Dolores Zepeda v. Central Motors, Inc. ( 2022 )

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.
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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
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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
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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.”
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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. . . .
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(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.
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COUNSEL FOR APPELLANT:
Joseph Rugg
David Noble
Morgan & Morgan, PLLC
COUNSEL FOR APPELLEE:
R. Craig Reinhardt
Reinhardt & Associates, PLC
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