Nelms v. Gulf Coast State Bank

• Decision Date: 14 November 1974
• Docket Number: No. 16381,16381
• Citation: 516 S.W.2d 421,15 UCCRep.Serv. 942
• Parties: 15 UCC Rep.Serv. 942 Elmo NELMS et al., Appellants, v. GULF COAST STATE BANK, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 421

516 S.W.2d 421

15 UCC Rep.Serv. 942

Elmo NELMS et al., Appellants, v. GULF COAST STATE BANK, Appellee.

No. 16381.

Court of Civil Appeals of Texas,

Houston (1st Dist.).

Nov. 14, 1974.

Rehearing Denied Dec. 12, 1974.

Dearman, Myers & Brown, W. Dan Myers, Houston (Claude B. Masters, Houston, of counsel), for appellants.

McCall & McCall, LeRoy McCall, Hamshire, for appellee.

EVANS, Justice.

The principal question in this case is whether a lender's security interest in a motor vehicle, evidenced by lien notation recorded on the face of the title certificate, is superior to a subsequent mechanic's lien for automobile repairs.

The automobile in question, a 1971 Chevrolet, was purchased by Nelms from Beaumont Motor Company. Its installment contract and security agreement were subsequently assigned to Gulf Coast State Bank and its security interest was duly noted on the face of the title certificate. Nelms' automobile was thereafter damaged and Nelms took it to Buchanan who agreed to make repairs for the sum of $1160.63. When the repair work was completed, Buchanan notified Nelms to come for his automobile but Nelms never picked up the car nor paid Buchanan's repair bill. Gulf Coast State Bank, to whom Nelms was in arrears in his payments, then located the automobile at Buchanan's repair shop and sought possession. Upon Buchanan's refusal to turn over possession, Gulf Coast State Bank filed suit for recovery of the balance due on the note ($1855.54) and for foreclosure of the security interest. It also sued out writ of sequestration and thereafter replevied the automobile from the sheriff. Buchanan filed cross-action against Gulf Coast State Bank seeking to recover the reasonable value of the repairs plus storage charges. After a non-jury trial, the trial court entered judgment for Gulf Coast State Bank against Nelms for the amount of the balance due on the note plus interest and attorney's fees and held that Buchanan had a valid but inferior lien for the value of repairs and other charges plus reasonable attorney's fees. The court ordered the automobile sold and the proceeds of sole applied to the payment of the amounts due the respective lienholders, in the order of their determined priority, and that any balance remaining after the satisfaction of both such liens should be paid to Nelms. The court entered a take nothing judgment on Buchanan's cross-action against Gulf Coast State Bank. From this judgment Buchanan appeals.

The lien given mechanics, artisans and materialmen exists by reason of Article 16, Section 37 of the Texas Constitution, Vernon's St.Ann., and by Article 5503, Vernon's Tex.Ann.Rev.Civ.Stat., which provides for its enforcement.

Prior to the enactment of the Texas Uniform Commercial Code, the Texas Certificate of Title Act (Article 1436--1, Vernon's Ann.Texas Penal Code), provided the exclusive means for perfecting a security interest in a motor vehicle in this State. Under that law the priority of liens in motor vehicles was set forth as follows:

'Sec. 43. All liens on motor vehicles shall take priority according to the order of time the same are recorded on the receipt or certificate of title of all such recordings to be made by the Department.

'Sec. 44. No lien on any motor vehicle to which a receipt or certificate of title has been issued shall be valid as against third parties without actual knowledge thereof, or enforceable against the motor vehicle of any such third parties, unless the notation of said lien shall have been caused to be made on receipts and certificates of title on said motor vehicle, as provided in this Act.

'Sec. 45. Exposure for sale of any motor vehicle by the owner thereof with the knowledge or consent of any mortgagee shall not affect the rights of any mortgagee as against all third parties.

'Sec. 46. Only liens noted on a receipt or certificate of title shall be valid as against creditors of the mortgagor in so far as concerns the motor vehicle.'

Under the law as it then existed, a conditional sales lien noted on the certificate of title was held superior to a subsequently established mechanic's lien. Motor Truck Sales Co. v. Hauck, 388 S.W.2d 214 (Tex.Civ.App.--San Antonio 1965, writ ref. n.r.e.).

The Texas Uniform Commercial Code, which became effective July 1, 1966 and was re-enacted in 1967 as a part of the Texas Business and Commerce Code, did not repeal except by implication Sections 43 through 46 of the Texas Certificate of Title Act. The fact that these sections were not expressly repealed resulted in predicted uncertainty as to the legislature's intent with respect to the priority of liens in motor vehicles. Ruud, 33 Tex. Bar Journal 11, pp. 968--69 (December, 1970).

Section 9.310 of the Texas Business and Commerce Code, V.T.C.A., (Tex.U.C.C.1967) provides:

'When a person in the ordinary course of his business furnishes services or materials with respect to goods subject to a security interest, a lien upon goods in the possession of such person given by statute or rule of law for such materials or services takes priority over a perfected security interest unless the lien is statutory and the statute expressly provides otherwise.'

In G.M.C. Superior Trucks, Inc. v. Irving Bank & Trust Company, 463 S.W.2d 274 (Tex.Civ.App.--Waco, January, 1971, no writ), the court was concerned with a priority situation, similar to that in the case at bar, which had occurred after the effective date of Section 9.310 of the Texas Business and Commerce Code but prior to express repeal of Sections 43 through 46 of the Certificate of Title Act. The court held that the Texas Business and Commerce Code and the Certificate of Title Act were in para materia and in constructing the statutes together, determined that the special provisions of Section 43 of the Certificate of Title Act should be given precedence over the general provisions of Section 9.310 and that the bank's security interest was, therefore, superior to the subsequently established artisan's lien.

In April, 1971 the legislature amended the Certificate of Title Act expressly repealing, among others, Sections 43 through 46. (Article 6687--1, Tex.Rev.Civ.Stat.). In this amendatory Act it also added an entirely new provision as follows:

'Section 65. In case of any conflict between this Act and the Business and Commerce Code, Chapters 1 through 9, the provisions of the Business and Commerce Code control.'

In the emergency clause of the ...