1. Actual notice of a prior lien to a subsequent purchaser is sufficient to preserve the priority of the lien even where the Certificate of Title issued under Code Ann. Ch. 68-4a does not disclose the prior lien.
Franklin Finance brought a trover suit for a car against Strother Ford. A general demurrer was overruled and the case proceeded to trial before the judge without a jury, resulting in a judgment for the defendant.
The evidence developed the following factual situation: One West bought the new Ford Fairlane in question from Strother in May, 1963, dealing with Casey, a Strother salesman. Because West did not have cash for a down payment, he and Casey went to Franklin Finance Company to borrow the money. West executed a note and bill of sale to secure debt to Franklin Finance and the check was made payable jointly to West and Strother Ford. He also financed the balance of the purchase price With Pacific Finance Company, and the conditional-sale contract was recorded May 8, 1963. About 30 days later, West decided he wanted another car, went back to Casey, and traded the Fairlane for a new Galaxie. In that transaction West signed a retail buyer's order which showed only the Pacific Finance lien existing against the Fairlane that was being traded in. Casey testified that he had "some discussion" with West about the Franklin lien but he did not know whether it had been paid out or not. He did not recommunicate any information to Strother's used car manager, who had final authority on sales, but testified that he informed the manager of the existence of the Franklin lien when the Fairlane was originally purchased. Between the first and second transactions, a Certificate of Title was issued to West under Code Ann. Ch. 68-4a. The Certificate showed only the Pacific Finance lien, and a Strother official testified that they relied on the information in the Certificate and in the Retail Buyer's Order in consummating the trade. West, the purchaser, refused to answer a number of questions on cross examination until ordered to do so by the court and he then stated he did not remember or his answers were equivocal. Casey, Strother"s agent, testified he was no longer working for Strother because of his inability to make bond. This inability was caused by the cancellation of his bond when a purchaser to whom he sold a car could not be located for payment. He had made a settlement with the bonding company.
Franklin assigns error directly on the judgment for Strother as "contrary to law." Strother, by cross bill, assigns error on the overruling of its general demurrer.
1. This appears to be the first case arising under the Motor Vehicle Certificate of Title Act (Ga. L. 1961, p. 68; Ga. L. 1962, p. 79; Code Ann. Ch. 68-4a). Franklin Finance concedes that it failed to comply with the provision of the Act relating to the perfection of a security interest, Code Ann. 68-421a (b, c), and relies on actual notice of its lien to Strother Ford. Is actual notice sufficient?
Code Ann. 68-427a provides that "The method provided in this Chapter of perfecting and giving notice of security interests and liens with respect to motor vehicles . . . is exclusive . . ." (emphasis added), and then exempts these from the requirements of other recording statutes. Strother Ford urges that lack of compliance with this section combined with its pleaded reliance upon the provisions of Code Ann. 68-410a (d) 1
makes its defense complete.
We cannot agree. The very language of the Certificate of Title Act shows that the filing with the Commissioner is for the purpose of "perfecting and giving notice" of the security interest. Quite obviously, this does not affect the creation of the security interest, which remains a matter of contract between the parties. The recording statutes, of which the Certificate of Title Act is merely a different form, are notice statutes having the effect, when complied with, of imputing constructive notice to all who may subsequently acquire an interest in or lien against the property. It is well settled under the recording statutes that actual notice of the prior lien to one who subsequently purchases or acquires a security interest is sufficient to preserve the priority of the lien, or of title. See, as to actual notice of a chattel mortgage, McLendon v. Ricks, 22 Ga. App. 15 (95 SE 471); retention of title contract, Bank of Ringgold v. West Publishing Co., 61 Ga. App. 426 (6 SE2d 598); security deed, Marshall v. Pierce, 136 Ga. 543 (4) (71 SE 893); warranty deed, Burkhalter v. Ector, 25 Ga. 55 (2). As to the effect of actual notice under the Uniform Commercial Code, see Code Ann. 109-A--301. "The object of the recording statutes is the constructive notice which is given to all the world as to the rights of the parties thereto. Actual notice to third parties, where it can be shown, is as effective as recordation." Bank of Ringgold v. West Publishing Co., 61 Ga. App. 426, 428, supra. The perfecting and notice provisions of the Motor Vehicle Certificate of Title Act, having the same purpose as the recording statutes, are governed by the same principles as to actual notice.
2. Was there actual notice of Franklin Finance's lien to Strother Ford? Although Casey, the salesman, testified that he did inform Strother's used car manager of it when the first transaction was being completed, there is evidence in the record tending to discredit Casey. If the judge disbelieved him, as he may have done, there was ample evidence to support a finding that there was no actual notice, which is implicit in the judgment rendered.
Franklin's further contention is that, after Strother's general demurrer was overruled, the Finance Company was entitled to a verdict as a matter of law because every allegation in its petition was proven under the undisputed testimony. This reasoning is incorrect; Franklin is attempting to apply the measuring rod for the granting of nonsuits to the final verdict in the case. See Kelly v. Strouse, 116 Ga. 872 (4d) (43 SE 280).
This disposition of the case results in the dismissal of the cross bill.