Car Sold And Lein Not Paid

What is the name of your state? Texas

I hope this is the right forum.

I loaned money to a co-worker. He signed a document acknowledging that he owed me the money. He also signed a document stating that his car will be used as collateral and that I have a lein on the car and so if he stopped paying I can repossess the car.

Well he stopped paying. I told him I would take his car. It turns out he sold the car without telling me! I am hearing different things. That I can repossess the car anyway. That I don't have a lein because it was not recorded on the title. What can I do?

If you recorded the lein on the title, the title can't legally be transferred without your approval. If an old title was used that didn't show the lein, it will not clear state records when the new owner tries to register it. If you didn't record the lein on the title, your only recourse is (small claims) court.

To distill it out: You never had a legal lien on the title.

I disagree with the other posters. Recording a lien gives notice to third parties, and has no bearing on the lien's legality or creation.

Assuming that the OP gave value for the security interest, that the co-worker owned the car, and that the co-worker signed a security agreement that adequately describes the car, then the OP has a valid lien on the car against the co-worker.

The issue is whether the lien is good against the third party buyer. If the third party buyer bought the car for his personal use, and had no knowledge of the security interest, then he took the car free of the lien. Otherwise, the OP can repo the car against the third party buyer.

Confused

Now I'm confused. Do I have a lein or not? The guy who bought the car maybe knew about our lein agreement because it was my co-worker's brother. But how can I prove it?

scottpetecarl said:

Now I'm confused. Do I have a lein or not? The guy who bought the car maybe knew about our lein agreement because it was my co-worker's brother. But how can I prove it?

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You can "prove" it by proving that the lien was recorded and visible on the title. Yours was not. Bored Attorney *may* be right from an absolute black and white perspective, but the reality of it is that you do not have an enforceable lien on the vehicle.
Sue your co-worker for the money.

Zigner said:

You can "prove" it by proving that the lien was recorded and visible on the title. Yours was not. Bored Attorney *may* be right from an absolute black and white perspective, but the reality of it is that you do not have an enforceable lien on the vehicle.
Sue your co-worker for the money.

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I am definitely correct.

As for proving whether the buyer knew about the lien, you may want to start by asking the co-worker and asking the buyer (preferably via email). They may very well admit it if they think (as others apparently do ) that unperfected liens cannot be enforced.

BoredAtty said:

I am definitely correct.

As for proving whether the buyer knew about the lien, you may want to start by asking the co-worker and asking the buyer (preferably via email). They may very well admit it if they think (as others apparently do ) that unperfected liens cannot be enforced.

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Not saying it can't be enforced...just clarifying that it will be difficult (I'll even approach the word "impossible") to enforce against a third party (in this particular case).

Our OP's best course of action is against his co-worker through the court systems. You are doing a disservice by suggesting he approach this in any other way, as he would be exposing himself to huge liabilities if he improperly "repossesses" the vehicle without the legal right to do so.

Zigner said:

Not saying it can't be enforced...just clarifying that it will be difficult (I'll even approach the word "impossible") to enforce against a third party (in this particular case).

Our OP's best course of action is against his co-worker through the court systems. You are doing a disservice by suggesting he approach this in any other way, as he would be exposing himself to huge liabilities if he improperly "repossesses" the vehicle without the legal right to do so.

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I was not suggesting any course of action to the OP. Rather, I was explaining the law. I agree that his safest bet is to sue for the money. That said, if the brother admits that he knew about the lien, then it is still good. I don't know why you would claim that enforcing a lien against a third party is impossible. The law is quite clear.

BoredAtty said:

I was not suggesting any course of action to the OP. Rather, I was explaining the law. I agree that his safest bet is to sue for the money. That said, if the brother admits that he knew about the lien, then it is still good. I don't know why you would claim that enforcing a lien against a third party is impossible. The law is quite clear.

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I've tried to be very clear that I was always referring to this particular situation. Not saying that it could NEVER be enforced

Cars in the hiding

It sounds to me like the co-worker is scamming to "hide" the car that he knows will be taken. He needs to be sued, and I think selling a car that is collateral is a criminal offense as well.. it is here anyway.. maybe that state is different though...


My goodness! It sounds like you are being manipulated by a group to take your money.

Zigner said:

I've tried to be very clear that I was always referring to this particular situation. Not saying that it could NEVER be enforced

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Okay, let me clarify my statement to you: I don't know why you would claim that enforcing a lien against this particular third party is impossible if he admits to knowing about the lien. The law is quite clear.

mrstan said:

It sounds to me like the co-worker is scamming to "hide" the car that he knows will be taken.

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That's what I suspect as well. The fact that the buyer is the debtor's brother is a red flag. I'd be interested to know how close in time these two events occurred: (1) co-worker stops paying and (2) co-worker sells car to brother. I would also be interested to know if the co-worker is now using the car.

BoredAtty said:

Okay, let me clarify my statement to you: I don't know why you would claim that enforcing a lien against this particular third party is impossible if he admits to knowing about the lien. The law is quite clear.

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§ 501.071. SALE OF VEHICLE; TRANSFER OF TITLE. (a)
Except as provided in Section 503.039, a motor vehicle may not be
the subject of a subsequent sale unless the owner designated in the
certificate of title transfers the certificate of title at the time
of the sale.
(b) The transfer of the certificate of title must be on a
form prescribed by the department that includes a statement that:
(1) the signer is the owner of the vehicle; and
(2) there are no liens on the vehicle except as shown
on the certificate of title or as fully described in the statement.

If the seller stated upon transfer that there were no liens, then our OP is out of luck. His recourse is against the seller, and the seller ONLY. Even if the BIL says he knew there was a lien at some point, if he has the correctly filled out statement at the time of transfer, then he is immune. Why? Because the statement at the time of sale is what will govern. In court (which is where our OP's contemplated theft will end up), the BIL will state that, at the actual time of transfer, the seller certified that there was no lien on the vehicle.

Of course, if the title was not properly transferred, it might change things a bit. But, in any case, our OP needs to pursue this against his co-worker and not through repossession of the vehicle.

Zigner said:

Even if the BIL says he knew there was a lien at some point, if he has the correctly filled out statement at the time of transfer, then he is immune. Why? Because the statement at the time of sale is what will govern. In court (which is where our OP's contemplated theft will end up), the BIL will state that, at the actual time of transfer, the seller certified that there was no lien on the vehicle.

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Are you just making this up? That's a ridiculous conclusion. The laws regarding secured transactions don't have exceptions for sellers and buyers who lie about liens on title transfer documents. If the buyer knew about the lien, then regardless of what the seller certified on the title transfer documents, the lien can be enforced.

BoredAtty said:

Are you just making this up? That's a ridiculous conclusion. The laws regarding secured transactions don't have exceptions for sellers and buyers who lie about liens on title transfer documents. If the buyer knew about the lien, then regardless of what the seller certified on the title transfer documents, the lien can be enforced.

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I tell you that there is a lien on my car today. If I pay it by certified funds to the lienholder, today, then I can certify on my title transfer that there is no lien when I sell it tomorrow.
BA - you're not right about this one. If the seller certifies that there is no lien, then the buyer is safe. The buyer is not privy to every financial transaction that the seller does in his life.
I will again say that it is bad to imply that our OP can safely repossess this vehicle from the third party.

I'm done here...we have a difference of opinion