Motor Inv. Co. v. Knox City, 8117.

• Decision Date: 06 October 1943
• Docket Number: No. 8117.,8117.
• Citation: 174 S.W.2d 482
• Parties: MOTOR INV. CO. et al. v. KNOX CITY.
• Court: Texas Supreme Court

174 S.W.2d 482

MOTOR INV. CO. et al. v. KNOX CITY.

No. 8117.

Supreme Court of Texas.

October 6, 1943.

Rehearing Denied November 3, 1943.

Error from Court of Civil Appeals for Fifth Supreme Judicial District.

Action by Motor Investment Company against City of Knox City and others for debt and foreclosure of an alleged chattel mortgage lien on an automobile. To review a judgment of the Court of Civil Appeals, 169 S.W.2d 245, affirming in part and reversing and rendering in part a judgment of the district court, the plaintiff brings error.

Judgment of Court of Civil Appeals affirmed.

Strasburger, Price, Holland, Kelton & Miller, H. W. Strasburger, and Nathaniel Jacks, all of Dallas, for petitioner Motor Investment Co.

Allen & Allen, of Dallas for petitioner Boling-D. Co.

M. F. Billingsley, of Munday, and Shook & Shook, of Dallas, for respondent.

Wm. Kay Miller, of Austin, for Texas Auto Motive Dealers, amicus curiae.

Irion & Cain, of Dallas, for Texas Ass'n of Auto Finance Companies, amicus curiae.

Gerald C. Mann, Atty. Gen., and Ocie Speer and Eugene N. Catlett, Asst. Attys. Gen., amici curiae.

ALEXANDER, Chief Justice.

This suit is between the alleged purchaser of an automobile and one claiming a lien thereon, and involves a construction of the automobile "Certificate of Title Act," Article 1436 — 1, Vernon's Penal Code, Acts 46th Leg., 1939, p. 602.

Ford Motor Company manufactured an automobile and sold it in due course to Boling-Duggan, a partnership, a dealer in Dallas, and delivered the manufacturer's certificate along with the automobile. On March 7, 1940, Boling-Duggan sold the vehicle to R. M. Hedrick, taking a chattel mortgage lien for $770 of the sale price. Boling-Duggan delivered the manufacturer's certificate to its vendee Hedrick at the time of the sale, but did not note thereon the above lien. Hedrick purchased the automobile for the purpose of converting it into a fire truck and reselling it to a consumer. After having so converted it, Hedrick, on the 30th day of April, 1940, for a valuable consideration sold and delivered the automobile to the City of Knox City. At that time said automobile had not been previously registered with nor licensed by the State Highway Department of the State of Texas. Hedrick exhibited the manufacturer's certificate to the City, but apparently never delivered it. What became of it is not shown by the record. Thereafter Hedrick represented to Boling-Duggan that he had lost the original manufacturer's certificate, and through the latter company secured from Ford Motor Company a duplicate or second manufacturer's certificate, which was exactly like the original. On July 17, 1940, Hedrick applied to J. Earl Presley for a loan to take up the balance due on the debt of $770 previously held by Boling-Duggan, which was then held by Interstate Securities Company. In order to secure the loan he assigned to Presley the second or duplicate manufacturer's certificate, and executed to him a note for $759, secured by a mortgage on the automobile. Presley made the loan, noting his lien on the margin of the second or duplicate manufacturer's certificate, and out of the funds so loaned paid off the prior debt held by Interstate Securities Company. Presley in due course assigned the note and lien to Motor Investment Company. Motor Investment Company brought this suit for debt and to foreclose its lien, joining Knox City as one of the defendants.

The trial court rendered judgment in favor of Motor Investment Company against J. Earl Presley, as endorser of the note, with foreclosure of the lien on the automobile as against all parties, including the City of Knox City. The Court of Civil Appeals in a majority opinion affirmed the judgment for debt against Presley, but denied the right of foreclosure of the lien on the automobile as against the City of Knox City. 169 S.W.2d 245.

Boling-Duggan undoubtedly had good title to the automobile at the time it purported to sell it to Hedrick. The sale to Hedrick was for a valuable consideration and possession was delivered to him. At common law such a sale was valid, and it must here be held to be good unless there was then some statutory provision to the contrary. The majority of the Court of Civil Appeals held that the sale to Hedrick was invalid because the automobile had not theretofore been registered with and a certificate of title obtained from the Highway Department under the above-mentioned Certificate of Title Act.

The Certificate of Title Act, Article 1436 — 1, Vernon's Penal Code, was enacted by the Legislature of this State in 1939 to lessen and prevent the theft of motor vehicles, and the importation into this State of and traffic in stolen motor vehicles, and the sale of encumbered motor vehicles without disclosure of existing liens. The pertinent provisions of the Act are as follows:

"Sec. 4. The term `Owner' includes any person, firm, association, or corporation other than a manufacturer, importer, distributor, or dealer claiming title to, or having a right to operate pursuant to a lien on a motor vehicle after the first sale as herein defined, except the Federal Government and any of its agencies, and the State of Texas and any governmental subdivision or agency thereof not required by law to register or license motor vehicles owned or used thereby in this State."

"Sec. 7. The term `First Sale' means the bargain, sale, transfer, or delivery within this State with intent to pass an interest therein, other than a lien of a motor vehicle which has not been previously registered or licensed in this State.

"Sec. 8. The term `Subsequent Sale' means the bargain, sale, transfer, or delivery within this State, with intent to pass an interest therein, other than a lien of a motor vehicle which has been registered or licensed within this State or when it has not been required under law to be registered or licensed in this State.

"Sec. 9. The term `New Car' means a motor vehicle which has never been the subject of a first sale."

"Sec. 16. The term `Manufacturer' means any person regularly engaged in the business of manufacturing or assembling new motor vehicles, either within or without this State."

"Sec. 19. The term `Dealer' means any person purchasing motor vehicles for resale at retail to owners."

"Sec. 22. The term `Manufacturer's Certificate' means a certificate on form to be prescribed by the Department showing original transfer of a new motor vehicle from the manufacturer to the original purchaser, whether importer, distributor, dealer, or owner, and when presented with an application for certificate of title must show thereon, on appropriate forms to be prescribed by the Department, each subsequent transfer between distributor and dealer, dealer and dealer, and dealer to owner."

"Sec. 24. The term `Certificate of Title' means a written instrument which may be issued solely by and under the authority of the Department, and which must give the following data together with such other data as the Department may require from time to time:

"(a) The name and address of the purchaser and seller at first sale or transferee and transferrer at any subsequent sale. (b) The make. (c) The body type. (d) The motor number. (e) The serial number. (f) The number of the license plates currently assigned thereto and the State of issuance, whether in this or any other State. (g) The names and addresses and dates of any liens on the motor vehicle, in chronological order of recordation. (h) If no liens are registered on the motor vehicle, a statement of such fact. (i) A space for the signature of the owner and the owner shall write his name with pen and ink in such space upon receipt of the certificate."

"Sec. 27. Before selling or disposing of any motor vehicle required to be registered or licensed in this State on any highway or public place within this State, except with dealer's metal or cardboard license number thereto attached as now provided by law, the owner shall make application to the designated agent in the county of his domicile upon form to be prescribed by the Department for a certificate of title for such motor vehicle.

"Sec. 28. No designated agent shall issue a receipt for an application for certificate of title to any new motor vehicle the subject matter of the first sale unless the applicant shall deliver to such agent a manufacturer's certificate properly assigned by the manufacturer, distributor, or dealer shown thereon to be the last transferee to the applicant, upon form to be prescribed by the Department."

"Sec. 33. No motor vehicle may be disposed of at subsequent sale unless the owner designated in the certificate of title shall transfer the certificate of title on form to be prescribed by the Department before a Notary Public, which form shall include, among such other matters as the...