{ "id": 1604101, "name": "Commercial Credit Corporation v. Associates Discount Corporation, et al", "name_abbreviation": "Commercial Credit Corp. v. Associates Discount Corp.", "decision_date": "1969-02-10", "docket_number": "5-4791", "first_page": "118", "last_page": "128", "citations": [ { "type": "official", "cite": "246 Ark. 118" }, { "type": "parallel", "cite": "436 S.W.2d 809" } ], "court": { "name_abbreviation": "Ark.", "id": 8808, "name": "Arkansas Supreme Court" }, "jurisdiction": { "id": 34, "name_long": "Arkansas", "name": "Ark." }, "cites_to": [ { "cite": "168 A. 2d 600", "category": "reporters:state_regional", "reporter": "A.2d", "year": 1961, "opinion_index": 0 }, { "cite": "240 F. Supp. 183", "category": "reporters:federal", "reporter": "F. Supp.", "case_ids": [ 363785 ], "year": 1965, "opinion_index": 0, "case_paths": [ "/f-supp/240/0183-01" ] }, { "cite": "227 Ark. 458", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1705313 ], "weight": 2, "year": 1957, "opinion_index": 0, "case_paths": [ "/ark/227/0458-01" ] } ], "analysis": { "cardinality": 748, "char_count": 15849, "ocr_confidence": 0.447, "pagerank": { "raw": 2.0928148557652556e-07, "percentile": 0.7606026451735217 }, "sha256": "65e03a83a4e5ad3d9da700c5154c5e0325c0cd8120b1e1d6f762cf890d1fa750", "simhash": "1:406d54528eaacbe6", "word_count": 2640 }, "last_updated": "2023-07-14T22:44:17.719304+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "Commercial Credit Corporation v. Associates Discount Corporation, et al" ], "opinions": [ { "text": "Conley Byrd, Justice.\nThe issue on this appeal is whether a \u2018 \u2018 buyer in the ordinary course of business \u2019 \u2019 of an automobile from a dealer takes title superior to that of tlie repossessin lien creditor who had stored the automobile with the dealer.\nThe record shows that:\n1. Cox Brothers Co. Inc., an automobile dealer, on June 21, 1965, sold a 1965 Pontiac to William White.\n2. 'William White, through Cox Brothers, financed the automobile with appellant Commercial Credit Corp., with Cox Brothers being an indorser with recourse. The certificate of title issued by the Motor Vehicle Division of the Revenue Department of the State of Arkansas was issued on July 12, 1965. The certificate of title, properly showing Commei\u2019cial\u2019s lien, was forwarded by the Motor Vehicle Division to Commercial where it has remained until trial of this suit.\n3. In March of 1966, \"William White traded the Pontiac to Cox Brothers in exchange for another automobile. Thereafter Cox Brothers transferred the caito Bobby Reagan, who with Commercial\u2019s acquiescence, assumed White\u2019s obligation to Commercial.\n4. October 14, 1966, Commercial, through its Memphis office and for reasons not shown by the record, took possession of the car from Reagan.\n5. Under date of October 16, 1966, the certificate of title in possession of Commercial was endorsed by someone in the Memphis office to show that Commercial\u2019s lien on the car had been released.\n6. October 20, 1966, Commercial stored the Pontiac with Cox Brothers and returned its file to its Little Rock office. Cox Brothers upon receipt of the automobile executed a storage agreement acknowledging that it had no authority to sell the automobile.\n7. From October 10, 1966 to February 28, 1967, Commercial, from an unknown source, received five monthly payments on the financing agreement held by it.\n8. On December 5, 1966 someone forged the names of \"William White and John Bailey, one of Commercial\u2019s agents, to an application to the Motor Vehicle Division for a duplicate title. The Motor Vehicle Division issued the duplicate title, as authorized by Ark. Stat. Ann. \u00a7 75-145 (Repl. 1957), and forwarded the same to Cox Brothers in accordance with the directions contained on the application.\n9. Under date of December 7, 1966, Commercial\u2019s lien, on the duplicate title, was shown as being released through the forgery of the name of John Bailey as an agent of Commercial.\n10. During December 1966, Appellee, Associates Discount Corporation came into possession of the duplicate title, in its forged condition, through a floor plan financing arrangement with Cox Brothers.\n11. February 16, 1967, Don Chaney and his wife Joy purchased the Pontiac from Cox Brothers by giving a $400 post dated check and financing $2,000 with Associates Discount. The post dated check was picked up March 5, 1967.\n12. March 7, 1967, Associates Discount and Commercial discovered that they held duplicate liens on the Pontiac and other vehicles.\n13. Associates Discount filed its lien with the Revenue Department on March 29, 1967.\n14. Commercial brought this action on May 8, 1967.\n15. Mr. George Fell, Jr., Commercial\u2019s district manager, assumed that Cox Brothers kept a number of repossessed automobiles on its premises and stated that Commercial checked vehicles stored by it with Cox at least every 30 days. Commercial\u2019s policy was that it preferred that the cars oil which Cox was an endorser, be paid for when delivered, but if Cox didn\u2019t pay off when the car was delivered, a signed storage agreement was accepted. His testimony with reference to Commercial\u2019s practice was as follows:\nQ. Air. Fell, your company actually had physical possession of this ear before turning it over to Cox, didn\u2019t you?\nA. That\u2019s right.\nQ. Now regardless of what that storage agreement says, you do admit, do you not, that if Cox sold his automobile and gave you this money you would have accepted it, and the only thing you are griping about is the fact that he did not give you the money?\nA. As I stated, if Cox had brought the money to pay the account off, I would have accepted it, but I still have the certificate of title.\nQ. You wouldn\u2019t have turned over the certificate of title until you got the money, but you wouldn\u2019t stand in the way of his selling the car?\nA. Normally, a man has to check with our office first, but if a man has already sold it, I would have accepted it.\nQ. As a matter of fact, wouldn\u2019t there be a chance the only way he could get the money, the dealer, is to sell that automobile if he was otherwise broke ?\nA. He couldn\u2019t pay me.\nQ. Unless lie sold it?\nA. Yes Sir.\n16. Mr. Chaney testified that Cox Brothers bought the license for him \u2014 that he left the registration of the car up to Cox Brothers. He had never received title to any ear that he purchased and financed until it was paid off. He understood that Cox Brothers was going to take care of the title details, \u2014that he was relying on them to do so.\n17. John L. Bowen, a new and used car salesman with seven years experience, testified that it 'was common practice for a dealer to make the filings of title with the Revenue Department as a customer service. Yaughan-Hicks, his employer, employed two women just to handle the certificates. He also stated that there was nothing unusual about a dealer selling a used automobile prior to receiving the certificate of title.\nThe trial court found that \u201cDon Chaney and Joy Chaney purchased said automobile from an authorized dealer and were bona fide purchasers for value,\u201d and awarded possession of the automobile to Associates. For reversal Commercial relies upon the following points:\nI. That the court erred in finding Don Chaney et ux were purchasers in good faith.\nII. The court erred in finding that Associates was a holder through a purchaser in good faith; and\nIII. That Associates is estopped to claim a prior lien by its owm neglect and by its failure to perfect its lien prior to acquiring actual knowledge of Commercial\u2019s lien. For affirmance Associates takes the position that Commercial was an \u201cENTRUSTER\u201d within the meaning of the Uniform Commercial Code, Ark. Stat. Ann. \u00a7 85-2-403 (2) and (3) (Add. 1961), and that since it entrusted the repossessed automobile with Cox Brothers, a recognized dealer, the Chaneys are protected as buyers in the ordinary course of business.\nCommercial\u2019s basic arguments are premised upon the theory that it is a lien holder pursuant to Ark. Stat. Ann. \u00a7 75-161 (Repl. 1956); that Cox Brothers was Channeys\u2019 agent in securing the title; and that subsections (2) and (3) of Ark. Stat. Ann. \u00a7 85-2-403 (Add. 1961) are not applicable to the transactions here involved.\nThe registration of motor vehicles and issuance of certification of titles thereto are governed by Acts 1949, No. 142 (Ark. Stat. Ann. \u00a7\u00a7 75-101 thru 75-191 [Repl. 1957 and Supp. 1967]) as amended. Section 75-149 requires a purchaser or transferee, before operating a vehicle, to obtain the registration within five days and requires the transferee to obtain a new certificate of title. Section 75-150 requires the dealer to execute and acknowledge the assignment of title upon the certificate and to deliver it to the purchaser. Section 75-151 recognizes that the owner\u2019s title or interest may pass without a voluntary transfer by operation of law, as in the case of a repossessing lien holder, and recognizes the transfer of a vehicle without the certificates of title upon \u201c...such instruments or documents of authority or certified copies thereof as may be sufficient or required by law to evidence or effect a transfer of title or interest in or to chattels in such case .. . .\u201d\nSection 75-360 in part provides:\n\u201cNo conditional sale contract, or title retention instrument upon a registered vehicle, other than a lien dependent upon possession, is valid as against the creditors of an owner acquiring a lien by levy or attachment or subsequent purchasers or encumbrances with or without notice until the requirements of this article [\u00a7 75-160, 75-161] have been complied with.\nSection 75-161 provides:\n(A) Such filing and issuance of a new certificate of title as provided in this article (75-160, 161) shall constitute constructive notice of liens and encumbrances against the vehicle described therein to creditors of the owner, to subsequent purchasers and encumbrancers, except such liens as may be authorized by law dependent upon possession. In the event the documents referred to in Section 62 (75-162) are received and filed in the Central Office of the department within 10 days after the date said documents were executed, the constructive notice shall date from the time of the execution of said documents. Otherwise constructive notice shall date from the time of receipt and filing of such documents by the department as shoiun by its endorsement thereon. (Emphasis supplied.)\n(B) The method provided in this article of giving constructive notice of a lien or encumbrance upon a registered vehicle shall be exclusive except as to liens dependent upon possession and any said lien or encumbrance or title retention instrument filed as herein provided and any documents evidencing the same are hereby exempted from the provisions of the law which otherwise require or relate to the recording or filing of instruments creating or evidencing title retention or other liens or encumbrances upon vehicles of a type subject to registration hereunder.\nIn House v. Hodges, 227 Ark. 458, 299 S.W. 2d 201 (1957), we held that a certificate of title is not title itself but only evidence of title. In so doing we pointed out that the motor vehicle act only makes it a misdemeanor for a purchaser not to promptly obtain a title \u2014i.e., the failure to obtain a new certificate of title does not affect a transfer between parties.\nCommercial\u2019s repossession of the vehicle here in question, of course, was authorized by the Uniform Commercial Code, Ark. Stat. Ann. \u00a7 85-9-503 (Add. 1961) and furthermore Commercial was authorized and expected to sell the same at either public or private sale by terms of Ark. Stat. Ann. \u00a7 85-9-504 (Add 1961). Thus the trial court could find that, under the state of this record, Commercial was lawfully in possession of the automobile, Ark. Stat. Ann. \u00a7 85-9-503, with right to sell the same at private sale, Ark. Stat. Ann. \u00a7 85-9-504, without the necessity of a certificate of title, upon \u201c...such instruments or documents of authority or certified copies thereof as may be sufficient or required by law to evidence or effect a transfer of title or interest in or to chattels in such case .... \u201d\nThe Uniform Commercial Code, Ark. Stat. Ann. \u00a7 85-2-403 provides in part as follows:\n\u201c(2) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in the ordinary course of business.\n\u201c(3) \u2018Entrusting\u2019 includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless o\u00ed whether the procurement of the entrusting or the possessor\u2019s disposition of the goods have been such as to be larcenous under the criminal law.\n\u201c(4) The rights of other purchasers of goods and of lien creditors are governed by the Articles on Secured Transactions (Article 9, [\u00a7\u00a7 85-9-101-85-9-507]) ....\u201d\nSection 85-9-307 provides:\n\u201c(3) A buyer in ordinary course of business ... takes free of a security interest (created by his seller) even though the security interest is perfected and even though tire buyer knows of its existence.\u201d\nSection 85-1-203. (9) provides:\n\u201c \u2018Buyer in ordinary course of business\u2019 means a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind....\u201d\nCommercial contends that the terms \u201c\u00a1entrustment\u201d and \u201centruster\u201d apply only to inventory financing, and that its rights here as a \u201clien creditor\u201d were specifically removed from subsections (2) and (3) of \u00a7 85-2-403 by subsection (4) which in turn places lien creditors under \u00a7 85-9-307. Commercial then contends that the Chaneys cannot take free of its lien under \u00a7 85-9-307 (1) because its lien was not created by the Chaneys\u2019 seller.\nWe do not agree with Commercial\u2019s theory that its rights as a lien creditor with respect to repossessed property have been removed from subsection (2) and (3) of \u00a7 85-2-403. It clearly had possession with the right to transfer title without a certificate of title, and as pointed out by the committee comment, has no right to complain, whether it be considered as a consignor or a lender with a. security interest, for the very purpose of placing goods in inventory is to turn them into cash by sale. Therefore, we think that the entrustment of possession is most applicable to a repossessing lien holder with right of sale.\nCommercial also contends that the Chaneys made Cox Brothers their agent for purpose of acquiring title and tliai the Chaneys are therefore charged with the knowledge that Cox had of the forgeries. The record does not support Commercial's premise on this assertion.\n~\\Yhi]p, as pointed out above, Act 142 of 1949 originally contemplated that the purchaser would be responsible for securing the certificate, it has become apparent in practical application that dealers who assign conditional sales contracts with recourse have a financial interest in seeing that the conditional sales contract is promptly filed and noted on the certificate of title \u2014 for instance, In re Shiflet, 240 F. Supp. 183 (Ark. 1965), whore the conditional sales contract lien was lost because the purchaser neglected to apply for his title before becoming bankrupt. Therefore when the dealer\u2019s interest in prompt filing is considered in connection with the evidence of Cox\u2019s conduct in obtaining the registration and certificate of title, we are unable to say that there was no substantial evidence to sustain the frial court\u2019s finding on the issue.\n'Under point two Commercial argues that Cox\u2019s knowledge of the defective title should be imputed to Associates since the latter was furnishing Cox the necessary forms, advice, relying upon Cox to acquire credit information and was actually making Cox\u2019s sales possible by financing sales. This contention is not supported by the record. The only thing shown by the record is that- the Chaneys\u2019 financial arrangements with Associates was made on a form furnished by Associates.\nCommercial next contends that since Associates did not perfect its lien within ten days after its execution nor before it had actual knowledge of Commercial\u2019s claim, Associates is not now in a position to contend that its lien has priority. The record shows that Associates\u2019 lien was perfected before suit was filed and under such circumstances its priority must staud or fall upon the validity of the Chaney\u2019s purchase. Since we have found that the purchase by Chaneys is protected under the law, we find this contention to be without merit.\nIt has been suggested that the entrustment doctrine should not be applied to used automobiles because a buyer in the ordinary course of business should know that a certificate of title is outstanding. This was suggested, by way of dictum in Sterling Acceptance Co. v. Grimes, 168 A. 2d 600 (Penn. 1961). However, we need not decide the issue at this time because here Commercial fits into one of the few categories under our law where a transfer is authorized without a certificate of title.\nAffirmed.", "type": "majority", "author": "Conley Byrd, Justice." } ], "attorneys": [ "Patten & Brown for appellant.", "Martin, Dodds, Kidd, Hendricks & Ryan for appellees." ], "corrections": "", "head_matter": "Commercial Credit Corporation v. Associates Discount Corporation, et al\n5-4791\n436 S.W. 2d 809\nOpinion Delivered February 10, 1969\nPatten & Brown for appellant.\nMartin, Dodds, Kidd, Hendricks & Ryan for appellees." }, "file_name": "0118-01", "first_page_order": 150, "last_page_order": 160 }