NXCESS Motor Cars, Inc. v. JPMorgan Chase Bank, N.A.

Opinion issued May 20, 2010

In The

Court of Appeals

For The

First District of Texas

NO. 01-09-00018-CV

NXCESS MOTOR CARS, INC., Appellant

V.

JPMORGAN CHASE BANK, N.A., Appellee

On Appeal from the County Civil Court at Law No. 4

Harris County, Texas

Trial Court Cause No. 917204

OPINION ON REHEARING

This

is a suit to resolve the title to a Mercedes S550 and a lien against that

title. The trial court granted summary

judgment to the lienholder, JPMorgan Chase Bank, N.A. (Chase), on its

conversion claims against Xavier Valeri and US Bank, N.A, and severed this

judgment from the cause. Valeri and US

Bank both had brought third-party claims against NXCESS Motor Cars, Inc.

(NXCESS), for breach of warranty and breach of contract. Concerned that the trial court’s summary

judgment rulings are dispositive of the claims against it, NXCESS appeals the

trial court’s order granting Chase’s motion for summary judgment. NXCESS contends that the trial court erred by

(1) failing to find that NXCESS and Valeri were buyers in the ordinary

course, (2) failing to find that the Texas Certificate of Title Act conflicted

with the Texas Business and Commerce Code, (3) failing to find that the

Code preempts the Act, and (4) finding Valeri liable for conversion. Chase moves to dismiss the appeal for lack of

standing. We grant rehearing, withdraw

our opinion and judgment dated February 18, 2010, and issue this opinion in its

stead to address two arguments NXCESS advances in its motion. Our disposition of the case is

unchanged. We conclude that NXCESS has

standing to appeal the judgment, but that the trial court’s rulings were

proper. We affirm.

Background

In June 2007, James Cavazos purchased

a new Mercedes S550 from Mercedes-Benz of Sugar Land and gave Chase a purchase

money security interest in the vehicle. The

Texas Department of Transportation (TxDOT) recorded Chase’s lien on the

original certificate of title. After

making only three payments, Cavazos forged a release of the lien against the

title and applied for a certified copy of the original certificate of title. In reliance on the certified copy and the

forged release letter, the Avatar-Foundation Trust (Avatar Trust) purchased the

vehicle from Cavazos and signed the “assignment of title” section on the

reverse of the certified copy of the title.

Avatar Trust then applied for an original certificate of title to the

vehicle, submitting the certified copy and forged release letter with its

application.

TxDOT then issued a second “original

certificate” of title, which listed Avatar Trust as the owner and indicated

that no third parties held any liens on the vehicle. Avatar Trust presented this original

certificate of title to NXCESS in February 2008. According to NXCESS, it “performed the usual

and customary due diligence to determine good, clean, clear title,” and it did

not discover Chase’s lien on the vehicle prior to purchase.

Shortly after NXCESS purchased the

vehicle from Avatar Trust, Valeri purchased the vehicle from NXCESS and granted

a purchase money security interest to US Bank.

At this time, NXCESS and US Bank entered into an “indirect dealer

agreement,” in which US Bank purchased Valeri’s retail installment contract

with NXCESS and NXCESS warranted that title to the vehicle was free of all

liens, encumbrances, claims, and defenses.

After Valeri’s purchase, TxDOT issued an original certificate of title

which listed Valeri as the owner and US Bank as the sole lienholder.

Chase sued Cavazos for fraud and

conversion and sued TxDOT, Valeri, and US Bank solely for conversion. Chase sought the balance of its loan to

Cavazos, possession of the Mercedes, and declarations that Chase’s lien is

superior to all other liens and any titles issued after the initial sale to

Cavazos are void. Chase then moved for traditional

summary judgment against Cavazos, Valeri, and US Bank, arguing that the summary

judgment evidence entitled Chase to judgment as a matter of law on its

conversion claim. Valeri, US Bank, and

NXCESS responded to Chase’s motion, contending that no conversion occurred

because both NXCESS and Valeri were buyers in the ordinary course of business

and took title to the Mercedes free of Chase’s lien.

Though NXCESS responded to the motion

for summary judgment, Chase asserted no direct claim against it. Valeri, however, had sued NXCESS for breach

of warranty and for violations of the Deceptive Trade Practices Act, and US

Bank had sued it for breach of contract and breach of warranty. US Bank, in its original cross claim against NXCESS,

pleaded:

In addition, should JPMorgan Chase prevail on its

claim to invalidate US Bank’s lien, additional warranty violations would be

triggered regarding NXcess’s obligation to assign the Contract and Vehicle

title free of encumbrances and to obtain a first priority security interest in

the Vehicle in favor of US Bank. In the

event of a finding in favor of Plaintiff JPMorgan Chase on its lien claim,

NXcess is liable to US Bank for the amounts identified above.

The trial court granted summary judgment

to Chase against Cavazos, Valeri, and US Bank.

The trial court authorized Chase to foreclose its lien, ordered Cavazos

to pay the remaining $96,941 on his loan from Chase, ordered Valeri to turn

over possession of the Mercedes to Chase, declared that Chase’s lien is

superior to all other claims and liens, and ordered TxDOT to void the title

issued to Valeri and all certificates of title issued after July 3, 2007. The trial court then severed the summary

judgment order from the remaining claims in the case. The trial court’s order did not adjudicate

the claims against NXCESS.

Valeri complied with the judgment by

turning over possession of the Mercedes to Chase, which Chase then sold to

satisfy its lien. NXCESS appeals the

summary judgment order.

Discussion

Appellate Jurisdiction

We

first examine whether we have jurisdiction over the appeal. See

Smith v. Houston Lighting & Power Co ., 7 S.W.3d 287,

288 (Tex. App.—Houston [1st Dist.] 1999, no pet.) ( citing

Tex. Ass’n of Bus. v. Tex. Air Control

Bd. , 852 S.W.2d 440, 443 (Tex. 1993)).

Chase moves to dismiss the appeal, contending that NXCESS lacks standing

to prosecute it. Chase never asserted

any claims against NXCESS in the trial court, which became a party to the suit

only after Valeri and US Bank asserted third-party claims against it. [1]

Generally,

only parties of record may appeal a final judgment. Motor

Vehicle Bd. v. El Paso Indep. Auto. Dealers Ass’n , 1 S.W.3d 108, 110 (Tex. 1999) (per curiam). To be entitled to appellate review, the party

of record’s own interests must also be prejudiced by the trial court’s

decision. Buchele v. Woods , 528 S.W.2d 95, 98

(Tex. Civ. App.—Tyler 1975, no writ); Menetti

v. Chavers , 974 S.W.2d 168, 171 (Tex. App.—San Antonio 1998, no pet.). NXCESS appeared in the case by filing its

answer to Valeri’s third-party petition in June 2008, four months before the

trial court granted Chase’s motions for summary judgment. Although NXCESS was not a party to the

summary judgment proceedings on Chase’s claims, NXCESS was a party of record.

NXCESS

also demonstrates that the judgment on appeal prejudices its interests. In its order granting Chase’s motions for summary

judgment, the trial court ruled that (1) Valeri must turn over possession of

the vehicle to Chase; (2) Chase’s lien was superior to any claims by Valeri and

US Bank; (3) Chase’s title was superior to all titles issued subsequent to the

initial title to Cavazos; and (4) TxDOT must void and destroy all titles issued

after the initial title. As NXCESS

contends, this ruling voided the contracts NXCESS had with Valeri and US Bank

and subjected NXCESS to liability for breach of warranty and breach of

contract. Shortly after the trial court

severed Chase’s claims, US Bank moved for summary judgment on its breach of warranty

claim against NXCESS. US Bank stated:

The Court specifically ruled as a matter of law, in

granting [Chase’s] MSJ, that the title transferred to US Bank by Nxcess was

“void;” that [Chase’s] lien was “superior to any claim

of . . .US Bank . . . ”; and that TXDOT

should “void and destroy” the title issued to US Bank on the vehicle. US Bank is, therefore; entitled to summary

judgment that Nxcess breached multiple representations/warranties to US Bank

under the Agreement with respect to the Valeri contract . . . .

The trial court agreed with US Bank

and rendered judgment against NXCESS. We

hold that the trial court’s summary judgment order prejudiced the interests of

NXCESS, a party of record, and thus NXCESS has standing to appeal. We deny Chase’s motion to dismiss for lack of

jurisdiction.

Standard of Review

We

review de novo the trial court’s grant of a motion for summary judgment. Provident Life & Accid. Ins. Co. v. Knott ,

128 S.W.3d 211 , 215–16 (Tex. 2003). For the trial court to properly grant a

traditional motion for summary judgment, the movant must establish that there

is no genuine issue as to any material fact and the movant is thus entitled to

judgment as a matter of law. Tex. R. Civ. P. 166a(c). When a plaintiff moves for summary judgment

on its own claim, the plaintiff must conclusively prove all essential elements

of its cause of action as a matter of law.

City of Houston

v. Clear Creek Basin Auth. , 589 S.W.2d 671, 678 (Tex. 1979). A genuine issue of material fact exists if

the non-movant produces more than a scintilla of probative evidence regarding

the challenged element. See Ford Motor Co. v. Ridgway , 135

S.W.3d 598, 600 (Tex. 2004); see also Forbes

Inc. v. Granada Bioscis., Inc. , 124 S.W.3d 167, 172 (Tex. 2003) (“More than

a scintilla of evidence exists if it would allow reasonable and fair minded

people to differ in their conclusions.”).

We examine the evidence in the light most favorable to the non-movant

and we indulge all reasonable inferences and resolve all doubts in the non-movant’s

favor. See Goodyear Tire & Rubber Co. v. Mayes ,

236 S.W.3d 754, 756 (Tex. 2007) (per curiam).

Buyers in the Ordinary Course of Business

In

its first issue, NXCESS contends the trial court erred by failing to find that

it and Valeri qualified as buyers in the ordinary course of business. The Texas Business and Commerce Code, which

contains Texas’ version of the Uniform Commercial Code, provides that title to

goods, including motor vehicles, passes to the buyer at the time and place the

seller completes performance regarding the physical delivery of the goods, and title

passes despite the reservation of a security interest and despite the delivery

of a title document at a later time. See Tex.

Bus. & Com. Code Ann. § 2.401(b) (Vernon 2009); see also Vibbert v. PAR, Inc. , 224

S.W.3d 317, 322 (Tex. App.—El Paso 2006, no pet.) (“Motor vehicles are included

in the UCC’s definition of ‘goods.’”). A

“buyer in the ordinary course of business” may take the goods free of a security

interest created by the buyer’s seller, even if that security interest is

perfected and the buyer is aware of the interest at the time of purchase. Tex.

Bus. & Com. Code Ann.

§ 9.320(a) (Vernon 2002). To qualify as a buyer in the ordinary course

of business, the buyer must “ buy[ ] goods in good

faith, without knowledge that the sale violates the rights of another person in

the goods, and in the ordinary course from a

person . . . in the business of selling goods of that

kind.” Id. § 1.201(9) (Vernon 2009). NXCESS relies on these provisions to assert

that it is entitled to the Mercedes, regardless of any defect in the title.

The

Texas Supreme Court has previously held, however, that a forged certificate of

title passes no title to the vehicle. See Drake Ins. Co. v. King ,

606 S.W.2d 812, 817 (Tex. 1980).

The Austin Court of Appeals has extended this holding to include

situations in which the certificate of title itself is not forged, but a

release of lien, on which the certificate of title is based, is forged. See Lee

v. The Bank, N.A. , 23 S.W.3d

129, 131 (Tex. App.—Austin 2000, no pet.). In Lee ,

the original purchaser of the vehicle obtained a certified copy of the

certificate of title and forged a letter from The Bank stating that its lien

had been released. Id. at 130 . The certified copy, which reflected The

Bank’s lien, was assigned to two dealers prior to Lee. Lee, in reliance on the forged release,

applied for an original certificate of title and stated on his application that

no liens existed and the evidence of ownership was a “certified copy [of a] Texas

title.” Id. TxDOT issued an original

certificate of title to Lee that did not indicate any lienholders. Id. at 130–31. The

Austin Court of Appeals held that Lee did not defeat The Bank’s security

interest because “the buyer acquires no title when any link in his chain of

title is forged.” Id. at 131 . Hence, even though the certificate of title

itself was not a forgery, “a forged document on which a certificate of title is

based voids that title.” Id. ; see

also Dublin Nat’l Bank v. Chastain , 167 S.W.2d 795, 797 (Tex. Civ.

App.—Eastland 1942, writ ref’d) (“Proof of the forgery of a link of title is

tantamount to proof that the claimant of such title has none, or, in other

words that he is not the owner of the property.”).

In

this case, Cavazos applied for and received a certified copy of the certificate

of title, which noted Chase’s lien. Cavazos

then assigned this certified copy and gave his forged release of lien to Avatar

Trust. In reliance on these documents,

Avatar Trust applied for an original certificate of title, stating that “no

liens existed” and the ownership evidence is a “certified copy [of a] Texas

title.” Although none of the

certificates of title involved in this chain of transactions are forgeries, the

release of lien was. Following Lee , we hold that Avatar Trust’s

certificate of title is void because it obtained it using a forged release of

lien. Avatar Trust never acquired a

title to the Mercedes. See Lee , 23 S.W.3d at

131 . Avatar Trust thus had no

title which it could pass on to NXCESS, and NXCESS had no title which it could

pass on to Valeri. See Tex. Bus. & Com.

Code Ann. § 2.403(a) (Vernon 2009) (“A purchaser of goods acquires

all title which his transferor had or had power to transfer . . . .”).

NXCESS

contends that Lee is inapplicable to

this case because Lee relied on a certified copy of a certificate of title, and

thus could not be a buyer in the ordinary course, whereas NXCESS and Valeri

both relied on an original certificate of title. We disagree.

Lee’s analogue in this case is neither NXCESS nor Valeri, but is instead

Avatar Trust, which relied on a certified copy of the certificate of title and

a forged release of lien in purchasing the Mercedes from Cavazos. Just as the forged release of lien voided

Lee’s certificate of title, Cavazos’ forged release of lien voided the

certificate of title of Avatar Trust. None

of the subsequent purchasers took valid title to the car. See Lee ,

23 S.W.3d at 131 .

NXCESS

further contends that Cavazos’ fraudulent conduct does not disturb it and

Valeri’s status as buyers in the ordinary course, arguing that Avatar Trust had

voidable title, instead of void title, and persons with voidable title can transfer

good title to a good-faith purchaser for value.

See Tex. Bus. & Com. Code Ann. § 2.403(a); see also Kotis v. Nowlin Jewelry, Inc. ,

844 S.W.2d 920, 923 (Tex. App.—Houston [14th Dist.] 1992, no writ). Section 2.403(a) specifies that a purchaser

obtains voidable title if the goods are delivered through a transaction of

purchase even if the delivery “was procured through fraud punishable as

larcenous under criminal law.” Tex. Bus. & Com. Code

Ann. § 2.403(a). In Kotis ,

Sitton purchased a watch from Nowlin Jewelry with a forged check and then sold

the watch to Kotis, who asserted that he was a good-faith purchaser. Kotis ,

844 S.W.2d at 921–22 .

In determining whether Sitton had voidable title, and the ability to

transfer good title to Kotis, the Fourteenth Court of Appeals distinguished

between a thief, who wrongfully takes goods against the will of the owner and

has void title, and a swindler, who fraudulently induces the owner to deliver

goods voluntarily and has voidable title.

See id. at

922–23. Because Sitton did not obtain

the watch against Nowlin Jewelry’s will, but instead used a forged check to

fraudulently induce Nowlin Jewelry into delivering the watch, Sitton received

voidable title and could pass good title to Kotis, if Kotis qualified as a

good-faith purchaser. Id.

The Fourteenth Court noted, however, that section 2.403(a )( 4) only applies to “cases involving acts fraudulent to the

seller such as where the seller delivers the goods in return for a forged

check.” Id. at 923 .

In contrast to Kotis , in this case, the seller of the vehicle, Cavazos, committed

the fraud by forging the release of lien and giving it to Avatar Trust. Avatar Trust did not fraudulently induce

Cavazos to sell the vehicle. As a result,

Avatar Trust did not obtain voidable title to the car and could not transfer

good title to NXCESS under section 2.403(a). [2] When Avatar Trust used Cavazos’ forged

release of lien to obtain an original certificate of title, the forgery voided

Avatar Trust’s certificate of title. See Lee , 23 S.W.3d at 131 ; cf. Dyson Descendant Corp. v. Sonat

Exploration Co. , 861 S.W.2d 942, 947 (Tex. App.—Houston [1st Dist.] 1993,

no writ) (“A forged deed is void ab initio. . . . No person

can be an innocent purchaser of land where one of the links in the chain of

title is a forgery.”); Kirkpatrick Joint

Venture v. Loots , 826 S.W.2d 205, 210 (Tex. App.—Fort Worth 1992, writ

denied) (“The protection usually afforded to a bona fide purchaser for value

without notice does not apply when such purchaser’s claim is dependent upon a

forged instrument. . . . A void instrument passes no title,

and the mere fact that the grantee-mortgagee is an innocent purchaser makes no

difference.”). Because Avatar Trust

possessed void, and not voidable, title, it could not transfer valid title to

NXCESS.

NXCESS

relies on the Corpus Christi Court of Appeals’ decision in South Texas Bank v. Renteria for the proposition that it and Valeri

have the “best title,” and thus are buyers in the ordinary course, because they

took physical possession of the Mercedes and their claim derives from an

original certificate of title. 523 S.W.2d 780, 786 (Tex. Civ. App.—Corpus Christi 1975, no writ). In Renteria ,

the original owner of the vehicle obtained a certified copy of the certificate

of title, and assigned that title to his employer in exchange for a loan, but

retained possession of the vehicle. Id. at 782–83. The employer received a new original

certificate of title from TxDOT. Id. at 783 . The owner then traded the vehicle to the

original dealership, and assigned his original certificate of title to the

dealer, who then sold the vehicle to Renteria.

Id. In the ensuing title dispute between the

employer’s lender and Renteria, the Corpus Christi court held that because

Renteria had physical possession of the vehicle and an original certificate of

title, instead of a certified copy, he had superior title to the vehicle. Id. at 786 .

Renteria is

distinguishable. We first note that

Chase and NXCESS both claim superiority of title based upon an original, and

not a certified, certificate of title.

Avatar Trust assigned its original certificate, with no lien noted, to

NXCESS, and Chase retained the first original certificate from Mercedes-Benz of

Sugar Land to Cavazos, with Chase noted as the first lienholder. Second, in Renteria , none of the certificates of title or accompanying release

of lien documents involved forgeries. Here,

even though NXCESS took physical possession of the Mercedes as well as an

original certificate of title assigned from Avatar Trust, the forged release of

lien, upon which this certificate was based, voided Avatar Trust’s certificate

of title. Under these facts, NXCESS and

Valeri cannot have the “best title” to the vehicle. The forged release of lien,

which forms the basis for Avatar Trust’s certificate of title, voids that title

and all subsequent certificates of title. Thus, the trial court properly rejected NXCESS’s

defense that it and Valeri are buyers in the ordinary course of business.

Conflict Between the Certificate of Title Act

and the Code

In

its second and third issues, NXCESS contends that the trial court erred by

failing to find that the Certificate of Title Act conflicts with the Business

and Commerce Code and by failing to preempt application of the Act in favor of

the Code. Chapter 501 of the

Transportation Code encompasses the Texas Certificate of Title Act, and section

501.005 states that “[c]hapters 1-9, Business & Commerce Code, control over

a conflicting provision of this chapter.”

Tex. Transp.

Code Ann. § 501.005 (Vernon 2007). If the same factual situation “can harvest

different results under different statutes, the statutes are in conflict.” Vibbert ,

224 S.W.3d at 324 .

Courts have previously held that, for example, section 2.401(b) of the

Code and sections 501.071(a) and 501.073 of the Act conflict regarding when and

how title to vehicles transfers, and therefore under section 501.005 of the

Act, section 2.401 of the Code trumps. See id. ; First Nat’l Bank v. Buss , 143 S.W.3d 915 , 923–24 (Tex. App.—Corpus

Christi 2004, pet. denied).

In

this case, NXCESS contends that section 501.134(c) of the Act, relied upon by

Chase, conflicts with section 2.403 of the Code, and therefore section 2.403

prevails. Section 501.134(c) provides that,

when TxDOT issues a certified copy of the title, “[a] subsequent purchaser or

lienholder of the vehicle only acquires the rights, title, or interest in the

vehicle held by the holder of the certified copy.” Tex. Transp. Code Ann.

§ 501.134(c) (Vernon 2007). Section 2.403 states that “[a] purchaser of

goods acquires all title which his transferor had or had power to transfer . . . . A person with voidable title has power to transfer a

good title to a good faith purchaser for value.” Tex.

Bus. & Com. Code Ann. § 2.403(a) (emphasis added). Both of these statutes essentially state that

a subsequent purchaser cannot acquire greater rights and title than their

transferor has, although section 2.403 creates an exception when a person with

voidable title transfers the goods to a good-faith purchaser for value: the purchaser receives good title. See id.

The exception, however, is not

applicable here. Upon purchasing the Mercedes

from Cavazos, Avatar Trust obtained the same rights and title as Cavazos: ownership subject to Chase’s perfected

lien. The forged letter of release voided

the original certificate of title TxDOT subsequently issued to Avatar

Trust. See Lee , 23 S.W.3d at 131 . Avatar Trust held void title, not voidable

title, and thus had no good title to transfer.

Regardless of whether the Certificate of Title Act or the Business and

Commerce Code govern, Avatar Trust and all subsequent purchasers received void

title to the vehicle due to the forgery in the chain of title. [3] We hold that the trial court did not err in

ruling that the Act and the Code do not conflict so as to require that the Act be

preempted in favor of the Code.

Valeri’s Liability for Conversion

NXCESS

further contends that Valeri was a buyer in the ordinary course who purchased the vehicle in good faith and without

knowledge of Chase’s lien, and thus the trial court erred in ruling that Valeri

converted the vehicle. To be entitled to

summary judgment on its claim for conversion, Chase must establish, as a matter

of law, that (1) Chase owned or had possession of the property or entitlement

to possession; (2) Valeri unlawfully and without authorization assumed and

exercised control over the property to the exclusion of, or inconsistent with,

Chase’s rights as an owner; (3) Chase demanded return of the property; and (4)

Valeri refused to return the property. Ashdon, Inc. d/b/a Impression

Bridal v. Gary Brown & Assocs., Inc. , 260 S.W.3d 101, 116 (Tex.

App.—Houston [1st Dist.] 2008, no pet.).

As summary judgment evidence, Chase attached the account information for

Cavazos, indicating that he defaulted on the lien on January 15, 2008. Upon default, Chase was entitled to foreclose

its lien and take possession of the vehicle.

See Tex. Bus. & Com. Code Ann. § 9.601 ( a )( 1) ( Vernon Supp. 2009).

The

only element of conversion that the defendants disputed in the trial court was

whether Valeri unlawfully exercised control over the vehicle to the exclusion

of Chase’s rights. The defendants

contended that based on Renteria ,

Valeri had the best title to the vehicle, and that he was a buyer in the ordinary

course of business who purchased the vehicle in good faith and without

knowledge of Chase’s lien. Wrongful

intent is not an element of conversion—even innocent buyers of property may be

liable. Schwartz v. Pinnacle Commc’ns , 944 S.W.2d 427 , 432–33 (Tex.

App.—Houston [14th Dist.] 1997, no pet.); see

also Smith v. Maximum Racing, Inc. , 136 S.W.3d 337, 343 (Tex. App.—Austin

2004, no pet.) (“It is well established under Texas law that acting with good

faith or innocence does not constitute a defense to conversion.”); White-Sellie’s Jewelry Co. v. Goodyear Tire

& Rubber Co. , 477 S.W.2d 658, 662 (Tex. Civ. App.—Houston [14th Dist.]

1972, no writ) (“The requisite intent [in a conversion action] is only one to

assert a right in the property, and a wrongful intent is not required.”). By purchasing the vehicle, financing it

through US Bank, and possessing it, Valeri asserted a right in the

property. Because the chain of title to

the vehicle included a forgery, neither Avatar Trust, nor NXCESS, nor Valeri had

valid title to the vehicle. The summary

judgment record establishes that Valeri assumed and exercised control over the

vehicle to the exclusion of Chase’s rights in the vehicle. Thus, the trial court did not err in ruling

that Valeri converted the vehicle.

Conclusion

We hold that Avatar Trust’s original

certificate of title was based upon a forged release of lien; accordingly, Avatar

Trust did not transfer good title to NXCESS or Valeri, and neither party

qualifies as a buyer in the ordinary course of business. We further hold that the trial court did not

err in ruling that Chase established its conversion claim as a matter of

law. We therefore affirm the judgment of

the trial court.

Jane Bland

Justice

Panel consists of Justices Jennings,

Hanks, and Bland.

[1] After the trial court severed Chase’s claims it

granted US Bank’s motion for summary judgment and rendered judgment against

NXCESS for breach of warranty.

[2] NXCESS cites two cases from Alabama and Georgia to

support its contention that Avatar Trust obtained voidable title. See Hodges Wholesale Cars v. Auto Dealer’s Exchange , 628 So.

2d 608, 610–11 (Ala. 1993); Charles Evans BMW, Inc. v. Williams , 395 S.E.2d 650, 651 (Ga. Ct.

App. 1990). In Hodges , the initial purchaser’s check

was returned for insufficient funds after he sold the vehicle to a dealer while

representing that he was the initial seller.

Hodges , 628 So. 2d at 609. Similarly,

in Williams , the initial purchaser

paid with a forged cashier’s check and sold the car to a dealer while

representing that he was the initial seller.

Williams , 359

S.E.2d at 651 . In both of these

cases, the courts held that the initial purchasers,

like Sitton in Kotis , fraudulently

induced the seller to sell the vehicle and thus obtained voidable title. Hodges ,

628 So. 2d at 610–611; Williams , 395 S.E.2d at 651–52 .

[3] NXCESS contends that even if the transfer to Avatar

Trust did not comply with the Certificate of Title Act, the transfer is not

automatically void because “noncompliance with the Act does not override the

clear showing of a valid and complete transfer of ownership of an

automobile.” Hudson Buick, Pontiac, GMC Truck Co. v.

Gooch , 7 S.W.3d 191, 197 (Tex. App.—Tyler 1999, pet. denied). In Gooch ,

the Tyler Court held that a non-compliant transfer, in which

the buyer purchased a vehicle without a transfer of the certificate of title,

is valid if the transfer does not defeat the purposes of the Act. Id. at 197–98. One

purpose of the Act is to “lessen and prevent theft of motor vehicles.” Id. at 197 . An

additional purpose is to “lessen and prevent . . . [the]

sale of encumbered vehicles without disclosure of existing liens.” Id. ; Tex. Transp. Code Ann. § 501.003(3) (Vernon 2007). When Cavazos sold the car to Avatar Trust, he

provided a certified copy of the certificate of title which noted Chase’s lien,

but he also provided the forged letter purporting to release the lien. Because of the forged release, this

transaction did not validly transfer title to Avatar Trust and defeated the

Act’s goal of disclosing existing liens.