TEIEA~LTORNEY GENEHAL OF TEXAS

HonorableHomer Garrison, Jr. Director, Department of Public Safteg Cainp Mabrg Austin, Texas
Dear Sir: Attention: Mr. Ralph L. Buell OpinionNo. 0-2073 Re: liotation

on Certificate of Title of lien to s~ecure "futureaebts"~;

under H.B. 407, Acts of the 46th Leglslature..~ This is in dply to your letter dated March 11, 1940, inwhich you ask the following question:

"Underthe provisions of Rouge Bill 407; the-certificateof Title Act, Shall theDeparttientof Public-~Safety issue a certificate of title against an automobile,the application for which citesunder the heading of liens. a specific sum of money, togetherwith the further notation "and futuredebts'?"
We assume that there is no doubt in your mind that it is proper to Issue a certifFcate of titlewhen the application lists a lien for a specific sum ofmoney only,but that you are concernedwith whether or not it is proper for a lien to be listedwhich is for a specific sum of money and 'alsofor "future debts". The parts of Rouse Bill 407,Acts of the Fortydixth Legislature, of Texas) (Article 1426-l of Vernon'sAnnotatled Penal Code known as the Certificate of Title A@", with which we are concerned in answeringyour question are :a8follows:

"Section 1. This Act shallby&referred to, cltea,-land

known as the 'Certificateof Title. Act', and in the enactment hereof it is hereby declared to be the legislative,lntentand public policy of this State to lessen and prevent the theft of motor vehicles, and t@e Importation into this State of and traffic'in stolenmotorHonorable Homer Garrison, Jr., page 2 0-2073

vehicles, and thewe of encumberedmotor vehicleswithout the enforceddisclosure to the purchaser of any and all liens for which any such motor vehicle or the tires, radios, parts, or appliances thereof stands assecurity,and the provisions hereof, singularlyand collectively, are to be liberally construed to that end. The following terms as herein defined shall control In the enforcementand construction of this Act. ” “Sec. 3. The term 'Lien'means every kind of lease, conditional sales contract,deed of trust, chattelmortgage, trust receipt, reservation of title, or otherwritten instrument of whatsoever kind OP characterwhereby an interest, other than absolute title, Is sought to be held or given in a motor vehicle, also any lien created or given by Constitution or Statute." Section 24, par. (g). "Thenames and addresses and dates of any liens on the motor vehicle, In chronologicalorder of recordatlon." Section 43. "All liens on motor vehicles shall take priority according to the order of time the same are recorded on the receipt or certificate of title of all such recordings to be made by theDepartment." Section 44, "No lien on any motor vehicle to which a receipt or certificate of title has been Issued shallbe'valld as against third partieswithout actual knowledge thereof, or enforceable,againstthe motor vehicle of any such third parties, unless the notation of said lien shall have been caused to be made on receipts and certificatesof title on saidmotor vehicle, as provided in thisAct." Section 46. "Only liens noted on a receipt OP certificate of title be valid as against creditors of the mortgagor in so far as concerns the motor vehicle."
If a valid lien can be created to cover "futuredebts" we think It is proper to Issue a certificate of title listing a lien for a specific sum of money and also for "futuredebts". The appellate court cases in Texas are clear on this question. In the case of Frelbetig v. Magale, 70 Tex. 116, 7 S.W. 634, the Supreme Court of Texas said:Honorable Homer Garrison, Jr., page 3 O-2073

"Butthe appellee claims that the mortgage does not securethe debts for which the trustee sold the property; that the mortgage could not secure futuredebts, and, if it could, the future debts contemplatedby the mortgagewere to be of the same kind proviaed for In terms by the mortgagee A mortgage can be made to cover future debts, and such a mortgagewill be good not only between the parties,but as to purchasers from the mortgagorwith notice of the mortgage. A mortgage providing for the security of future debts puts personsdealing with the mortgagor in reference to the mortgaged propertyupon notice that suchdebts may exist ana bind the property. They must inqui,re as to this fact, or purchase at their peril. 1 Jones, 

### Mortg.i i 364, 370-372;~

Lovelace V. Webb, 

### 62Ala. 271; Wltczlnski v. Everman, 51 Miss, 

### 846,

. D ."
In the case of H. W. Williams'& Co. v. Bell, (Tex. Clv. App.) 

### 8 S.W. 

### (2a)743, the court said:

'
. ; It iswell settled that a valid

. mortgage can be given to secure the future advances, and that the samewill be effective, not only against the mortgagor, but as against subsequentpurchasers and lienholderswith notice theretif.Freiberg v."Magale; 70 Tex. 116, 7 S-W; 

### ,684;

Bullard v.'Stewart, 

### 46Tex. 

### Clv. App. 49;.102 S.W,,174;Gross-v. Chittlm (Tex,Civ. App.) loo s.w, 

### 1006. It is also the rule that, In order to cover such future advances, It isnot necessary that the mortgage show the amount of such Indebtedness,or to definitely fix the time within which the same shall accrue. . . . 0
In the case of Poole v. Cage, (Tex,Civ. App.) 214 S.W. 500, the court said:

8, 0 D D It has longbeen a well-establishedrule of decision in this state that a recordedmortgage, which recites that It Is given to secure future Indebtednessthat in contemplation of the parties may be incurredby the mortgagor to the mortgagee is a valid mortgage, not only between the parties to the contract,but as to subsequentpurtihasers from the mortgagor, Any subsequentpurchaser from a mortgagor rmst take notice of such contract or agreement as to future indebtedness,and any advancesmade or indebtedness incurred in pur-- . . .

HonorableHomer Garrlson, Jr., page 4 O-2073

suance to such contract,whether before or after the subsequent sale or lncumbrance,are protected by a prior and superior lien upon the property.

. . . . . . Some other authoritiesthat make the same or similar statements of the law are Brunson v. Dawson State Bank, (Tex. Civ.App.) 

### ,175.

S.W. 

### 438;Askey V. Stroua, (Tex.Clv. App.) 240 S.W. 339; MassachusettsMutual Life NationalBank, (Tex. Clv.App.) 

### 50 S.W. Co.'v. Stockyards
& Co. ir.

Baker, (Tex.Clv. App.) 

### 62 S.W. ,425; Cason; Monk 

### 135,par 47; and 14 Cor. Jurls, Sec. 722. 592; 9 Tex. Jur.

We have heretoforeheld in our OpinionNo. O-1539 that the certificate of title act supersedesand repeals the general recording statuteas to motor vehicles, and that it isunnecessary for a lien on an automob,ile to be recorded In the office of the Count Clerk*,and the "Certificateof Title Act" says in ‘s'ectlons

%

### 4 and 46 that only liens on a receipt or a certificate of title shallbe valid as against third partie.s or a5 against creditors of the mortgagor. .As the courts of this State hold that a lien for "futuredebts" Is valid, It certainly follows that the mortgagee, In order to put subsequentpurchasers of the property on notice, has a right to have that lien noted on the certificate of title.

Our answer to your questfon is that theDepartment of PublicSafety should Issue a certificate of title showing a lien for a specific sum of money and for "futuredebts" If the application states that the lien Is for a specific sum of money and for "future

### dews”

.

The foregoing represents the considered opinion of this department.
Yours very truly
ATTORNEYGENERAL OF TEXAS Bg s/Cecil C. Rotsch Cecil C. Rotsch Assistant
CCR:GO-:wc
APPROVEO APR 1, 1940 s/Gerald C. Mann ATTORNEYGENERAL OFTFXAS Approved Opinion CommFtteeBy df3WB Chairman