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 after Grant executed a retail installment contract and BMW applied for a certificate of title listing BMW as first lienholder.
- Grant submitted a fraudulent lien-release letter to the Illinois Secretary of State and obtained a duplicate certificate of title that omitted BMW as lienholder but stated it "may be subject to the rights of a person under the original certificate."
- Grant assigned the duplicate certificate to Auto Showcase, which purchased the car and, after searching Secretary of State records that showed no lien, sold the vehicle to Felice.
- BMW Financial notified the Secretary of State that the lien release was fraudulent; Auto Showcase later obtained mandamus relief to have title issued to Felice (BMW Financial was not a party to that mandamus action).
- BMW sued in replevin to recover possession; after cross-motions for summary judgment on stipulated facts, the trial court granted BMW summary judgment awarding possession; Auto Showcase appealed.
Issues
| Issue | Plaintiff's Argument (BMW) | Defendant's Argument (Auto Showcase) | Held |
|---|---|---|---|
| Whether Auto Showcase took title free of BMW's perfected security interest when Grant transferred via a duplicate certificate | BMW: BMW’s lien was perfected by an April 4, 2012 certificate of title and remained effective; duplicate certificate does not nullify original lien or perfection | Auto Showcase: Duplicate certificate omitted BMW’s lien; buyer relied on Secretary of State records and took title free of the lien | Court: Duplicate certificate did not remove or defeat BMW’s previously perfected lien; BMW prevails |
| Applicability of UCC §9-337 to defeat BMW’s lien | BMW: §9-337 inapplicable because it governs security interests perfected under another jurisdiction’s law | Auto Showcase: §9-337 should operate to protect purchasers when title issued omits liens regardless of jurisdiction | Court: §9-337 applies only to security interests perfected under another jurisdiction; not applicable here |
| Whether Felice was a buyer in the ordinary course who took free of BMW’s security interest | BMW: The buyer-in-ordinary-course rule does not apply because Auto Showcase did not create BMW’s security interest | Auto Showcase: Reliance on buyer-in-ordinary-course precedent to protect purchaser | Court: Cases cited (Mar-K-Z, Helland) are inapplicable; buyer-in-ordinary-course protection does not defeat BMW’s lien here |
| Equity/fraud/unjust enrichment defenses to replevin | BMW: No fraud by BMW; enforcing lien does not result in unjust enrichment | Auto Showcase: Equity should bar replevin given reliance on official records and unfairness to purchaser | Court: Equitable relief unavailable because allowing BMW to recover would not sanction BMW fraud or cause unjust enrichment; legal priority governs |
Key Cases Cited
- Herman v. First Farmers State Bank of Minier, 73 Ill. App. 3d 475 (discusses priority of perfected security interests)
- LoBianco v. Clark, 231 Ill. App. 3d 35 (summary judgment may be entered on stipulated facts)
- Mar-K-Z Motors & Leasing Co. v. American National Bank & Trust Co. of Chicago, 57 Ill. 2d 29 (buyer in ordinary course rule discussed)
- Massey-Ferguson, Inc. v. Helland, 105 Ill. App. 3d 648 (application of buyer-in-ordinary-course principles)
- Carroll v. Curry, 392 Ill. App. 3d 511 (equitable principles in replevin where fraud or unjust enrichment would be sanctioned)
- Adams v. Greg Weeks, Inc., 327 Ill. App. 3d 380 (equitable defenses in replevin context)