Opinion ID: 1911047
Heading Depth: 2
Heading Rank: 1

Heading: Warranty of Title

Text: Wyoming authorities challenged the authenticity of Colton's title as the truck had three different VINs engraved at various points. Under these circumstances Colton averred Decker breached the warranty of title under SDCL 57A-2-312: (1) Subject to subsection (2) there is in a contract for sale a warranty by the seller that (a) The title conveyed shall be good, and its transfer rightful; and (b) The goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge. (2) A warranty under subsection (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have. Comment 1 to UCC § 2-312 states a buyer is entitled to receive a good, clear title transferred... in a rightful manner so [the buyer] will not be exposed to a lawsuit in order to protect it. A split of authority persists on the scope of § 2-312. Decker relies on those cases which hold that a breach of warranty of title occurs only when an outstanding superior title exists. [3] See, e.g., C.F. Sales, Inc. v. Amfert, Inc., 344 N.W.2d 543 (Iowa 1983); Johnston v. Simpson, 621 P.2d 688 (Utah 1980). Other courts hold that under § 2-312 mere initiation of a colorable challenge, one which is not spurious, regardless of the outcome, is sufficient to violate the warranty of title. Jefferson v. Jones, 286 Md. 544, 408 A.2d 1036, 1042 (1979) (law enforcement seizure of motorcycle when its VIN did not correspond to VIN in title document was colorable claim thus seller breached title warranty); American Container Corp. v. Hanley Trucking Corp., 111 N.J.Super. 322, 268 A.2d 313 (1970) (law enforcement seizure of semi-trailer as stolen sufficient to cast substantial shadow thus violating warranty of good title). Good title typically means the title which the seller gives to the buyer is `free from reasonable doubt, that is, not only a valid title in fact, but [also] one that can again be sold to a reasonable purchaser ...' Jefferson, 408 A.2d at 1040 (quoting Langford v. Berry, 68 Ga.App. 193, 22 S.E.2d 349, 351 (1942)). We find the latter to be the better rule. Wyoming Highway Patrol officials questioned Colton's ownership due to contradictory VINs thus casting a colorable challenge to its title. This was sufficient for a breach of title warranty claim. American Container Corp., 268 A.2d at 318; City Car Sales, Inc. v. McAlpin, 380 So.2d 865 (Ala. Civ.App.1979); Ricklefs v. Clemens, 216 Kan. 128, 531 P.2d 94 (1975). Indeed, the majority view holds that a purchaser can recover for a breach of warranty of title by merely showing the existence of a cloud on the title. Maroone Chevrolet, Inc. v. Nordstrom, 587 So.2d 514, 518 (Fla.Dist.Ct.App.1991). Once breach of good title is established, good faith is not a defense, nor is a lack of knowledge of the defect. James A. White & Robert S. Summers, UNIFORM COMMERCIAL CODE § 9-12 (3d ed. rev. 1993); Smith v. Taylor, 44 N.C.App. 363, 261 S.E.2d 19 (1979). Purchasers should not be required to enter into a contest on the validity of ownership over a titled motor vehicle. Frank Arnold Contractors v. Vilsmeier Auction Co., Inc., 806 F.2d 462, 464 (3rd Cir.1986); Maroone Chevrolet, 587 So.2d at 518; American Container, 268 A.2d at 318; Ricklefs, 531 P.2d at 100. As the undisputed facts reveal, Colton was forced into a contest over ownership because of conflicting VINs and an improper title. Thus, we uphold the circuit court's ruling that Decker breached the warranty of title. Maroone Chevrolet, 587 So.2d at 518.