The action herein is for the wrongful conversion of an automobile. It is before the court on cross-motions for summary judgment confined to the issue of liability.
The essential facts are not in dispute. On April 30, 1965 West Side Auto Sales, a used car dealer in New York, sold to one Jessie Cordova a 1963 Oldsmobile which was in turn assigned under a security agreement to defendant Jefferson Credit Corporation (hereinafter Jefferson), a finance company doing business in New York. Cordova, being a New Jersey resident, made application to the New Jersey Division of Motor Vehicles for the certificate of ownership. On May
28, 1965 the Division issued Cordova the original certificate of ownership indicating that the motor vehicle was subject to a lien in favor of Jefferson.
Cordova paid Jefferson the first seven monthly installments under the security agreement. He failed to pay the installment due in December 1965. Long prior to this default, and without the knowledge of Jefferson, Cordova forged a satisfaction of Jefferson's lien on the original certificate of ownership by affixing thereto a stamp "Paid," "Jefferson Credit Corp." with an illegible signature. On the strength of this forged satisfaction, Cordova obtained a loan from the Jersey Loan Company using the car as collateral. A new certificate of ownership dated July 9, 1965 was issued to Cordova subject to a security interest in favor of the Jersey Loan Company. Thereafter, Cordova in a trade-in transaction sold the vehicle to Key Ford, Inc., an automobile dealer. As part of this transaction the lien in favor of Jersey Loan Company was satisfied and the certificate of ownership was marked "Paid" on September 17, 1965. On September 23, 1965 there was an assignment in favor of Key Ford, Inc. and a new certificate of ownership was issued by the Division of Motor Vehicles in the name of Key Ford, Inc. on that date. On December 18, 1965 Key Ford, Inc. sold the automobile to plaintiff Reda M. Muir. The sale was financed by the Ford Motor Credit Corporation (hereinafter Ford), a plaintiff herein. On December 23, 1965 a new certificate of ownership was issued showing Muir to be the owner subject to the security interest of Ford.
As a result of independent investigations made after Cordova defaulted in December, Jefferson found that plaintiff Muir had possession of the automobile. During the night of February 8, 1966 defendant's agents seized the automobile without Muir's or Ford's knowledge and thereafter sold it to a New York dealer.
Plaintiffs contend generally that Jefferson's seizure of the car was inconsistent with their respective ownership rights
and security interest in the car and constituted a tortious conversion. Firstly, it is advanced that apart from the question of who has a superior right to the automobile, defendant's seizure and disposal of the automobile did not comply with the procedures called for under New Jersey law. Secondly, it is asserted that the ownership rights and security interest of the respective plaintiffs are superior to defendant's security interest. Lastly, plaintiffs contend that defendant is estopped from asserting a superior right in the automobile because its conduct made it possible for Cordova to commit the fraud.
The last two issues will be approached first. The perfection of a security interest in an automobile is governed by Title 39 of the New Jersey Revised Statutes. In re Ferro Contracting Co. , 380 F.2d 116 (3 Cir. 1967), cert. den. Barbato v. Livingston Nat. Bank , 389 U.S. 974, 88 S. Ct. 475, 19 L. Ed 2d 466 (1967). This result is dictated directly by the terms of the Uniform Commercial Code, viz:
The filing provisions of this Chapter do not apply to a security interest in property subject to a statute * * * of this state * * * which requires indication on a certificate of title of such security interests in such property. [ N.J.S.A. 12A:9-302(3)]
A security interest in property covered by a statute described in subsection (3) can be perfected only * * * by indication of the security interest on a certificate of title or a duplicate thereof by a public official. [ N.J.S.A. 12A:9-302 (4); emphasis added]
The requirements for perfection of a security interest in an automobile sold in New Jersey are spelled out in N.J.S.A. 39:10-11(J):
The notation of the name and business or residence address of a secured party or his assignee * * * on the certificate of ownership, as provided in sections 39:10-8 and 39:10-9 of this Title [sections dealing with new and used cars respectively], and the presentation to ...