OFFICE OFTHEATTORNEY GENERALOFTEXAS 

AUSTIN 

Bonorrble 2onmr Barrlson, Jr., Dfrecfor, 

Department of Flmio 2&u&y 

Calnoww 

AuatAn, Texae 

mar Mr. fhrrieon) Attention8 

utee of texao 

Artilb&r of date June 21, 

or alarlfbation of our 

the 8lme-8aptloned 

red in the affl.rnnt&Ll 

sd by the Eanldng Wmdaeioner 

be6iree to adTane0 am- $0 

to be 

lea vtliuh are 

A--Mmrtgage aholrlag the funds were a&aut?ed for the pnwhase 

of the cara, and (88 an aaatbnal plmautlon) 

proper regAetratl.on at the Wwtgage, aml n0k 

tlon themof on.the numf%Mtarer~e, &SnpOrter8 

or title aert%f'iioate, 8511 the banHa lbn Be 

,ralid a&net a plrahaaer who in fact had no 

aataal kmml~e of the erSeteme of the nmrttivwP 
Iionorable Siomcr Garrison, Jr. - Fage 2 

The point as to which you request a rcconsideration or a clarification is shown by the following quotation from your letter: 

WInsofar as your opinion refers to 

the notation of dealer-financing liens against 

used cars upon an importer*s oertifioate or 

Certificate of Title, this Department is not 

concerned, inasnmch as such cars, being rcquircd to be registered in the State of Taxas 

and thus ooming under the prwisions of the 

Certificate of Title Ast, would, of nousssity, 

unon the issuancn of 2 Certificate of Title 

otation made upon any 

ued. However, that 

oh holds that a 

*floor planning' or 

automobiles may make 

inst such automobiles 

certificate is of 

partment and to every 

By way of illustrating the impraotioability of 

following our opinion, you say, 

s-Q stated above, a following out of 

the opinion in this case would result in the 

virtual stoppage of ner ear sales. For example let us assume that the Smithvllle Auto 

Company of Smithville, Texas, is a Ford dealera& is financed, or *floor planned' by the 

Universal Credit Co. of Houston. The Universal Credit Co. forces a notation of its lien 

against each individual, new automobile offered for sale by the Smithville duto Co. upon 

the xmnufacturer*s certificate issued by the 

Ford hiotor Co. against such car. A rstail 

purchaser appears on the scene at five otclock 

Saturday afternoon desiring to pay cash for a 

new car. Under the opinion before the Smithville Auto Co. can give a clear tit13 to this 

retail 'purchaser, it nil1 be necessary to secur3 a release of the mortgage against the 

particular car dasir3d as noted upon the manufacturor's certificate, from the Universal 

Credit Co. of Houston, 3 prooedur3 which in 
Honorable Homer Garrison, 3r. - Page 3 

the ordinary Course of busPness would take from 

three to five days. As a practical and obvious 

result, a salt is l0st.v 

Xeither your department nor our department is 

oonoerned with the wisdom of the Title Certificate Act, 

but we are ooncerned with the validity, construction, interpretation, and proper adminIstration of the law. If 

the dlfflculties pointed out by you should emus in the 

adsd.niotration of the law, the fault is not that of your 

departnmnt nor of our depart=&, but is that of ,tho Legielature alone. 

The situation, however, is not as bad as you 

appear to &ink. The Title Certificate Act Is a wholesome one, the chief purpose of which is tom afford a cow 

plete system of registration aff33ting th3 tit13 to motor 

vehicles for the protection of all persons dealing in, 

selling or purchasing such vehicles or aoquiring li3n3 

thereon. 

We think it was the purpose of the Legislature in 

passing the Aot to prwlde for a suitable exposition of 

eaoh a& every lien affooting the title to a motor vehicle 

transferred or oonveyed in Texas, upon the instruments, or 

some of the instruments, authorized to be exeauted by the 

Act. If the Act has not done this, it has fallen short of 

the primary plrpoee of Its enaotment. 

Undoubtedly, Article 4000 of the Revised Clvll 

Statutes, and Article 548128 of Vernon*8 Codification of 

the Oivll Statutes, have been to some extent at least, 

affeotad by.the passage of the Certificate of Title A&. 

Article 4000 declares broadly thatc 

m5very mortgage, deed of trust, or 

other form of lien attempted to be given by 

the owner of any stock of goods, wares or 

merchandise daily exposed to sale, in parcels, in the regular oourse of business of 

such merchandise, and contemplating a continuance of the possession of said goods by 

said owner, shall be deemed fraudulent and 

void; provided that this Article shall not 

apply to farm poducte when offered for 

sale by the producer.* 
iionorablc Homer Garrison, Jr. - Trtge 4 

Article 5497s declares8 

*That all chattel nortqages hereafter given as security for money dvnnced 

for the wchase of motor vehicles shall, 

when registered as required by lau of chattel mortgages, be and are superior to the 

claim or ololms of other creditors even 

though such motor vehicle or vehicles are 

aaily exposed for sale. Provided, however, 

any such chattel mortgage shall be void as 

to bona fide ~rchasetinhen such motor vehicles are daily exposed for sale." 

It will be seen this Article is a special statute 

dealing with chattel mrtgages upon motor vehicles daily exposed for sale. It will further be seen that such mortgages 

ape not 00.i.d exoept rsa to bona fiae purchasers.* The Article, therefore, recognizes the validity of such mortgsges, 

with the exception noted. Clearly, the subject mstter of 

such mortgages comss within the purview of the Title Certificate Act providing p system of registration and notice. 

lf'rom the practical viewpoint, srnl, of course, this 

is not unimportant in the considerration, no bank or finance 

company would make a loan upon such vetioles daily exposed 

for sale,without provkling in the instrument itself, or 

otherwise, for the sale of suoh vehicles by the mortgagor, 

for this, ordinarily, would be the only way the bank or 

finance company tould realize on its lonns. Where such 

provision for sales is thus made, of course, the purchaser 

at the sale thus authorized would take title free of the 

mortgage, if. he is a bona fide plrohaser. The assent of 

the miortgagee to such sale may be as well given in the instrument of mortgage or before such sale, as afterward by 

a release or acquiftance of the particular vehicle sold. , 

Such a mortgagee might be willing to take the 

risk of the rxWtgagorls not accounting for such sales, but 

yet unwilling to assume the risk ?f a subsequent mortgage 

by the mortgagor, or of a levy by attachment or execution 

of some other creditor. Such a mortgage is not entirely 

YOiCl -- it is valid between the parties, and likewise 

valid as to the claim or claims of other creditors. 

Yhlsra such a stock mortgage is shown upon the 

instruments of title to a vehicle sold to a first ;xlrchaser, 
Honorable Homer Garrison, Jr. - Page 5 

he is, of course, charged through aotual notice with 3 

knowledge of the existence of such mortgage, but that 

knowleage is of the very terms of the i-natrumont. 

Where those terms proviae that the mortgagor 

may sell the vehicle, then purchaser takes title free 

from tho mortgage by the very terms of the instrument, and 

no further release is required from the mortgagee. Whether 

the mortgageeeowill evidence his assent to a sale in the instrrmsnt of mortgage itself, or will evidence his assent to 

such sale oniy by an indiviciual release, is a matter of 

choice upen his part. 

We are yet of the opinion that a proper interpretation of the Title Certificate Act contemplates that such 

liens should bo WidenCed in an appropriate entry upon the 

instrument~s evidencing the title to such csr sold, and 

that the detail of effectuating the sale and releaso of the 

mortgaged cars is one to be workea out by the wties most 

at interest, to-wit, the mortgagor and the mortgagee. 

We thsnk you for your very full letter discussion 

of the prsctical sicle of the questions here involved, and 

trust that what we have said vi11 have Ol&Udfied the situation that otherwise ndght have been confusing. 

Very truly yours 

ATTORNET GEWIERAIJ OF TEX$$j 

BY 

Ooie Gpder 

Assistant 

OS-Am