Paccar Financial Corporation v. Bulk Trans Express, Co., Inc.

A-2482-98T2 (N.J. Super. App. Div. 2000) (Unpublished)
  • Opinion Date: April 10, 2000

LIENS; GARAGE KEEPERS—A garage keeper and automobile repair lien is not superior to, nor does it affect, a prior perfected security interest such as a title lien.

A financing company had a purchase money security interest in a tractor as a result of a purchase money loan. The title to the tractor was issued by the State of Tennessee and showed the financing company as first lien holder. A garage performed significant repair work on the tractor and was holding the tractor because the repair bill was unpaid. The financing company brought a replevin action seeking recovery of the tractor and restraints against the garage, preventing its sale. The lower court found that the financing company’s lien was superior to the garage’s claim and that finding was upheld by the Appellate Division. What happened is as follows. The tractor’s owner defaulted on its monthly payments. Unbeknownst to the financing company, at about the same time, the tractor had been towed to the garage as a result of a blown engine. The engine was repaired and the cost was substantial. When the financing company became aware of the tractor’s location, it contacted the garage. Eventually, the financing company received notice from the garage that it intended to dispose of the tractor at a public sale. The value of the tractor was not sufficient to cover the claims of both the garage and the financing company. The garage contended that the doctrines of unjust enrichment and implied/constructive contracts made it unfair to give superiority to the financing company’s lien. The garage argued that Article 9 of the Uniform Commercial Code requires a lien holder to re-perfect its security interests before the collateral is relocated to another jurisdiction. Unfortunately for the garage, Article 9 does not apply to goods covered by a certificate of title, such as the tractor. Further, under Tennessee law and the Uniform Commercial Code, a security interest shown on the certificate of title is not lost even if the title is moved from one jurisdiction to another. There was no evidence that the Tennessee certificate of title was either surrendered or that the tractor was subsequently registered in any other state. Further, a garage keeper and automobile repairman’s lien “is not superior to, nor shall it ‘affect’ a prior perfected security interest.” Nor was the garage entitled to an equitable lien based on the doctrine of implied contract/unjust enrichment. That doctrine creates an equitable remedy where a benefit is conferred on another for which retention without payment would be unjust. “However, it only applies when a party asserting it expected remuneration from the party benefitted and the failure to pay enriched the party receiving the benefit beyond its contractual rights.” Here, the repair was performed for the owner, not the financing company and the garage expected payment from the owner. The certificate of title clearly listed the financing company as the first lien holder and the garage was on notice. Even though the Appellate Division upheld the financing company’s priority of lien, it remanded the matter to the lower court for a trial as to whether, in the conversations between the financing company and the garage, the financing company promised to pay for all or part of the repairs.