UNIFORM CERTIFICATE OF TITLE ACT
(Last Revised or Amended in 2006)
drafted by the
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
and by it
APPROVED AND RECOMMENDED FOR ENACTMENT
IN ALL THE STATES
at its
ANNUAL CONFERENCE
MEETING IN ITS ONE-HUNDRED-AND-FOURTEENTH YEAR
PITTSBURGH, PENNSYLVANIA
July 21-28, 2005
WITH PREFATORY NOTE AND COMMENTS
Copyright ©2005
By
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
September 6, 2006
ABOUT NCCUSL
The National Conference of Commissioners on Uniform State Laws (NCCUSL), now in its 114th year, provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.
Conference members must be lawyers, qualified to practice law. They are practicing lawyers, judges, legislators and legislative staff and law professors, who have been appointed by state governments as well as the District of Columbia, Puerto Rico and the U.S. Virgin Islands to research, draft and promote enactment of uniform state laws in areas of state law where uniformity is desirable and practical.
• NCCUSL strengthens the federal system by providing rules and procedures that are consistent from state to state but that also reflect the diverse experience of the states.
• NCCUSL statutes are representative of state experience, because the organization is made up of representatives from each state, appointed by state government.
• NCCUSL keeps state law up-to-date by addressing important and timely legal issues.
• NCCUSL’s efforts reduce the need for individuals and businesses to deal with different laws as they move and do business in different states.
• NCCUSL’s work facilitates economic development and provides a legal platform for foreign entities to deal with U.S. citizens and businesses.
• NCCUSL Commissioners donate thousands of hours of their time and legal and drafting expertise every year as a public service, and receive no salary or compensation for their work.
• NCCUSL’s deliberative and uniquely open drafting process draws on the expertise of commissioners, but also utilizes input from legal experts, and advisors and observers representing the views of other legal organizations or interests that will be subject to the proposed laws.
• NCCUSL is a state-supported organization that represents true value for the states, providing services that most states could not otherwise afford or duplicate.
DRAFTING COMMITTEE ON UNIFORM CERTIFICATE OF TITLE ACT
The Committee appointed by and representing the National Conference of Commissioners on Uniform State Laws in preparing this Uniform Certificate of Title Act consists of the following individuals:
LEON M. MCCORKLE, JR., P.O. 256, 4288 W. Dublin-Granville Rd., Dublin, OH 43017-0387, Chair
THOMAS J. BUITEWEG, 200 Renaissance Ct., Mail Code: 482-BO9B11, P.O. Box 200, Detroit, MI 48265-2000
MICHAEL A. FERRY, 200 N. Broadway, Suite 950, St. Louis, MO 63102
DIANE FORD, 630 S. Farmingdale Rd., New Berlin, IL 62670
DALE G. HIGER, 101 S. Capitol Blvd., Suite 1900, Boise, ID 83702-5958, Enactment Plan Coordinator
H. LANE KNEEDLER, 901 E. Byrd Street, Suite 1700, Richmond, VA 23219
EARL F. LEITESS, 3 Whitecap Ln., Ocean Pines, MD 21811
ESSON MCKENZIE MILLER, JR., Division of Legislative Services, 2nd Floor, 910 Capitol St., Richmond, VA 23219
EDWIN E. SMITH, 150 Federal St., 21st Floor, Boston, MA 02110-1726
ALVIN C. HARRELL, Oklahoma City University School of Law, 2501 N. Blackwelder, Oklahoma City, OK 73106, Reporter
EX OFFICIO
FRED H. MILLER, University of Oklahoma, College of Law, 300 Timberdell Rd., Room 3056, Norman, OK 73019, President
JACK DAVIES, 687 Woodridge Dr., Mendota Heights, MN 55118, Division Chair
AMERICAN BAR ASSOCIATION ADVISOR
STEVEN N. LEITESS, One Corporate Center, 10451 Mill Run Circle, Suite 1000, Baltimore, MD 21117, American Bar Association Advisor
EXECUTIVE DIRECTOR
WILLIAM H. HENNING, University of Alabama School of Law, Box 870382, Tuscaloosa, AL 35487-0382, Executive Director
Copies of this Act may be obtained from:
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
211 E. Ontario Street, Suite 1300
Chicago, Illinois 60611
312/915-0195
UNIFORM CERTIFICATE OF TITLE ACT
TABLE OF CONTENTS
SECTION 3. SUPPLEMENTAL PRINCIPLES OF LAW AND EQUITY
SECTION 4. LAW GOVERNING VEHICLE COVERED BY CERTIFICATE OF
TITLE OR CERTIFICATE OF ORIGIN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 6. VEHICLE IDENTIFICATION NUMBER, MAKE, AND MODEL YEAR
SECTION 7. EXECUTION OF CERTIFICATE OF ORIGIN
SECTION 8. CANCELLATION AND REPLACEMENT OF CERTIFICATE OF ORIGIN
SECTION 9. APPLICATION FOR CERTIFICATE OF TITLE
SECTION 10. CREATION AND CANCELLATION OF CERTIFICATE OF TITLE
SECTION 11. CONTENTS OF CERTIFICATE OF TITLE
SECTION 12. EFFECT OF POSSESSION OF CERTIFICATE OF TITLE OR
CERTIFICATE OF ORIGIN; JUDICIAL PROCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 14. MAINTENANCE OF AND ACCESS TO FILES
SECTION 15. DELIVERY OF CERTIFICATE OF TITLE
SECTION 17. NOTICE OF TRANSFER WITHOUT APPLICATION
SECTION 19. OTHER TRANSFEREES OF VEHICLE COVERED BY CERTIFICATE
OF TITLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 20. EFFECT OF OMISSION OR INCORRECT INFORMATION
SECTION 21. TRANSFER BY SECURED PARTY’S TRANSFER STATEMENT
SECTION 22. TRANSFER BY OPERATION OF LAW
SECTION 23. APPLICATION FOR TRANSFER OF OWNERSHIP OR
TERMINATION OF SECURITY-INTEREST STATEMENT WITHOUT
CERTIFICATE OF TITLE OR CERTIFICATE OF ORIGIN. . . . . . . . . . . . . . . . . . . . . 48
SECTION 24. REPLACEMENT CERTIFICATE OF TITLE
SECTION 25. EFFECTIVENESS OF SECURITY-INTEREST STATEMENT
SECTION 26. PERFECTION OF SECURITY INTEREST
SECTION 27. TERMINATION STATEMENT
SECTION 28. DUTIES AND OPERATION OF FILING OFFICE
SECTION 29. UNIFORMITY OF APPLICATION AND CONSTRUCTION
SECTION 30. ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL
COMMERCE ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
UNIFORM CERTIFICATE OF TITLE ACT
This Uniform Certificate of Title Act (Act) is intended to respond to several principal, though by no means exclusive, factors affecting transfers of interests in motor vehicles: Diversity of state treatment; the increasing use of electronic records, including efforts to reduce and prevent title and other vehicle fraud, and contracting; evolving commercial practices and current legal issues; and the impact of revised Article 9 of the Uniform Commercial Code.
Principal Purposes of the Act
Each year, on the order of 70 million motor vehicles are titled in the United States. While there is almost universal consistency in some industry standards, for example Vehicle Identification Number (VIN) usage, these vehicles are titled by the states under some sixteen different types of systems, virtually none of which is entirely compatible with the others for purposes of information exchange and title interchange. The states also vary in designation of the officials who administer titles and transfers, and collect state taxes, and there are variations in the definitional scope of titling statutes. As with other states’ files the move from paper to electronic records is not uniform either within or among the states.
The increasing use of electronic records and contracting practices by public officials, industries, and consumers, has in some transactions rendered the paper certificate of title an anachronism. While some transactions, for example casual sales between individuals and some lending transactions, continue to require the use of paper certificates of title, in many other transactions involving vehicles from manufacture through salvage, none of the governments, manufacturers, financers, owners/lessees, or others involved need to be denied the convenience or economies of electronic records.
Industry practices have evolved significantly over recent decades, and many of those practices can be accommodated by electronic titling with no adverse impact on either transfers of interests or other statutes and regulations, for example, involving the collection of sales and use taxes, the requirements of safety inspections, and the disclosure of odometer information, which often piggyback on the certificate of title transfer process. Greater uniformity in the core principles governing certificate of title administration and the movement toward electronics will facilitate development of consistent approaches to information and title interchange and discourage fraud. Moreover, the recent revision and nationwide enactment of revised Uniform Commercial Code Article 9 has highlighted some related deficiencies with respect to existing certificate of title laws and regulations.
In addition, as business conditions and practices have evolved, state certificate of title laws that are nonuniform and sometimes outmoded have become inadequate to deal with current and emerging issues. The need for a consistent informational structure and uniform rules dealing with common title problems has become increasingly apparent.
Responses to these conditions are among the primary purposes of this Act.
Electronic and Paper Titles — Enactment Flexibility
Because of state funding limitations and a variety of other factors it would be unrealistic to expect (in the manner of the recent Article 9 revisions) simultaneous multi-state effectiveness of a statutory certificate of title revision. In addition the states vary greatly in terms of the speed and extent of embracing the movement toward electronics. For these reasons, and because some important uses for paper certificates of title remain, the Act provides for parallel and compatible systems of electronic and paper certificates of title; like revised Article 9, the Act is medium-neutral, but it goes beyond mere neutrality to provide specific alternative and compatible legal structures for electronic and paper certificates of title and transactions, and addresses the relation between them.
Thus, the Act is intended to permit each enacting state the flexibility to adopt electronic titling practices on its own schedule and as available funds allow. The Act is also designed so that no significant transition periods are needed: it provides for simultaneous administration of fully complementary systems of electronic and paper certificates of title. Neither system interferes with the other, and a state could adopt or utilize an electronic title system at any time, or to any extent, or not at all, without disruption. Enactment will allow states with different systems and approaches to technology issues to achieve uniformity in law and information interchange while continuing their administrative and technological diversity. Enactment will facilitate consistency with Article 9, facilitate the interstate exchange of information and transfers of title, help resolve common titling problems, discourage title fraud, and promote greater consistency of titling law with commercial practice, to the benefit of all parties to transfers of interests in vehicles.
Study and Drafting History
In 1955, the Conference promulgated a motor vehicle title act which, although enacted by few states, has influenced the statutes of many. The factors enumerated at the beginning of this Prefatory Note suggested the need for a new look at the potential benefits of an updated uniform effort on this subject by the Conference.
Like all Conference legislative drafting efforts, the appointment of a drafting committee followed several years’ work by a study committee, but in this instance the antecedents are even more extensive. For nearly all of the past decade, a Task Force of the Uniform Commercial Code Committee of the Business Law Section of the American Bar Association (ABA) has been devoted to study of the problems and opportunities attendant to certificate of title questions; the ABA Advisor to the Drafting Committee and the Reporter for this Act have been active in the leadership of that effort, and the Drafting Committee is drawing heavily on that ABA work.
To date the Drafting Committee also has been fortunate in the active interest shown by numerous Observers, particularly those who have attended the meetings of the Drafting Committee. These Observers include representatives of manufacturers, importers, dealers, auctioneers, lessors, financers, title and tag agents, consumers, state titling administrators and authorities, trade associations, the ABA, and various other public and private interests. Particularly important has been the information imparted to the Drafting Committee by these Observers about existing and possible future governmental, administrative, consumer, and industry practices and concerns, in effect describing in detail the commercial, legal, and regulatory context within which the Act must fit.
Matters of Scope
After consideration, it was determined initially that the Act would not attempt to cover watercraft and premanufactured homes, largely due to a need to first resolve basic issues in the context of a specific and limited framework, and because of some perceived fundamental business background differences among the affected industries. However, representatives of segments of both industries have attended Drafting Committee meetings and this question of scope is under continuing evaluation. Also, the Drafting Committee is maintaining communications with regulators and financers of all product industry segments, with a view to consistency and in recognition of the value of the experience of those parties with respect to certificate of title issues, and also in contemplation of the possibility of expanding the scope at some later date.
Also, after consideration by the leadership of the Conference, the Drafting Committee, and Observers, this draft reflects affirmative determinations to leave substantially as is certain provisions of the existing states’ laws. Perhaps most notable in this respect are title branding, which is diverse among the states in both substance and administration, “lemon laws,” and laws relating directly to fraudulent activity, which are also diverse and combine local common law and criminal and civil statutory law. This draft requires notation and carry-forward of existing, known title brands, but does not seek to define those requirements.
In light of the diversity, current and probably future, in various states’ electronic systems and capabilities and the administration of those systems, the Drafting Committee has attempted to avoid to the extent possible mandating or affecting the technical details of the states’ electronic systems, as distinguished from the information legally required to be maintained and furnished by those systems. Compatibility is being attempted as well with systems in use by law enforcement and industry groups. Thus the goal of the draft is uniformity in information interchange and legal results, but not technology or specific operational procedures.
Title Fraud, Odometer Disclosure and the Like — Coordination with Federal and Other State Laws
Under the federal Anti-Car Theft Act of 1992 and the Anti-Car Theft Improvements Act of 1996, under the responsibility of the Department of Justice, the National Motor Vehicle Title Information System (NMVTIS) is being developed and tested, with information input from the states. In the words of the American Association of Motor Vehicle Administrators:
The Act specifies that the information within NMVTIS shall be available to jurisdictions; federal, state and local law enforcement officials; insurance carriers; and other prospective purchasers (e.g., individuals, auction companies, and used car dealers).
NMVTIS allows jurisdictions to verify the validity of titles prior to issuing new titles. This inhibits title fraud and auto theft by making it harder to title stolen vehicles. Law enforcement officials can get information on any particular vehicle or title, and also are provided access to junk yard and salvage yard information, allowing them to identify illegal activities. The consumer has access to the latest odometer reading and any current or former title brands related to the value and condition of a particular vehicle. This allows consumers to make more informed decisions on whether to buy a vehicle and at what purchase price. Businesses that are prospective purchasers (e.g., dealers or auctions) and insurance carriers also are allowed to get information on a vehicle. This information includes title history, odometer, and brand data, which allows them to make informed decisions on whether to buy or insure the vehicle.
Clearly, states’ law enforcement and vehicle title administration agencies will have electronic tie-ins and coordination with NMVTIS, for, among other things, prevention of title and odometer fraud. This Act is intended to enable coordination with, rather than to duplicate, the federal initiative, by providing for state titling practices that are consistent with the federal system.
Odometer disclosure laws, federal and state, are recognized by this Act, which is intended to facilitate a titling system to exist in coordination with those laws. Section 16 of this Act provides for delivery of electronic disclosures to provide information that would be on a written certificate of title.
Focus on Title Issues
Finally, the inherent limitations on the scope of this Act should be noted. It is recognized that not every type of problem involving vehicle sales and finance can be addressed in the Act. The focus of the Act is the legal structure for administration of certificate of title issues, transfers of ownership, and perfection of security interests. The overall purpose is to create a consistent legal structure to facilitate efficient resolution of common titling issues and the efficient handling of title-related transactions. The Act thus focuses on the duties, authority, and responsibilities of title administrators. To purport to resolve every issue that may arise in relationships between the parties to private transactions would be such an expansion of scope as to obscure the basic purpose of this Act and effectively preclude its uniform enactment. For example, many issues relating to sales contracts, the priority of security interests, and consumer protection are covered by the Uniform Commercial Code or consumer protection laws rather than this Act; similarly, all states have dealer licensing laws, most of which establish administrative structures and regulate some aspects of dealer transactions. The Act does not displace those laws as regards basic contract or tort law, or consumer protection issues.
Nonetheless, by providing for improved administrative rules and remedies governing title issues, creating better and more consistent data flows and information, and providing increased uniformity in the law, the Act will make certificates of title more meaningful and useful for all parties. The resulting increased integrity of the title system will benefit all involved.
In addition to the statutory text and Official Comments, Legislative Notes are provided at appropriate places, to alert legislators and other interested parties to issues and provisions in this Act that may impact other state laws, and therefore may require adjustment of those laws or this Act as part of the enactment process.
UNIFORM CERTIFICATE OF TITLE ACT
SECTION 1. SHORT TITLE. This [act] may be cited as the Uniform Certificate of Title Act.
(a) In this [act]:
(1) “Buyer” means a person that buys or contracts to buy goods.
(2) “Buyer in ordinary course of business” means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in ordinary course if the sale comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller’s own usual or customary practices. A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods under a pre-existing contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under [Uniform Commercial Code Article 2] may be a buyer in ordinary course of business. The term does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt. A buyer in ordinary course of business does not lose that status solely because a certificate of title was not executed to the buyer.
(3) “Cancel”, with respect to a certificate of title or a certificate of origin, means to make the certificate ineffective.
(4) “Certificate of origin” means a record created by a manufacturer or importer as the manufacturer’s or importer’s proof of identity of a vehicle.
(5) “Certificate of title”, except in the phrases “certificate of title created by a governmental agency of any state” and “certificate of title created by a governmental agency of any jurisdiction”, means a record, created by the office and designated as a certificate of title by it, that is evidence of ownership of a vehicle.
(6) “Create” means to bring a record into existence by making or authorizing the record.
(7) “Deliver” means voluntarily to give possession of a record or to transmit it, by any reasonable means, properly addressed and with the cost of delivery provided.
(8) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
(9) “Electronic certificate of origin” means a certificate of origin consisting of information that is stored solely in an electronic medium and is retrievable in perceivable form.
(10) “Electronic certificate of title” means a certificate of title consisting of information that is stored solely in an electronic medium and is retrievable in perceivable form.
(11) “Execute” means to sign and deliver a record on, attached to, accompanying, or logically associated with a certificate of title or certificate of origin to transfer ownership of the vehicle covered by the certificate.
(12) “Good faith” means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(13) “Importer” means a person authorized by a manufacturer to bring into and distribute in the United States new vehicles manufactured outside the United States.
(14) “Lessee in ordinary course of business” means a person that leases goods in good faith, without knowledge that the lease violates the rights of another person, and in ordinary course of business from a person, other than a pawnbroker, in the business of selling or leasing goods of that kind. A person leases in ordinary course if the lease to the person comports with the usual or customary practices in the kind of business in which the lessor is engaged or with the lessor’s own usual and customary practices. A lessee in ordinary course of business may lease for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or a certificate of title covering goods under a preexisting lease contract. Only a lessee that takes possession of the goods or has a right to recover the goods from the lessor under [Uniform Commercial Code Article 2A] may be a lessee in ordinary course of business. A person that acquires goods in bulk or as security for or in total or partial satisfaction of a money debt is not a lessee in ordinary course of business.
(15) “Lien creditor” means:
(A) a creditor that has acquired a lien on the property involved by attachment, levy, or the like;
(B) an assignee for the benefit of creditors from the time of assignment;
(C) a trustee in bankruptcy from the date of the filing of the petition; or
(D) a receiver in equity from the time of appointment.
(16) “Manufacturer” means a person that manufactures, fabricates, assembles, or completes new vehicles.
(17) “Office” means [insert name of relevant department or agency that creates certificates of title in enacting state].
(18) “Owner” means a person that has legal title to a vehicle.
(19) “Owner of record” means the owner of a vehicle as indicated in the files of the office.
(20) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, federally recognized Indian Tribe, public corporation, government, or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.
(21) “Purchase” means to take by sale, lease, mortgage, pledge, consensual lien, security interest, gift, or any other voluntary transaction that creates an interest in a vehicle.
(22) “Purchaser” means a person that takes by purchase.
(23) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(24) “Secured party” means:
(A) a person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding;
(B) a person that is a consignor under [Uniform Commercial Code Article 9];
(C) a person to which accounts, chattel paper, payment intangibles, or promissory notes have been sold;
(D) a trustee, indenture trustee, agent, collateral agent, or other representative in whose favor a security interest is created or provided for; or
(E) a person that holds a security interest arising under [Uniform Commercial Code Section 2-401, 2-505, 2-711(3), or 2A-508(5)].
(25) “Secured party of record” means the secured party whose name is provided as the name of the secured party or a representative of the secured party in a security-interest statement that has been received by the office or, if more than one are indicated, the first indicated in the files of the office.
(26) “Security interest” means an interest in a vehicle which secures payment or performance of an obligation. The term includes any interest of a consignor in a vehicle in a transaction that is subject to [Uniform Commercial Code Article 9]. The term does not include the special property interest of a buyer of a vehicle on identification of that vehicle to a contract for sale under [Uniform Commercial Code Section 2-401], but a buyer may also acquire a security interest by complying with [Uniform Commercial Code Article 9]. Except as otherwise provided in [Uniform Commercial Code Section 2-505], the right of a seller or lessor of a vehicle under [Uniform Commercial Code Article 2 or 2A] to retain or acquire possession of the vehicle is not a security interest, but a seller or lessor may also acquire a security interest by complying with [Uniform Commercial Code Article 9]. The retention or reservation of title by a seller of a vehicle notwithstanding shipment or delivery to the buyer under [Uniform Commercial Code Section 2-401] is limited in effect to a reservation of a security interest. Whether a transaction in the form of a lease creates a security interest is determined by law other than this [act].
(27) “Security-interest statement” means:
(A) a record created by a secured party which indicates a security interest; or
(B) an application for which the office is required to create a certificate of title, if the application indicates a security interest.
(28) “Sign” means, with present intent to authenticate or adopt a record, to:
(A) make or adopt a tangible symbol; or
(B) attach to or logically associate with the record an electronic sound, symbol, or process.
(29) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, a federally recognized Indian tribe, or any territory or insular possession subject to the jurisdiction of the United States.
(30) “Termination statement” means a record created by a secured party pursuant to Section 27 which:
(A) identifies the security-interest statement to which it relates; and
(B) indicates that it is a termination statement or that the identified security-interest statement is not effective.
(31) “Title brand” means a designation of previous damage, use, or condition that [this [act] or] law other than this [act] requires to be indicated on a certificate of title or a certificate of origin created by a governmental agency of any jurisdiction.
(32) “Transfer” means to convey, voluntarily or involuntarily, an interest in a vehicle.
(33) “Transferee” means a person that takes by transfer.
(34) “Vehicle” means goods that are any type of motorized, wheeled device of a type in, upon, or by which an individual or property is customarily transported on a road or highway, or a commercial, recreational, travel, or other trailer customarily transported on a road or highway. The term does not include:
(A) an item of specialized mobile equipment not designed primarily for transportation of individuals or property on a road or highway;
(B) an implement of husbandry; [or]
(C) a wheelchair or similar device designed for use by an individual having a physical impairment[; or
(D) a manufactured home].
Legislative note: The enacting state should compare this definition of “Vehicle” with existing state law to determine if adjustments are needed to conform to other law, as this term may appear in other statutes and affect the scope and application of those statutes.
(35) “Written certificate of origin” means a certificate of origin consisting of information inscribed on a tangible medium.
(36) “Written certificate of title” means a certificate of title consisting of information inscribed on a tangible medium.
(b) The following definitions and terms also apply to this [act]:
(1) “Agreement”, [UCC Section 1-201(b)(3)].
(2) “Collateral”, [UCC Section 9-102(a)(12)].
(3) “Debtor”, [UCC Section 9-102(a)(28)].
(4) “Lease”, [UCC Section 2A-103(a)(j)].
(5) “Lessee”, [UCC Section 2A-103(1)(n)].
(6) “Lessor”, [UCC Section 2A-103(a)(p)].
(7) “Manufactured home”, [UCC Section 9-102(a)(53)].
(8) “Merchant”, [UCC Section 2-104(1)].
(9) “Notice; Knowledge”, [UCC Section 1-202].
(10) “Representative”, [UCC Section 1-201(b)(33)].
(11) “Sale”, [UCC Section 2-106(1)].
(12) “Security agreement”, [UCC Section 9-102(a)(73)].
(13) “Seller”, [UCC Section 2-103(1)(o)].
(14) “Send”, [UCC Section 1-201(b)(36)].
(15) “Value”, [UCC Section 1-204].
Legislative Note: If a state has not enacted the 2002 uniform text of Uniform Commercial Code Articles 1, 2, and 2A, the references to Articles 1, 2, and 2A, section numbers should be adjusted as needed to reflect state law.
Comment
1. “Buyer in ordinary course of business.” Section 2(a)(2) is consistent with Uniform [Commercial Code] Section 1-201(a)(9).
2. “Certificate of origin.” Section 2(a)(4) recognizes that a certificate of origin is a temporary record that typically describes basic vehicle identification features, such as the vehicle, its manufacturer, and each seller and purchaser during the period between manufacture of the vehicle and creation of the first certificate of title. A certificate of origin may be created or authorized by the manufacturer or, in the case of vehicle manufactured outside the United States, by the importer of the vehicle. The certificate of origin is submitted to the office that creates the first certificate of title and is to be cancelled at that time. See also Sections 6-9.
3. “Certificate of title.” The definition at Section 2(a)(5) is similar to those in many state certificate of title laws, in that it recognizes the certificate of title as evidence of ownership. A certificate of title is defined as a “record,” meaning it can be in either paper or electronic form. The definition of “certificate of origin” is similar in this regard. Thus the term “certificate of title” is broad enough to include both electronic and written certificates of title. The term “electronic certificate of title” or “written certificate of title” is used where the reference is limited to one or the other. See Section 2(a)(8), (10), (36).
A “certificate of title” governed by this act can only be created by the “office” in this state. See Section 2(a)(5), (17). However, “certificate of title created by a governmental agency of any state” means such a record created and designated by the appropriate government agency of any state; and “certificate of title created by a governmental agency of any jurisdiction” means such a record created and designated by the appropriate agency of the jurisdiction, whether or not the jurisdiction is a state. These terms are cumulative: “Jurisdiction” includes any state, and “any state” includes this State.
The definition at Section 2(a)(5) requires a certificate of title to have three basic elements: (1) a record; (2) created or authorized by the appropriate office of this State; (3) evidencing ownership of a vehicle. Although a certificate of title is evidence of ownership, it is not necessarily conclusive evidence. See, e.g., Seward County v. Hauck, 2003 WL 21211373 (Nebr. App. May 27, 2003) (unpublished) (certificate of title obtained by theft was not effective). See also: Section 10 (regarding cancellation); Sections 16-19 (rights of transferees); [Uniform Commercial Code] Sections 2-403, 9-316(d) and (e), and 9-337. Compare Volvo v. McClellan, 69 P.3d 274 (Okla. Ct. App. 2003) (improper lien foreclosure was sufficient to transfer ownership to an innocent purchaser). Volvo is consistent with Section 19(b), and [Uniform Commercial Code] Section 9-337.
The definition of “certificate of title” is different from [Uniform Commercial Code] Article 9 Section 9-102(a)(10) in some important ways. The [Uniform Commercial Code] Article 9 definition incorporates by reference certain standards that a state law must meet in order to be the applicable certificate of title law for purposes of [Uniform Commercial Code Article 9]. See [Uniform Commercial Code] Sections 9-303 and 9-311(a). This act is that certificate of title law, and therefore cannot directly use the [Uniform Commercial Code Article 9] incorporation-by-reference approach. This act satisfies the [Uniform Commercial Code Article 9] requirements, rather than merely restating them. As discussed below, these requirements are met in this act at Sections 2(a)(5) and (10), 11(a)(2), and 14(b) and (c), as well as Sections 25 and 26, providing for perfection of security interests pursuant to this act; there is no need for these provisions or the requirements of [Uniform Commercial Code Article 9] to be restated in the definition at Section 2(a)(5).
The [Uniform Commercial Code Article 9] definition at Section 9-102(a)(10) requires a “certificate,” but does not define that term or require a written certificate. The provisions of this act providing for written and electronic certificates of title are consistent with the [Uniform Commercial Code Article 9] definition.
The [Uniform Commercial Code Article 9] definition at Section 9-102(a)(10), and the Section 9-311(a)(2) and (3) deference to an applicable certificate of title perfection system, [Uniform Commercial Code] require a certificate of title statute providing for security interests to be indicated on the certificate as a condition or result of perfection or priority over a lien creditor. Section 11(a)(2) of this act requires that the office indicate the security interest on the certificate of title. Section 2(a) (5) and (10) provide that an electronic certificate of title is maintained entirely in files created by the office, and Section 14(b) and (c) require the office to indicate security interests in those files. Section 19(e) provides that a security interest is indicated on the electronic certificate of title if it is indicated in the files of the office. These provisions satisfy the [Uniform Commercial Code Article 9] requirement for a certificate of title statute that provides for indication of security interests on the certificate of title.
In addition, Sections 25 and 26 of this act provide the mechanisms for perfection of the security interest. This act uses the term “perfection” as that term is used in [Uniform Commercial Code Article 9]. Perfection under Sections 25 and 26 satisfies the requirements for perfection under [Uniform Commercial Code Article 9] Sections 9-310 and 9-311(a) and (b). The consequences of that perfection, including priority, are determined under [Uniform Commercial Code Article 9], as well as Sections 18 and 19 of this act. Thus, for example, a security interest perfected under Sections 25 and 26 is entitled to priority over a subsequent lien creditor pursuant to [Uniform Commercial Code Article 9] Section 9-317.
[Uniform Commercial Code Article 9] Sections 9-102(a)(10) and 9-311(a)(2) and (3) require that the certificate of title statute provide for the security interest to be indicated on the certificate as a condition or result of perfection or priority. Under this act, indication on the certificate of title is not a condition to perfection or priority; the security interest may be perfected and have priority by reason of the secured party’s compliance with the requirements of Sections 25 and 26. Under these sections the requisite condition to perfection is proper receipt by the office of a security-interest statement. This provides priority over a subsequent lien creditor, pursuant to [Uniform Commercial Code Article 9] section 9-317. As a result of this perfection, this act provides for the security interest to be indicated on the certificate of title, either by indication in files of the office constituting an electronic certificate of title or upon subsequent submission of an application for a written certificate of title. Perfection under Sections 25 and 26 does not require prior indication on a written certificate of title, but will result in such indication in the course of processing by the office of a subsequent application for a written certificate of title. Thus, this act provides for indication on the certificate of title as a result of perfection and priority over a lien creditor, in accordance with [Uniform Commercial Code Article 9] Sections 9-102(a)(10) and 9-311(a)(1) and (2), even though such indication is not a prerequisite to perfection and priority. This is consistent with established law in many jurisdictions, and the equivalent procedure in [Uniform Commercial Code Article 9] (see Section 9-516(a)), in that perfection of security interests occurs upon receipt by the office of the proper documentation.
Pursuant to Sections 9 and 11(d), the certificate of title must provide for reassignment of the certificate of title by execution of the certificate of title, including dealer reassignments and secured powers of attorney, e.g., by execution of a form that is part of the certificate of title. See also the definition of “execute,” at Section 2(a)(11).
4. “Create.” Section 2(a)(6) defines what it means to “create” a certificate of title. This definition relates to other definitions and provisions of this act. See, e.g.: the definitions of “Electronic certificate of title” and “Written certificate of title,” Sections 2(a)(10) and (36); and Section 10 (obligation of the office to create a certificate of title). A certificate of title can be created by the office making a file that constitutes an electronic certificate of title pursuant to Sections 9, 10, and 11, or by creating a written certificate of title pursuant to those sections.
5. “Deliver.” Section 3(a)(7) defines “deliver” to mean a transfer of possession of a record; as used in this context the meaning and context of the term “transfer” are different from the definition of “Transfer” at Section 2(a)(32), which refers to conveyance of an interest in a vehicle. Payment by the transferee for the cost of delivery constitutes “the cost of delivery provided” and meets the definition of deliver. In the case of an electronic record, “deliver” means the transmission by electronic means to the electronic mail address of the recipient.
6. “Electronic certificate of title.” Under Section 2(a)(9), “electronic certificate of title” designates a certificate of title that meets all requirements in the definition of a certificate of title and is only in electronic form. See also Sections 11 and 14 (distinguishing between a certificate of title and other information in the files of the office). This definition is modeled somewhat on the [Uniform Commercial Code Article 9] definition of “Electronic chattel paper” at Section 9-102(a)(31). The general purpose is to create a parallel system for electronic certificates of title, somewhat like that for electronic chattel paper in [Uniform Commercial Code Article 9]. Under Section 2(a)(9), an electronic certificate of title can be created only if any existing written certificate of title is cancelled; this recognizes the traditional primacy of a written certificate of title if one exists. The result is that some provisions apply only to written certificates of title, some apply only to electronic certificates of title, and some apply to both. See, e.g., Sections 16, 18, 19, 20-23; and the definition of “written certificate of title” at Section 2(a)(36).
7. “Execute.” The definition of “execute” at Section 2(a)(11) denotes only the execution of a certificate of title or certificate of origin.
8. “Lessee in ordinary course of business”; “Lien creditor.” The definitions of “Lessee in ordinary course of business” at Section 2(a)(14) and “Lien creditor” at Section 2(a)(15) are taken largely from [Uniform Commercial Code] Sections 2A-103(1)(u) and 9-102(a)(52), for purposes of consistency with the [Uniform Commercial Code].
9. “Manufacturer.” The definition of “Manufacturer” at Section 2(a)(16) includes a later-stage manufacturer, e.g., a manufacturer that completes vehicles by installing or modifying vehicle body on a chassis manufactured by another manufacturer.
10. “Owner.” The definition of “Owner” at Section 2(a)(18) means a person with ownership of an interest in the legal title to a vehicle. It does not include an equitable or beneficial ownership interest. An owner has an ownership interest in the vehicle. If there are multiple ownership interests, the term “owner” can include any or all such interests.
11. “Person.” The definition of “Person” at Section 2(a)(20) is derived from [Uniform Commercial Code Article 1] Section 1-201(b)(27), for purposes of consistency with the [Uniform Commercial Code]. The list is illustrative, not exclusive. “Other legal entity” includes things not specifically listed, such as the trustee of a statutory trust.
12. “Purchase”; “Purchaser.” The definition of “Purchase” at Section 2(a)(21) is adapted from [Uniform Commercial Code] Section 1-201(b)(29), for purposes of consistency; see also Section 1-201(32) of old Article 1. Some parts of the [Uniform Commercial Code] definition are directed at purchases of instruments or investment securities or the like, and are not applicable to vehicles, e.g., the words “discount,” “negotiation,” and “issue or reissue.” The [Uniform Commercial Code] language is included in this act as applicable, for purposes of consistency with the [Uniform Commercial Code]. The definition of “Purchaser” at Section 2(a)(22) is similarly adapted from [Uniform Commercial Code] Section 1-201(b)(30), for purposes of consistency with the [Uniform Commercial Code].
13. “Secured party”; “Secured party of record”; “Security interest.” The definitions of “Secured party” and “Security interest” at Sections 3(a)(24) and (26) are similar to those in [Uniform Commercial Code Article 9]. “Secured party of record” means not only a secured party shown in the files of the office, but the first one so indicated if there is more than one.
14. “Security-interest statement” is the record delivered to the office pursuant to Section 25, to perfect a security interest under Section 26 and Article 9. Under prior law in many states this was required to be in writing and was called a “lien entry form.”
This act provides for perfection of a security interest on receipt by the office of a security-interest statement, subject to the additional UCC Article 9 requirements, even if the security interest is not otherwise indicated on a certificate of title or the office never receives an application for a certificate of title. See Sections 25, and 26. This is consistent with [Uniform Commercial Code Article 9] Sections102(a)(10) and 9-311(a)(2), because perfection occurs pursuant to a statute providing for the security interest to be indicated on the certificate of title. This act must provide for such perfection, in order to meet the requirements for a certificate of title under [Uniform Commercial Code Article 9], while [Uniform Commercial Code Article 9] simply references such perfection at Sections 9-102(a)(10) and 9-311(a). Note that [Uniform Commercial Code Article 9] Section 9-311(a)(3), requiring that a certificate of title created by another jurisdiction be created pursuant to a law providing for indication on the certificate as a condition or result of priority, does not require the applicable certificate of title law to include priority rules; the applicable priority rules are in [Uniform Commercial Code Article 9], and the certificate of title law merely needs to provide for perfection so that priority can result under [Uniform Commercial Code Article 9]. Therefore, receipt by the office of a security-interest statement pursuant to Section 25 creates a basis for perfection under Section 26 and [Uniform Commercial Code Article 9] and triggers application of this Act pursuant to Section 26 and [Uniform Commercial Code Article 9] Section 9-311(a), even if there is no certificate of title and no other record covering the vehicle in the files of the office. This satisfies the requirements of [Uniform Commercial Code Article 9] section 9-311(a)(2), as the vehicle is subject to perfection under this Act and this Act qualifies as a certificate of title statute under Section 9-102(a)(10) and 9-311(a)(2). This also constitutes perfection under the law of another state pursuant to that states [Uniform Commercial Code Article 9] Section 9-311(a)(3). As a result no [Uniform Commercial Code Article 9] filing is needed and perfection under Section 26 of this [act] is perfection for purposes of [Uniform Commercial Code Article 9], even if the office never creates a certificate of title. If any state creates a certificate of title, the choice of law rules of Section 4 of this [act] and [Uniform Commercial Code Article 9] Section 9-303 apply.
15. “Sign.” This definition is derived from the [Uniform Commercial Code] and the Uniform Electronic Transactions Act (UETA) and includes authentication of an electronic record. The definition of “Sign” at Section 2(a)(28) is derived from the definition of “signed” in [Uniform Commercial Code] Section 1-201(b)(37) and the definition of “electronic signature” in the UETA Section 3(8). It is intended to encompass both electronic and written signatures.
16. “Termination statement.” Section 2(a)(30) relates to the termination of a security-interest statement under Section 27. This serves the same function as in [Uniform Commercial Code Article 9], to denote that perfection of a security interest has been terminated. See Sections 23, 27, [Uniform Commercial Code] Section 9-513. This act adopts an “open drawer” system for security-interest statements and termination statements, as in [Uniform Commercial Code Article 9]: all such statements become part of the office file, with the effect to be individually considered for each issue that may arise. In addition, the debtor can terminate a security-interest statement in limited circumstances under Section 23 of this [act]. See also Sections 25 and 26 (perfection of security interests).
17. “Title brand.” This act does not determine what constitutes a title brand. This is determined under other law. Once a title brand is created, under the law of any jurisdiction requiring it to be indicated on a certificate of title, that title brand must be indicated on a certificate of title created by the office. See Section 11.
18. “Transfer”; “Transferee.” The terms “Transfer” and “Transferee” at Section 2(a)(32) and (33) denote any conveyance of an interest, whether voluntary or by operation of law, in contrast to a “purchase,” which denotes a voluntary conveyance. Again this distinction is drawn from the [Uniform Commercial Code]
19. “Vehicle.” “Specialized mobile equipment” is not a vehicle. “Specialized mobile equipment,” as that term is used in Section 2(a)(34)(A), includes off-road motorized vehicles whose use of the roadway is only incidental to their off-road purpose, i.e., mobile equipment not designed primarily for the transportation of individuals or property upon a road or highway and only incidentally operated or moved over a road or highway, including: motorized vehicles designed exclusively for off-road use; ditch digging apparatus; well-boring apparatus; construction equipment; road construction and maintenance machinery such as asphalt spreaders, bituminous mixers, bucket loaders, tractors other than truck tractors, ditchers, levelling graders, finishing machines, motor graders, road rollers, scarifiers, earth-moving carry-alls and scrapers, power shovels, and drag lines; self-propelled cranes; and earth-moving equipment. “Specialized mobile equipment” also includes consumer goods such as golf carts, “go-karts,” and devices designed for transport on sidewalks, inside the home, or in and around facilities such as shopping malls, amusement parks, and other commercial buildings (e.g., “Segways”). Specialized mobile equipment does not include a house trailer (which is not vehicle), or dump trucks, truck-mounted transit mixers, truck-mounted cranes and shovels, or other mobile equipment mounted on vehicles designed for transport of individuals or property on a roadway. Vehicles designed for transport on a roadway are not specialized mobile equipment, and are therefore vehicles under this act.
A bicycle is not a vehicle because it is not motorized. Motorized bicycles, motor scooters, and motorcycles are vehicles and may be covered by a certificate of title pursuant to this act.
Although not a definition, in [Uniform Commercial Code Article 9] “Location of debtor” is governed by Section 9-307. For purposes of this act, the location of the debtor is determined under [Uniform Commercial Code] Section 9-307.
20. Two other fundamental purposes are evident in the definitions: (1) Allowing purely electronic certificates of title and origin and related documentation (with a tiered option provided at Sections 9, 10, 11, and 15 to allow certain persons to request a written certificate); and (2) allowing transactions relating to written certificates of title and origin to be conducted electronically (e.g., executing certificates of title and origin, and perfection of security interests under Sections 25 and 26). Thus electronic records may be used to effectuate electronic transactions, and also certain transactions that involve written certificates of title. See, e.g., Section 16.
21. This act permits the filing of written and electronic security-interest statements to perfect security interests (Sections 25 and 26), in some circumstances even if there has not been an application for a certificate of title. If a certificate of title has been created in another state, or is subsequently created in another state, the receipt by the office of a security-interest statement pursuant to Sections 25 and 26 will not constitute perfection because the law of this State will not apply under Section 4 and [Uniform Commercial Code] Section 9-303. However, if a certificate of title has not been created in any state, and the law of this State applies under Section 4(e) or this state’s choice of law principles, the office may receive a security-interest statement under Sections 25 and 26 and this will constitute perfection. If the office subsequently receives an application for a certificate of title, the perfected security interest will be indicated on the certificate. If an application for a certificate of title is made in another state, the law of that state will apply pursuant to Section 4 and [Uniform Commercial Code] Section 9-303. This act also permits written and electronic documentation of other records, such as title transfers, divorce decrees, leases, corporate mergers, and security agreements, and communications such as title searches, with or without a certificate of title, based on the procedures, discretion, budget, and files of the office. See, e.g., Sections 13 and 14, and Sections 21-24. The official records of the office are designated “files,” to avoid confusion with the defined term “record.”
Thus, “certificate of title” means any form of “record” meeting the requirements for a certificate of title, and can mean either a written or electronic certificate of title. An electronic certificate of title is a certificate of title being maintained solely in electronic form, in the files of the office; a written certificate of title is one that exists solely in written form. If the office creates a written certificate of title, the files of the office cannot constitute an electronic certificate of title; there can be only one certificate of title at a time. See, e.g., Section 15(c). Note again that, unless stated otherwise (as in Section 4(a)), “certificate of title” means one created by the office in this State.
SECTION 3. SUPPLEMENTAL PRINCIPLES OF LAW AND EQUITY. Unless displaced by this act, the principles of law and equity supplement its provisions.
Comment
1. This section is consistent with [Uniform Commercial Code] Section 1-103(b). In addition, like the [Uniform Commercial Code], this act should be liberally construed and applied to promote its underlying purposes and policies, which are:
(1) to simplify, clarify, and modernize the law governing certificates of title;
(2) to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and
(3)to make uniform the law among the various jurisdictions.
SECTION 4. LAW GOVERNING VEHICLE COVERED BY CERTIFICATE OF TITLE OR CERTIFICATE OF ORIGIN.
(a) In this section, “certificate of title” means a certificate of title created by a governmental agency of any state.
(b) The local law of the state under whose certificate of title a vehicle is covered governs all issues relating to the certificate of title, from the time the vehicle becomes covered by the certificate of title until the vehicle ceases to be covered by the certificate of title, even if no other relationship exists between the state and the vehicle or its owner.
(c) A vehicle becomes covered by a certificate of title created in this State when an application for a certificate of title and the fee are received by the office in accordance with this act. A vehicle becomes covered by a certificate of title in another state when an application for a certificate of title and the fee are received in that state pursuant to the law of that state.
(d) A vehicle ceases to be c