Court Opinion

ID: 9851152
Source: CourtListenerOpinion
Date Created: 2023-09-24 05:08:08.792394+00
Date Added: 2024-06-11T09:20:49.878669
License: Public Domain

KAUS, J.*
I respectfully dissent.
*456As both the trial court and the Court of Appeal clearly saw, the issues in this case are quite simple and unerringly point to priority of United California Bank’s (UCB) security interest which was perfected in compliance with all applicable provisions of law. Unfortunately the majority obscures this simplicity by (1) an erroneous suggestion that the California Uniform Commercial Code’s (hereafter Commercial Code) protections for perfected security interests are primarily designed to establish priorities among lien-holders,1 (2) an outdated analysis of California’s “full title system,” (3) an inapplicable analogy to real property recording, (4) a meticulous but, I believe, irrelevant description of post-1979 law, and, finally, (5) a misplaced appeal to principles of equity.2
The applicable statutes are found in the Vehicle Code and the Commercial Code. Vehicle Code sections 6300 and 6301—amended as part of the same chapter which enacted the Commercial Code (Stats. 1963, ch. 819)—pre-scribe the mechanics for the recording of a security interest in a vehicle. Briefly, section 6300 calls for the deposit of certain documents with the Department of Motor Vehicles. Section 6301 then provides that the deposit “constitutes perfection of the security interest and the rights of all persons in the vehicle shall be subject to the provisions of the Uniform Commercial Code, ...” (Italics added.) To be specific: if the party to be secured has done all that is required of him, we look to the Commercial Code for the consequences of slipups by the filing officer—here, of course, the Department of Motor Vehicles.3
It is at this point in its analysis of applicable statutory law that the majority leaves the straight and narrow. (Ante, p. 448.) It states that the rule that perfected security interests are good against bona fide purchasers is premised on the assumption that filing of a security interest will result in a record *457which a prospective purchaser can discover. From this premise it concludes that if a record is not discoverable, we can ignore the Commercial Code. The premise is, however, only half-true and the conclusion is quite mistaken. It is, of course, to be hoped that filing will result in a discoverable record, but—even if we ignore the inevitable delay in indexing (§ 9403, subd. (4)(a))—mistakes happen and it begs the question presented by this case simply to abandon the Commercial Code because a perfected security interest is not discoverable.
It is not as if the problem of a slipup by the filing officer had not been considered. To the contrary, the wording of the relevant provisions of the Commercial Code, the official comment thereto and Mr. Anderson’s authoritative treatise on the code, are in perfect harmony to the effect that a perfected security interest is not lost because of a mistake by the filing officer. Section 9303 provides that a security interest is perfected when it has attached4 and the applicable steps toward perfection, such as filing, have been taken. Section 9403 states that filing consists of “[presentation for filing . . : tender of the filing fee and acceptance ... by the filing officer.” Nothing further is required. The Uniform Commercial Code comment to section 9-407 (§ 9407) states unequivocally: “Note . . . that under section 9-403(1) the secured party does not bear the risk that the filing officer will not properly perform his duties: under that Section the secured party has complied with the filing requirements when he presents his financing statement for filing and the filing fee has been tendered or the statement accepted by the filing officer.” (Italics added.) In 4 Anderson, Uniform Commercial Code, section 9-403:5, the author states: “The secured party does not bear the risk of an improper filing or indexing by the filing officer, as long as the secured party has not by his own conduct caused the error by misleading the filing officer, [¶] The Code adopts the concept that filing is constructive notice from the time of presentation to the filing officer, rather than from the later time of indexing. . . . [¶] The rationale of the Code provision defining ‘filing’ is to make certain the time of filing and to free the secured party from errors or mistakes on the part of the filing officer.” (Id., at pp. 519-520.)
Although no California case in point has been found, the authorities from other jurisdictions uniformly agree that the Commercial Code means what it says. (Matter of Glasco, Inc. (5th Cir. 1981) 642 F.2d 793, 796 [“A creditor who has complied with the filing requirements does not bear the risk of improper indexing by the Secretary of State.”]; In re Royal Electro*458type Corporation (3d Cir. 1973) 485 F.2d 394, 396; In re Hammons (D.Miss. 1977) 438 F.Supp. 1143, 1151 [“Nor is the secured party an insurer of proper indexing.”]; Matter of Fowler (D.Okla. 1975) 407 F.Supp. 799, 803; In re May Lee Industries, Inc. (D.N.Y. 1974) 380 F.Supp. 1, 3.)5
This phalanx of authority to the effect that the secured party does not have to bear the risk of a slipup in the recording system, is simply ignored by the majority, which offers us nothing better than (a) an imperfect analogy to the real property recording system6 and (b) a reference to California’s “full title” system which, as far as I cán tell, never did encounter—let alone solve—the problem posed by this case. Certainly the two decisions relied on by the majority are not in point. First Nat. Bank of Hays City v. Sprigg (1962) 209 Cal.App.2d 258 [25 Cal.Rptr. 838] involved as the creditor a Kansas bank which failed to note its lien on the certificate of title before handing it over to the debtor, who drove the car to California where he sold it. The court held, most plausibly, that the bank was estopped to claim its lien. Even less pertinent is Ferraro v. Pacific Fin. Corp. (1970) 8 Cal.App.3d 339 [87 Cal.Rptr. 226], where an employee of the creditor neglected to indicate its security interest when submitting the relevant documents to the Department of Motor Vehicles.7
*459In conclusion I would simply ask what the Legislature could have intended by providing in section 6301 of the Vehicle Code that “the rights of all persons in the vehicle shall be subject to the provisions of the Uniform Commercial Code” if, the first time an occasion for applying this command arises, we simply ignore it?
I would affirm.
Grodin, L, concurred.

Retired Associate Justice of the Supreme Court sitting under assignment by the Chairperson of the Judicial Council.

Section 9201 of the Commercial Code begins as follows: “Except as otherwise provided by this code a security agreement is effective according to its terms between the parties, against purchasers of the collateral and against creditors.” (Italics added.)

Equity! T&O Mobile Homes, Inc. (T&O), a professional dealer in mobilehomes, paid $7,000 for a unit on which UCB, another pro, had loaned more than twice as much. If T&O had been charged with receiving stolen property, the disproportionately low price it paid for the mobilehome would have been evidence of guilty knowledge. (People v. Brumley (1966) 242 Cal.App.2d 124, 128 [51 Cal.Rptr. 131]; People v. Bartfeld (1962) 204 Cal.App.2d 701, 705 [22 Cal.Rptr. 618].) Undoubtedly it was only recognition of the doctrine of the “white heart and the empty head” (see Morgan v. Reasor (1968) 69 Cal.2d 881, 894, fn. 19 [73 Cal.Rptr. 398, 447 P.2d 638]) that made UCB stipulate that T&O had no actual— my emphasis—knowledge of UCB’s interest and would not have bought, had it known of it. It is, of course, true that section 1103 of the Commercial Code provides that, inter alia, principles of equity supplement its provisions, wherever the code is silent. The trouble is, however, that it is not silent on the point in issue here, but explicitly commands a result contrary to the majority.

Henceforth, unless otherwise indicated, all statutory references are to the Commercial Code.

Section 9204 sets forth the conditions which must be satisfied for a security interest to “attach.” Since it is clear that UCB’s interest had attached, the point need not be pursued.

General Motors Acceptance Corporation v. Hodge (Ky. 1972) 485 S.W.2d 894 is not to the contrary. There the court interpreted a recently passed statute to require that a security interest be shown on the face of the certificate of registration before it was perfected. The statute was apparently passed in response to a contrary holding in Lincoln Bank & Trust Company v. Queenan (Ky. 1961) 344 S.W.2d 383. In the case at bar there is no question that under California law UCB had perfected its lien. (Veh. Code, § 6301.)

The applicable statutes there require not only that the instrument be filed with the recorder, but that, to give constructive notice, it be “recorded as prescribed by law.” (See Civ. Code, §§ 1170, 1213; Cady v. Purser (1901) 131 Cal. 552 [63 P. 844].) No comparable statute applies to this case.

Since, as I have tried to show, the majority seeks to solve this case without resort to the pertinent statutory law—the Commercial Code—it inevitably goes awry in several respects. Two examples are illustrative:
1. The majority states that the purpose of the provision of section 6301 of the Vehicle Code imparting constructive notice from the time of the secured party’s application for registration as legal owner is “primarily to establish priority among two or more competing lienholders . . . .” (Italics in original.) Section 6301 expressly states that the “rights of all persons ...” shall be subject to the Commercial Code. Does “all persons” not include buyers?
2. The majority labels as a “dubious proposition” UCB’s argument that it should prevail because T&O did not apply for a transfer to itself under section 5600 of the Vehicle Code. I agree that the argument is bad, but the criticism sounds strange in an opinion which relies on the real property recording acts by analogy: section 1214 of the Civil Code only protects subsequent purchasers “whose conveyance is first duly recorded.” The majority gets out of its dilemma by pointing out that, as a dealer, T&O did not have to comply with section 5600. Does this mean that the majority’s equitable rule protects professional dealers but leaves consumers to twist in the wind?