TCA § 55-3-125 — Liens and encumbrances — Filing

No conditional sales contract, chattel mortgage, or other lien or encumbrance or title retention instrument upon a registered vehicle, other than a lien dependent upon possession entered into after March 1, 1951, or a lien of the state for taxes established pursuant to title 67, chapter 1, part 14, shall be valid against the creditors of an owner or subsequent purchasers or encumbrancers, until the requirements of this section and § 55-3-126 have been complied with, unless such creditor, purchaser, or encumbrancer has actual notice of the prior lien. Acts 1951, ch. 70, § 68 (Williams, § 5538.168); Acts 1978, ch. 686, § 3; T.C.A. (orig. ed.), § 59-326. Cross-References. Garagekeeper's lien, § 66-19-103 . Perfection of lien or security interest, § 55-3-126 . Textbooks. Tennessee Jurisprudence, 4 Tenn. Juris., Automobiles, §§ 24, 29, 31. Law Reviews. Principal Security Devices in Tennessee, 22 Tenn. L. Rev. 392. NOTES TO DECISIONS 1. Tax Lien Statute Not Repealed. 2. Application of Section — Unregistered Vehicle. 3. Effect of Noncompliance — Creditors of Buyer. 4. —Security Interest in Dealer Inventory. 5. —Replevin Suit. 6. Priority of Liens. 7. Execution Liens. 8. Possessory Ownership Interest. 9. Vehicles Not Held as Inventory. 10. Mobile Homes. 11. “Dependent-upon-Possession” Exception. 12. Perfection of a Security Interest. 1. Tax Lien Statute Not Repealed. Provisions of Tennessee Motor Vehicle Title and Registration Law relating to filing of liens and encumbrances upon motor vehicles did not repeal provisions of §§ 66-21-201 — 66-21-205 relative to filing of notice of federal tax liens and were not repugnant thereto. Atlas Finance Co. v. Wilkerson, 214 Tenn. 619, 382 S.W.2d 529, 1964 Tenn. LEXIS 514 (1964). 2. Application of Section — Unregistered Vehicle. A motor vehicle is not excluded from the application of this section, so as to permit the establishment of a lien not shown on the certificate of title, by failure to register the vehicle. In re Wallace, 251 F. Supp. 581, 1966 U.S. Dist. LEXIS 6912 (E.D. Tenn. 1966). 3. Effect of Noncompliance — Creditors of Buyer. The fact that the notarized bill of sale furnished by the seller showed on its face a lien of holder of conditional sale contract was not sufficient to give notice to creditors of bankrupt buyer of automobile. In re Crosson, 226 F. Supp. 944, 1963 U.S. Dist. LEXIS 6982 (E.D. Tenn. 1963). Under Tennessee law, no conditional sales contract or other lien or encumbrance upon a registered vehicle, other than a lien dependent upon possession, shall be valid against creditors of the owner unless the lien is noted on the certificate of title. In re Crosson, 226 F. Supp. 944, 1963 U.S. Dist. LEXIS 6982 (E.D. Tenn. 1963); In re Custom Caps, Inc., 1 B.R. 99, 1979 Bankr. LEXIS 844 (Bankr. E.D. Tenn. 1979). 4. —Security Interest in Dealer Inventory. This section is not applicable to the used or trade-in inventory vehicles of a dealer and one claiming a security interest in such vehicles for floor-plan loans made to such dealer was not required to perfect such interest in the manner required in § 55-3-126 . In re Vaughn, 283 F. Supp. 730, 1968 U.S. Dist. LEXIS 8460 (M.D. Tenn. 1968). 5. —Replevin Suit. Assignee of vendor of truck sold to Georgia resident was not barred from instituting replevin suit for recovery of truck on the ground that vendee in registering truck in Tennessee failed to state that truck was subject to lien for unpaid purchase price where vendee removed truck to Tennessee without knowledge of vendor or its assignee. Lillard v. Yellow Mfg. Acceptance Corp., 195 Tenn. 686, 263 S.W.2d 520, 1953 Tenn. LEXIS 415 (1953). 6. Priority of Liens. Rights of party who properly had lien noted on certificate of title were superior to those of others who had loaned money on car but who had not complied with statute and who delayed sending lien notice to department. Manufacturers Acceptance Corp. v. Vaughn, 43 Tenn. App. 9, 305 S.W.2d 513, 1956 Tenn. App. LEXIS 148 (Tenn. Ct. App. 1956). Where dealer took used car in trade and paid off lien and then sold the vehicle giving the purchaser a bill of sale upon execution of a title retention contract which contract was not registered, and the purchaser subsequently obtained the certificate of title from the original owner to whom the lienor had forwarded the certificate of title, dealer had not complied with statute and had no rights as against parties subsequently making loans on car. Manufacturers Acceptance Corp. v. Vaughn, 43 Tenn. App. 9, 305 S.W.2d 513, 1956 Tenn. App. LEXIS 148 (Tenn. Ct. App. 1956). Notice of federal tax lien filed under §§ 66-21-201 — 66-21-205 against all property of taxpayer in county where property was situated had priority over chattel mortgage subsequently filed under Tennessee Motor Vehicle and Title Registration Law by finance company which took chattel mortgage on vehicle as security. Atlas Finance Co. v. Wilkerson, 214 Tenn. 619, 382 S.W.2d 529, 1964 Tenn. LEXIS 514 (1964). A “mobile home” that has had its wheels removed and has been affixed to realty is not subject to the certificate of title provisions for motor vehicles under chapters 1 and 3 of this title and therefore plaintiff's security interest, which was noted on a certificate of title to the home and was perfected in accordance with those provisions could not take priority over defendant's real estate mortgage, which was created by a deed of trust properly recorded in accordance with state mortgage law and with former § 47-9-401 . Associates Capital Corp. v. Cookeville Production Credit Asso., 569 S.W.2d 474, 1978 Tenn. App. LEXIS 296 (Tenn. Ct. App. 1978). An application for notation of lien on the title to an automobile which was properly filed but subsequently lost due to error by the filing officials of the state of Tennessee did not perfect a security interest superior to a trustee in bankruptcy. Because Tennessee law required both filing and notation of the lien on an automobile title for perfection of a security interest, the trustee could defeat the putative lienor and sell the automobile free of the lien. In re York, 43 B.R. 36, 1984 Bankr. LEXIS 5018 (Bankr. M.D. Tenn. 1984). 7. Execution Liens. As long as the statutory requirements governing execution liens and writs of execution are observed, persons claiming an execution lien need not comply with the filing requirements of Article Nine of the Commercial Code, T.C.A. § 47-9-101 et seq., because execution liens are not consensual security interests created by contract, and compliance with motor vehicle title and registration statutes is not required since execution liens depend on possession. Keep Fresh Filters v. Reguli, 888 S.W.2d 437, 1994 Tenn. App. LEXIS 503 (Tenn. Ct. App. 1994). 8. Possessory Ownership Interest. This section bore no relevance to the transfer of a possessory ownership interest in a vehicle. In re Crabtree, 39 B.R. 713, 1984 Bankr. LEXIS 6065 (Bankr. E.D. Tenn. 1984). 9. Vehicles Not Held as Inventory. With respect to a motor vehicle in Tennessee not held as inventory, perfection of a security interest is accomplished by notation of a lien on the vehicle's certificate of title. In re Armstrong, 56 B.R. 781, 1986 U.S. Dist. LEXIS 30616 (W.D. Tenn. 1986). 10. Mobile Homes. Security interests in mobile homes which complied with T.C.A. § 47-9-302 rather than T.C.A. § 55-3-125 and 55-3-126 were unperfected even though the mobile homes had been purchased for use in a motel business and had not been so occupied. In re Hughes, 58 B.R. 452, 1986 Bankr. LEXIS 6557 (Bankr. E.D. Tenn. 1986). Where a lender's security interest was perfected by notation of its lien on the certificate of title in accordance with the Tennessee Motor Vehicle Title and Registration Law, the lender was not required to change the manner of perfection after the mobile home was affixed to realty. Roberts v. Green Tree Fin. Corp. (In re Cassady), 197 B.R. 846, 1996 Bankr. LEXIS 772 (Bankr. E.D. Tenn. 1996). 11. “Dependent-upon-Possession” Exception. The “dependent-upon-possession” exception means liens depending upon possession for existence and not depending upon possession for perfection and the notation of a lien on the title of a motor vehicle is the exclusive method of perfecting that lien. In re Groves, 75 B.R. 227, 1987 U.S. Dist. LEXIS 6228 (M.D. Tenn. 1987). 12. Perfection of a Security Interest. State law requires both filing and notation of a lien on an automobile title for perfection of a security interest, and if the filing does not lead to the notation of the lien on the title, perfection does not occur. In re Clark, 112 B.R. 226, 1990 Bankr. LEXIS 652 (Bankr. E.D. Tenn. 1990). A trustee in bankruptcy could not avoid, pursuant to 11 U.S.C. § 544 , a creditor's security interest in a mobile home, where the lien had been created and perfected under T.C.A. § 47-9-101 et seq. by the time the debtor filed his petition in bankruptcy. Farmer v. Green Tree Serv. LLC (In re Snelson), 330 B.R. 643, 2005 Bankr. LEXIS 1851 (Bankr. E.D. Tenn. 2005).