Court Opinion

ID: 4144320
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:43:48.20917+00
Date Added: 2024-06-11T14:35:25.642621
License: Public Domain

TEIEA~LTORNEY            GENEHAL

                        OF   TEXAS

Honorable Homer Garrison, Jr.
Director, Department of Public Safteg
CainpMabrg
Austin, Texas
Dear Sir:                     Attention: Mr. Ralph L. Buell
                              Opinion No. 0-2073
                              Re: liotationon Certificate of
                                   Title of lien to s~ecure
                                   "future aebts"~;under H.B.
                                   407, Acts of the 46th Legls-
                                   lature..~
        This is in dply to your letter dated March 11, 1940,
in which you ask the following question:
        "Under the provisions of Rouge Bill 407;
    the-certificate of Title Act, Shall the Depart-
    tientof Public-~Safetyissue a certificate of
    title against an automobile, the application
    for which cites under the heading of liens.a
    specific sum of money, together with the fur-
    ther notation "and future debts'?"
        We assume that there is no doubt in your mind that it
is proper to Issue a certifFcate of title when the application
lists a lien for a specific sum of money only, but that you are
concerned with whether or not it is proper for a lien to be
listed which is for a specific sum of money and 'alsofor "future
debts".
        The parts of Rouse Bill 407, Acts of the Fortydixth
Legislature, (Article 1426-l of Vernon's AnnotatledPenal Code
of Texas) known as the Certificate of Title A@", with which
we are concerned in answering your question are :a8 follows:
        "Section 1. This Act shall by&referred to,
    cltea,-landknown as the 'Certificate of Title.
    Act', and in the enactment hereof it is hereby
    declared to be the legislative ,lntent and 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 stolen motor
Honorable Homer Garrison, Jr., page 2              0-2073

    vehicles, and thewe   of encumbered motor ve-
    hicles without the enforced disclosure 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, singularly and collec-
    tively, are to be liberally construed to that
    end. The following terms as herein defined shall
    control In the enforcement and construction of
    this Act. ”
        “Sec. 3.  The term 'Lien' means every kind
    of lease, conditional sales contract, deed of
    trust, chattel mortgage, trust receipt, reserva-
    tion of title, or other written instrument of
    whatsoever kind OP character whereby an inter-
    est, 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). "The names and ad-
    dresses and dates of any liens on the motor ve-
    hicle, In chronological order 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 the Department."
        Section 44, "No lien on any motor vehicle
    to which a receipt or certificate of title has
    been Issued shall be'valld as against third
    parties without actual knowledge thereof, or
    enforceable,against the motor vehicle of any
    such third parties, unless the notation of said
    lien shall have been caused to be made on re-
    ceipts and certificates of title on said motor
    vehicle, as provided in this Act."
        Section 46. "Only liens noted on a re-
    ceipt OP certificate of title be valid as a-
    gainst creditors of the mortgagor in so far as
    concerns the motor vehicle."
        If a valid lien can be created to cover      "future debts"
we think It is proper to Issue a certificate of      title listing
a lien for a specific sum of money and also for      "future debts".
The appellate court cases in Texas are clear on      this question.
In the case of Frelbetigv. Magale, 70 Tex. 116,      7 S.W. 634, the
Supreme Court of Texas said:
Honorable Homer Garrison, Jr., page 3        O-2073

         "But the appellee claims that the mortgage
    does not secure the debts for which the trustee
    sold the property; that the mortgage could not
    secure future debts, and, if it could, the future
    debts contemplated by the mortgage were to be of
    the same kind proviaed for In terms by the mort-
    gage e A mortgage can be made to cover future
    debts, and such a mortgage will be good not only
    between the parties, but as to purchasers from
    the mortgagor with notice of the mortgage. A
    mortgage providing for the security of future
    debts puts persons dealing with the mortgagor
    in reference to the mortgaged property upon no-
    tice that such debts may exist ana bind the prop-
    erty. They must inqui,reas to this fact, or pur-
    chase at their peril. 1 Jones, Mortg. i i 364,
    370-372;~Lovelace V. Webb, 62 Ala. 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 is well settled that a valid
    mortgage can be given to secure the future
    advances, and that the same will be effective,
    not only against the mortgagor, but as against
    subsequent purchasers and lienholders with no-
    tice theretif. Freiberg v."Magale; 70 Tex. 116,
    7 S-W; ,684;Bullard v.'Stewart, 46 Tex. 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 is not
    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 long been a well-established rule
    of decision in this state that a recorded mortgage,
    which recites that It Is given to secure future
    Indebtedness that in contemplation of the parties
    may be incurred by the mortgagor to the mortgagee
    is a valid mortgage, not only between the parties
    to the contract, but as to subsequent purtihasers
    from the mortgagor, Any subsequent purchaser
    from a mortgagor rmst take notice of such con-
    tract or agreement as to future indebtedness, and
    any advances made or indebtedness incurred in pur-
                                                                    -   . . .

Honorable Homer 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 authorities that 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; Massachusetts Mutual Life      Co.'v. Stockyards
National Bank, (Tex. Clv. App.) 50 S.W.       ,425;Cason; Monk
& Co. ir.Baker, (Tex. Clv. App.) 62 S.W. 592; 9 Tex. Jur.
135, par 47; and 14 Cor. Jurls, Sec. 722.
        We have heretofore held in our Opinion No. O-1539 that
the certificate of title act supersedes and repeals the general
recording statute as to motor vehicles, and that it is unneces-
sary for a lien on an automob,ileto be recorded In the office of
the Count Clerk*,and the "Certificate of Title Act" says in
         % 4 and 46 that only liens on a receipt or a certificate
‘s'ectlons
of title shall be valid as against third partie.sor a5 against
creditors of the mortgagor. .As the courts of this State hold
that a lien for "future debts" Is valid, It certainly follows
that the mortgagee, In order to put subsequent purchasers 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 the Department of
Public Safety should Issue a certificate of title showing a
lien for a specific sum of money and for "future debts" 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
                            ATTORNEY GENERAL 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 CommFttee By df3WB Chairman