In La Gar Marketing, Inc. v. W. Finance & Lease, Inc., 2012 WL 4898785 (Ohio App. 9 Dist. 2012), the Ohio Court of Appeal found in favor of a commercial lender as against a bona-fide consumer purchaser of a vehicle under Ohio law.  The Court of Appeal relied on precedent finding dealer’s floor plan lender’s security interest superior to a consumer bona-fide purchaser’s interest.  Possession of the Certificate of Title took precedents, said the Court of Appeal.  The facts were as follows:

On August 20, 2007, Western Finance entered into an “Equipment Finance Agreement” with Mark’s Akron and Medina Truck Sales, Inc. (“Mark’s Akron”). Pursuant to the agreement, Mark’s Akron purchased a 2000 Mack Truck with VIN of 1M1AA13Y4YW119803 and agreed to pay Western Finance $2117 per month for 24 months. Several weeks later, on September 11, 2007, La Gar bought the same truck from Mark’s Akron. La Gar paid Mark’s Akron $7000 upfront and agreed that it would pay an additional $970 per month for 18 months. While La Gar was in possession of the vehicle for approximately nine months, La Gar never received a certificate of title for the truck. While La Gar made its payments to Mark’s Akron, Mark’s Akron apparently defaulted on its obligation to Western Finance. ¶  After La Gar had made approximately nine of the monthly payments, Western Finance repossessed the truck and subsequently sold it at auction. La Gar filed a complaint against Western Finance seeking a declaratory judgment of its superior title, and dam-ages for conversion, trespass of chattel, and negligence. Both parties filed motions for summary judgment. In a judgment entry issued on December 3, 2010, the trial court concluded that La Gar lacked standing to pursue its claims because it did not have a certificate of title. The trial court then dismissed the action for failure to state a claim upon which relief could be granted.

The Court found in favor of the commercial lender, who held possession of the Certificate of Title.

The Third District confronted facts very similar to the facts before us in First Merit Bank, N.A. v. Angelini, 159 Ohio App.3d 179. 2004–Ohio–6045 (3d Dist.), which involved a dispute between an automobile dealer’s creditor and buyers’ creditor. The dealer’s creditor possessed the certificates of title to the two automobiles in question, and a notation of its security interest was made on each certificate. The dealer sold the cars to purportedly innocent buyers, and the buyers financed the purchase price. Although the dealer was paid in full for the cars, it did not pay the proceeds to its creditor. The dealer’s creditor refused to surrender the certificates of title for the cars, which resulted in the buyers’ creditor being unable to perfect its purchase-money security interests in the cars. The buyers’ creditor filed a complaint requesting an order terminating the dealer’s creditor’s interest in the cars, and an injunction requiring transfer of the certificates of title. After the trial court found that Article 9 of the UCC applied because the cars were inventory, the Third District concluded on appeal that the case involved “competing claims of ownership” and held that R.C. 4505.04 was controlling. Angelini at ¶ 17. The court reached this conclusion by applying the Supreme Court precedent established in Saturn of Kings and held that R.C. 4505.04 governs over the UCC. Thus, the Third District concluded that the retention and possession of the certificates of title made the dealer’s creditor’s security interests in the vehicle “superior” to the security interests of the buyers’ creditor. Id. at ¶ 18. We note that the appellant in Angelini advanced arguments similar to those made by La Gar here, namely that “as a matter of public policy the creditors of bona fide purchaser for value must be protected in these situations.” Id. at ¶ 24. The Third District disagreed, concluding: “[T]he Certificate of Title Act [codified in R.C. 4505.04] was created to protect bona fide purchasers, because motor vehicles are a distinct and different type of goods. To equate the sale of motor vehicles to that of a refrigerator or other household appliance would be to render the Certificate of Title Act meaningless. The act was created to protect Ohio’s bona fide purchaser, but that does not mean that a dealer’s creditor who has done everything within the Certificate of Title Act should be left without recourse. Accordingly, while R.C. 4505.04(A) may require some extra steps for dealers and purchasers in vehicle sales, we find those steps to be necessary to protect purchasers.” ¶  Id. In this case, La Gar brought an action for declaratory judgment against Western Finance seek-ing to have the court declare that its interest in the truck was superior to Western Finance’s interest. Thus, this case involves a dispute between an alleged owner and a lien claimant, and R.C. 4505.04 is controlling. While it may seem unjust that a buyer is unable to benefit from the Article 9 provisions protecting a buyer in the ordinary course, that is a matter left to the discretion of the legislature. There is no dispute that La Gar does not possess a certificate of title to the truck. As the clear language of R.C. 4505.04 mandates that a court may not recognize a “right, title, claim, or interest of any person in or to any motor vehicle” unless evidenced by a certificate of title, the trial court properly concluded that it was unable to litigate this matter and awarded summary judgment to Western Finance.