Untitled Texas Attorney General Opinion ( 1940 )

TEIEA~LTORNEY GENEHAL
OF TEXAS
Honorable Homer Garrison, Jr.
Director, Department of Public Safteg
CainpMabrg
Austin, Texas
Dear Sir: Attention: Mr. Ralph L. Buell
Opinion No. 0-2073
Re: liotationon Certificate of
Title of lien to s~ecure
"future aebts"~;under H.B.
407, Acts of the 46th Legls-
lature..~
This is in dply to your letter dated March 11, 1940,
in which you ask the following question:
"Under the provisions of Rouge Bill 407;
the-certificate of Title Act, Shall the Depart-
tientof Public-~Safetyissue a certificate of
title against an automobile, the application
for which cites under the heading of liens.a
specific sum of money, together with the fur-
ther notation "and future debts'?"
We assume that there is no doubt in your mind that it
is proper to Issue a certifFcate of title when the application
lists a lien for a specific sum of money only, but that you are
concerned with whether or not it is proper for a lien to be
listed which is for a specific sum of money and 'alsofor "future
debts".
The parts of Rouse Bill 407, Acts of the Fortydixth
Legislature, (Article 1426-l of Vernon's AnnotatledPenal Code
of Texas) known as the Certificate of Title A@", with which
we are concerned in answering your question are :a8 follows:
"Section 1. This Act shall by&referred to,
cltea,-landknown as the 'Certificate of Title.
Act', and in the enactment hereof it is hereby
declared to be the legislative ,lntent and public
policy of this State to lessen and prevent the
theft of motor vehicles, and t@e Importation
into this State of and traffic'in stolen motor
Honorable Homer Garrison, Jr., page 2 0-2073
vehicles, and thewe of encumbered motor ve-
hicles without the enforced disclosure to the
purchaser of any and all liens for which any
such motor vehicle or the tires, radios, parts,
or appliances thereof stands assecurity, and
the provisions hereof, singularly and collec-
tively, are to be liberally construed to that
end. The following terms as herein defined shall
control In the enforcement and construction of
this Act. ”
“Sec. 3. The term 'Lien' means every kind
of lease, conditional sales contract, deed of
trust, chattel mortgage, trust receipt, reserva-
tion of title, or other written instrument of
whatsoever kind OP character whereby an inter-
est, other than absolute title, Is sought to
be held or given in a motor vehicle, also any
lien created or given by Constitution or Statute."
Section 24, par. (g). "The names and ad-
dresses and dates of any liens on the motor ve-
hicle, In chronological order of recordatlon."
Section 43. "All liens on motor vehicles
shall take priority according to the order of
time the same are recorded on the receipt or
certificate of title of all such recordings to
be made by the Department."
Section 44, "No lien on any motor vehicle
to which a receipt or certificate of title has
been Issued shall be'valld as against third
parties without actual knowledge thereof, or
enforceable,against the motor vehicle of any
such third parties, unless the notation of said
lien shall have been caused to be made on re-
ceipts and certificates of title on said motor
vehicle, as provided in this Act."
Section 46. "Only liens noted on a re-
ceipt OP certificate of title be valid as a-
gainst creditors of the mortgagor in so far as
concerns the motor vehicle."
If a valid lien can be created to cover "future debts"
we think It is proper to Issue a certificate of title listing
a lien for a specific sum of money and also for "future debts".
The appellate court cases in Texas are clear on this question.
In the case of Frelbetigv. Magale, 70 Tex. 116, 7 S.W. 634, the
Supreme Court of Texas said:
Honorable Homer Garrison, Jr., page 3 O-2073
"But the appellee claims that the mortgage
does not secure the debts for which the trustee
sold the property; that the mortgage could not
secure future debts, and, if it could, the future
debts contemplated by the mortgage were to be of
the same kind proviaed for In terms by the mort-
gage e A mortgage can be made to cover future
debts, and such a mortgage will be good not only
between the parties, but as to purchasers from
the mortgagor with notice of the mortgage. A
mortgage providing for the security of future
debts puts persons dealing with the mortgagor
in reference to the mortgaged property upon no-
tice that such debts may exist ana bind the prop-
erty. They must inqui,reas to this fact, or pur-
chase at their peril. 1 Jones, Mortg. i i 364,
370-372;~Lovelace V. Webb, 62 Ala. 271; Wltczlnski
v. Everman, 51 Miss, 846, . D ."
In the case of H. W. Williams'& Co. v. Bell, (Tex.
Clv. App.) 8 S.W. (2a) 743, the court said:
' . . ; It is well settled that a valid
mortgage can be given to secure the future
advances, and that the same will be effective,
not only against the mortgagor, but as against
subsequent purchasers and lienholders with no-
tice theretif. Freiberg v."Magale; 70 Tex. 116,
7 S-W; ,684;Bullard v.'Stewart, 46 Tex. Clv.
App. 49;.102 S.W,,174; Gross-v. Chittlm (Tex, Civ.
App.) loo s.w, 1006. It is also the rule that,
In order to cover such future advances, It is not
necessary that the mortgage show the amount of
such Indebtedness, or to definitely fix the time
within which the same shall accrue. . . . 0
In the case of Poole v. Cage, (Tex, Civ. App.) 214
S.W. 500, the court said:
8,
0 D D It has long been a well-established rule
of decision in this state that a recorded mortgage,
which recites that It Is given to secure future
Indebtedness that in contemplation of the parties
may be incurred by the mortgagor to the mortgagee
is a valid mortgage, not only between the parties
to the contract, but as to subsequent purtihasers
from the mortgagor, Any subsequent purchaser
from a mortgagor rmst take notice of such con-
tract or agreement as to future indebtedness, and
any advances made or indebtedness incurred in pur-
- . . .
Honorable Homer Garrlson, Jr., page 4 O-2073
suance to such contract, whether before or after
the subsequent sale or lncumbrance, are protected
by a prior and superior lien upon the property.
. . . . . .
Some other authorities that make the same or similar
statements of the law are Brunson v. Dawson State Bank, (Tex.
Civ. App.) ,175.S.W. 438; Askey V. Stroua, (Tex. Clv. App.)
240 S.W. 339; Massachusetts Mutual Life Co.'v. Stockyards
National Bank, (Tex. Clv. App.) 50 S.W. ,425;Cason; Monk
& Co. ir.Baker, (Tex. Clv. App.) 62 S.W. 592; 9 Tex. Jur.
135, par 47; and 14 Cor. Jurls, Sec. 722.
We have heretofore held in our Opinion No. O-1539 that
the certificate of title act supersedes and repeals the general
recording statute as to motor vehicles, and that it is unneces-
sary for a lien on an automob,ileto be recorded In the office of
the Count Clerk*,and the "Certificate of Title Act" says in
% 4 and 46 that only liens on a receipt or a certificate
‘s'ectlons
of title shall be valid as against third partie.sor a5 against
creditors of the mortgagor. .As the courts of this State hold
that a lien for "future debts" Is valid, It certainly follows
that the mortgagee, In order to put subsequent purchasers of the
property on notice, has a right to have that lien noted on the
certificate of title.
Our answer to your questfon is that the Department of
Public Safety should Issue a certificate of title showing a
lien for a specific sum of money and for "future debts" If the
application states that the lien Is for a specific sum of money
and for "future dews”.
The foregoing represents the considered opinion of this
department.
Yours very truly
ATTORNEY GENERAL OF TEXAS
Bg s/Cecil C. Rotsch
Cecil C. Rotsch
Assistant
CCR:GO-:wc
APPROVEO APR 1, 1940
s/Gerald C. Mann
ATTORNEYGENERAL OFTFXAS
Approved Opinion CommFttee By df3WB Chairman