Karibian v. Paletta

• Decision Date: 06 May 1983
• Docket Number: Docket No. 56856
• Citation: 122 Mich.App. 353,36 UCC Rep.Serv. 466,332 N.W.2d 484
• Parties: Van KARIBIAN, Plaintiff-Appellee, v. Antonio PALETTA and Maria Paletta, Defendants-Appellants, and Liberty State Bank & Trust Company, a Michigan corporation, Defendant. 122 Mich.App. 353, 332 N.W.2d 484, 36 UCC Rep.Serv. 466
• Court: Court of Appeal of Michigan — District of US

Page 484

332 N.W.2d 484

Van KARIBIAN, Plaintiff-Appellee, v. Antonio PALETTA and Maria Paletta, Defendants-Appellants and Liberty State Bank & Trust Company, a Michigan corporation Defendant.

Docket No. 56856.

122 Mich.App. 353, 332 N.W.2d 484, 36 UCC Rep.Serv. 466

Court of Appeals of Michigan.

Submitted Oct. 12, 1982.

Decided Jan. 10, 1983.

Released for Publication May 6, 1983.

[122 MICHAPP 355] Raymond, Rupp & Wienberg, P.C. by Patrick C. Hall, Troy, for plaintiff-appellee.

Lawrence E. Zellen, Troy, for defendants.

Before T.M. BURNS, P.J., and V.J. BRENNAN and WAHLS, JJ.

T.M. BURNS, Presiding Judge.

On February 2, 1981, the trial court granted plaintiff's motion for summary judgment. Defendants Antonio and Maria Paletta appeal as of right.

In early 1979, plaintiff owned a 1978 "Silver Edition" Corvette allegedly worth $12,500. On August 9, 1979, plaintiff delivered the car to Colin Brook to transport it to England to sell. Simultaneously, plaintiff transferred the title of the car to Brook. Although he signed his own name on the certificate of title, which was subsequently notarized, he failed to place Brook's name on it. However, rather than shipping the car to England, Brook sold it to defendants for $8,500 which was borrowed from defendant Liberty State Bank and Trust. ¹ Brook failed to turn the money over to plaintiff.

Eventually, plaintiff sued for the car. Defendants responded by filing an answer and a motion for summary judgment. Rather than rule on the motion, the trial court referred the dispute to an officer it called a Master in Chancery for fact finding. Even though defendants objected to the Master in Chancery's findings of fact, the trial [122 MICHAPP 356] court granted plaintiff's summary judgment motion based on these findings.

Defendants first argue that the summary judgment should be reversed because the Michigan Constitution prohibits the office of Master in Chancery. Const.1963, art. 6, Sec. 5. We need not determine whether or not the parties may stipulate to such a procedure, however, because of our resolution of the next issue. Yet, we suggest trial courts not use this procedure. See Brockman v. Brockman, 113 Mich.App. 233, 317 N.W.2d 327 (1982).

The trial judge granted plaintiff's motion claiming that the undisputed facts showed that defendants were not good faith bona fide purchasers for value. A summary judgment is inappropriate where a material fact is created when the affidavits, pleadings, depositions, admissions and documentary evidence, viewed in the light most favorable to the party opposing the motion, might permit inferences contrary to the facts as asserted by the movant. Opdyke Investment Co. v. Norris Grain Co., 413 Mich. 354, 320 N.W.2d 836 (1982).

Generally, when faced with a choice, as here, between two innocent parties, courts will rule in favor of the party other than the one who made the fraud possible. Graham v. Sinderman, 238 Mich. 210, 213 N.W. 200, 51 A.L.R. 1225 (1927). Because Brook defrauded plaintiff rather than stole from him, defendants will prevail if they can prove that they are good faith bona fide purchasers for value. M.C.L. Sec. 440.2403; M.S.A. Sec. 19.2403.

Specifically, the trial judge found that defendant Antonio Paletta was not a good faith bona fide purchaser for value:

"[B]ecause he had knowledge of Colin Brook's unreliability before the Silver Corvette was purchased; because [122 MICHAPP 357] Brook was too willing to sell the Corvette at any price acceptable to the bank even if such price was below market value, and because defendant should have been alerted by the incomplete title to the fact that he should at least have contacted plaintiff to confirm Colin Brook's statements."

Plaintiff first argues that defendants ² could not have been good faith bona fide purchasers for value because the certificate of title did not have the transferee's name on it. ³ A sale of a car is void where the sale violates the Michigan Vehicle Code. Endres v. Mara-Rickenbacker Co., 243 Mich. 5, 219 N.W. 719 (1928); Dodson v. Imperial Motors, Inc., 295 F.2d 609 (CA 6, 1961). A car buyer is charged with knowledge of the pertinent statutes. Cain v. Kroblen GMC Truck Sales, Inc., 360 Mich. 244, 103 N.W.2d 353 (1960); Bayer v. Jackson City Bank & Trust Co., 335 Mich. 99, 55 N.W.2d 746 (1952). Therefore, the relevant inquiry is whether or not Michigan's statutes require the transferee's name to be on the certificate of title. If so, defendants cannot be good faith bona fide purchasers for value.

A number of cases have stated that the transferee's[122 MICHAPP 358] name must be on the certificate of title. E.g., Fick v. Mills, 347 S.W.2d 381 (Tex.Civ.App.1961), Hawkins v. M & J Finance Corp., 238 N.C. 174, 77 S.E.2d 669 (1953); Swartz v. White, 80 Utah 150, 13 P.2d 643 (1932); Rasmussen v. O.E. Lee & Co., Inc., 104 Mont. 278, 66 P.2d 119 (1937). However, each of these cases relied on its own state's motor vehicle statute. Michigan does not require the transferee's name to be on the certificate of title when a car is sold. This Court ruled in Albanys v. Mid-Century Ins. Co., 91 Mich.App. 41, 44-45, 282 N.W.2d 11, 13 (1979), rev'd on other grounds 407 Mich. 925, 285 N.W.2d 202 (1979):

"The statute only requires an owner to 1) endorse the certificate of title and 2) deliver the certificate to the transferee. There is no requirement that the transferee's name be placed on the certificate.

"Additionally, the purpose of the statute is 'to discourage and to prevent the stealing of automobiles, to protect the public against crime'. * * * This objective is met by requiring that a signed, notarized title be delivered to a transferee in possession in order to transfer title. Requiring the transferee's name on the certificate of title would not further the statutory purpose. The notarized signature of the transferor sufficiently ensures that the transferor intends to sell the vehicle involved."

In granting summary judgment, the trial judge relied on Jackson City Bank & Trust Co. v. Blair, 333 Mich. 399, 407, 53 N.W.2d 493, 497, 32 A.L.R.2d 920, 926 (1952):

"The rule of Willey v. Snyder, [34 Mich. 60 (1876) ], casts the burden on the subsequent purchaser or mortgagee to make reasonable inquiry beyond the description in the mortgage itself if it furnishes the means of identification; and if such reasonable inquiry would [122 MICHAPP 359] reveal the complete identification, the filing of the mortgage will constitute adequate constructive notice."

However, the incomplete certificate of title did not give defendants constructive notice under the present situation. The validly executed and notarized certificate of title sufficiently complied with the motor vehicle code and did not give defendants notice of any contrary claims.

Plaintiff next argues that the low cost of the car put defendants on constructive notice that Brook did not really own it. M.C.L. Sec. 440.1201(19); M.S.A. Sec. 19.1201(19) defines good faith as: "honesty in fact in the conduct or transaction concerned". This is a "subjective test of good faith, sometimes referred to as the 'white heart and empty head' test, rather than the objective or 'reasonably prudent man' test". Steinheimer, Practice Commentary to Sec. 1201(19), 21 Michigan...