and purchasers that a lien against the motor vehicle exists, and failure to transfer possession of the vehicle shall not invalidate said lien or encumbrance."
What is the effect of this amendment? A careful examination of the Pennsylvania cases fails to disclose any reported decision construing its terms. We must, therefore, place our own interpretation upon it. When we consider its provisions in the light of the existing law, it seems clear that it is intended to be a recording act, the purpose of which is to provide a method whereby notice of a lien or encumbrance placed upon a motor vehicle may be given to creditors of and purchasers from the pledgor so as to bind them without requiring the pledgor to give up physical possession of the vehicle to the pledgee. It seems to us that this intent is manifest from the language of the amending act. It provides that the notation of the lien or encumbrance on the certificate of title of the motor vehicle "shall be adequate notice to the Commonwealth, creditors, and purchasers that a lien against the motor vehicle exists." As we have pointed out, purchasers and creditors with notice are bound by a pledge valid between the parties, even though no transfer of possession has taken place. It therefore follows that the effect of this statutory provision is to eliminate the requirement for such a transfer of possession. That this was the legislative intention is made certain by the provisions which follow immediately that "failure to transfer possession of the vehicle shall not invalidate said lien or encumbrance."
We do not construe this amending act as requiring the Secretary of Revenue to make any determination as to the validity of a lien or encumbrance reported to him by an owner. On the other hand, we think it quite clear that the act leaves to a creditor or purchaser full liberty to invoke against a pledgee any and all defenses which may be available to the pledgor. The sole effect of the act is, as in the case of any other recording act, to give public notice to parties interested with regard to liens and encumbrances on motor vehicles which shall be binding upon them whether the notice is actually brought home to them or not. There is here no delegation of judicial power to the Secretary of Revenue, as urged by the trustee, and the act is therefore not unconstitutional.
While the procedure under the act is somewhat different from that provided by the usual recording act, it seems to us reasonably designed to carry out its purpose to give notice to parties interested. The certificate of title which each Pennsylvania motor vehicle owner is required to have, shows on its face all liens or encumbrances against the vehicle so that any one dealing with a motor vehicle need only examine its certificate of title in order to secure actual knowledge of all liens and encumbrances with notice of which the statute charges him. Furthermore, any one interested may secure the same information by inquiry from the Secretary of Revenue. It may be noted that this is not the first Pennsylvania act for recording liens on chattels. While the Pennsylvania Legislature has never enacted a general statute for the recording of chattel mortgages, it has passed many recording acts applicable to mortgages and pledges upon specific classes of chattels. Thus at the same session at which was passed the amending act with which we are concerned, the Legislature also passed an act authorizing the recording of chattel mortgages on livestock, farm machinery, farm equipment, and crops (Act March 2, 1933, P.L. 6).
Getting back to the facts of the present case, we have already seen that the lien of the plaintiff bank was noted upon the title certificates issued for the six motor vehicles referred to. There being no question raised as to the validity of the lien of the pledge as between the parties, it was therefore binding upon the trustee in bankruptcy, and the referee's action in awarding the proceeds of the sale of these vehicles to the claimant bank was correct.
This, however, does not entirely dispose of the matter, since it appears from the record that there was a seventh vehicle, a Chevrolet Sport coupe, for which the bank also filed a reclamation petition and the proceeds of the sale of which were included in the fund awarded to the bank, although the referee in his order referred to six vehicles only. The facts as to this car were that the bankrupt had borrowed a sum of money from the bank with which to purchase this and other cars from the manufacturer, and that when this car arrived the certificate of title at the request of the bankrupt was issued by the Secretary of Revenue in the name of the bank. The car was, however, never delivered to the bank, but was received by the bankrupt from the manufacturer and held by him for sale. No tags, signs, or other marks of ownership or identification were placed upon it to indicate that it was the bank's property. The referee found that this transaction was in fact a pledge of the car as security for the loan, and he seems to have held that under the act of 1933 the pledge was good as against the trustee in bankruptcy. In this he fell into error, since there is no evidence that a lien or encumbrance in favor of the bank was noted on the certificate of title of this car. On the contrary, the evidence is that the certificate of title was made out to the bank as owner. Neither the amending act of 1933, however, nor the Vehicle Code prior to the amendment, provides that the issuance of a certificate of title to one stated therein to be the owner shall be notice to any one of that person's claim of ownership.The act does not provide, or intend to provide, that the certificate of title shall determine the absolute ownership of the car, or alter or affect in any manner the actual ownership of the vehicle and the relations of the persons interested in its ownership. It only requires registration of the person entitled to its possession and in control of its operation. The certificate is not a warrant of ownership or muniment of title as usually understood in the law. Braham & Co. v. Steinard-Hannon M. Co., 97 Pa.Super. 19; General Motors Acceptance Corporation v. Hartman, 14 Pa.Super. 544, 174 A. 795. It follows that the validity of the rights of all persons claiming ownership, as distinguished from those who claim a lien or encumbrance registered under the provisions of the act of 1933, must depend upon their compliance with the requirements of the general law upon the subject of the ownership of chattels. Consequently the bank, in order to sustain its claim to the Chevrolet coupe as against the trustee in bankruptcy, must show that it took possession of the car, and since the evidence is that it did not do so, its claim as to this car must be denied.
As we have said, it appears from the record that the referee awarded the entire fund realized from the sale of all seven cars to the bank. His order must, therefore, be modified by eliminating therefrom the net proceeds of the sale of the Chevrolet coupe. As so modified, it is confirmed. The record will be returned to the referee in order that he may modify his order in accordance with this opinion.
© 1992-2004 VersusLaw Inc.