Court Opinion

ID: 7801649
Source: CourtListenerOpinion
Date Created: 2022-08-18 15:05:26.872402+00
Date Added: 2024-06-11T16:29:19.550447
License: Public Domain

RENDERED: AUGUST 18, 2022
                                                        TO BE PUBLISHED

               Supreme Court of Kentucky
                              2021-SC-0204-DG

DELORES ZEPEDA                                                      APPELLANT

                   ON REVIEW FROM COURT OF APPEALS
V.                        NO. 2019-CA-0650
                  SCOTT CIRCUIT COURT NO. 18-CI-00096

CENTRAL MOTORS, INC.                                                APPELLEE

               OPINION OF THE COURT BY JUSTICE CONLEY

                                  AFFIRMING

      Dolores Zepeda (Zepeda) was grievously wounded in an automobile

accident on August 14, 2014, in Scott County. She filed a claim against Central

Motors, Inc. (Central Motors) alleging it was the statutory owner of the 2002

BMW in which she was a passenger at the time of the accident. The trial court

granted summary judgment in favor of Central Motors, holding it had

substantially complied with KRS 186A.220 when it sold the vehicle to Juan

Garcia (Garcia) and was no longer the statutory owner of the vehicle. Zepeda

appealed and the Court of Appeals affirmed the lower court’s ruling. Zepeda

filed a motion for discretionary review which we granted. We affirm the Court of

Appeals.
                   I.    FACTS AND PROCEDURAL BACKGROUND

      This appeal is solely concerned with determining the statutory ownership

of the vehicle involved in the crash, the 2002 BMW, as between Garcia and

Central Motors. Therefore, understanding the title and sales history of the

vehicle is essential.

      Elite Motors, of Clarksville, Tennessee, sold the vehicle to Kevin and

Shantell Cook on August 23, 2012. Tennessee issued a certificate of title with a

lien held by Elite Motors on August 24, 2012. The Cooks defaulted on the loan

and the vehicle was repossessed. Loan Portfolio Services bought the vehicle

from Elite Motors on March 14, 2014.

      Central Motors purchased the vehicle from Loan Portfolio Services in

Tennessee on March 19, 2014 and brought the vehicle into Kentucky the same

day. Central Motors did not file a notice of vehicle acquisition with the Fayette

County Clerk within fifteen (15) days per KRS 186A.220(1).1 The vehicle was

inspected by Larry Van Diver on behalf of Central Motors on April 10, 2014.

      Garcia purchased the vehicle from Central Motors on July 24, 2014 and

executed a bill of sale, retail installment contract and security agreement for

the purchase. As part of the transaction, Garcia also executed a power of

      1   KRS 186A.220(1) provides, as follows:

      Except as otherwise provided in this chapter, when any motor vehicle
      dealer licensed in this state buys or accepts such a vehicle in trade,
      which has been previously registered or titled for use in this or another
      state, and which he holds for resale, he shall not be required to obtain a
      certificate of title for it, but shall, within fifteen (15) days after acquiring
      such vehicle, notify the county clerk of the assignment of the motor
      vehicle to his dealership and pay the required transferor fee.

                                              2
attorney, designating Central Motors as his attorney-in-fact so it could deliver

the assigned certificate of title and other documents to make the application for

registration and certificate of title on Garcia’s behalf per KRS 186A.220(5)(b).2

Central Motors obtained proof of insurance from Garcia and then transferred

physical possession of the vehicle to him on July 24, 2014.

      On August 11, 2014, Central Motors paid the required fees and

submitted an application for a Kentucky certificate of title and registration and

delivered the assigned certificate of title from Tennessee to the Fayette County

Clerk. Central Motors then filed a title lien statement with the Woodford

County Clerk on August 13, 2014. Woodford was the county in which Garcia

resided.

      Juan Garcia was the father of Darley Morales (Morales). Though Morales

did not possess a valid driver’s license, Garcia let Morales drive the vehicle. On

August 14, 2014, Morales was driving the 2002 BMW when he caused it to

crash in a single vehicle accident. Morales had a blood alcohol level (BAC) of

0.145. The accident killed Morales and left his passenger, Zepeda, paralyzed.

The title was issued in Garcia’s name the next day on August 15th and the

registration was completed on the 18th, three days later.

      2   KRS 186A.220(5)(b) provides,

      The dealer may, with the consent of the purchaser, deliver the assigned
      certificate of title, and other appropriate documents of a new or used
      vehicle, directly to the county clerk, and on behalf of the purchaser,
      make application for registration and a certificate of title. In so doing, the
      dealer shall require from the purchaser proof of insurance as mandated
      by KRS 304.39-080 before delivering possession of the vehicle.

                                            3
      Zepeda filed suit against the Estate of Morales seeking compensatory and

punitive damages; against Garcia for negligent entrustment; against Allstate

Property & Casualty Insurance Company (Allstate) for underinsured motorist

coverage; and against Central Motors as the purported statutory owner of the

vehicle.

      Central Motors filed a motion for summary judgment and Zepeda filed a

cross-motion for summary judgment. Zepeda alleged Central Motors, as the

holder of the title, was the statutory owner of the vehicle because it had not

filed a notice of vehicle acquisition form, the TC 96-183, which Zepeda claimed

is required under KRS 186A.220(1).3 After holding oral arguments, the trial

court granted summary judgment for Central Motors and held it was not the

owner of the vehicle at the time of the accident. The trial court ruled Central

Motors had indeed failed to file the notice of vehicle acquisition form, the TC-

96-183, with the Fayette County Clerk after purchasing the vehicle. But it had

substantially complied with the statute when it submitted an application for

certificate of title along with the previous title. The trial court reasoned Central

Motors provided notice under KRS 186A.220(1) to the Fayette County Clerk

when it submitted the aforementioned documents. Therefore, the trial court

reasoned, under this Court’s decision in Travelers Indem. Co. v. Armstrong, 565

S.W.3d 550 (Ky. 2018), that there was substantial compliance with KRS

186A.220.

      3 The Kentucky Transportation Cabinet provides a form, the “TC 96-183.” The
plain language of KRS 186A.220(1) does not require the use of this form, only that the
dealer notify the county clerk and pay the required fees.

                                          4
      Zepeda appealed. The Court of Appeals affirmed the lower court ruling

on the same grounds citing Travelers. Zepeda filed a motion for discretionary

review which we granted. We now address the merits of the appeal.

                                   II.    Analysis

      Zepeda contends the Court of Appeals erred when it affirmed the lower

court’s summary judgment. She argues that even under the standard of

substantial compliance as allowed by Travelers, Central Motors failed to comply

with the requirements as set forth in KRS 186A.220.4 Since Zepeda also filed a

motion for summary judgment, she is not arguing that summary judgment was

inappropriate, only that the lower court’s ruling was in error. Because

summary judgment is reached as a matter of law and there are no material

facts that are in dispute, the standard of review on appeal is de novo. Scifres v.

Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996).

      The sole issue in this appeal is to determine whether the lower courts

correctly determined the statutory owner of the 2002 BMW on the date of the

accident on August 14, 2014. “Owner” is defined by KRS 186.010(7)(a):

      a person who holds the legal title of a vehicle or a person who
      pursuant to a bona fide sale has received physical possession of
      the vehicle subject to any applicable security interest.
In this case Central Motors was the title holder but Garcia had received

physical possession of the BMW pursuant to a bona fide sale on July 24, 2014.

KRS 186.010(7)(c) states:

      4Zepeda concedes in her brief on page 7 that Central Motors complied with
KRS 186A.220(2)-(4).

                                         5
      A licensed motor vehicle dealer who transfers physical possession
      of a motor vehicle to a purchaser pursuant to a bona fide sale, and
      complies with the requirements of KRS 186A.220, shall not be
      deemed the owner of that motor vehicle solely due to an
      assignment to his dealership or a certificate of title in the
      dealership's name. Rather, under these circumstances, ownership
      shall transfer upon delivery of the vehicle to the purchaser. . . .

Despite Kentucky being a certificate of title state for the purpose of determining

ownership and for requiring liability insurance coverage, KRS 186.010(7)(c)

provides an exception to the general rule. Travelers, 565 S.W.3d at 556 (citing

Auto Acceptance Corp. v. T.I.G. Ins. Co., 89 S.W.3d 398, 401 (Ky. 2002)). If a

licensed motor vehicle dealer delivers physical possession to the buyer and

complies with KRS 186A.220 then ownership transfers upon physical delivery

of the vehicle. Id. at 557.

      Compliance with KRS 186A.220 requires licensed motor vehicle dealers

to perform certain acts to take advantage of this statutory exception. However,

our decision in Travelers makes it clear that substantial compliance with the

statute is sufficient for the exemption to apply. As this Court explained:

      By violating the strict requirements of the provisions (namely, the
      15 day requirement) but still accomplishing the goal (notifying the
      clerk of the acquisition of the vehicle), the intention of the statute is
      still upheld. We note that, in describing this statute as directory,
      this does not mean non-compliance is permissible. If the dealer fails
      to comply, at all, then there is no compliance with KRS
      186A.220 and the dealer is still the “owner.” However, substantial
      compliance, i.e., late compliance, may still allow the dealer to take
      advantage of the exception in KRS 186.010(7)(c).
Travelers, 565 S.W.3d at 567.

      Zepeda argues since Central Motors did not file the “TC 96-183” it should

be considered the statutory owner. The statute does not mention this form nor

                                          6
require any specific form. It is undisputed that Central Motors never filed the

form the Transportation Department provides, the “TC 96-183,” but KRS

186A.220(1) requires only that the dealer “notify the county clerk of the

assignment of the motor vehicle to his dealership and pay the required

transferor fee.” Our decision in Travelers is clearly focused on accomplishing

the intention of the legislature. The purpose of the KRS 186A.220(1) is:

      to effectuate an efficient registration and titling process. If a dealer
      complies with these requirements late, it does not vitiate the
      overarching goal. Thus, the statute is directory and substantial
      compliance is sufficient for those sections. A licensed dealer,
      therefore, can cure an untimely compliance with KRS 186A.220,
      sections 1 through 4, by complying at a later date. If an accident
      occurs before the dealer has complied (in which case, at that point,
      there would be no compliance rather than substantial compliance),
      that dealer will still be the statutory “owner” of the vehicle. If the
      dealer has complied before the accident, it can still avail itself of
      the exception in KRS 186.010(7)(c).
Id. Zepeda’s approach imposes a requirement simply not found in the plain text

of the statute. This elevates form over substance, an approach this Court

rejected in Travelers. The Fayette County Clerk’s office was notified of Central

Motors’s acquisition of the BMW because the dealership had submitted the

assigned certificate of title from Tennessee and application for certificate of title

on August 11, 2014, prior to the accident. At that point, Central Motors had

substantially complied with KRS 186A.220.

      Zepeda also makes much of the fact that Central Motors did not pay the

fee that KRS 186A.220(1) requires when a dealer notifies the county clerk.

This is clearly a requirement of the statute, but it is the responsibility of the

county clerk’s office to collect those fees. Its failure to do so should not

                                          7
preclude a party from transferring ownership, nor does it negate that

notification had been sufficiently given.

      Zepeda also contends that the transfer of the ownership was not

complete until the certificate of title was delivered to Garcia. The earliest

possible date that could have occurred, Zepeda argues, was August 15, the

date the certificate of title was issued which was one day after the accident.

Zepeda urges this court to apply the holding of this Court’s decision in Nantz v.

Lexington Lincoln Mercury Subaru, 947 S.W.2d 36, 37 (Ky. 1997) to this case.

Zepeda points to the holding of Nantz and KRS 186A.220(5)(a),5 and (d),6 which

state ownership transfers upon delivery of the documents to the buyer. But

Zepeda ignores the multiple changes made to these statutes since 1994. The

General Assembly amended this statute in 1994 and again in 2016. The issues

this Court decided in Nantz were governed by the pre-1994 statute. Subsection

5(b), the applicable subsection in this case, became law in 1994. Subsection

5(d) was also not in effect at the time of the accident. It was enacted in 2016.

KRS 186A.220(5)(b) states:

      The dealer may, with the consent of the purchaser, deliver the
      assigned certificate of title, and other appropriate documents of a
      new or used vehicle, directly to the county clerk, and on behalf of
      the purchaser, make application for registration and a certificate of
      title. In so doing, the dealer shall require from the purchaser proof

      5   Subsection (5)(a) states, “[W]hen a dealer assigns the vehicle to a purchaser
for use, he shall deliver the properly assigned certificate of title, and other documents
if appropriate, to such purchaser, who shall make application for registration and a
certificate of title thereon.”
        6 Subsection (5)(d) states, “[W]hen a dealer assigns a vehicle to a purchaser for

use under paragraph (a) of this subsection, the transfer and delivery of the vehicle is
effective immediately upon the delivery of all necessary legal documents, or copies
thereof, including proof of insurance as mandated by KRS 304.39-080.”

                                            8
      of insurance as mandated by KRS 304.39-080 before delivering
      possession of the vehicle.

Garcia appointed Central Motors as his attorney-in-fact at the time of purchase

to effectuate the transfer of ownership and delivered the documents directly to

the county clerk as allowed by subsection 5(b). Central Motors delivered all the

required documents on August 11, 2014, and the new certificate of title was

processed the same day, several days before the accident. Subsection 5(d),

which states the transfer is “immediately upon delivery of all necessary legal

documents,” is explicitly conditioned upon adherence to subsection 5(a). That

subsection applies only where the purchaser is to make the application for

certificate of title and registration.

      Zepeda’s erroneous reliance on Nantz also ignores KRS 186.010(7) which

was also amended in 1994. The definition of owner under KRS 186.010(7)(a)

was modified. The current definition, with the 1994 amendment in bold, is:

      "Owner" means a person who holds the legal title of a vehicle or a
      person who pursuant to a bona fide sale has received physical
      possession of the vehicle subject to any applicable security
      interest.
The General Assembly also added a new subsection in 1994 that applies to

licensed motor vehicle dealers which we cite here once more. KRS 186.010(7)(c)

states:

      A licensed motor vehicle dealer who transfers physical possession of
      a motor vehicle to a purchaser pursuant to a bona fide sale, and
      complies with the requirements of KRS 186A.220, shall not be
      deemed the owner of that motor vehicle solely due to an assignment
      to his dealership or a certificate of title in the dealership's name.
      Rather, under these circumstances, ownership shall transfer upon
      delivery of the vehicle to the purchaser. . . .

                                         9
(Emphasis added). At the time of the accident Central Motors, a licensed motor

vehicle dealer, had submitted all the required documents to the Fayette County

Clerk, obtained proof of insurance from Garcia, and notified the County Clerk

of its acquisition of the vehicle before the crash occurred. Therefore, Central

Motors substantially complied with KRS 186A.220 and transferred physical

possession of the vehicle pursuant to a bona fide sale. As such, Central Motors

was not the statutory owner of the vehicle on the date of the accident.

                                III.   CONCLUSION
      The Court of Appeals correctly affirmed the summary judgment of the

Scott County Circuit Court which held that Garcia was the statutory owner of

the vehicle at the time of the accident on August 14, 2014. Based on this

Court’s decision in Travelers, we affirm the Court of Appeals and hold Central

Motors substantially complied with KRS 186A.220 and delivered possession of

the vehicle pursuant to a bona fide sale, thereby making Garcia the statutory

owner of the vehicle.

   Minton, C.J., Keller, Lambert, Nickell, VanMeter, JJ., sitting. All concur.

Hughes, J., not sitting.

                                        10
COUNSEL FOR APPELLANT:

Joseph Rugg
David Noble
Morgan & Morgan, PLLC

COUNSEL FOR APPELLEE:

R. Craig Reinhardt
Reinhardt & Associates, PLC

                              11