NORTH CAROLINA GENERAL ASSEMBLY
1961 SESSION
CHAPTER 835
HOUSE BILL 564
AN ACT TO STRENGTHEN THE MOTOR VEHICLE CERTIFICATE OF TITLE LAWS BY PROVIDING FOR A MANUFACTURER'S CERTIFICATE OF TRANSFER FOR NEW MOTOR VEHICLES AND FOR THE RECORDATION AND PERFECTION OF SECURITY INTERESTS IN VEHICLES.
WHEREAS, the present motor vehicle certificate of title law provides for a declaration of all existing liens at the time of application for registration, but does not require that liens given thereafter be declared and entered on the certificate of title; and
WHEREAS, the certificate of title, often regarded as absolute, is not conclusive as to liens and may not be relied upon to show good title for purpose of sale or encumbrance, except as it relates to lien perfection under Section 213 of the Interstate Commerce Act; that is, liens on equipment of interstate common and contract carriers; and
WHEREAS, the present certificate of title law does not meet the requisites of the Uniform Title Code because the certificate of title is not in and of itself adequate notice to third parties of existing liens; and
WHEREAS, a certificate of title that can be relied upon as a ready means by which all legal interests in motor vehicles may be determined would be to the public interest: Now, therefore,
The General Assembly of North Carolina do enact:
Section 1. G.S. 20‑38 is hereby amended by adding at the end thereof three new subsections to be designated subsections (hh), (ii) and (jj) to read as follows:
"(hh) Security agreement. A written agreement which reserves or creates a security interest.
"(ii) Security interest. An interest in a vehicle reserved or created by agreement and which secures payment or performance of an obligation. The term includes but is not limited to the interest of a chattel mortgagee, the interest of a vendor under a conditional sale contract, the interest of a trustee under a chattel deed of trust, and the interest of a lessor under a lease intended as security. A security interest is 'perfected' when it is valid against third parties generally,
"(jj) Manufacturer's certificate. A certification, on a form approved by the Department of Motor Vehicles, signed by the manufacturer, indicating the name of the person or dealer to whom the therein described vehicle is transferred, the date of transfer and that such vehicle is the first transfer of such vehicle in ordinary trade and commerce. The description of the vehicle shall include the make, model, year, type of body, identification number or numbers, and such other information as the Department may require."
Sec. 2. G.S. 20‑52(a) is hereby amended by rewriting subdivision 3 thereof to read as follows:
"3. A statement of the applicant's title and of all liens or encumbrances upon said vehicle and the names and addresses of all lien holders in the order of their priority, and the amount, date and nature of the security agreement."
Sec. 3. G.S. 20‑52(b) is hereby rewritten to read as follows:
"(b) When such application refers to a new vehicle purchased from a manufacturer or dealer, such application shall be accompanied with a manufacturer's certificate of origin that is properly assigned to the applicant. If the new vehicle is acquired from a dealer or person located in another jurisdiction other than a manufacturer, the application shall be accompanied with such evidence of ownership as is required by the laws of that jurisdiction duly assigned by the disposer to the purchaser, or, if no such evidence of ownership be required by the laws of such other jurisdiction, a notarized bill of sale from the disposer."
Sec. 4. Chapter 20 of the General Statutes is hereby amended by inserting following G.S. 20‑52 a new Section to be designated G.S. 20‑52.1 and to read as follows:
"§ 20‑52.1. Manufacturer's certificate of transfer of new motor vehicle. (a) Any manufacturer transferring a new motor vehicle to another shall, at the time of the transfer, supply the transferee with a manufacturer's certificate of origin assigned to the transferee.
"(b) Any dealer transferring a new vehicle to another dealer shall, at the time of transfer, give such transferee the proper manufacturer's certificate assigned to the transferee.
"(c) Any dealer transferring a new vehicle to a consumer-purchaser shall, at the time of transfer, give the purchaser the proper manufacturer's certificate assigned to the transferee."
Sec. 5. G.S. 20‑57(d) is hereby rewritten to read as follows:
"(d) The certificate of title shall contain upon the face thereof the identical information required upon the face of the registration card, and in addition thereto the date of issuance and all liens or encumbrances disclosed in the application for title. All such liens or encumbrances shall be shown in the order of their priority, according to the information contained in such application."
Sec. 6. Chapter 20 of the General Statutes is hereby amended by striking out G.S. 20‑58 and by inserting in lieu thereof eleven new Sections to be designated G.S. 20‑58 and G.S. 20‑58.1 through G.S. 20‑58.10 inclusive and to read as follows:
"§ 20‑58. Perfection of security interests. (a) Except as provided in G.S. 20‑58.9, a security interest in a vehicle of a type for which a certificate of title is required is not valid against creditors of the owner or subsequent transferees or lien holders of the vehicle unless perfected as provided in this Chapter.
"(b) A security interest is perfected by delivery to the Department of the existing certificate of title if the vehicle has been previously registered in this State, and if not, an application for a certificate of title containing the name and address of the lien holder, the date, amount and nature of his security agreement, and the required fee. The lien is perfected as of the time of its creation if the delivery of the certificate or application to the Department is completed within ten days thereafter, otherwise it is perfected as of the time of delivery.
"(c) If a vehicle is subject to a security interest when brought into this State, the validity of the security interest is determined by the law of the jurisdiction where the vehicle was when the security interest attached, subject to the following:
(1) If the vehicle is purchased for use and registration in North Carolina, the validity of the security interest in this State is determined by the law of this State.
(2) If the security interest was perfected under the law of the jurisdiction where the vehicle was when the security interest attached, the following rules apply:
a. If the name of the lien holder is shown on an existing certificate of title issued by that jurisdiction, his security interest continues perfected in this State.
b. If the name of the lien holder is not shown on an existing certificate of title issued by that jurisdiction, the security interest continues perfected in this State for four months after vehicle is brought into this State, and also, thereafter if, within the four‑month period, it is perfected in this State. The security interest may also be perfected in this State after the expiration of the four‑month period; in that case perfection dates from the time of perfection in this State.
(3) If the security interest was not perfected under the law of the jurisdiction where the vehicle was when the security interest attached, it may be perfected in this State; in that case, perfection dates from the time of perfection in this State.
"§ 20‑58.1. Liens subsequently created. If an owner creates a security interest in a vehicle after the original issuance of a certificate of title to such vehicle.
(1) The owner shall immediately execute an application, on a form the Department prescribes, to name the lien holder on the certificate, showing the name and address of the lien holder, the amount, date and nature of his security agreement, and cause the certificate, application and the required fee to be delivered to the lien holder.
(2) The lien holder shall immediately cause the certificate, application and the required fee to be mailed or delivered to the Department.
(3) If the certificate of title is in the possession of some prior lien holder, the new or subordinate lienor shall forward to the Department the required application for noting his lien, together with the required fee, and the Department when satisfied that the application is in order shall procure the certificate of title from the lien holder in whose possession it is being held, for the sole purpose of noting the new lien thereon. Upon request of the Department, a lien holder in possession of the certificate of title shall forthwith deliver or mail the certificate of title to the Department. The delivery of the certificate does not affect the rights of the first lien holder under his security agreement.
(4) Upon receipt of the certificate of title, application and the required fee, the Department, if it finds the application in order, shall either endorse on the certificate, or issue a new certificate containing, the name and address of the new lien holder, and mail the certificate to the first lien holder named in it. The Department shall also notify the new lien holder of the fact that his lien has been noted upon the certificate of title.
"§ 20‑58.2. Certificate as notice of lien. A certificate of title to a vehicle, when issued by the Department showing a lien or encumbrance, shall be deemed adequate notice to all creditors and purchasers that a security interest exists in and against the motor vehicle, and recordation of such reservation of title, lien or encumbrance in the county wherein the purchaser or debtor resides or elsewhere shall not be necessary for the validity thereof.
"§ 20‑58.3. Assignment by lien holder. (a) A lien holder, other than one whose interest is dependent solely upon possession may assign, absolutely or otherwise, his security interest in the vehicle to a person other than the owner without affecting the interest of the owner or the validity of the security interest, but any person without notice of the assignment is protected in dealing with the lien holder as the holder of the security interest and the lien holder remains liable for any obligations as lien holder until an assignment by the lien holder is delivered to the Department as provided in subsection (b).
"(b) The assignee may, but need not to perfect the assignment, have the certificate of title endorsed or issued with the assignee named as a lien holder, upon delivering to the Department with the required fee, the certificate of title and an assignment by the lien holder named in the certificate in the form the Department prescribes.
"(c) The assignee of any lien properly assigned and noted on the certificate of title as described above shall be entitled to the same priority among the outstanding lienors and have all the other property rights therein as had formerly been held by his assignor.
"§ 20‑58.4. Release of security interest. (a) Upon the satisfaction of a security interest in a vehicle for which the certificate of title is in the possession of the lien holder, the lien holder shall within ten days after demand and, in any event, within thirty days, execute a release of his security interest, in the space provided therefor on the certificate or as the Department prescribes, and mail or deliver the certificate and release to the next lien holder named therein, or, if none, to the owner or other person authorized to receive the certificate for the owner.
"(b) Upon the satisfaction of a security interest in a vehicle for which the certificate of title is in the possession of a prior lien holder, the lien holder whose security interest is satisfied shall within ten days execute a release of his security interest in such form as the Department prescribes and mail or deliver the same to the owner or other person authorized to receive the same for the owner.
"(c) An owner, upon securing the release of any security interest in a vehicle shown upon the certificate of title issued therefor, may exhibit the documents evidencing such release, signed by the person or persons making such release, and the certificate of title to the Department which shall, when satisfied as to the genuineness and regularity of the release, issue to the owner either a new certificate of title in proper form or an endorsement or rider attached thereto showing the release of the security interest.
"(d) If an owner exhibits documents evidencing the release of a security interest as provided in subsection (c) of this Section but is unable to furnish the certificate of title to Department because it is in possession of a prior lien holder, the Department, when satisfied as to the genuineness and regularity of the release, shall procure the certificate of title from the person in possession thereof for the sole purpose of noting thereon the release of the subsequent security interest, following which the Department shall return the certificate of title to the person from whom it was obtained and notify the owner that the release has been noted on the certificate of title.
(e) If it is impossible for the owner to secure from the lien holder the release contemplated by this Section, the owner may exhibit to the Department such evidence as may be available showing satisfaction of the debt secured, together with a sworn affidavit by the owner that the debt has been satisfied, which the Department may treat as a proper release for purpose of this Section when satisfied as to the genuineness, truth and sufficiency thereof. Prior to cancellation of a security interest under the provisions of this subsection, at least fifteen days notice of the pendency thereof shall be given to the lien holder at his last known address by the Department by registered letter.
"§ 20‑58.5. Duration of security interests in favor of firms which cease to do business. Any security interest recorded in favor of a firm or corporation which, since the recording of such lien, has dissolved, ceased to do business, or gone out of business for any reason, and which remains of record as a security interest of such firm or corporation for a period of more than three years from the date of the recording thereof, shall become null and void and of no futher force and effect.
"§ 20‑58.6. Levy of execution, etc. A levy made by virtue of an execution or some other proper court order, upon a vehicle for which a certificate of title has been issued by the Department, shall constitute a security interest, subsequent to all others theretofore recorded by the Department, if and when the officer making such levy makes a report to the Department in the form prescribed by the Department, that such levy has been made and that the vehicle levied upon has been seized by and is in the custody of such officer. If such security interest created thereby is thereafter satisfied, or should the vehicle thus levied upon and seized be thereafter released by such officer, he shall immediately report that fact to the Department. Any owner who, after such levy and seizure by an officer and before a report thereof by the officer to the Department, shall fraudulently assign or transfer his title to or interest in such vehicle or cause the certificate of title thereto to be assigned or transferred or cause a security interest to be shown upon such certificate of title shall be deemed guilty of a misdemeanor and upon conviction thereof shall be fined not less than twenty-five dollars ($25.00) nor more than five hundred dollars ($500.00), or imprisoned for not less than ten days nor more than twelve months.
"§ 20‑58.7. Duty of lien holder. A lien holder named in a certificate of title shall, upon written request of the owner or of another lien holder named on the certificate, disclose information as to his security agreement and the indebtedness secured by it.
"§ 20‑58.8. Cancellation of certificate. The cancellation of a certificate of title shall not, in and of itself, affect the validity of a security interest noted on it.
"§ 20‑58.9. Excepted liens and security interests. The provisions of G.S. 20‑58 through G.S. 20‑58.8 inclusive shall not apply to or affect:
(1) A lien given by statute or rule of law for storage of a motor vehicle or to a supplier of services or materials for a vehicle;
(2) A lien arising by virtue of a statute in favor of the United States, this State or any political subdivision of this State; or
(3) A security interest in a vehicle created by a manufacturer or dealer who holds the vehicle for resale but a buyer in the ordinary course of trade from the manufacturer or dealer takes free of such security interest.
"§ 20‑58.10. Effective date. The provisions of G.S. 20‑58 through G.S. 20‑58.9 inclusive shall be effective and relate to the perfecting and giving notice of security interests entered into on and after January 1, 1962."
Sec. 7. G.S. 20‑68(c) is hereby rewritten to read as follows:
"(c) If a certificate of title is lost, stolen, mutilated, destroyed or becomes illegible, the first lien holder or, if none, the owner or legal representative of the owner named in the certificate, as shown by the records of the Department, shall promptly make application for and may obtain a duplicate upon furnishing information satisfactory to the Department. It shall be mailed to the first lien holder named in it or, if none, to the owner. The Department shall not issue a new certificate of title upon application made on a duplicate until fifteen days after receipt of the application. A person recovering an original certificate of title for which a duplicate has been issued shall promptly surrender the original certificate to the Department."
Sec. 8. G.S. 20‑72(b) is hereby amended by adding at the end thereof a new sentence to read as follows: "Transfer of ownership in a vehicle by an owner is not effective until the provisions of this subsection have been complied with."
Sec. 9. G.S. 20‑75 is hereby amended by adding a new sentence at the end thereof to read as follows: "Transfer of ownership in a vehicle by a dealer is not effective until the provisions of this subsection have been complied with."
Sec. 10. G.S. 20‑76 is hereby amended by designating G.S. 20‑76 as now written as subsection (a) thereof and adding thereto a new subsection to be designated subsection (b) and to read as follows:
"(b) Whenever the applicant for a new certificate of title is unable to satisfy the Department that he is entitled thereto as provided in subsection (a) of this Section, the applicant may nevertheless obtain issuance of a new certificate of title by filing a bond with the Department as a condition to the issuance thereof. The bond shall be in the form prescribed by the Department and shall be executed by the applicant. It shall be accompanied by the deposit of cash with the Department, be executed as surety by a person, firm or corporation authorized to conduct a surety business in this State or be in the nature of a real estate bond as described in G.S. 20‑279.24(a). The bond shall be in an amount equal to one and one-half times the value of the vehicle as determined by the Department and conditioned to indemnify any prior owner or lien holder, any subsequent purchaser of the vehicle or person acquiring any security interest therein, and their respective successors in interest, against any expense, loss or damage, reason of the issuance of the certificate of title to the vehicle or on account of any defect in or undisclosed security interest in the right, title and interest of the applicant in and to the vehicle. Any person damaged by issuance of the certificate of title shall have a right of action to recover on the bond for any breach of its conditions, but the aggregate liability of the surety to all persons shall not exceed the amount of the bond. The bond, and any deposit accompanying it, shall be returned at the end of three years or prior thereto if the vehicle is no longer registered in this State and the currently valid certificate of title is surrendered to the Department, unless the Department has been notified of the pendency of an action to recover on the bond."
Sec. 11. G.S. 20‑85 is hereby amended by striking out the figures ".50" at the end of subsection (a) thereof and substituting in lieu thereof the figures "1.00"; striking out the figures ".50" at the end of subsection (b) thereof and substituting in lieu thereof the figures "1.00"; striking out the figures ".50" at the end of subsection (c) thereof and substituting in lieu thereof the figures "1.00", and by adding at the end thereof three new subsections to be designated subsections (g), (h) and (i) and to read as follows:
"(g) Each application for recording supplementary lien.................................................... $1.00
(h) Each application for removing a lien from a certificate of title.................................... $1.00
(i) The fees collected under subsections (g) and (h) of this Section shall be placed in a special fund designated the 'Lien Recording Fund' and shall be used under the direction and supervision of the Assistant Director of the Budget for the administration of the laws of this State relating to the perfection of security interest in vehicles."
Sec. 12. G.S. 47‑20.2(b) is hereby amended by adding at the end thereof a new subdivision to be designated subdivision (5) and to read as follows:
"(5) If the personal property concerned is a vehicle required to be registered under the motor vehicle laws of the State of North Carolina, then the provisions of this Section shall not apply but the security interest arising from the deed of trust, mortgage, conditional sales contract, or lease intended as security of such vehicle may be perfected by recordation in accordance with the provisions of G.S. 20‑58 through G.S. 20‑58.10."
Sec. 13. All laws and clauses of laws in conflict with this Act are hereby repealed.
Sec. 14. This Act shall be in full force and effect from and after July 1, 1961.
In the General Assembly read three times and ratified, this the 15th day of June, 1961.