession of the original certificates of title for Dota's inventory of used vehicles. For each vehicle Dota sold, Dota was to apply the sales proceeds to the loan and arrange for the release of the original title from FNB.

Under section 501.111 of the Texas Transportation Code, a person perfects a security interest in a motor vehicle held as inventory by a person in the business of selling motor vehicles only by complying with chapter 9 of the Texas Business and Commerce Code. See TEX. TRANSP. CODE ANN. § 501.111(b) (Vernon 1999). FNB perfected its security interest in Dota's inventory by filing a UCC-1 with the Texas Secretary of State. FNB retained possession of the original certificates of title.

In a series of separate transactions, the Buyers each bought vehicles from Dota. They paid for the vehicles and took possession. Dota deposited the funds he received from the Buyers into his account at FNB. Dota did not give the Buyers certificates of title, which were held by FNB. The Buyers completed title applications, which they left with Dota. Dota was to complete the application process and obtain issuance of new certificates of title in the Buyers' names.

Meanwhile, Dota defaulted on his promissory note to FNB. FNB made demand on both Dota and the Buyers to return the vehicles. Dota filed bankruptcy. The Buyers filed suit against FNB, seeking: (1) a declaratory judgment that their purchases cut off FNB's security interest in the inventory; and (2) damages caused by FNB's refusal to release the certificates of title. FNB counterclaimed for a declaratory judgment that its lien was valid and superior to the Buyers' claims of ownership.

The Buyers did not dispute that FNB perfected its lien in Dota's inventory. FNB filed a motion for summary judgment, asking the trial court to rule on the validity of its lien. FNB contended that the Texas Certificate of Title Act (the "Act") governed the dispute and the parties' rights. See TEX. TRANSP. CODE ANN. § 501.001-501.138 (Vernon 1999 & Supp.2004). On the other hand, the Buyers countered that the Texas Business and Commerce Code (the "Code") applied to the transactions. See, e.g., Tex. Bus. & Com.Code Ann. § 1.201(9) (Vernon Supp.2004) (defining buyer in ordinary course), § 2.401 (Vernon 1994) (effect of passing of title), § 2.403 (Vernon 1994) (power to transfer), § 9.315(a) (Vernon 2002) (secured party's rights on disposition of collateral; formerly § 9.306); § 9.320(a) (Vernon 2002) (buyers of goods; formerly § 9.307).² The trial court denied FNB's motion for summary judgment. After nonsuiting their claim for damages, the Buyers filed their own summary-judgment motion. The trial court granted it. This appeal ensued.

II. SUMMARY-JUDGMENT ANALYSIS

A. Summary-Judgment Standards of Review

On appeal, the standard of review for the grant of a motion for summary judgment is determined by whether the motion was brought on no-evidence or traditional grounds. Tex.R. Civ. P. 166a(i), (c); Ortega v. City Nat'l Bank, 97 S.W.3d 765, 771 (Tex.App.-Corpus Christi 2003, no pet.) (op. on reh'g). The difference in relative burdens between the parties in the two types of summary-judgment motions is significant. Id. Determination of the nature of the motion for summary judgment under analysis is critical. Id. Here, both parties brought traditional motions for summary judgment. See Tex.R. Civ. P.166a(c).

The function of summary judgment is to eliminate patently unmeritorious claims and defenses, not to deprive litigants of the right to a jury trial. Alaniz v. Hoyt, 105 S.W.3d 330, 344 (Tex.App.-Corpus Christi 2003, no pet.). In both traditional and no-evidence summary-judgment motions, we review the evidence "in the light most favorable to the nonmovant, disregarding all contrary evidence and inferences." See KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex.1999); Branton v. Wood, 100 S.W.3d 645, 646 (Tex.App.-Corpus Christi 2003, no pet.). The movant bears the burden of showing both no genuine issue of material fact and entitlement to judgment as a matter of law. Hoyt, 105 S.W.3d at 345.

When a summary-judgment order does not specify the grounds on which it is based, we affirm the trial court's ruling if any of the theories advanced in the motion are meritorious. State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex.1993). Here, however, the trial court specified its grounds:

Upon consideration of the motion, the response, the summary judgment evidence and the argument of counsel, the Court found that each Plaintiff purchased a vehicle from Greg Dota d/b/a Greg's Auto Sales ("Dota"), and that each Plaintiff was a buyer in [the] ordinary course of business in connection with his/her/its purchase of such vehicle....

The Court was of the opinion that Plaintiffs' purchases of vehicles from Greg Dota d/b/a Greg's Auto Sales cut off the Bank's inventory security interest in such vehicles, and was therefore of the opinion that the motion should be granted.

It is therefore ORDERED, ADJUDGED and DECREED that the Motion for Summary Judgment of Plaintiffs/Counter defendants Michael W. Buss, Tiffany Riha, Anthony Ott and Faltisek Paving, Inc. is granted.

It is further ORDERED, ADJUDGED, and DECREED that Plaintiffs' purchases of vehicles from Greg Dota d/b/a Greg's Auto Sales cut off the Bank's inventory security interest in such vehicles, and each Plaintiff owns each such vehicle free and clear of any claim of the Bank.

Accordingly, we limit our review to these grounds. See id.; see also Pena v. State Farm Lloyds, 980 S.W.2d 949, 953 (Tex.App.-Corpus Christi 1998, no pet.).

The non-movant has the burden to respond to a traditional summary-judgment motion if the movant conclusively: (1) establishes each element of its cause of action or defense; or (2) negates at least one element of the non-movant's cause of action or defense. Hoyt, 105 S.W.3d at 345. When: (1) both sides move for summary judgment; and (2) the trial court grants one motion and denies the other, we review both parties' summary-judgment evidence and determine all questions presented. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex.2000); Frost Nat'l Bank v. L & F Distribs., 122 S.W.3d 922, 929 (Tex.App.-Corpus Christi 2003, pet. filed). Since each party is a movant, the burden is the same for both: to establish entitlement to summary judgment by conclusively proving all the elements of the cause of action or defense as a matter of law. Buccaneer's Cove, Inc. v. Mainland Bank, 831 S.W.2d 582, 583-84 (Tex.App.-Corpus Christi 1992, no writ). Neither may prevail because of the failure of the other to discharge its burden. Id. at 584. When, as here, the only issue both movants presented to the trial court was a question of law, we render the judgment the trial court should have rendered if we reverse. Tex.R.App. P. 43.2(c); Jones v. Strauss, 745 S.W.2d 898, 900 (Tex.1988). Our review is de novo. Ortega, 97 S.W.3d at 771. We turn to a discussion of the statutory schemes at issue.

B. Discussion

1. The Statutory Schemes

a. The Texas Certificate of Title Act

The Texas Legislature originally passed the Act in 1939. Its legislative history reflects that its purpose was to replace the transfer of vehicles by bill of sale with transfer by certificate of title, to be administered by a central state-wide agency. Drake Ins. Co. v. King, 606 S.W.2d 812, 815 (Tex.1980); see generally TEX. TRANSP. CODE ANN. § 501.001 — § 501.138 (Vernon 1999 & Supp.2004). The Act specifically provides that it shall be construed to lessen and prevent: (1) the theft of motor vehicles; (2) the importation into this State of and traffic in stolen vehicles; and (3) the sale of an encumbered vehicle without disclosure to the purchaser of a lien secured by the vehicle. TEX. TRANSP. CODE ANN. § 501.003 (Vernon 1999). The legislative intent of the Act was not to prevent sales and transfers of interest in motor vehicles. See Gramercy Ins. Co. v. Arcadia Fin., Ltd., 32 S.W.3d 402, 408 (Tex.App.-Houston [14th Dist.] 2000, no pet.); Cash v. Lebowitz, 734 S.W.2d 396, 398 (Tex.App.-Dallas 1987, writ ref'd n.r.e.).

A sale in violation of the Act is void. See TEX. TRANSP. CODE ANN. § 501.073 (Vernon 1999). Title does not pass until the requirements of the Act are satisfied. See id. However, non-compliance with the Act does not override a clear showing of valid and complete transfer of ownership. Gramercy Ins. Co., 32 S.W.3d at 408; Najarian v. David Taylor Cadillac, 705 S.W.2d 809, 812 (Tex.App.-Houston [1st Dist.] 1986, no writ). Despite the express language of section 501.073, the sale of a vehicle...