Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / In May 2006, Jacob J. Magish agreed to purchase a certain 2001 Harley-Davidson Motorcycle ...

In May 2006, Jacob J. Magish agreed to purchase a certain 2001 Harley-Davidson Motorcycle from Christine and Larry Logsdon for $14,635. Magish took out a loan at a Fifth Third Bank branch in

In May 2006, Jacob J. Magish agreed to purchase a certain 2001 Harley-Davidson Motorcycle from Christine and Larry Logsdon for $14,635. Magish took out a loan at a Fifth Third Bank branch in Indianapolis with a security interest in the Motorcycle favor of Fifth Third in order to borrow $15,000 for the purchase. Magish presented to Fifth Third the Logsdons' original certificate of title. As part of the transaction, Magish executed, among other documents, an Application for Certificate of Title and a Power of Attorney. Fifth Third's Closing Representative, John Wargel, copied the Logsdon Original Title and then gave the Logsdon Original Title back to Magish. Wargel instructed Magish to apply for a new title at the Indiana Bureau of Motor Vehicles ("BMV"). Wargel kept the May 31 application and the Magish file in the loan file.

 

Shortly after the transaction, Magish, using deception, approached the Logsdons and requested that they sign paperwork to obtain a duplicate title. The Logsdons, who had no knowledge that Magish had financed the purchase of the Motorcycle through Fifth Third, unwittingly signed an application to obtain a duplicate title and gave the application to Magish.

 

Magish obtained a duplicate title from the BMV in the name of the Logsdons. The Logsdons signed the Logsdon Duplicate Title as Sellers. The Logsdon Duplicate Title inactivated the Logsdon Original Title in the BMV records.

 

Magish, using the Logsdon Duplicate Title, submitted an application to the BMV for a new title in his name. Magish intentionally omitted Fifth Third from the June 20 application and did not list a lienholder. Magish concurrently tendered the Logsdon Duplicate Title to the BMV and failed to notate Fifth Third as lienholder. On June 28, 2006, the BMV issued a new title in Magish's name. There was no lien notated on the First Magish Title.

 

On October 16, 2006, Fifth Third submitted an application for an amended title to the BMV ... Fifth Third did not have the Logsdon Original Title nor the First Magish Title in its possession and so did not tender to the BMV either with the Fifth Third application.

 

On October 18, 2006, the BMV issued a new title listing Magish as owner and Fifth Third as lienholder. The Second Magish Title inactivated the First Magish Title in the BMV records. The whereabouts of the Second Magish Title are unknown and Fifth Third has no record of receiving it.

 

In 2009, the Dawsons responded to a Magish posting on Craigslist for the sale of the Motorcycle. On June 18, 2009, Magish sold and delivered the Motorcycle to the Dawsons for $13,050.00. Magish, who was terminally ill and died in August 2009, had defaulted on the loan in 2008. Magish gave the Dawsons the certificate of title that showed it was free of any lienholders. After the sale, the Dawsons submitted an application for a new title to the Motorcycle to the BMV. The BMV advised the Dawsons that, according to the BMV records, the title the Dawsons had was not the most current title. For privacy reasons the BMV would not tell the Dawsons exactly what the issue was but said it was either there was a duplicate title or a lienholder on the title. After discussions with Magish and his wife, the Dawsons determined that Fifth Third was a lienholder. The BMV refused to issue a new title to the Motorcycle to the Dawsons.

 

The Dawsons filed suit against Fifth Third, arguing that Fifth Third's lien against the Motorcycle should be unenforceable because, under a theory of equitable estoppel, Fifth Third should bear the loss of Magish's fraud on the Dawsons because Fifth Third's acts and omissions made the loss possible. Fifth Third filed a counterclaim, seeking replevin of the Motorcycle.

 

The trial court denied the Dawsons' summary judgment motion, granted Fifth Third's summary judgment motion, awarded permanent possession of the Motorcycle to Fifth Third, and ordered that the Dawsons maintain possession of the Motorcycle pending their appeal.

 

JUDICIAL OPINION

 

DARDEN, Judge ... The stipulated facts show that Fifth Third obtained a security interest in the Motorcycle in 2006 after Magish signed the Simple Interest Note and Security Agreement and pledged the Motorcycle as collateral for his loan with Fifth Third. The stipulated facts also indicate that the most current certificate of title to the Motorcycle that was issued by and on file with the BMV reflects that security interest, and it indicates that Fifth Third is a lienholder on the Motorcycle. The Dawsons acknowledge that, pursuant to the terms of the Security Agreement, Fifth Third has a right to repossess the Motorcycle upon default by Magish, and the parties stipulated to the fact that Magish defaulted on the Security Agreement in 2008 when he failed to make payments to Fifth Third. The parties do not dispute that Fifth Third has not released its lien on the Motorcycle. At the time the Dawsons purchased the Motorcycle, they did not check with the BMV to verify that the certificate of title that Magish gave them was the most recent one; thus, they were unaware of Fifth Third's lien on the Motorcycle. However, after learning that Fifth Third was a lienholder on the Motorcycle, the Dawsons have not paid Fifth Third to release the lien but have retained possession of the Motorcycle.

 

"It is black letter law that, upon default, a secured creditor has the right to take possession of the collateral securing its claim and the rights set forth in the agreement with the defaulting party." Therefore, when Magish defaulted on his loan, Fifth Third, as the secured party, had a right to take possession of the Motorcycle.

 

The Dawsons do not dispute the fact that Fifth Third had a right to possession of the Motorcycle based on its security interest and lien on the Motorcycle. Instead, they contend that their purchase, and resulting ownership, of the Motorcycle, precludes Fifth Third from being able to prove that the Dawsons wrongfully held possession of the Motorcycle. Fifth Third does not contest the Dawsons' ownership of the Motorcycle but contends that such ownership is subject to Fifth Third's lien, which upon Magish's default, entitles Fifth Third to replevin the Motorcycle.

 

A security agreement is effective against purchasers of the collateral. The stipulated facts show that Magish pledged the Motorcycle as collateral for his loan with Fifth Third; that the certificate of title, which had been on file with the BMV since October 18, 2006 and was on file when the Dawsons purchased the Motorcycle on June 18, 2009, reflected Fifth Third as lienholder; that Magish defaulted on the loan; and that the lien has not been released. Despite subsequently learning of Fifth Third's lien and acknowledging its right to repossess the Motorcycle, the Dawsons have maintained possession of the Motorcycle. While the Dawsons had an interest in the Motorcycle as purchasers of the collateral, their interest was not superior to Fifth Third's perfected security interest in the Motorcycle. Accordingly, we conclude that the trial court did not err by concluding that Fifth Third, as lienholder of the Motorcycle, had a right to replevin of the Motorcycle from the Dawsons. Thus, we affirm the trial court's grant of summary judgment to Fifth Third on its counterclaim for replevin.

 

We next turn to the Dawsons' argument that the trial court erred by denying their summary judgment motion on their claim for equitable estoppel. The Dawsons argue that, despite Fifth Third's lien, they are entitled to own the Motorcycle free and clear of such lien based on equitable principles. Specifically, the Dawsons assert that the following equitable principles should apply: (1) when one of two innocent parties must suffer a loss, that loss must be borne by the party whose act or omission made the loss possible; and (2) equity aids the vigilant, not those who slumber on their rights. In other words, the Dawsons contend that Fifth Third should bear the loss of the fraud Magish perpetrated on them because Fifth Third's acts or omissions allowed Magish to obtain a certificate of title that did not reflect Fifth Third's lien and thereafter allowed him to sell the Motorcycle to the Dawsons without their knowledge of Fifth Third's lien. In so arguing, the Dawsons list various things that they contend Fifth Third did or did not do—such as returning the original certificate of title (or the Original Logsdon Title) to Magish so that he could apply for a certificate of title and failing in its duty to protect its own interests in the lien—and argue that Fifth Third could have prevented the Dawsons' loss.

 

The record reveals that the Dawsons purchased the Motorcycle after seeing Magish's post on Craigslist, and there is no evidence presented that they knew Magish or had any previous dealings or interactions with him. Despite this apparent lack of familiarity with Magish, the Dawsons did not check the BMV to verify the status of the certificate of title that Magish presented to them. Indeed, there would have been little effort on their part to do so, and the record suggests that the Dawsons were in a better position to protect themselves from a loss. "As a general rule, we find that it is unreasonable to rely on the statements of third parties—or the debtor—about the current status of security interests."

 

Affirmed.

 

How did Magish manage to get a clean title?

Aug 14 2021 View more View Less

Answer (UnSolved)

question Get Solution

Related Questions