2021 Georgia Code
Title 40 - Motor Vehicles and Traffic
Chapter 3 - Certificates of Title, Security Interests, and Liens
Article 3 - Security Interests in and Liens on Motor Vehicles
§ 40-3-50. Perfection of Security Interests Generally

1. Except as provided in Code Sections 11-9-303, 11-9-316, and 11-9-337, the security interest in a vehicle of the type for which a certificate of title is required shall be perfected and shall be valid against subsequent creditors of the owner, subsequent transferees, and the holders of security interests and liens on the vehicle by compliance with this chapter.
2. 1. A security interest is perfected by delivery to the commissioner or to the county tag agent of the county in which the seller is located, of the county in which the sale takes place, of the county in which the vehicle is delivered, or of the county wherein the vehicle owner resides, of the required fee and:
      1. The existing certificate of title, if any, and an application for a certificate of title containing the name and address of the holder of a security interest; or
      2. A notice of security interest on forms prescribed by the commissioner.
   2. The security interest is perfected as of the time of its creation if the initial delivery of the application or notice to the commissioner or local tag agent is completed within 30 days thereafter, regardless of any subsequent rejection of the application or notice for errors; otherwise, as of the date of the delivery to the commissioner or local tag agent. The local tag agent shall issue a receipt or other evidence of the date of filing of such application or notice. When the security interest is perfected as provided for in this subsection, it shall constitute notice to everybody of the security interest of the holder.

(Ga. L. 1961, p. 68, § 21; Ga. L. 1962, p. 79, § 11; Ga. L. 1978, p. 1081, § 9; Ga. L. 1981, p. 883, § 9; Ga. L. 1990, p. 2048, § 3; Ga. L. 1994, p. 352, § 2; Ga. L. 1995, p. 809, § 14; Ga. L. 2000, p. 227, § 1; Ga. L. 2001, p. 362, § 32; Ga. L. 2011, p. 510, § 1/HB 323.)

- Ga. L. 1994, p. 352, § 3, not codified by the General Assembly, provides: "The General Assembly declares that the enactment of Section 2 of this Act is a present clarification of the original intent of the General Assembly as to the method, manner, and time of perfection of a security interest in a motor vehicle."

Ga. L. 1995, p. 809, § 22, not codified by the General Assembly, provides: "Any local law enacted pursuant to Code Section 40-2-21, which is in conflict with the provisions of this Act shall stand repealed on the effective date of this Act." The act became effective January 1, 1997.

- For comment on Maley v. National Acceptance Co., 250 F. Supp. 841 (N.D. Ga. 1966), see 3 Ga. St. B.J. 248 (1966).

JUDICIAL DECISIONS

Purpose.

- Legislature intended to provide a simple statutory lien procedure upon which those both financing and repairing motor vehicles could rely when conducting daily business. This statutory procedure did not engraft upon itself common law principles of accession or the complex and multi-faceted procedures of the UCC. Barnes v. GMAC, 191 Ga. App. 201, 381 S.E.2d 146 (1989).

- Trial court erred in concluding that the security interest holder had a valid, perfected security interest in the vehicle that the car buyer purchased; ordinarily, the holder's security interest would have been noted on the certificate of title issued to the buyer when the car was purchased, but the state motor vehicle department made a clerical error and did not include the security interest holder's security interest on the certificate of title; as a result, the buyer was able to purchase the car free of the security interest holder's security interest pursuant to O.C.G.A. § 11-9-337, which provided an exception to enforcement of a security interest pursuant to O.C.G.A. § 40-3-50 for people taking delivery of a good without knowledge of a security interest. Metzger v. Americredit Fin. Svcs., 273 Ga. App. 453, 615 S.E.2d 120 (2005).

- Failure to comply with the Motor Vehicle Certificate of Title Act, (O.C.G.A. § 40-3-1 et seq.,) with respect to the perfection of a security interest does not affect the creation of the security interest which remains a matter of contract between the parties. Spoon v. Herndon, 167 Ga. App. 794, 307 S.E.2d 693 (1983).

While it appeared that O.C.G.A. § 9-3-24, rather than O.C.G.A. § 11-2-725, would most likely apply to defendant collection attorney's state court deficiency action against plaintiff consumer, and it was not for the federal court to say what the Georgia courts would hold, the uncertainty meant there was no intentional unfair conduct and the consumer's Fair Debt Collection Practices Act, 15 U.S.C. § 1692, claim was dismissed; other parts of the Georgia Code, such as O.C.G.A. §§ 10-1-36 and40-3-50, and applicable case law indicated that Georgia's highest courts would most likely hold that the case fell within Ga. U.C.C. art. 9 and not Ga. U.C.C. art. 2. Almand v. Reynolds & Robin, P.C., 485 F. Supp. 2d 1361 (M.D. Ga. 2007).

- Only way to perfect security interest in motor vehicles is by filing under Ga. L. 1961, p. 68 (see now O.C.G.A. Ch. 3, T. 40). General Fin. Corp. v. Hester, 141 Ga. App. 28, 232 S.E.2d 375 (1977); Freeman v. Bentley, 205 Ga. App. 409, 422 S.E.2d 435 (1992).

- O.C.G.A. § 40-3-50(b) does not provide that a security interest is void if the relevant documents are not delivered within 20 days, but states that if delivery is accomplished within 20 days, the perfection of the security interest will relate back to the time of the security's creation. Perkins v. Gilbert, 169 Bankr. 455 (Bankr. M.D. Ga. 1994).

- Effect of Ga. L. 1962, p. 79, § 11 (see now O.C.G.A. § 40-3-50) is that the only way to create security interests in automobiles is by the method provided in that section, which does not apply to or affect dealers holding automobiles for sale, which not only need not have certificate of title, but also pass to buyers in the ordinary course of trade free of the security interest. Sun Ins. Office, Ltd. v. First Nat'l Bank & Trust Co., 113 Ga. App. 782, 149 S.E.2d 753, rev'd on other grounds, 222 Ga. 559, 150 S.E.2d 803 (1966).

- Application substantially complying with filing requirements is effective even though the application contains minor errors which are not seriously misleading. Roberts v. International Harvester Credit Corp., 143 Ga. App. 206, 237 S.E.2d 697 (1977).

- An application for a certificate of title initially listing no security interest holder is not covered by O.C.G.A. § 40-3-50. Kelley v. Citizens Bank (In re Russell), 227 Bankr. 196 (Bankr. M.D. Ga. 1998).

- When a certificate of title provided constructive notice to future debtors that the motor vehicle was encumbered by a security interest in favor of plaintiff, plaintiff's first security interest was superior to defendants' later asserted mechanics' lien. Hull v. Transport Acceptance Corp., 177 Ga. App. 875, 341 S.E.2d 330 (1986).

- When lessee agreed to lease with an option to buy three tractors and, pursuant to subsection (b) of O.C.G.A. § 40-3-50, applied for certificates of title and thereby perfected security interests in the three tractors, but the parties subsequently executed an installment sales contract entitled a "Financing and Security Agreement," but the former lessee failed to reapply with the state revenue commissioner for certificates of title showing lessor rather than lessee as owner of the tractors under the new agreement, the former lessee was not in substantial compliance with the Georgia Motor Vehicle Certificate of Title Act, O.C.G.A. § 40-3-1 et seq., and failed to perfect the lessee's security interest under the installment contract. Load-It, Inc. v. GTE Leasing Corp., 72 Bankr. 13 (N.D. Ga. 1986).

- Lessor under a lease intended as security can perfect the lessor's interest in a motor vehicle by applying for a certificate of title showing the lessor as owner, and when the parties' second agreement is identical to their first agreement, there is not such a change in their relationship as to require the lessor to reapply for a certificate of title showing the lessee, rather than the lessor as owner. Levine v. Leasing Int'l, Inc. (In re Betts), 71 Bankr. 171 (Bankr. N.D. Ga. 1987).

Finance company had a perfected security interest in tractors and was not required under the Georgia Motor Vehicle Certificate of Title Act, O.C.G.A. § 40-3-1 et seq., to reapply for new certificates of title after completion of a financing and security agreement since the certificates already on file listed the names and addresses of the interested parties and accurately designated the company as the holder of the security interest. GTE Leasing Corp. v. Load-It, Inc., 860 F.2d 393 (11th Cir. 1988).

- Lapse of 48 days between the date a security interest was created and the date the certificate of title was perfected created an antecedent debt which was a recoverable preferential transfer under the Bankruptcy Code. Mann v. GMAC (In re Harley), 41 Bankr. 276 (Bankr. N.D. Ga. 1984).

- Use of an unregistered trade name as the owner's name does not defeat a creditor's search for, and the giving of notice to the world of, the existence of the bank's security interest, and does not therefore invalidate the bank's security interest. In re Firth, 363 F. Supp. 369 (M.D. Ga. 1973).

Ga. L. 1961, p. 68 (see now O.C.G.A. Ch. 3, T. 40) is notice statute, having the effect, when complied with, of imputing constructive notice to all who may subsequently acquire an interest in or lien against the property. Franklin Fin. Co. v. Strother Ford, Inc., 110 Ga. App. 365, 138 S.E.2d 679 (1964).

- Ga. L. 1962, p. 79, § 11 (see now O.C.G.A. § 40-3-50) must not be construed as permitting retroactive validity against innocent third parties who have acquired rights for value. First Nat'l Bank & Trust Co. v. Smithloff, 119 Ga. App. 284, 167 S.E.2d 190 (1969).

Late-perfected security interest is not retroactively valid against an innocent third party who acquired the automobile for value. General Fin. Corp. v. Hester, 141 Ga. App. 28, 232 S.E.2d 375 (1977).

Under the UCC, O.C.G.A. §§ 11-9-302(3) (see now O.C.G.A. § 11-9-310),40-3-20, and40-3-50, the rights of the holder of an unperfected security interest in an automobile are subordinate to the rights of an innocent third party who acquires the automobile for value. A party who purchases a car from one who purchased the car at a judicial sale to satisfy a judgment against the owner's spouse is such an innocent party. May v. Macioce, 200 Ga. App. 542, 409 S.E.2d 45, cert. denied, 200 Ga. App. 896, 409 S.E.2d 45 (1991).

Trial court erred in concluding that the security interest holder had a valid, perfected security interest in the car buyer's vehicle that the holder could enforce against the buyer; while the security interest holder ordinarily would have had an enforceable security interest pursuant to O.C.G.A. § 40-3-50, regarding the perfection of security interests, the security interest in the car buyer's vehicle was not perfect and the buyer did not have constructive notice; the state motor vehicle department made a clerical error and did not list the security interest on the certificate of title issued to the buyer, and the buyer showed that a statutory exception existed that allowed the buyer to purchase the car free of the security interest. Metzger v. Americredit Fin. Svcs., 273 Ga. App. 453, 615 S.E.2d 120 (2005).

- In order to perfect a security interest in a vehicle, a pawnbroker, as a used car dealer, must follow the requirements specified in O.C.G.A. § 40-3-50. Cobb Ctr. Pawn & Jewelry Brokers, Inc. v. Gordon, 242 Ga. App. 73, 529 S.E.2d 138 (2000).

- When bank forwarded the bank's application for the certificate of title in the truck to the State Revenue Commissioner, and the certificate of title was issued to the bank on November 7, 1990, the bank's purchase money security interest became perfected some time prior to the issuance of the certificate of title. United States v. Specialty Contracting & Supply, Inc., 140 Bankr. 922 (Bankr. N.D. Ga. 1992).

- Creditor failed to deliver necessary documentation to the county motor vehicle licensing department within 20 days of the initial delivery of possession of the car to the debtor as required under O.C.G.A. § 40-3-50(b); therefore, the creditor's security interest in the vehicle could be set aside and recovered by the trustee along with any payments thereunder pursuant to 11 U.S.C. §§ 544(a) and 549. Gordon v. Am. Honda Fin. Corp. (In re Vollmer), Bankr. (Bankr. N.D. Ga. July 7, 2005).

Creditor failed to deliver the necessary documentation to the county motor vehicle licensing department within 20 days of the initial delivery of possession of the car to the debtor as required under O.C.G.A. § 40-3-50(b), which precluded the creditor's reliance upon the affirmative defense of 11 U.S.C. § 547(c) to the trustee's avoidance action. Gordon v. Am. Honda Fin. Corp. (In re Vollmer), Bankr. (Bankr. N.D. Ga. July 7, 2005).

- When creditor of car owner had a perfected security interest in the car, and the name of the creditor as the holder of a security interest was shown on an existing certificate of title issued by the jurisdiction where the car was located when the security interest attached, the creditor's security interest perfected in North Carolina continued perfected in Georgia, and was valid against subsequent transferees. United Carolina Bank v. Sistrunk, 158 Ga. App. 107, 279 S.E.2d 272 (1981).

- Lender's perfected security interest in a vehicle was constructive notice to the liability insurer of a third-party tortfeasor. JCS Enter., Inc. v. Vanliner Ins., 227 Ga. App. 371, 489 S.E.2d 95 (1997).

- Lease agreement evidenced by a certificate of title in which the lessor was denominated the "owner," while containing no express identification of the "owner's" security interest, constituted a perfected security interest. Load-It, Inc. v. VTCC, Inc., 774 F.2d 1077 (11th Cir. 1985).

- Judicial liens created either contemporaneously or after the creation of the security agreement are subordinate to the perfected security interest. GMAC v. Busenlehner, 918 F.2d 928 (11th Cir. 1990), cert. denied, 5 U.S. 949, 111 S. Ct. 2251, 114 L. Ed. 2d 492 (1991).

- Security interest in motor cranes operated by separate motor of a truck is not properly perfected unless it is noted on the motor crane's certificate of title. Citizens & S. Nat'l Bank v. Georgia Steel, Inc., 25 Bankr. 796 (Bankr. M.D. Ga. 1982).

- Lender's properly perfected security interest in a vehicle extended to after-acquired parts and repairs, and was superior to a repair shop's mechanic's lien and claim for unjust enrichment regarding parts affixed to the vehicle. Barnes v. GMAC, 191 Ga. App. 201, 381 S.E.2d 146 (1989).

- "Double-wide" mobile home unit which has become permanently attached to the land on which the mobile home is placed ceases to be a "vehicle" under the Motor Vehicle Certificate of Title Act, O.C.G.A. § 40-3-1 et seq., so that a security interest is obtained by recording a security deed to the land and the "improvements thereon" rather than placing a lien on the mobile home under the vehicle title act. Walker v. Washington, 837 F.2d 455 (11th Cir. 1988).

Since the resident failed to offer sufficient evidence that the mobile home was the resident's principal dwelling or that the mobile home was permanently affixed to real estate, or even that the resident had any ownership interest in the mobile home at the time of the loan application, a security interest was perfected under O.C.G.A. § 40-3-50. Griswell v. Columbus Fin. Co., 220 Ga. App. 803, 470 S.E.2d 256 (1996).

Cited in Green v. King Edward Employees' Fed. Credit Union, 373 F.2d 613 (5th Cir. 1967); Capital Auto. Co. v. Continental Credit Corp., 117 Ga. App. 451, 160 S.E.2d 836 (1968); GMAC v. Whisnant, 387 F.2d 774 (5th Cir. 1968); First Nat'l Bank & Trust Co. v. McElmurray, 120 Ga. App. 134, 169 S.E.2d 720 (1969); Frank Jackson Motors, Inc. v. Mortgage Enters., Inc., 124 Ga. App. 798, 186 S.E.2d 464 (1971); In re Thompson, 349 F. Supp. 990 (M.D. Ga. 1972); Cooper v. Citizens Bank, 129 Ga. App. 261, 199 S.E.2d 369 (1973); McMath v. Columbus Bank & Trust Co., 136 Ga. App. 723, 222 S.E.2d 177 (1975); Rome Bank & Trust Co. v. Bradshaw, 143 Ga. App. 152, 237 S.E.2d 612 (1977); Szczepanski v. GMAC, 558 F.2d 732 (5th Cir. 1977); McClintock v. GMAC, 240 Ga. 606, 241 S.E.2d 831 (1978); McConnell v. Barrett, 154 Ga. App. 767, 270 S.E.2d 13 (1980); Harris v. Ford Motor Credit Co. (In re Smith), 7 Bankr. 574 (Bankr. M.D. Ga. 1980); Flatau v. Bank of Banks County (In re Stewart), 9 Bankr. 32 (Bankr. M.D. Ga. 1980); Turner v. Jackson, 157 Ga. App. 31, 276 S.E.2d 92 (1981); Tidwell v. Chrysler Credit Corp. (In re Blackburn), 90 Bankr. 569 (Bankr. M.D. Ga. 1987); SunTrust Bank v. Atlanta Classic Cars, Inc., 249 Ga. App. 726, 549 S.E.2d 523 (2001); Shepard v. State of Ga., 267 Ga. App. 604, 600 S.E.2d 691 (2004).

OPINIONS OF THE ATTORNEY GENERAL

Debtor's signature.

- Debtor is not required to sign the notice of lien or security interest filed under Ga. L. 1961, p. 68. 1967 Op. Att'y Gen. No. 67-48 (see now O.C.G.A. Ch. 3, T. 40).

- Holder of a purchase money security interest in a certain vehicle may not substitute a different vehicle in the contract and have the date of perfection of the security interest in the substituted collateral relate back to the date the security interest in the first vehicle was perfected. 1983 Op. Att'y Gen. No. 83-3.

- Filing of an execution issued on a judgment on the general execution docket does not afford notice to a subsequent security interest holder in a motor vehicle and the security interest holder's lien is not subject to the prior judgment lien. 1968 Op. Att'y Gen. No. 68-95.

- In order to perfect a dealer's security interest in a vehicle, a used car dealer must follow the requirements specified in O.C.G.A. Ch. 3, T. 40; the method for perfecting a security interest as described in that chapter is exclusive, and such security interests in motor vehicles as to which certificates of title must be obtained are exempt from the provisions of law which otherwise require or relate to the recording or filing of security interests. 1990 Op. Att'y Gen. No. 90-8.

Used car dealer who has a security interest in a vehicle may exercise all rights afforded to the dealer by the security agreement including repossession, despite not having perfected the dealer's security interest. 1990 Op. Att'y Gen. No. 90-8.

- In order for liens or security interests in manufactured homes to be valid against subsequent creditors of the owner, subsequent transferees and subsequent security interests and liens, the lien or security interest must be perfected in accordance with the Motor Vehicle Certificate of Title Act, O.C.G.A. § 40-3-1 et seq. 2000 Op. Att'y Gen. No. 2000-8.

RESEARCH REFERENCES

Am. Jur. 2d.

- 7A Am. Jur. 2d, Automobiles and Highway Traffic, §§ 36, 37, 45, 56.

- 60 C.J.S., Motor Vehicles, § 103 et seq. 72 C.J.S., Pledges, § 13. 78 C.J.S., Sales, § 576 et seq.