Vibbert v.PAR, Inc., __ S.W.3d __, 2006 WL 737429 (Tex. App. March 23, 2006)

(Opinion not released for publication as of July 2006)

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FACTUAL SUMMARY

On June 6, 2001, the Vibberts purchased a 1989 Mercedes Benz from G.S. Motor Sports, Inc. (G.S.) for $9,500. They traded Sandra's 1998 Nissan Altima and G.S. gave them a trade-in allowance of $10,000. G.S. agreed to pay the loan balance of $9,367.95 owed on the Altima to Wells Fargo Bank (formerly Norwest Bank El Paso N.A.). The balance of the trade-in allowance, $632.05, was applied to the purchase as a down-payment. A few days later, G.S. sold the Altima to Michael and Rhonda Kuwamoto for $10,997.48. The Kuwamotos financed the purchase through Zoom Lot Funding, an entity of Cygnet Dealer Finance.

Wells Fargo notified the Vibberts in July 2001 that it had not received a payment on the Altima. Sandra began communicating with a Wells Fargo supervisor who advised her to contact G.S. Sandra followed that advice and obtained a copy of a payoff check from Gary Swenson, the owner of G.S. Motor Sports. As it turned out, the check bounced and G.S. did not pay off the indebtedness. Wells Fargo continued to demand payment, but Sandra did not pay because she no longer owned the car. The Vibberts filed suit in November 2001 against G.S. and owner Gary Swenson alleging DTPA violations, fraud, and breach of contract. The record before us does not reveal the posture of that lawsuit.

On January 14, 2002, Cygnet contacted PAR to secure a duplicate title to the Altima. PAR specializes in the repossession of vehicles on behalf of lien holders and its title department obtains repossession titles, certified copies of titles, and duplicate titles for its customers. Cygnet provided PAR with the Kuwamoto sales contract and other relevant documents indicating that G.S. had sold the Altima to the Kuwamotos in June 2001 and that Zoom Lot Funding held the lien. Nothing in the documents indicated that the Vibberts or Wells Fargo held any interest in the vehicle. PAR hired C & M Title Services on January 15 to perform the necessary title work and forwarded the papers it had received from Cygnet. C & M Title Services (C & M) was owned by Mary and Clint Wennerstrom. PAR provided C & M with a limited power of attorney so that it could obtain the duplicate title. Based on the documents it had been provided, PAR anticipated that C & M would obtain a duplicate title reflecting the Kuwamotos as the owner and Zoom Lot Funding as the lienholder. If a different lienholder than Zoom Lot funding appeared on the title, PAR expected C & M to provide that information so steps could be taken to contact the lienholder and determine whether it had a valid lien.

On January 16, C & M filed an application for a certified copy of a Texas certificate of title for the Altima. That title showed Sandra as the record owner and Norwest Bank El Paso as the lienholder. C & M did not share this information with PAR. On February 11, C & M filed an application for a Texas certificate of title in order to transfer title from Sandra to the Kuwamotos. Mrs. Wennerstrom denied signing Sandra's name on the application. She also submitted a release of lien on behalf of Norwest but she could not specifically recall whether it had been provided by PAR with the other paperwork. The release was dated January 12, 2002 and it was purportedly signed by Brenda Bodkin, a PAR supervisor, as agent for Norwest. [Footnote omitted.] Bodkin denied signing the release of lien, and Mrs. Wennerstrom denied forging Bodkin's signature.

The Vibberts then filed suit against PAR, alleging that it converted the vehicle by fraudulently transferring the title to the Kuwamotos. [Footnote omitted.] PAR filed both traditional and no-evidence motions for summary judgment which the trial court granted without specifying the precise basis for its ruling. This appeal follows.

CONVERSION

The Vibberts bring three issues for review: (1) whether Sandra had an ownership interest in or a right of possession to the Altima at the time of the conversion; (2) whether PAR performed an act constituting conversion by directing that title be transferred from Sandra to the Kuwamotos; and (3) whether there is clear and convincing evidence that PAR's actions met the elements necessary for imposition of exemplary damages.

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Elements of Conversion

Conversion is the unauthorized and wrongful assumption and exercise of dominion and control over the personal property of another to the exclusion of, or inconsistent with, the owner's rights. [Citations omitted.] To establish a claim for conversion of personal property, a plaintiff must prove that: (1) the plaintiff owned or had legal possession of the property or entitlement to possession; (2) the defendant unlawfully and without authorization assumed and exercised dominion and control over the property to the exclusion of, or inconsistent with, the plaintiff's rights as an owner; (3) the plaintiff demanded return of the property; and (4) the defendant refused to return the property. [Citations omitted.].

Ownership, Possession, or Right to Possession

PAR sought both traditional and no-evidence summary judgments as to the first element of the conversion action. It argued that under the Uniform Commercial Code, title to the Altima passed to G.S. when Sandra physically delivered the vehicle in June 2001 and therefore, she did not own or have a right to possession. The Vibberts countered that the sale of the Altima was void under the Texas Certificate of Title Act because Sandra did not transfer the certificate of title. They also claimed that the certificate of title showing Sandra as the record owner created a presumption of ownership and a right of possession.

The name on the certificate of title is not conclusive of ownership. [Citations omitted.] Evidence of the name in which an automobile is registered raises only a presumption of ownership. A presumption is not evidence and vanishes when positive evidence to the contrary is introduced. [Citation omitted.]

The Legislature enacted the Texas Certificate of Title Act (the Act) in order to replace the transfer of vehicles by bill of sale with transfer by certificate of title administered by a central state-wide agency. [Citations omitted.] These provisions must be construed in light of the Act's stated purpose to lessen and prevent: (1) the theft of motor vehicles; (2) the importation into this State of and traffic in stolen vehicles; and (3) the sale of an encumbered vehicle without disclosure to the purchaser of a lien secured by the vehicle. Tex.Transp.Code Ann. § 501.003 (Vernon 1999); First National Bank, 143 S.W.3d at 919. Its purpose is not to prevent sales and transfers of interests in motor vehicles. [Citations omitted.]

At the time of the transaction between the Vibberts and G.S., Section 501.071(a) of the Texas Transportation Code provided that:

A motor vehicle may not be the subject of a subsequent sale [FN3] unless the owner [FN4] designated in the certificate of title transfers the certificate of title at the time of the sale.

Tex.Transp.Code Ann. § 501.071(a). A sale made in violation of Chapter 501 is void and title may not pass until the requirements of the chapter are satisfied. Tex.Transp.Code Ann. § 501.073 (Vernon 1999). But the Act additionally provides that Chapters 1 through 9 of the Texas Business and Commerce Code control over a conflicting provision of Chapter 501. Tex.Transp.Code Ann. § 501.005.

Under the Uniform Commercial Code, a "sale" consists of the "passing of title from the seller to the buyer for a price (Section 2.401)." Tex.Bus. & Comm.Code Ann. § 2.106(a)(Vernon 1994). Unless otherwise explicitly agreed, title passes to the buyer at the time and place at which the seller completes her performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place. Tex.Bus. & Comm.Code Ann. § 2.401(b)(Vernon Supp.2005). Motor vehicles are included in the UCC's definition of "goods." Tex.Bus. & Comm.Code Ann. § 2.105(a); [case citations omitted.] Under the UCC, title to a motor vehicle passes to the buyer upon delivery or possession even though a certificate of title will be delivered later and the names on the certificate of title are not changed. [Citations omitted.] Non-compliance with the Texas Certificate of Title Act does not override a clear showing of valid and complete transfer of ownership. [Citations omitted.] The sale of a vehicle without the transfer of a certificate of title is valid as between the parties when the purposes of the Certificate of Title Act are not defeated, although the Act declares that the non-transfer of such certificates renders the sale void. [Citations omitted.]

At oral argument, the Vibberts cited Gallas v. Car Biz, Inc., 914 S.W.2d 592 (Tex.App.-Dallas 1995, writ denied) in support of their argument that a sale of a motor vehicle made in violation of the Texas Certificate of Title Act is void. Car Biz, a licensed car dealership, sold a vehicle it had just purchased to Stamper d/b/a Heart Attack Autos, another licensed car dealer. Title had not been transferred to Car Biz at the time of the transaction. Stamper gave Car Biz a three-day sight draft for the purchase price and Car Biz permitted Stamper to take possession of the vehicle. Car Biz began the title process but did not give Stamper the certificate of title. Stamper subsequently sold the vehicle to Gallas. Stamper gave Gallas possession of the vehicle but did not give him certificate of title. Gallas filled out an application for title and relied on Stamper's representation that title was "in transit or in transfer" and that all paper work would be sent to Austin where title would be transferred into Gallas' name. Id. at 593. Before the title process was completed, Car Biz learned that Stamper's draft was no good. It also reported the vehicle as stolen and Gallas was subsequently arrested for driving a stolen vehicle. Car Biz then applied for and received an original certificate of title naming it the owner.

Gallas sued Car Biz seeking a declaratory judgment that he was the owner and sought specific performance in the form of title transfer. Gallas additionally alleged conversion and estoppel causes of action. Car Biz counterclaimed seeking a declaration of ownership and specific performance of possession of the vehicle. It also alleged conversion and sought damages for the loss of the vehicle. A jury returned a verdict in favor of Gallas but the trial court granted judgment non obstante veredicto in favor of Car Biz. It entered a judgment declaring that Car Biz was the owner and ordered Gallas to deliver the vehicle.

In its motion for judgment n.o.v., Car Biz complained that the evidence conclusively established that Gallas purchased the vehicle from a third party, Stamper, who did not have and could not pass "good title" pursuant to the Certificate of Title Act. Car Biz apparently relied on former Tex.Rev.Civ.Stat. art. 6687-1 §§ 33 and 53. Id. at 594. Former Article 6687-1, § 33 [FN5] provided, in relevant part, that:

No motor vehicle may be disposed of at a subsequent sale unless the owner designated in the certificate of title transfers the certificate of title, at the time the motor vehicle is transferred, on a form prescribed by the Department.... No title to any motor vehicle shall pass or vest until the transfer is so executed.

Id. at 594 n. 2. Article 6687-1, § 53 [FN6] provided that: All sales made in violation of this Act shall be void and no title shall pass until the provisions of this Act have been complied with. Id. at 594 n. 3.

Claiming that disposition of the case was controlled by Section 2.403(b) of the UCC, [FN7] Gallas argued that Car Biz's entrustment of the vehicle to Stamper gave him the power to transfer all rights in the vehicle to Gallas. Gallas, 914 S.W.2d at 594. The majority first faulted the dissent for considering Gallas' argument that the UCC controlled in the event of a conflict with the Certificate of Title Act since it was not properly briefed. Gallas, 914 S.W.2d at 594 n. 5. It then concluded that the sale from Car Biz to Stamper was void because Car Biz did not have a certificate of title at the time it sold the vehicle as required by the Act. Therefore, the sale from Stamper to Gallas did not pass title. Gallas, 914 S.W.2d at 595, citing Article 6687-1, § 53. In its analysis, the majority referenced two earlier opinions which, "after harmonizing the respective provisions," held that the Act controls transactions involving the sale of motor vehicles without a proper transfer of the certificate of title. [Citations omitted.] "This interpretation gives meaning to both statutes and obviates any necessity to resort to section 65 of the Act to resolve any apparent conflict." Gallas, 914 S.W.2d at 595, citing Pfluger, 620 S.W.2d at 742.

We find ourselves in agreement with the dissent in Gallas and the concurrence in Pfluger. "[I]f the same factual transaction can harvest different results under different statutes, the statutes are in conflict." Gallas, 914 S.W.2d at 599 (Wright, J., dissenting), citing Pfluger, 620 S.W.2d at 747 (Stephens, J., concurring). "A statutory interpretation which attempts to harmonize these provisions necessarily admits there is a conflict between them." Id.

And so we conclude that there is a conflict between Section 2.401(b) of the UCC and Sections 501.071(a) and 501.073 of the Act regarding when and how title transfers. By express language in the Act, the UCC trumps. The summary judgment evidence conclusively established that Sandra transferred her ownership interest in the Altima to G.S. when she purchased the Mercedes Benz. Her failure to transfer the certificate of title to G.S. did not void the sale. Because the Vibberts presented no evidence that they had an ownership interest in or a right to immediate possession of the Altima, the trial court did not err in granting summary judgment in favor of PAR. For these reasons, Issue One is overruled. Given our resolution of Issue One, it is unnecessary to address the remaining issues. We affirm the judgment of the trial court.

FN3. The Act defines "subsequent sale" to mean: (A) the bargain, sale, transfer, or delivery of a motor vehicle that has previously been registered or licensed in this state or elsewhere, with intent to pass an interest in the vehicle, other than a lien, regardless of where the bargain, sale, transfer, or delivery occurs; and (B) the registration of the vehicle if registration is required under the laws of this state. Tex.Transp.Code Ann. § 501.002(20)(Vernon Supp.2005).

FN4. Under the Act, "owner" includes a person, other than a manufacturer, importer, distributor, or dealer, claiming title to or having a right to operate under a lien a motor vehicle that has been subject to a first sale. Tex. Transp. Code Ann. § 501.002(16).

FN5. The current version of this statute is found at Sections 501.071 and 501.073 of the Transportation Code.

FN6. The current version of this statute is found at Section 501.073 of the Transportation Code.

FN7. This section provides that: 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. Tex. Bus. & Comm.Code Ann. § 2.403(b).

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