Pine Bluff Cotton Belt Federal Credit Union v. David Patterson and David Jacks

NOT DESIGNATED FOR PUBLICATION

ARKANSAS COURT OF APPEALS

JUDGE KAREN R. BAKER

DIVISION II

PINE BLUFF COTTON BELT FEDERAL CREDIT UNION

APPELLANTS

v.

DAVID PATTERSON and DAVID JACKS

APPELLEES

CA02-969

MAY 7, 2003

APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT

[CV 2001-3319]

HONORABLE CHRISTOPHER CHARLES PIAZZA, CIRCUIT JUDGE

AFFIRMED

This case involves competing interests in a 1997 Ford truck. The facts relate to transactions between appellee David Patterson and appellant Pine Bluff Cotton Belt Federal Credit Union, as well as transactions between Mr. Patterson and appellee David Jacks.

In July 2000, Pine Bluff Cotton Belt Federal Credit Union loaned twenty thousand dollars ($20,000) to Mr. Patterson to purchase a 1997 Ford truck from a dealer in Benton, Arkansas. Mr. Patterson paid a total of twenty-four thousand ninety-five dollars ($24,095) for the truck. Appellant gave the check to Mr. Patterson to give to the dealership, and permitted Mr. Patterson to have possession of the title. Mr. Patterson retained the title to the truck issued by the State of Arkansas. No lien holder was identified on the title to the truck. On or about July 27, 2000, appellant applied to the State of Arkansas for, and subsequently obtained, a direct lien. Although Mr. Patterson was a resident of Arkansas, he never registered the vehicle with the Arkansas Revenue Department, but he did obtain a license for the truck in Oklahoma.

Approximately three months after the purchase of the truck, a transaction regarding the truckoccurred between Mr. Patterson and Mr. Jacks. The nature of the transaction was disputed. Mr. Jacks asserted that Mr. Patterson conveyed the title of the truck to him to satisfy debts owed by Mr. Patterson. Mr. Patterson claimed that he had only used the truck for collateral for a loan for which Mr. Jacks subsequently refused to accept the tendered repayment. Mr. Patterson filed a replevin action against Mr. Jacks to regain possession of the truck. On July 24, 2001, a hearing for replevin was held, and on February 14, 2002, another hearing regarding appellant's rights was held. Mr. Jacks testified that over a period of time, Mr. Patterson borrowed money from him. He also explained that when Mr. Patterson was unable to repay the loans, Mr. Patterson offered to and did convey the title to Mr. Jacks for satisfaction of the debt, plus an additional $1,000. After a dispute about the possession of the truck arose between the two, Mr. Jacks testified that Mr. Patterson stole the truck along with tools and tires he had replaced. Mr. Jacks valued these transactions at approximately $9,000.

Mr. Patterson admitted that he had borrowed money from Mr. Jacks periodically and that he initially would borrow money and pay more than the original amount back. These were all cash transactions. However, he stated that in November 17, 2000, he had a problem in Memphis and needed to borrow more money. Mr. Patterson testified that when Mr. Jacks told him that he would loan him the money but needed collateral, he told Mr. Jacks to take his truck and that he would repay Mr. Jacks when he got back from Memphis. Mr. Jacks came to Memphis, and according to Mr. Patterson, loaned him $2,000. Mr. Patterson insisted that he did not give Mr. Jacks "a complete Bill of Sale," but merely signed a piece of paper identifying the truck with the vehicle identification number. Mr. Patterson claimed that when he returned from Memphis he tried to repay Mr. Jacks but that Mr. Jacks said he wanted the truck. Mr. Patterson testified that he had the title to the truck and if Mr. Jacks had a title, that he did not know how he came by it. After the replevin hearing, thetrial court held that Mr. Jacks had title and Mr. Patterson could not prevail.

In February 2002, a bench trial was held which addressed the issue of appellant's lien and whether it could foreclose on the collateral, and have a judgment for debt against Mr. Patterson. The court found that because no lien was indicated on the title subsequently acquired by Mr. Jacks, there was no lien in favor of the appellant and Mr. Jacks should have all right, title, and possession of the 1997 Ford truck. The court also awarded a judgment against Mr. Patterson in favor of appellant for the debt on the note for the truck.

The trial court found that the appellant could not enforce its lien against Mr. Jacks because it did not have its lien on the title. Appellant's argument focuses on Mr. Jacks's status as a good-faith purchaser and its belief that he is not entitled to protection of the statute. Appellant emphasizes that Mr. Patterson never registered the vehicle with the State of Arkansas pursuant to state law and argues that Mr. Jacks failed to pay value for the truck.

Addressing the first point, Arkansas Code Annotated section 27-14-723 (Supp.2001) requires any person who is a resident of this state to obtain an Arkansas motor vehicle registration and license in order to operate the motor vehicle upon the streets and highways of this state. Mr. Patterson failed to comply with this requirement and appellant emphasized this failure in its argument; however, it provided no citation to authority holding that this failure will prevent a buyer from acquiring bona-fide-purchaser status and we decline to so hold. See Midway Auto Sales, Inc. v. Clarkson, 71 Ark. App. 316, 320, 29 S.W.3d 788, 791 (2000). Although appellant's argument on this point contains some discussion of a conflict of laws analysis, no conflict of law exists on the facts of this case. There was no evidence that the vehicle was ever titled in Oklahoma or that an Oklahoma title indicated that appellant had a lien on the vehicle.

As for the second point, appellant argues that the debts owed by Mr. Patterson to Mr. Jackswere far less than the value of the truck and that this discrepancy in value prevents Mr. Jacks from being a good-faith purchaser. Our supreme court has held that where a purchaser of personalty knows that the price is inadequate, he is on notice of the infirmity of his seller's title and is, therefore, not a bona-fide purchaser for value. Hollis v. Chamberlin, 243 Ark. 201, 419 S.W.2d 116 (1967). The supreme court in Gentry v. Alley, 228 Ark. 236, 306 S.W.2d 695 (1957), held that one is not an innocent purchaser if he fails to inquire when he had notice of circumstances that ought to have put a prudent business man upon inquiry.

Despite appellant's assertion, this was not a case where Mr. Patterson was merely attempting to procure a buyer for his vehicle. Mr. Patterson was previously indebted to Mr. Jacks. Mr. Patterson turned to Mr. Jacks when he had a problem in another state and Mr. Jacks had traveled to Memphis to assist Mr. Patterson with that problem.

Appellant's arguments include a general assertion that Mr. Jacks must have been aware of the lien and that papers noting the lien should have been in the truck. Appellant cannot identify the means by which the title issued to Mr. Jacks failed to include the lien that appellant had filed with the State, arguing only that Mr. Jacks was able to defeat the lien by "unknown means."

Although appellant focuses on Mr. Jacks's actions and its dispute of Mr. Jacks's status as a good-faith purchaser, there is really no dispute that appellant failed to comply with the statutes setting forth the requirements one must follow to perfect a lien. Arkansas Code Annotated section 27-14-801 (Repl. 1994) provides that "[n]o . . . lien or encumbrance . . . upon a vehicle, of a type subject to registration under the laws of this state . . . is valid as against . . . subsequent purchasers . . . with or without notice, until the requirements of this subchapter have been complied with." Section 27-14-802(a) states that one shall deposit with the State Office of Motor Vehicles "a copy of the instrument creating and evidencing a lien or encumbrance, accompanied by the certificate oftitle last issued for the vehicle." Appellant argues that Mr. Patterson failed to take the papers to the revenue department and/or failed to return the title to appellant so that it could record its lien.

Conflicting testimony regarding the transactions and the handling of the vehicle's title was presented to the court. When there are issues of credibility and conflicting testimony, we defer to the superior position of the factfinder to resolve those questions. Coran Auto Sales v. Harris, 74 Ark. App. 145, 151, 45 S.W.3d 856, 860 (2001) (citing Maloy v. Stuttgart Mem'l Hosp., 316 Ark. 447, 872 S.W.2d 401 (1994)). Under these circumstances, we find no error with the trial judge's finding that appellant's lien was not valid against Mr. Jacks. Accordingly, we affirm.

Affirmed.

Hart and Griffen, JJ., agree.