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IN RE MILLER

United States District Court, Eastern District of Pennsylvania


October 20, 1952

IN RE MILLER ET AL.

The opinion of the court was delivered by: Follmer, District Judge.

This matter is before the Court on a certificate for the review of an order of the Referee in Bankruptcy refusing claimant's petition for reclamation of a certain motor vehicle and directing claimant to surrender possession to the Trustee in Bankruptcy of the certificate of title to the same.

The facts are clearly set forth in the opinion of the Referee as follows:

    "* * * On October 23, 1950 Sam Shoemaker, of
  Ashland, Schuylkill County, Pennsylvania, sold a
  model 1950 Chevrolet one and one-half ton truck with
  refrigerator body to J.W. Miller, Jack W. Miller and
  James A. Miller, trading as J.W. Miller and Sons, the
  present bankrupt, under a Conditional Sales Agreement
  for the price of $3,144.70. The purchaser made a down
  payment of $1,050.70 at the time of the sale leaving
  $2,094.00, which sum together with other charges
  raised the full balance due under the agreement of
  $2,539.92. This latter sum was made payable in 24
  monthly installments of $105.83 each commencing
  December 4, 1950. The Conditional Sales Agreement was
  thereafter assigned by the seller to General Motors
  Acceptance Corporation, hereinafter referred to as
  G.M.A.C. The vehicle was titled in the partnership
  name and a notation of an encumbrance in favor of
  G.M.A.C. in the amount of $2,539.92 was endorsed on
  the Certificate of Title. Thereafter, on September 4,
  1951, the partnership and its individual partners
  were adjudged bankrupt. At the time of bankruptcy the
  subject vehicle was then in possession of the
  bankrupt. G.M.A.C. did not file its contract or a
  copy thereof in the Office of the Prothonotary in
  Schuylkill County until September 25, 1951.

    "On October 3, 1951, G.M.A.C. filed its petition to
  reclaim possession of the vehicle upon the ground
  that it holds a lien thereon, and setting forth the
  Conditional Sales Contract and default in the payment
  due September 8, 1951. The balance alleged to be due
  under the contract at the time of bankruptcy was
  $1,587.45 The Trustee is resisting on the ground that
  the failure of G.M.A.C. to file its Conditional Sales
  Contract prior to bankruptcy has rendered invalid its
  claim to an encumbrance. * * *"

In rejecting claimant's petition, the Referee found that the contract in question was in fact a conditional sale and not a bailment lease, and then held:

    "Our conclusion is that the mere notation of a lien
  or encumbrance on the face of the certificate of
  title to a motor vehicle is not of itself sufficient
  to establish the existence or legal validity of such
  alleged lien as against a third party, such as a
  trustee in bankruptcy. Accordingly, we hold that the
  failure of

  G.M.A.C.*fn1 to file its Conditional Sales Contract
  prior to bankruptcy is fatal to its position."

The parties have stipulated that the subject matter of this action was puchased under the terms of a conditional sale; the Referee has found that the transaction was in fact a conditional sale, and I so find.

The question before us may, therefore be tersely stated as follows:

Does the notation of a lien or encumbrance upon a certificate of title to a motor vehicle constitute such notice as to eliminate the necessity for recording a conditional sales contract under which a motor vehicle is purchased?

The Pennsylvania Conditional Sales Act of May 12, 1925, P.L. 603, 69 P.S. § 401, provides as follows:

    "Every provision in a conditional sale, reserving
  property in the seller after possession of the goods
  is delivered to the buyer, shall be valid as to all
  persons, except as hereinafter otherwise provided."

This proviso refers to the succeeding paragraph of the Act, 69 P.S. § 402, which provides as follows:

    "Every provision in a conditional sale reserving
  property in the seller shall be void as to any
  purchaser from or creditor of the buyer who, without
  notice of such provision, purchases the goods or
  acquires by attachment or levy a lien upon them
  before the contract or a copy thereof shall be filed,
  as hereinafter provided, unless such contract or copy
  is so filed within ten days after the making of the
  conditional sale."

The Pennsylvania Vehicle Code of May 1, 1929, P.L. 905, as amended, 75 P.S. § 32, provides as follows:

    "(a) Application for a certificate of title shall
  be made upon a form prescribed and furnished by the
  department; and shall be accompanied by the fee
  prescribed in this act; and shall contain a full
  description of the motor vehicle, trailer, or
  semi-trailer, the actual or bona fide address and
  name of the owner, together with a statement of the
  applicant's title and of any liens or encumbrances
  upon said motor vehicle, trailer, or semi-trailer,
  and whether possession is held subject to a chattel
  mortgage or under a lease, contract of conditional
  sale, or other like agreement. * * *

    "(b) If a motor vehicle, trailer or semi-trailer is
  used as collateral for a loan after a certificate of
  title has been issued, the lien thereof may be
  recorded by making application for a duplicate
  certificate of title on a form prescribed and
  furnished by the Secretary of Revenue."

75 P.S. § 33 provides as follows:

    "(a) A certificate of title shall contain such
  description and other evidence of identification of
  the motor vehicle, trailer, or semi-trailer for which
  it is issued as the secretary may deem necessary,
  together with a statement of any liens or
  encumbrances which the applicant may show to be
  thereon, together with the name and addresses of the
  holder or holders of any such liens or encumbrances.

    "(b) * * * The outstanding certificate of title,
  when issued by the secretary showing a lien or
  encumbrance, shall be adequate notice to the
  Commonwealth, creditors, subsequent mortgagees,
  lienors, encumbrancers and purchasers that a lien
  against the motor vehicle, trailer, or semi-trailer
  exists, and failure to transfer possession of the
  vehicle, trailer, or semi-trailer shall not
  invalidate said lien or encumbrance. * * *"
  (Emphasis supplied.)

Finally, 75 P.S. § 38 provides as follows:

    "In the case of the transfer of ownership or
  possession of a motor vehicle, trailer, or
  semi-trailer by operation of law, as upon
  inheritance, devise or bequest, order in bankruptcy,
  insolvency, replevin, or execution sale, * * *. The
  certificate of title, when issued by

  the secretary, showing a lien or encumbrance shall be
  adequate notice to the Commonwealth, creditors,
  subsequent mortgagees, lienors, encumbrancers and
  puchasers that a lien against the motor vehicle,
  trailer, or semi-trailer exists, and failure to
  transfer possession of the vehicle, trailer, or
  semi-trailer shall not invalidate said lien or
  encumbrance: * * *." (Emphasis supplied.)

In Commercial Banking Corporation v. Active Loan Company of Philadelphia, 135 Pa. Super. 124, 134, 4 A.2d 616, 621, the court said:

    "We think the pivotal point in these cases is that
  the cars were not ordinary chattels; they were motor
  vehicles, the ownership and sale of which are
  regulated by `The Vehicle Code' of 1929 and its
  amendments".

In In re Berlin, 3 Cir., 1945, 147 F.2d 491, 492, the court, in referring to "The Vehicle Code" above cited, said:

    "* * * The Legislature was dealing with motor cars,
  concerning which it had previously loosened up some
  of the former decisions. * * *

    "The Legislature protected the title of one who had
  made a conditional sale of an automobile and left it
  with one who subsequently became a bankrupt, by
  prescribing recording of the transaction. We see no
  reason why it may not protect the lien of a lender by
  making the recording of the lien upon the certificate
  of title sufficient notice of it to creditors.
  Certainly the Legislature intended to do so. In the
  first section of the Act of 1939, quoted supra, in
  general terms it was determined that a lien disclosed
  by the certificate of title was adequate notice to
  creditors which was not invalidated by failure to
  transfer possession. In the third section of the Act
  the same verbiage was used which had been in the Act
  of 1933, and which had been limited in scope by the
  Superior Court of Pennsylvania in Kaufmann & Baer v.
  Monroe Motor Line, 124 Pa. Super. 27, 187 A. 296. By
  the general language used in the first section of the
  Act and the repetition in the third section of that
  which had described the limited lien in the Act of
  1933, it is obvious that the Legislature designed a
  statute which prescribed notation of the lien upon
  the certificate of title as sufficient notice to
  creditors of its existence. Call the lien a `chattel
  mortgage' or what you will, it was within the
  jurisdiction of the Legislature and was but an
  extension of the powers theretofore exercised in the
  regulation of motor vehicles pursuant to the Vehicle
  Code of 1929 and its amendments, 75 P.S.Pa. § 1 et
  seq."

The facts in this case, which may be accepted as typical, confirm, in my judgment, the observation of the court in the case of Commercial Banking Corporation v. Active Loan Company of Philadelphia, supra, that we are not here dealing with "ordinary chattels" or such as would of necessity be governed by the provisions of the Conditional Sales Act. The Legislature in The Vehicle Code has seen fit to regulate, as a sort of selected class, the ownership and sale of motor vehicles and as a necessary corollary thereto has provided a method, applicable solely to motor vehicles, of charging the world with notice of liens and encumbrances against the title to the same.

Here Shoemaker, the dealer, sells the motor vehicle to Miller, the bankrupt, and as a part of the sales negotiation the dealer arranges with G.M.A.C. to provide the necessary funds. We then have the dealer making the conditional sale but only with the aid of G.M.A.C., which furnished the money. To hold that in order to charge this Trustee with the requisite statutory notice this lienholder would have to first qualify under the Conditional Sales Act by filing the same, as provided in the Act, in the office of the Prothonotary of the County in which the sale was made and simultaneously therewith cause to be noted on the certificate of title to the motor vehicle this same conditional sale encumbrance would result in a purposeless duplication. There certainly is nothing in The Vehicle Code to indicate that the Legislature had any such thought in mind.

A diligent search of the Pennsylvania cases has failed to disclose any pronouncement by the State appellate courts on this precise situation. It seems clear to me that the Legislature in passing The Vehicle Code meant to deal comprehensively and exclusively with the ownership and sale, and which of a necessity involved the financing, of motor vehicles. It necessarily follows that since the ownership and sale of motor vehicles, including the notice provision by notation of all encumbrances on the certificate of title issued by the Secretary of the Department of Highways, is completely covered by The Vehicle Code of 1929, the recordation provisions of the Conditional Sales Act as affecting motor vehicles is repealed. "* * * if two acts which cover the same subject matter are repugnant in any of their provisions, the latter operates to the extent of the repugnancy as a repeal of the former * *; and it is not necessary that the later act contain a provision expressly repealing the prior act or parts thereof * * *." Commonwealth v. Gross, 145 Pa. Super. 92, 96, 21 A.2d 238, 240; see also Bradley Election Case, 352 Pa. 63, 69, 42 A.2d 155.

The order of the Referee dated March 26, 1952, must be reversed. An appropriate order may be submitted.


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