O.C.G.A. § 40-3-50 (2019)

Annotations

Editor’s notes. 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local law enacted pursuant to Code Section 40-2-21, which is in conflict with the provisions of this Act shall stand repealed on the effective date of this Act.”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. Law reviews. 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

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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 Ga. App. LEXIS 497 (1989). Exception. - 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 Ga. App. LEXIS 336 (2005), cert. denied, No. S05C1525, 2005 Ga. LEXIS 552 (Ga. Sept. 19, 2005). Creation of security interest matter of contract between parties. - 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 Ga. App. LEXIS 2619 (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 and

40-3-50, 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, 2007 U.S. Dist. LEXIS 31907 (M.D. Ga. 2007). Chapter as sole means of perfection. - Only way to perfect security interest in motor vehicles is by filing under Ga. L. 1961, p. 68 (see now O.C.G.A. § 40-3-1 et seq.). General Fin. Corp. v. Hester, 141 Ga. App. 28, 232 S.E.2d 375, 1977 Ga. App. LEXIS 1742 (1977); Freeman v. Bentley, 205 Ga. App. 409, 422 S.E.2d 435, 1992 Ga. App. LEXIS 1202 (1992). Failure to deliver documents. - 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 B.R. 455, 1994 Bankr. LEXIS 997 (Bankr. M.D. Ga. 1994). Section inapplicable to automobile dealers. - 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, 1966 Ga. App. LEXIS 1204, rev’d, 222 Ga. 559, 150 S.E.2d 803, 1966 Ga. LEXIS 553 (1966). Minor errors on application tolerated. - 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 Ga. App. LEXIS 2248 (1977). Application initially listing no security interest holder. - 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 B.R. 196, 1998 Bankr. LEXIS 1468 (Bankr. M.D. Ga. 1998). Certificate of title superior to later asserted mechanics’ lien. - 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 Ga. App. LEXIS 1565 (1986). Reapplication for certificates of title when new agreement is executed. - 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 B.R. 13, 1986 U.S. Dist. LEXIS 23929 (N.D. Ga. 1986). Reapplication unnecessary. - 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 B.R. 171, 1987 Bankr. LEXIS 330 (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, 1988 U.S. App. LEXIS 15434 (11th Cir. 1988). Lapse between creation of interest and perfection. - 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 B.R. 276, 1984 Bankr. LEXIS 5395 (Bankr. N.D. Ga. 1984). Bank’s security interest survives owner’s use of unregistered trade name. - 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, 1973 U.S. Dist. LEXIS 12015 (M.D. Ga. 1973). Ga. L. 1961, p. 68 (see now O.C.G.A. § 40-3-1 et seq.) 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. App. LEXIS 632 (1964). Rights of innocent third-party purchasers. - 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 Ga. App. LEXIS 1076 (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 Ga. App. LEXIS 1742 (1977).

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Under the UCC, O.C.G.A. §§ 11-9-302(3) (see now O.C.G.A. § 11-9-310), 40-3-20, and 40-3-50, 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, 1991 Ga. App. LEXIS 1072 (1991), cert. denied, No. S91C1480, 1991 Ga. LEXIS 585 (Ga. Sept. 6, 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 Ga. App. LEXIS 336 (2005), cert. denied, No. S05C1525, 2005 Ga. LEXIS 552 (Ga. Sept. 19, 2005). Pawnbroker as used car dealer. - 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 Ga. App. LEXIS 93 (2000). When security interest perfected. - 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 B.R. 922, 1992 Bankr. LEXIS 830 (Bankr. N.D. Ga. 1992). Consequences of failure to perfect security interest within 20 days. - 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), No. A03-81803-REB, No. A03-81803-REB, No. 04-6490, 2005 Bankr. LEXIS 1623 (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), No. A03-81803-REB, No. A03-81803-REB, No. 04-6490, 2005 Bankr. LEXIS 1623 (Bankr. N.D. Ga. July 7, 2005). Security interest perfected in other state. - 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 Ga. App. LEXIS 2097 (1981). Perfected security interest was constructive notice. - Lender’s perfected security interest in a vehicle was constructive notice to the liability insurer of a third-party tortfeasor. JCS

Enters. v. Vanliner Ins., 227 Ga. App. 371, 489 S.E.2d 95, 1997 Ga. App. LEXIS 891 (1997). Lease agreement mentioning ownership. - 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, 1985 U.S. App. LEXIS 24420 (11th Cir. 1985). When judicial liens subordinate to perfected security interest. - 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, 1990 U.S. App. LEXIS 20994 (11th Cir. 1990), cert. denied, 500 U.S. 949, 111 S. Ct. 2251, 114 L. Ed. 2d 492, 1991 U.S. LEXIS 2986 (1991). Motor crane operated by separate motor. - 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 B.R. 796, 1982 Bankr. LEXIS 5163 (Bankr. M.D. Ga. 1982). After-acquired parts and repairs. - 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 Ga. App. LEXIS 497 (1989). Permanently attached mobile home not “vehicle.” - “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, 1988 U.S. App. LEXIS 1665 (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 Ga. App. LEXIS 254 (1996).

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. § 40-3-1 et seq.). Substitution of vehicles in contract. - 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. Security interest not subject to prior judgment lien. - 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. Used car dealers. - 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. § 40-3-1 et seq.; 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

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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. Manufactured homes. - 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. C.J.S. 60 C.J.S., Motor Vehicles, § 103 et seq.

72 C.J.S., Pledges, § 13. 78 C.J.S., Sales, § 576 et seq.