CO Code § 42-6-120 (2021)
2021 Colorado Code|Title 42 - Vehicles and Traffic|Article 6 - Certificates of Title - Used Motor Vehicle Sales|Part 1 - Certificates of Title|§ 42-6-120. Security Interests Upon Vehicles

  Except as provided in this section and sections 42-6-130 and 42-6-148, the provisions of the “Uniform Commercial Code”, title 4, C.R.S., relating to the filing, recording, releasing, renewal, priority, and extension of chattel mortgages, as defined in section 42-6-102 (9), do not apply to motor or off-highway vehicles. A mortgage or refinancing of a mortgage intended by the parties to the mortgage or refinancing to encumber or create a lien on a motor vehicle, or to be perfected as a valid lien against the rights of third persons, purchasers for value without notice, mortgagees, or creditors of the owner, must be filed for public record. The department or authorized agent shall note the fact of filing on the owner's certificate of title or bill of sale substantially in the manner provided in section 42-6-121.    This section and section 42-6-121 do not apply to a mortgage or security interest upon a vehicle or motor vehicle held for sale or lease that constitutes inventory as defined in section 4-9-102, C.R.S. The perfection of mortgages or security interests, and the rights of the parties, are governed by article 9 of title 4, C.R.S.    Notwithstanding any provision of law to the contrary, in the case of motor vehicles, off-highway vehicles, or trailers, a lease transaction does not create a sale or security interest solely because it permits or requires the rental price to be adjusted either upward or downward under the agreement by reference to the amount realized upon sale or other disposition of the motor vehicle, off-highway vehicle, or trailer.    The rights of a buyer, lessee, or lien creditor that arise after a mortgage attaches to a motor or off-highway vehicle and before perfection under this article are determined by section 4-9-317, C.R.S.     History. Source: L. 94: Entire title amended with relocations, p. 2458, § 1, effective January 1, 1995. L. 97: (3) added, p. 333, § 1, effective April 16. L. 2000: (1) amended, p. 1662, § 14, effective July 1, 2001. L. 2001: (2) amended, p. 1448, § 46, effective July 1. L. 2005: (1) amended, p. 817, § 18, effective August 8. L. 2006: (1) amended, p. 1513, § 78, effective June 1; (1) amended, p. 640, § 1, effective July 1. L. 2009: (1) amended and (4) added, (SB 09-150), ch. 182, p. 802, § 3, effective April 22. L. 2013: Entire section amended, (SB 13-280), ch. 407, p. 2385, § 16, effective June 5.    Editor's note:    This section is similar to former § 42-6-119 as it existed prior to 1994, and the former § 42-6-120 was relocated to § 42-6-121.    Amendments to subsection (1) by House Bill 06-1391 and Senate Bill 06-163 were harmonized.     ANNOTATION   Law reviews. For note, “Chattel Security Transactions and the Colorado Certificate of Title Act”, see 25 Rocky Mt. L. Rev. 60 . For note, “The Effect of Certificate of Title Acts on Foreign Auto Liens”, see 29 Rocky Mt. L. Rev. 384 (1957).   Annotator's note. Since § 42-6-120 is similar to § 42-6-119 as it existed prior to the 1994 amending of title 42 as enacted by SB 94-1, relevant cases construing that provision have been included in the annotations to this section.   This section relates only to mortgages on “motor vehicles”. Rabtoay Gen. Tire Co. v. Colo. Kenworth Corp., 135 Colo. 110 , 309 P.2d 616 (1957).   To enlarge the scope of the act to include a mortgage on tires would be an act of judicial legislation. Rabtoay Gen. Tire Co. v. Colo. Kenworth Corp., 135 Colo. 110 , 309 P.2d 616 (1957).   For tires are detachable accessories and, unless intention to the contrary is clearly shown, are not merged in the motor vehicle upon which they are placed. Rabtoay Gen. Tire Co. v. Colo. Kenworth Corp., 135 Colo. 110 , 309 P.2d 616 (1957).   The doctrine of title by accession does not apply to the equipment of a car which the buyer and seller do not intend to be merged into its structure and which is clearly distinguishable and as readily detachable from it as are tires and tubes. Rabtoay Gen. Tire Co. v. Colo. Kenworth Corp., 135 Colo. 110 , 309 P.2d 616 (1957).   Colorado's Certificate of Title Act operates as strictly as the real property recording statutes to cut off unrecorded interests, undoubtedly reflecting legislative intent to promote greater certainty in commercial transactions, by allowing parties to rely on the recording statutes. In re Richards, 275 B.R. 586 (Bankr. D. Colo. 2002 ).   Inapplicability of uniform commercial code to motor vehicles. By the express terms used in this section, only such provisions of the uniform commercial code as relate to the filing, recording, releasing, renewal, and extension of chattel mortgages are made inapplicable to motor vehicles. Roylance v. Citizens Sav. Bank, 148 Colo. 423 , 366 P.2d 557 (1961).   A creditor's lien has not been filed for public record until the information submitted from the lienholder has been reviewed by the director or his or her authorized agent and the lien information has been entered into the agent's database and transmitted to the state's central registry. Hepner v. AmeriCredit Fin. Servs., Inc., 338 B.R. 470 (D. Colo. 2005 ) (decided under law in effect prior to the 2005 amendment), aff'd, 345 B.R. 261 (D. Colo. 2006 ); Peters v. WFS Fin. Servs., Inc., 338 B.R. 103 (Bankr. D. Colo. 2006 ).   Perfection of a security interest in a motor vehicle occurs upon entry of the mortgage and title information into the central registry. Hepner v. AmeriCredit Fin. Servs., Inc., 345 B.R. 261 (D. Colo. 2006 ).   Once it occurs, perfection relates back to the time the mortgagee delivered its mortgage and title paperwork to the county clerk. Hepner v. AmeriCredit Fin. Servs., Inc., 345 B.R. 261 (D. Colo. 2006 ).   Application of uniform commercial code where automobiles held as inventory. Where automobiles were held for sale as inventory, the provisions of the Colorado uniform commercial code applied in their entirety. Guy Martin Buick, Inc. v. Colo. Springs Nat'l Bank, 184 Colo. 166 , 519 P.2d 354 (1974).   The uniform commercial code applies to a security interest in a motor vehicle held in inventory, notwithstanding the requirement in § 42-6-109 that the certificate of title is required to transfer an interest in a motor vehicle. Although a bank had a perfected security interest in an auto dealer's inventory, the interest was extinguished upon sale of the vehicle because the bank authorized the sale of the inventory. Under § 4-9-315 , the bank was left with a security interest only in the proceeds of the sale. Therefore, a credit union that financed the purchase of the vehicle from the dealer had a security interest that prevails against the bank, even though the certificate of title was not conveyed to the credit union at the time of sale. Valley Bank & Trust Co. v. Holyoke Cmty. Fed. Credit Union, 121 P.3d 358 (Colo. App. 2005).   Substantial compliance with § 42-6-120 . This section provides that any mortgage intended to create a lien on a motor vehicle, to be effective as a valid lien against creditors of the owner, shall be filed for public record and the fact thereof noted on the certificate of title “substantially” in the manner provided by § 42-6-120 and the filing with the authorized agent and the notation by him of that fact on the certificate “substantially” in the manner provided in § 42-6-120 shall constitute notice to the world of the existence of such mortgage. Loye v. Denver United States Nat'l Bank, 341 F.2d 402 (10th Cir. 1965).   Notation of creditor as “owner” suffices. A notation of the creditor as “owner” on the certificate of title constitutes substantial compliance with § 42-6-120 . Yeager Trucking v. Circle Leasing, 29 B.R. 131 (Bankr. D. Colo. 1983 ).   The certificate of title act creates a system of notice filing in which the certificate merely indicates who may have a security interest. Further inquiry from the parties is necessary to determine the complete state of affairs. Yeager Trucking v. Circle Leasing, 29 B.R. 131 (Bankr. D. Colo. 1983 ).   Proper recording of chattel mortgages provides “notice to the world”. If there ever was any exception to the general rule of priority of chattel mortgages for a garageman's equitable lien for necessary repairs, it was eliminated by the enactment of this section which provides that properly recording and noting chattel mortgages on the title certificate provides “notice to the world”. First Sec. Bank v. Crouse, 374 F.2d 17 (10th Cir. 1967).   With recordation of a chattel mortgage, persons who subsequently deal with the chattel have constructive notice of the encumbrance. Rabtoay Gen. Tire Co. v. Colo. Kenworth Corp., 135 Colo. 110 , 309 P.2d 616 (1957).   Constructive notice is as effectual as actual notice. Rabtoay Gen. Tire Co. v. Colo. Kenworth Corp., 135 Colo. 110 , 309 P.2d 616 (1957).   Superiority of recorded lien. A creditor cannot obtain a judicial lien superior to a transferee's interest, once the requirements for the recording of the lien on a motor vehicle set out in this section and § 42-6-120 are fulfilled. GMAC v. Martella, 22 B.R. 649 (Bankr. D. Colo. 1982 ).   Mortgage cannot attach more value than amount noted on certificate. Allowing a mortgage to attach having more value than the amount noted on the certificate of title would negate the purpose of this section and § 42-6-120 , which is to make the certificate conclusive as to the rights of the parties with respect to notice of prior encumbrances. In re Grizaffi, 23 B.R. 137 (Bankr. D. Colo. 1982 ).   Section inapplicable to foreign mortgages. In view of § 42-6-131 , the provisions of this section requiring filing of mortgages does not apply to foreign mortgages. First Nat'l Bank v. Chuck Lowen, Inc., 128 Colo. 104 , 261 P.2d 158 (1953).   Persons with no right in vehicle not protected by section. Where a party has no rights to a motor vehicle, having been divested of all ownership, he is not within the four categories of persons protected by the filing requirements of this section. People v. Armijo, 197 Colo. 91 , 589 P.2d 935 (1979).