BMW Financial Services, N.A., LLC v. Felice
2017 IL App (2d) 160397
Ill. App. Ct.2017Background
- BMW Financial held a perfected security interest in a 2011 Porsche Panamera under a retail installment contract with Bruce Grant; an original title naming BMW as first lienholder issued April 4, 2012.
- Grant submitted a fraudulent lien-release letter to the Secretary of State; the Secretary issued a duplicate certificate of title on November 16, 2012, that did not list BMW but bore the legend that it "may be subject to the rights of a person under the original certificate."
- Grant assigned the duplicate certificate to Auto Showcase on November 20, 2012; Auto Showcase searched Secretary of State records and found no recorded lien.
- Auto Showcase sold the car to Felice on November 29, 2012; a mandamus action later resulted in the Secretary of State issuing title to Felice (BMW was not a party to that mandamus).
- BMW sued in replevin to recover possession; Felice was later dismissed after Auto Showcase repurchased the vehicle. The trial court granted BMW’s summary judgment and ordered return of the Porsche; Auto Showcase appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Auto Showcase took title free of BMW’s perfected Illinois security interest when Grant obtained a duplicate title omitting BMW | BMW: Its security interest remained perfected and superior because it had obtained the original certificate of title and never released its lien | Auto Showcase: The duplicate certificate that omitted BMW’s lien removed BMW’s priority; buyer relied on Secretary of State records | Court: Duplicate certificate does not defeat the original; statute requires legend that duplicate may be subject to rights under original, so BMW’s perfected lien remained superior |
| Whether UCC §9-337 frees Auto Showcase / subsequent buyer from an Illinois lien | BMW: §9-337 inapplicable because it applies only to security interests perfected under another jurisdiction’s law | Auto Showcase: §9-337 should apply or else produce unfair interstate/intrastate results | Court: §9-337 expressly covers liens perfected under other jurisdictions only; not applicable; no absurd-result exception requires rewriting statute |
| Whether Felice was a buyer in the ordinary course who took free of BMW’s lien | BMW: Felice (and Auto Showcase) did not create the lien; UCC buyer-in-ordinary-course protection does not apply to purchasers who take from the debtor when the lien was created by the seller | Auto Showcase: Relies on cases recognizing buyer-in-ordinary-course protections | Court: Precedents cited (Mar-K-Z; Helland) are inapplicable because they involved buyers taking free of liens created by their seller; not the situation here |
| Whether equitable defenses (fraud/unjust enrichment) bar BMW’s recovery | BMW: Did not commit fraud; enforcing its perfected lien does not produce unjust enrichment | Auto Showcase: Equity should protect purchasers who relied on state records | Court: Equity does not bar BMW’s replevin because BMW did not engage in fraud and enforcement does not unjustly enrich BMW |
Key Cases Cited
- Herman v. First Farmers State Bank of Minier, 73 Ill. App. 3d 475 (1979) (holder of a perfected security interest has priority over subsequent purchasers and unsecured creditors)
- American Nat’l Bank & Trust Co. of Chicago v. Mar-K-Z Motors & Leasing Co., 57 Ill. 2d 29 (1974) (buyer in ordinary course takes free of a security interest created by its seller)
- Massey-Ferguson, Inc. v. Helland, 105 Ill. App. 3d 648 (1982) (application of buyer-in-ordinary-course principles in vehicle sale context)
- Carroll v. Curry, 392 Ill. App. 3d 511 (2009) (equitable principles may bar replevin when enforcing legal rights would sanction fraud or result in unjust enrichment)
- Adams v. Greg Weeks, Inc., 327 Ill. App. 3d 380 (2002) (equity can inform replevin outcomes but does not override valid, perfected security interests)