Hardware Mut. Cas. Co. v. Gall

• Decision Date: 18 September 1968
• Docket Number: Nos. 41282,41366,REPUBLIC-FRANKLIN,s. 41282
• Citation: 44 O.O.2d 448,15 Ohio St.2d 261,240 N.E.2d 502
• Parties: , 44 O.O.2d 448 HARDWARE MUTUAL CASUALTY CO., Appellee, v. GALL, Appellant.INS. CO., Appellant, v. CASHNER BROS. et al., Appellees.
• Court: Ohio Supreme Court

Page 261

15 Ohio St.2d 261

240 N.E.2d 502, 44 O.O.2d 448

HARDWARE MUTUAL CASUALTY CO., Appellee, v. GALL, Appellant.

REPUBLIC-FRANKLIN INS. CO., Appellant, v. CASHNER BROS. et al., Appellees.

Nos. 41282, 41366.

Supreme Court of Ohio.

Sept. 18, 1968.

Syllabus by the Court

1. Section 4505.01 et seq., Revised Code (Certificate of Motor Vehicle Title Act), does not abrogate the rule that the law of the state in which a chattel is located at the time of the transaction in question determines the creation and transfer of interests in the chattel, and an interest in a motor vehicle thus created in a foreign state will be recognized in this state, to which the motor vehicle is subsequently removed, even though by the law of Ohio such interest may be defeated by a subsequent transaction therein. (Paragraph one of the syllabus in State ex rel. Hertz Corp. v. Rice, 14 Ohio St.2d 34, 235 N.E.2d 721, approved and followed.)

2. A motor vehicle certificate of title issued by a foreign state will be recognized in Ohio as evidence of title to a motor vehicle purchased in a transaction in the foreign state, and Section 4505.04, Revised Code, does not apply where the holder of such foreign title is not otherwise obligated to procure an Ohio motor vehicle certificate of title. (Paragraph two of the syllabus in State ex rel. Hertz Corp. v. Rice, 14 Ohio St.2d 34, 235 N.E.2d 721, approved and followed.)

3. Under the provisions of the Ohio Certificate of Motor Vehicle Title Act, absent any question of estoppel arising from an act of the owner, a thief cannot convey valid title to a stolen motor vehicle to a bona fide purchaser for value without notice, although the certificate of title used in the purported transfer appears valid on its face. (Paragraph three of the syllabus of Atlantic Finance Co. v. Fisher, 173 Ohio St. 387, 183 N.E.2d 135, approved and followed. Paragraphs three and four of the syllabus of Commercial Credit Corp. v. Pottmeyer, 176 Ohio St. 1, 197 N.E.2d 343, overruled.)

In Gall (No. 41282), a 1964 Pontiac sports coupe was stolen from its owner, Floyd Foren, Inc., an automobile dealer in Michigan possessing a Michigan certificate of title. The defendant, Arthur Gall, subsequently purchased the automobile without notice of the theft or that the metal plate containing the correct manufacturer's serial number, riveted to the door post of the car, had been replaced by a false one. Defendant obtained an Ohio certificate of title bearing the altered manufacturer's serial number, riveted to the doorpost of the Company paid the loss to Floyd Foren, Inc., and acquired both a Michigan and Ohio certificate of title bearing the true manufacturer's serial number.

Hardware Mutual was unsuccessful in its attempt to replevy the automobile from the defendant in the Springfield Municipal Court, but the Court of Appeals reversed, holding that the possession of an Ohio certificate of title, apparently valid on its face but bearing a false manufacturer's serial number, by a bona fide purchaser for value without notice whose chain of title was derived from a thief, was not a good defense in a replevin action by one whose chain of title had been derived from the original owner and whose certificate of title bore the correct manufacturer's serial number.

In Cashner (No. 41366), a 1962 Chevrolet station wagon was stolen from Carl Stemple, a resident of Michigan. The original manufacturer's serial number, stamped in a plate attached to the left door post, was removed and a false one substituted. Thereafter, Robert W. Mitchell obtained a Michigan certificate of title containing the altered manufacturer's serial number. According to the agreed statement of facts, the car was subsequently purchased by Cashner Brothers at a Cuyahoga County auto auction, without notice of the theft or the alteration of the serial number. Cashner Brothers obtained an Ohio certificate of title containing the altered manufacturer's serial number and sold it to Gerald Kitto, who in turn obtained an Ohio certificate of title, also bearing the incorrect number.

Carl Stemple, the original owner, was issued an original Michigan certificate of title for the station wagon containing the correct manufacturer's serial number, which certificate he assigned to the Republic-Franklin Insurance Company who paid him for the loss. Republic-Franklin obtained an Ohio certificate of title based upon the assigned Michigan certificate of title.

Republic-Franklin filed this action for conversion in the Canton Municipal Court against Cashner Brothers, Gerald Kitto, and Gordon Phillips, doing business as Cuyahoga County Auto Auction. The court rendered judgment in favor of defendants. The Court of Appeals affirmed the decision of the Municipal Court, citing Commercial Credit Corp. v. Pottmeyer, 176 Ohio St. 1, 197 N.E.2d 343, and, finding its judgment to be in conflict with Gall, certified the record to this court.

Zimmermon & Zimmerman and Charles B. Zimmerman, Jr., Springfield, for appellee in case No. 41282.

John E. Gould and David W. Carter, Springfield, for appellant in case No. 41282.

Harry W. Schmuck, Canton, for appellant in case No. 41366.

Maurice W. Wendling, Richard O. Kuhn, Canton, and Thomas W. Sharatt, for appellees in case No. 41366.

SCHNEIDER, Judge.

Before we confront once more the principal issue at bar, we apparently must again dispel the erroneous notion that whoever first obtains an apparently valid Ohio certificate of title will be entitled to retain possession of the automobile regardless of whether he is the real owner or a bona fide purchaser without notice, whose title derives from a thief. See Buckeye Union Casualty Co. v. Nichols, 6 Ohio App.2d 36, 215 N.E.2d 733. The principal authority for this erroneous proposition is Commercial Credit Corp. v. Pottmeyer, supra (176 Ohio St. 1, 197 N.E.2d 343), where four members of the court agreed to the following syllabus (paragraph three):

'One who claims a right, title or interest in or to a motor vehicle but whose claim is not noted upon any Ohio certificate of title cannot prevail in an action in replevin against a purchaser in Ohio of such motor vehicle, who acquired possession in Ohio of such vehicle together with an apparently valid Ohio certificate of title therefor in good faith and without notice of any right, title or interest in such vehicle not set forth in his certificate of title.'

Pottmeyer does not, and cannot under any circumstances, sanction such a race to the registrar awarding ownership on a 'first come, first served' basis. State ex rel. Hertz Corp. v. Rice, 14 Ohio St.2d 34, 235 N.E.2d 721, and Gibson v. Bolner, 165 Ohio St. 357, 135 N.E.2d 353. The rationale of Hertz applies equally as well to the instant cases. See 14 Ohio St.2d pages 37 and 38, 235 N.E.2d 721.

Thus, neither plaintiff had any need (nor indeed, any right) to acquire an Ohio certificate of title in pursuit of its action in this state. Paragraph three of the syllabus of Pottmeyer is hereby overruled. The Michigan certificates of title were sufficient to establish their claims of ownership in Ohio and to test their rights as against bona fide Ohio purchasers without notice. ¹

In the only other case where that question has been squarely before this court, it was held:

'Under the provisions of the Ohio Certificate of Motor Vehicle Title Act, a thief can not convey valid title to a stolen motor vehicle to a bona fide purchaser for value without notice, although the certificate of title used in the purported transfer appears valid on its face.' Atlantic Finance Co. v. Fisher, 173 Ohio St. 387, 183 N.E.2d 135, paragraph three of the syllabus.

In Commercial Credit Corp. v. Pottmeyer, supra (176 Ohio St. 1, 197 N.E.2d 343), a case in which the question of theft was not before the court, four members of the court agreed in the syllabus (paragraph four) that '(a)n Ohio bona fide purchaser of a motor vehicle may be protected whether his Ohio certificate of title resulted from fraudulent representations of a swindler or a thief.'

The disposition of these cases involves a re-examination of Pottmeyer and the extent of its applicability to the instant cases.

In that case, a purchaser of an automobile entered into a conditional sales agreement providing for the payment of $3,528.72, at $98.02 per month. The purchaser obtained two West Virginia certificates of title. No liens were noted on the first, the application for the certificate having been falsified. The second certificate bore a notation of the lien in the correct amount. Plaintiff, the seller's assignee, sought to replevin the automobile from defendant, a bona fide purchaser for value without notice, who had obtained an Ohio certificate of title which did not show the lien. Under the rule followed by a majority of jurisdictions Pottmeyer would have been deprived of his automobile.

'Since the basis of the rule protecting an innocent purchaser of a motor vehicle who has relied upon his seller's possession of a certificate of title showing no liens or encumbrances is the fault of the actual owner or mortgagee in permitting the seller to have such possession, it follows that the rule will not be applied where the original owner or mortgagor is not at fault. And it is generally held that there is no fault, and therefore no estoppel, where the actual owner or mortgagor has complied with the local laws for the recordation of his ownership or lien, and the person to whom possession of the automobile has been delivered thereafter removes it to another jurisdiction and fraudulently obtains a lien-free certificate of title.' 18 A.L.R.2d 813, 823.

However, this court, in upholding the rights of the bona fide purchaser for value without notice as against those of the lien claimant, said in Pottmeyer, supra (176 Ohio St. 1, at page 4, 197 N.E.2d 343, at page 345), that 'the clear words of the Ohio Certificate of Title Act had in effect imparted negotiability in...