Bankr. L. Rep. P 67,085in the Matter of Robert Stephen Schalk, Bankrupt.curtis L. Mann, Trustee in Bankruptcy, Appellant, v. Belle-bland Bank, Appellee, 592 F.2d 993 (8th Cir. 1979)

Appellant Curtis L. Mann, Trustee for the bankruptcy estate of Robert Stephen Schalk, sought to compel appellee, the Belle-Bland Bank, to turn over a 1972 Lancer trailer or the amount of its value which the trustee claims as an asset of Schalk's estate. The trustee asserts a right to the vehicle by virtue of sections 70(a) and 70(c) of the Bankruptcy Act, 11 U.S.C. § 110(a), (c). The Bankruptcy Referee denied the trustee's claim, and the district court¹  affirmed. We affirm the judgment of the district court.

In July 1971 a dealer, V. L. Long Mobile Homes, Inc., received the manufacturer's statement of origin for the trailer and on November 22, 1972, sold the vehicle to Lenora Limberg for $10,474.80. Limberg's purchase was financed by the Belle-Bland Bank which took a purchase money security interest in the vehicle.

V. L. Long did not assign the manufacturer's statement of origin to Limberg until October 26, 1973. On October 31, 1973, Limberg sent an application for Missouri title to the Missouri Department of Revenue with the bank's lien noted on the application. The department issued a certificate of title on November 8, 1973, showing Limberg as owner, with the bank's lien noted as of October 26, 1973.

In the meantime, after the sale to Limberg but before her application for a new certificate of ownership, Limberg executed a document on October 18, 1973, purporting to sell all of her interest in the trailer to Robert Stephen Schalk. However, she never assigned a certificate of title to Schalk. Schalk paid $1,000, took possession of the trailer and agreed to pay the remaining installments on Limberg's debt to the bank.²  He made twenty-four payments of $87.29 each to the bank until March 1976. Later the bank repossessed the trailer, and in October 1976 Schalk instituted bankruptcy proceedings.

The trustee, who succeeded under section 70(a) of the Bankruptcy Act to such title to personal property as the bankrupt had on the date of bankruptcy, claims title to the vehicle based on the October 18, 1973 sale to Schalk and his subsequent payments. However, we agree with the district court that Schalk did not obtain title to the trailer in October 1973 or at any time thereafter because of Limberg's failure to deliver an assigned certificate of title to Schalk.

Under Mo.Ann.Stat. § 301.210 (Vernon), a buyer's failure to obtain an assigned certificate of ownership in connection with his purchase of a registered motor vehicle or trailer in the state precludes title from passing to him and renders the sale void.³  The Missouri courts have construed section 301.210 strictly. See, e. g., Horton v. State Farm Fire & Cas. Co.,550 S.W.2d 806 (Mo.App.1977).The Missouri courts have consistently held that absolute technical compliance with Sec. 301.210 is required, otherwise the sale is fraudulent and void. * * * Failure to strictly comply with the statute means no title passes and the purported buyer has no ownership. * * * This is true, painful as it may be, even where the buyer was guilty of no intentional wrongdoing, I. e., has acted in good faith.

Id. at 809. See also Fawley v. Bailey, 512 S.W.2d 477 (Mo.App.1974).

The fact that the title to plaintiff's truck was of Maryland origin does not alter the necessity of compliance with § 301.210. * * * The statute is applicable to all sales made in Missouri, irrespective of the origin of the certificate of title. The purpose of the statute is aimed to hamper traffic in stolen motor vehicles and to prevent fraud and deceit in the sale of used cars and trucks.

Id. at 479.

Limberg did not hold legal title in trust for Schalk. Hoshaw v. Fenton, 232 Mo.App. 137, 141, 110 S.W.2d 1140, 1143 (1937). At most, Schalk acquired a right to compel Limberg to assign the certificate of title to him. Pearl v. Interstate Sec. Co., 357 Mo. 160, 165, 206 S.W.2d 975, 979 (1947). However, he never exercised this right. As Schalk did not have title to the trailer on the date of bankruptcy in October 1976, the trustee's claim based on section 70(a) must fail.

In the alternative, the trustee claims that the bank's lien on the trailer is subordinate to his rights arising under section 70(c) of the Bankruptcy Act, 11 U.S.C. § 110(c). Under section 70(c) and Mo.Ann.Stat. § 400.9-301(1) (b), (3) (Vernon),⁴  the trustee is vested with the rights of a hypothetical lien creditor whose lien was perfected as of the date of bankruptcy and who is deemed without notice of prior unperfected liens on the bankrupt's property.⁵ 

We hold, however, that the bank had perfected its security interest in the trailer by November 1973. Thus the bank's lien, perfected before the date of bankruptcy, has priority over the trustee's section 70(c) lien which arose when bankruptcy proceedings were instituted in October 1976. See Lewis v. Manufacturers Nat. Bank of Detroit, 364 U.S. 603, 5 L. Ed. 2d 323 (1961).

Mo.Ann.Stat. § 301.600 (Vernon) governs perfection of security interests in motor vehicles and trailers. That section states in part:

2. A lien or encumbrance on a motor vehicle or trailer is perfected by the delivery to the director of revenue of the existing certificate of ownership, if any, an application for a certificate of ownership containing the name and address of the lienholder and the date of his security agreement, and the required certificate of ownership fee. It is perfected as of the time of its creation if the delivery of the aforesaid to the director of revenue is completed within thirty days thereafter, otherwise as of the time of the delivery. (Emphasis added.)

Therefore, the bank's security interest was perfected on October 31, 1973, when Limberg's application for a certificate of ownership noting the bank's lien was sent with the required fee to the Missouri Department of Revenue, or at the latest on November 8, 1973, when the certificate of title was issued showing Limberg as owner⁶  and the bank as lienholder as of October 26, 1973.

Accordingly, the judgment of the district court is affirmed.