Radcliff Finance Corp. v. City Motor Sales, Inc.

• Decision Date: 29 April 1959
• Docket Number: No. A-7038,A-7038
• Citation: 159 Tex. 493,323 S.W.2d 591
• Court: Texas Supreme Court
• Parties: RADCLIFF FINANCE CORPORATION, Petitioner, v. CITY MOTOR SALES. INC., et al., Respondents.

Page 591

323 S.W.2d 591

159 Tex. 493

RADCLIFF FINANCE CORPORATION, Petitioner, v. CITY MOTOR SALES. INC., et al., Respondents.

No. A-7038.

Supreme Court of Texas.

April 29, 1959.

H. A. Crawford, Houston, for petitioner.

Robert L. Sonfield and Abe Levy, Houston, for respondent Caruthers.

Seymour Lieberman, Houston, for respondent City Motor Sales.

WALKER, Justice.

This is a controversy over the title to a 1953 Cadillac automobile purchased by J. Caruthers, hereinafter referred to as respondent, from City Motor Sales, Inc. The latter will be referred to in this opinion as City Sales. Radcliff Finance Corporation, petitioner, brought the suit against City Sales and respondent to recover on a note executed to it by City Sales and foreclose a chattel mortgage on the automobile. After a trial before the court without a jury, judgment was entered in favor of petitioner and against City Sales for the amount owing on the note, but respondent was awarded title and possession of the automobile free and clear of the lien claimed by petitioner. The Court of Civil Appeals affirmed. 316 S.W.2d 170.

The note and chattel mortgage were executed to petitioner by City Sales after the latter had sold the automobile to respondent, and the principal question presented by the appeal is whether such sale was made in violation of the Certificate of Title Act, Art. 1436-1, Vernon's Ann.P.C., hereinafter referred to either as the Act or by section number without further identification. In our opinion the present record does not show that the sale violated any provision of the Act, and the judgment of the Court of Civil Appeals will be affirmed.

Neither party contends that any of the trial court's findings of fact are not supported by the evidence. Prior to the events which give rise to this controversy, a Wisconsin certificate of title was issued for the automobile in question. This title showed Walter F. Kappelmann as owner and 'Current Lic. No. 53-D9588.' The automobile and the Wisconsin title, with attached assignment form executed by Kappelmann and showing no liens, came into the possession of J. A. Glaspie, the proprietor of an automobile auction in Tyler. Although the vehicle was brought into Texas for the purpose of sale, no importer's certificate was ever issued for the same. Glaspie sold the automobile to City Sales, and the latter's name was entered as the new owner in the Kappelmann assignment. The record fails to show, however, whether Glaspie was acting for himself or for another in making this sale.

On September 22, 1953, City Sales drew a draft on petitioner payable to Glaspie for $4,100. Glaspie sent the draft with the Wisconsin title attached to the Texas National Bank in Houston for collection. In the meantime the automobile was in the possession of City Sales at Rosenberg and was there exposed for sale with petitioner's knowledge. City Sales offered the vehicle to respondent upon the representation that it was a new automobile. Respondent believed this representation and purchased and took possession of the automobile on September 23rd after paying City Sales the purchase price in full. He did not know of any defect in City Sales' title to the vehicle, and had no knowledge of any facts sufficient to excite inquiry. At the time of his purchase, he signed an application for a Texas certificate of title and was told that a few days would be required to obtain the same.

About two weeks after the sale to respondent, City Sales executed its note to petitioner secured by a chattel mortgage on the automobile, and petitioner paid the draft and obtained possession of the Wisconsin title. Some two months later, the Texas Highway Department issued a 'warning' certificate of title showing City Sales as owner and the lien in favor of petitioner. Early in 1954 another Texas title was issued for a 1953 Cadillac showing respondent as owner and reflecting no liens, but the motor number appearing on this title is not the true number of the vehicle sold to respondent.

The briefs are devoted primarily to the question of whether the transfer from City Sales to respondent was a subsequent sale as contended by petitioner rather than a first sale as held by the trial court. 'First sale' is defined by Section 7 as the transfer of a vehicle which has not been previously registered or licensed in this state or elsewhere. The Cadillac had previously been licensed in Wisconsin, and the sale to respondent could not be a first sale within the present definition of that term. Since the parties do not contend otherwise, we shall assume that the trial court was correct in its conclusion that the vehicle had been the subject of a first sale in Wisconsin. It was, therefore, a used car under the provisions of Section 10.

'Subsequent sale' is defined by Section 8 as the transfer 'of a motor vehicle which has been registered or licensed within this state or elsewhere, save and except when such vehicle is not required under law to be registered or licensed in this State * * *.' Respondent relies on the italicized exception and argues that the transaction in which he acquired the Cadillac was not a subsequent sale because the vehicle was not required to be registered or licensed while owned by City Sales. We do not think this is the meaning or effect of the exception.

Section 27 deals with a motor vehicle 'required to be registered or licensed in this State on any highway or public place in this State, except with dealer's metal or cardboard license number thereto attached as now provided by law,' and provides that the owner shall make application for a certificate of title before selling or disposing of such a vehicle. In Motor Inv. Co. v. Knox City, 141 Tex. 530, 174 S.W.2d 482, it was held that manufacturers and dealers who use their vehicles only for the purposes permitted by Art. 6686, Vernon's Ann.Tex.Civ.Stat., are not required by Section 27 to apply for a certificate of title as a condition precedent to the right to transfer same. The opinion rests this holding upon two entirely separate propositions: (1) that vehicles permitted by law to be operated with dealer's metal or cardboard license number attached are excepted from the provisions of Section 27, and under the terms of Art. 6686 a manufacturer or dealer is authorized to demonstrate his vehicles upon the highway with a dealer's license number attached and need not register the same separately; and (2) that only an 'owner' is required by Section 27 to apply for a title before selling his vehicle, and the term 'owner' as defined by Section 4 excludes manufacturers and dealers, and includes only those claiming title after the first sale. It was then held that each of the transactions there involved was a first sale.

We did not hold or say that a dealerowned vehicle, which is exempt from separate registration under the provisions of Art. 6686, is not a 'motor vehicle required to be registered or licensed in this State' within the meaning of Section 27. On the contrary, it was pointed out that the Act does not designate what vehicles are required to be registered or licensed in this State, and that this information is supplied by Art. 6675a-2, Vernon's Ann.Tex.Civ.Stat. That statute provides that all self-propelled vehicles except farm tractors, farm trailers and other implements of husbandry shall be registered with the State Highway Department before they are operated on the public highways. The Knox City case does not, therefore, support the construction of Section 8 which is now urged by respondent.

'Motor vehicle' is defined by Section 2 as every kind of motor-driven or propelled vehicle 'now or hereafter required to be registered or licensed under the laws of this State.' As originally enacted, Section 60 provided that the Act would not apply to motor vehicles not required to be registered or licensed under the laws of this State 'then effective.' Acts 1939, p. 602. The purpose of this provision was to exempt any kind of vehicle which, although subject to registration under some prior law, was not required to be registered or licensed at the time it was sold or mortgaged.

The reference to vehicles not required to be registered or licensed under the laws of this State was omitted when Section 60 was amended in 1947, but four years later substantially the same language was used in stating the exception to Section 8 mentioned above. Its meaning in the latter context is no different from that which it had in the former. The exception refers to a type of vehicle that is not required to be registered in this State at the time it is sold. To adopt the construction of Section 8 urged by respondent, it would be necessary to say that the transaction in which he acquired the...