A creditor who improperly identified its secured interest on a vehicle title as the “owner” instead of a “lien-holder” was sufficient to perfect its security interest in the motor vehicle.

In this case, the creditor, Microbank Companies Inc., the intended to place a lien on the debtor’s vehicle, however, creditor mistakenly designated itself on the certificate of title as the “owner.”

The debtor claimed that the improper identification of the creditor as “owner” instead of “lien-holder” voided the security interest.

Generally, a creditor must have its lien noted on the certificate of title to perfect a security interest in a motor vehicle.

The certificate of title gives notice to the public of the secured party’s interest, but not necessarily the extent or type of interest. A security interest is perfected when a certificate of title gives clear notice to potential creditors about the existence of a lien on the motor vehicle.

Here, perfection of an interest in the subject vehicle is governed by the Uniform Commercial Code and the applicable motor vehicle act of State law.

Although the creditor mistakenly identified itself as the “owner”, the court nonetheless found that a diligent search of the vehicle title would place any prospective creditor on notice that this creditor had an interest in the collateral.

The court upheld creditor’s security interest and ruled against the debtor. In re Microbank Companies Inc., et al., 135 B.R. 2.

Author: Charles R. Harroun, Attorney at Law