2017 IL App (2d) 160397
No. 2-16-0397
Opinion filed March 23, 2017
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
______________________________________________________________________________
BMW FINANCIAL SERVICES, N.A., LLC, ) Appeal from the Circuit Court
) of Du Page County.
Plaintiff-Appellee, )
)
v. ) No. 13-L-600
)
RICHARD D. FELICE and AUTO )
SHOWCASE, INC., d/b/a Auto Showcase )
of Carol Stream, )
)
Defendants )
) Honorable
(Auto Showcase, Inc., d/b/a Auto Showcase ) Ronald D. Sutter,
of Carol Stream, Defendant-Appellant). ) Judge, Presiding.
______________________________________________________________________________
PRESIDING JUSTICE HUDSON delivered the judgment of the court, with opinion.
Justices Schostok and Spence concurred in the judgment and opinion.
OPINION
¶1 Plaintiff, BMW Financial Services, N.A., LLC (BMW Financial), filed a replevin
complaint in the circuit court of Du Page County, seeking possession of a 2011 Porsche
Panamera. The complaint named Richard D. Felice as defendant, but an amended complaint
named both Felice and Auto Showcase, Inc. (Auto Showcase), as defendants. Felice was later
dismissed from the action. BMW Financial and Auto Showcase filed cross-motions for
summary judgment. The trial court granted BMW Financial’s summary judgment motion,
2017 IL App (2d) 160397
denied Auto Showcase’s motion, and awarded possession of the Porsche to BMW Financial.
Auto Showcase filed a timely notice of appeal. We affirm.
¶2 I. BACKGROUND
¶3 For purposes of their cross-motions for summary judgment, BMW Financial and Auto
Showcase stipulated in writing to the following material facts. On or about March 13, 2012,
Bruce Grant executed a retail installment contract for the purchase of the Porsche. The retail
installment contract granted a security interest in the Porsche to BMW Financial. On or about
April 4, 2012, the Secretary of State issued an original certificate of title for the Porsche, naming
BMW Financial as the first lienholder. Grant later submitted a “lien release letter” to the
Secretary of State. BMW Financial did not execute the lien release letter, nor did it ever
authorize the release of its security interest. On November 16, 2012, the Secretary of State
issued a duplicate certificate of title to Grant. The duplicate certificate did not name BMW
Financial as a lienholder. However, the duplicate certificate stated, “This is a duplicate
certificate and may be subject to the rights of a person under the original certificate.” On or
about November 20, 2012, Grant sold the Porsche to Auto Showcase for $47,000. He executed
the assignment of title on the duplicate certificate. Auto Showcase conducted computerized
searches of the Secretary of State’s records. Those searches did not reveal the existence of any
liens on the Porsche.
¶4 On November 29, 2012, Auto Showcase sold the Porsche to Felice for $59,000. By letter
dated January 30, 2013, BMW Financial advised the Secretary of State that the lien release letter
submitted by Grant was fraudulent. BMW Financial asked the Secretary of State to “accept this
letter as notice that any further attempt to title the [Porsche] without showing [BMW Financial’s]
lien should be denied.” Auto Showcase later brought a mandamus action in the circuit court of
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Du Page County to compel the Secretary of State to issue a certificate of title naming Felice as
the owner of the Porsche. The court entered judgment in favor of Auto Showcase, and the
Secretary of State issued a certificate of title to Felice. BMW Financial was not a party to the
mandamus action. BMW Financial subsequently commenced the replevin action giving rise to
this appeal. Felice was dismissed after Auto Showcase repurchased the Porsche from him.
¶5 II. ANALYSIS
¶6 Summary judgment is proper where “the pleadings, depositions, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2-1005(c) (West
2014). Furthermore, it is proper to enter summary judgment in favor of a party who is entitled to
judgment as a matter of law on the basis of stipulated facts. LoBianco v. Clark, 231 Ill. App. 3d
35, 38 (1992). The trial court’s ruling on a motion for summary judgment is subject to de novo
review. Peacock v. Waldeck, 2016 IL App (2d) 151043, ¶ 3.
¶7 A. Perfection of Security Interest
¶8 The primary purpose of a replevin proceeding is “to test the right of possession of
personal property and to place the successful party in possession of that property.” Koerner v.
Nielsen, 2014 IL App (1st) 122980, ¶ 12. It is undisputed that BMW Financial’s right of
possession depended on whether Auto Showcase acquired title to the Porsche subject to BMW’s
security interest. “As a general rule, the holder of a perfected security interest has an interest in
the secured property, and the proceeds from the sale thereof, which is superior to the interests of
unsecured creditors of the debtor and subsequent purchasers of the secured property.” Herman v.
First Farmers State Bank of Minier, 73 Ill. App. 3d 475, 477 (1979). The perfection of security
interests in motor vehicles is governed, in part, by section 3-202(b) of the Illinois Vehicle Code
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(Vehicle Code) (625 ILCS 5/3-202(b) (West 2014)), which provides, “[a] security interest is
perfected by the delivery to the Secretary of State of the existing certificate of title, if any, an
application for a certificate of title containing the name and address of the lienholder and the
required fee. The security interest is perfected as of the time of its creation if the delivery to the
Secretary of State is completed within 30 days after the creation of the security interest or receipt
by the new lienholder of the existing certificate of title from a prior lienholder or licensed dealer,
otherwise as of the time of the delivery.” Section 3-107(a)(3) of the Vehicle Code (625 ILCS
5/3-107(a)(3) (West 2014)) provides, in pertinent part, that a certificate of title shall contain “the
names and addresses of any lienholders, in the order of priority as shown on the application.”
Section 3-108 of the Vehicle Code (625 ILCS 5/3-108 (West 2014)) provides that “[t]he
certificate of title shall be mailed or delivered to the first lienholder named in it or, if none, to the
owner.”
¶9 BMW Financial acquired a security interest in the Porsche pursuant to the retail
installment contract with Grant. BMW Financial perfected its security interest by applying for a
certificate of title that noted its lien on the Porsche. The certificate of title was issued on April 4,
2012. Auto Showcase subsequently purchased the Porsche from Grant on or about November
20, 2012. Had Grant actually paid off his car loan, BMW Financial would have been obligated
to execute a release of its security interest and deliver the release and the certificate of title to
Grant. 625 ILCS 5/3-205(a) (West 2014). Grant could have then transferred the Porsche to Auto
Showcase by executing an assignment of title in the space provided for that purpose on the
original certificate. 625 ILCS 5/3-112(a) (West 2014). Instead, he submitted a false release to
the Secretary of State, obtained a duplicate certificate of title (see 625 ILCS 5/3-111(a) (West
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2014)) that did not identify any liens on the vehicle, and executed the assignment of title on the
duplicate certificate.
¶ 10 Auto Showcase maintains that the assignment via the duplicate certificate of title was not
subject to BMW Financial’s security interest. We disagree. Auto Showcase relies, in part, on
section 9-303(b) of the Uniform Commercial Code (UCC) (810 ILCS 5/9-303(b) (West 2014)),
which provides, “Goods cease to be covered by a certificate of title at the earlier of the time the
certificate of title ceases to be effective under the law of the issuing jurisdiction or the time the
goods become covered subsequently by a certificate of title issued by another jurisdiction.” Auto
Showcase argues that “the issuance of the duplicate Certificate of Title *** which removed BMW
[Financial]’s lien, must control the determination of possession.” (Emphasis added.) Auto
Showcase cites no authority for the proposition that the issuance of a duplicate certificate
somehow renders the original certificate ineffective under Illinois law. Indeed, Auto Showcase’s
argument contorts the meaning of the adjective “duplicate.” Section 3-111(a) of the Vehicle
Code (625 ILCS 5/3-111(a) (West 2014)) provides for the issuance of a duplicate certificate “[i]f
a certificate of title is lost, stolen, mutilated or destroyed or becomes illegible.” Furthermore,
section 3-111(a) provides that the duplicate certificate “shall contain the legend ‘This is a
duplicate certificate and may be subject to the rights of a person under the original certificate.’ ”
Id. That language would be meaningless if, as Auto Showcase argues, the original certificate
were no longer effective. Consequently, we reject Auto Showcase’s assertion that, by issuing the
duplicate certificate, the Secretary of State “removed” BMW Financial’s lien.
¶ 11 B. Uniform Commercial Code
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¶ 12 Auto Showcase also relies on section 9-337 of the UCC (810 ILCS 5/9-337 (West 2014))
in support of its contention that it holds title free and clear of BMW Financial’s security interest.
Section 9-337 provides, in pertinent part:
“If, while a security interest in goods is perfected by any method under the law of another
jurisdiction, this State issues a certificate of title that does not show that the goods are
subject to the security interest or contain a statement that they may be subject to security
interests not shown on the certificate:
(1) a buyer of the goods, other than a person in the business of selling goods of
that kind, takes free of the security interest if the buyer gives value and receives delivery
of the goods after issuance of the certificate and without knowledge of the security
interest; and
(2) the security interest is subordinate to a conflicting security interest in the
goods that attaches, and is perfected under Section 9-311(b), after issuance of the
certificate and without the conflicting secured party’s knowledge of the security interest.”
Id.
¶ 13 Section 9-337 clearly does not apply here. By its terms, section 9-337 applies only to a
security interest perfected under the law of another jurisdiction; BMW Financial’s security
interest was perfected under Illinois law. Although Auto Showcase insists that it should not
matter whether the security interest was perfected under Illinois law or the law of another
jurisdiction, we cannot simply ignore the plain language of the statute. Miller v. Sarah Bush
Lincoln Health Center, 2016 IL App (4th) 150728, ¶ 17. That said, we recognize that courts “are
not bound by the literal language of a statute if that language produces absurd or unjust results.”
People v. Johnson, 2013 IL App (1st) 120413, ¶ 17. “In such an instance, we may modify, alter
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or supply words to ‘obviate any repugnancy or inconsistency with the legislative intention.’ ” Id.
(quoting Community Consolidated School District No. 210 v. Mini, 55 Ill. 2d 382, 386 (1973)).
Auto Showcase argues that limiting section 9-337 to security interests perfected in other
jurisdictions “would achieve absurd results within interstate commerce.” We disagree. The
following comment accompanying section 9-303 of the UCC is illuminating:
“Ideally, at any given time, only one certificate of title is outstanding with respect
to particular goods. In fact, however, sometimes more than one jurisdiction issues more
than one certificate of title with respect to the same goods. This situation results from
defects in certificate-of-title laws and the interstate coordination of those laws, not from
deficiencies in this Article. As long as the possibility of multiple certificates of title
remains, the potential for innocent parties to suffer losses will continue. At best, this
Article can identify clearly which innocent parties will bear the losses in familiar fact
patterns.” 810 ILCS Ann. 5/9-303, Uniform Commercial Code Comment 6, at 474
(Smith-Hurd 2004).
In enacting section 9-337, the General Assembly evidently discerned a need to afford special
protection against hidden lien interests arising under the laws of other states. We see nothing
absurd in distinguishing between interstate and intrastate priority conflicts. In any event, section
9-337 is inapplicable because the duplicate certificate clearly indicated, as required by section 3
111(a) of the Vehicle Code (625 ILCS 5/3-111(a) (West 2014)), that others might have rights
under the original certificate.
¶ 14 Auto Showcase contends that it “researched the Certificate of Title presented by Grant
using all available commercial means for determining whether any encumbrance remained on the
vehicle, finding none.” According to Auto Showcase, to hold in favor of BMW Financial
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“would effectively negate the legal significance of Illinois duplicate certificates of title and the
ability for consumers and dealers to rely upon records of the Secretary of State.” But it is
equally true that to hold in favor of Auto Showcase would effectively negate the ability of
creditors to rely on the statutory mechanism for protecting their lien rights. And although we
sympathize with the plight of a purchaser in Auto Showcase’s position who has examined the
Secretary of State’s vehicle records to confirm that title is unencumbered, Auto Showcase cites
no statutory authority or case law for the proposition that errors in those records affect either the
validity or the priority of a security interest that was perfected in accordance with section 3
202(b) of the Vehicle Code.
¶ 15 C. Buyer in Ordinary Course
¶ 16 Auto Showcase contends that its customer, Felice, took title free and clear of BMW
Financial’s lien because he was a buyer in the ordinary course of business. In support of this
argument, Auto Showcase cites American National Bank & Trust Co. of Chicago v. Mar-K-Z
Motors & Leasing Co., 57 Ill. 2d 29 (1974), and Massey-Ferguson, Inc. v. Helland, 105 Ill. App.
3d 648 (1982). In Mar-K-Z, an automobile leasing company granted the plaintiff a security
interest in one of its rental vehicles. The leasing company then sold the vehicle, but defaulted on
its loan. In holding that the buyer took title free and clear, the court relied on section 9-307(1) of
the UCC, as in effect during the relevant time frame (Ill. Rev. Stat. 1969, ch. 26, ¶ 9-307(1)
(codified at 810 ILCS 5/9-320(a) (West 2014))), which provided that “ ‘[a] buyer in ordinary
course of business *** takes free of a security interest created by his seller even though the
security interest is perfected and even though the buyer knows of its existence.’ ” Mar-K-Z, 57
Ill. 2d at 32. Because Auto Showcase did not create BMW Financial’s security interest in the
Porsche, that provision does not apply to Auto Showcase’s sale to Felice. The outcome of
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Helland hinged on the same UCC provision. Accordingly, Helland, like Mar-K-Z, does not
apply here.
¶ 17 D. Fraud and Unjust Enrichment
¶ 18 Finally, Auto Showcase cites Carroll v. Curry, 392 Ill. App. 3d 511 (2009), and Adams v.
Greg Weeks, Inc., 327 Ill. App. 3d 380 (2002), for the proposition that (in Auto Showcase’s
words) “in cases of fraud or unjust enrichment, Illinois courts may consider equitable principles
in deciding replevin cases.” The argument is meritless. In Carroll we observed that, “where
Illinois reviewing courts have applied equitable principles to bar recovery in replevin, it was
because allowing recovery would have sanctioned fraudulent conduct or resulted in unjust
enrichment.” (Emphasis added.) Carroll, 392 Ill. App. 3d at 517. BMW Financial did not
commit fraud, so a judgment in its favor would not sanction any fraud. Nor would a judgment in
its favor result in unjust enrichment.
¶ 19 III. CONCLUSION
¶ 20 For the foregoing reasons, the judgment of the circuit court of Du Page County is
affirmed.
¶ 21 Affirmed.
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