                             IN THE SUPREME COURT OF MISSISSIPPI
                                      NO. 93-CA-00254-SCT
BOBBY REGAN, VERDIE REGAN AND JOEL TURNAGE
v.
CITIZENS BANK, A MISSISSIPPI BANKING CORPORATION

DATE OF JUDGMENT:                                    02/04/93
TRIAL JUDGE:                                         HON. HOWARD L. PATTERSON JR.
COURT FROM WHICH APPEALED:                           MARION COUNTY CHANCERY COURT
ATTORNEY FOR APPELLANTS:                             JAMES C. RHODEN
ATTORNEY FOR APPELLEE:                               RICHARD F. YARBOROUGH, JR.
NATURE OF THE CASE:                                  CIVIL - OTHER
DISPOSITION:                                         AFFIRMED - 5/30/96
MOTION FOR REHEARING FILED:
MANDATE ISSUED:                                      6/20/96




      BEFORE SULLIVAN, P.J., McRAE AND MILLS, JJ.


      SULLIVAN, PRESIDING JUSTICE, FOR THE COURT:


¶1. Citizens Bank is a commercial lender whose principal place of business is in Columbia, Mississippi. The
Bank loaned money to Regan Contractors, Inc. and as collateral for that loan the Bank acquired a
perfected security interest in four motor vehicles owned by Regan Contractors, Inc. The perfected security
interest is evidenced by four original certificates of title issued by the State of Mississippi on the four
vehicles. Citizens Bank is the first and only lienholder named on any of the certificates of title to the vehicles.

¶2. On April 28, 1989, Regan Contractors, Inc. executed a $20,000 promissory note to Verdie Regan and
Joel Turnage. To secure the loan evidenced by the note, Regan Contractors, Inc. executed a security
agreement granting Verdie Regan and Joel Turnage a security interest in a 1979 White truck and a 1978
Ford Gang truck then owned by Regan Contractors, Inc. That same day, Regan Contractors, Inc. executed
a $22,654 promissory note to Verdie and Bobby Regan. Regan Contractors, Inc. also executed a security
agreement granting the Regans a security interest in a 1977 Ford Gang truck, a 1981 Ford Gang truck, and
a 1981 International Gang truck, then owned by Regan Contractors, Inc. to secure this loan from the
Regans. Regan Contractors, Inc. also executed financing statements concerning these security interests,
which the parties thereafter filed with the Mississippi Secretary of State. This attempt at perfection of the
security interests is the method prescribed for non-titled personal property. The Regans did not utilize the
method prescribed under the Mississippi Motor Vehicle Title Law, Miss. Code Ann. § 63-21-1 to -77
which embodies a statutory provision expressly providing how a security interest or lien is perfected in a
titled motor vehicle. See Miss. Code Ann. § 63-21-43(2).

¶3. Regan Contractors, Inc. defaulted on its indebtedness to Citizens Bank. The Bank took possession of
the four vehicles and liquidated the vehicles pursuant to its security agreement and the law of the State of
Mississippi pertaining to liquidation. At no time prior to liquidation of these four vehicles was Citizens Bank
provided either an application for a certificate of title or a new certificate of title on any of these four
vehicles indicating that the Regans were named lienholders. On the date of the liquidation sale the Bank was
the only lienholder named on the certificate of title.

¶4. Bobby Regan, Verdie Regan, and Joel Turnage filed a petition in the Chancery Court of Marion
County, Mississippi seeking to set aside the sale of the property by the Citizens Bank or in the alternative
damages from the Bank for improper and unreasonable sale of property and contravention of their security
interests in the property. In response the Bank moved for a summary judgment which was granted by the
Chancellor. The Chancellor based his determination on the fact that the Regans did not properly perfect
their lien in the four vehicles at issue in accordance with the Mississippi Motor Vehicle Title Law, § 63-21-
43.

                                                          I.

                                  MISSISSIPPI MOTOR VEHICLE LAW

¶5. The Regans argue that the chancery court erred in concluding that they had no cause of action against
the Bank because they did not perfect their security interests under the Mississippi Motor Vehicle Title
Law. They argue that nothing in that law affects the procedures for selling vehicles subject to liens or
security interests since Article 9 of the Uniform Commercial Code (U.C.C.) governs such sales. The
Regans argue that since they had enforceable security interests in the vehicles, although they did not perfect
their interests according to the Mississippi Motor Vehicle Title Law, they did not lose their status as secured
parties under the relevant U.C.C. provisions because of their failure to perfect those interests. Also,
because they had notified the Bank of their interests, under the U.C.C. they were entitled to notice of the
sale from the Bank.

¶6. The Bank responds that the Chancellor was correct in determining that Miss. Code Ann. § 63-21-43,
the applicable section under the Mississippi Motor Vehicle Title Law, operated to preclude the Regans'
claim against the Bank, that the Regans did not perfect their security interest in the motor vehicles as
provided under the Mississippi Motor Vehicle Title Law, and that a security interest in titled motor vehicles
is not valid against lienholders unless perfected as provided in Miss. Code Ann. § 63-21-43(2).

¶7. The collateral in which the Regans claim an interest was titled vehicles and was subject to the provisions
of the Mississippi Motor Vehicle Title Law. A "security agreement" is a "written agreement which reserves
or creates a security interest." Miss. Code Ann. § 63-21-5(p). A "security interest," in turn, is "an interest in
a vehicle reserved or created by agreement and which secures payment or performance of an obligation."
Miss. Code Ann. § 63-21-5(q). Under the Mississippi Motor Vehicle Title Law § 63-21-43(1) "a security
interest in a vehicle of a type which a certificate of title is required is not valid against creditors of the owner
or subsequent transferees or lienholders of the vehicle unless perfected as provided by this chapter." Miss.
Code Ann. § 63-21-43(2) (emphasis added). Section 63-21-43 expressly provides how a security interest
or lien is perfected in a titled motor vehicle.(1) This section provides: "(2) A security interest is perfected by
the delivery to the comptroller 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 date of his security agreement, and the required
fee." Miss. Code Ann. § 63-21-43(2) (1993).

¶8. The Legislature amended this section in 1995 changing the requirements for perfecting a security interest
in vehicles. However, the application of these changes is prospective only. See Presley v. Mississippi
State Highway Comm'n, 608 So. 2d 1288 (Miss. 1992) (Banks, J., plurality); Mississippi Ins. Guar.
Ass'n v. Gandy, 289 So. 2d 677 (Miss. 1973); McCullen v. State, 217 Miss. 256, 63 So. 2d 856
(1953).

¶9. However, the Regans attempted to perfect their security interest by using the method prescribed under
the U.C.C. for non-titled personal property. They sought to perfect their interest in motor vehicles by
U.C.C. filings in the office of the Marion County Chancery Clerk and the Mississippi Secretary of State.

¶10. The Regans argue that the purpose of the language in Miss. Code Ann. § 63-21-43(1), that an
unperfected security interest in a vehicle is not "valid" against other lienholders or subsequent transferees, is
to govern priority disputes and disputes involving the rights of bona fide purchasers. They claim that this
section does not wholly negate unperfected security interests, nor does it affect the right of a secured party
to notice of the sale of the vehicle, especially where the seller has notice of the security interest.

¶11. Though their argument must fail, this question has arisen in several other jurisdictions. "Probably no
other species of commercial transaction has led to more lien priority disputes than the manufacture,
purchase, and resale of motor vehicles and other goods required by state law to carry certificates of title."
Richard L. Epling, Priority Disputes in Motor Vehicles and in Other Certificated Goods, 41 Bus. Law.
361, 361 (1986). The largest problem here is if by not following the Mississippi Motor Vehicle Title Law
for perfection is the "secured" party's interest invalid, as the statute clearly says, or does the language
comply with the U.C.C., Article 9, and allow the party's interest to be subordinated to a perfected party,
putting them in the position of an unperfected secured party? The authorities and other states have dealt
with the inconsistencies that lie between the Motor Vehicle Certificate and Title Act and the U.C.C. See
Simplot v. Owens, 805 P.2d 477 (Idaho Ct. App. 1990); Delisa Flowers Eddings, Buying a Previously
Leased or Rented Car: Buyers Beware of Sellers not in Business of Selling Goods of that Kind, 24
Mem. St. U. L. Rev. 87, 100-06 (1993). The conflict that arises between the U.C.C. and certificate of title
legislation concerns the failure to perfect a security interest. In some title act jurisdictions any interest that is
not recorded on the certificate will not be recognized.(2) See Jones v. Beavers, 866 P.2d 362 (N.M.
1993); State v. One Certain Conveyance 1978 Dodge Magnum, 334 N.W.2d 724 (Iowa 1983). The
putative secured party has no valid claim against creditors. See Miss. Code Ann. § 63-21-43(1).

¶12. On the other hand, the U.C.C. provides that where its filing system is the means of perfecting security
interests in any chattel, failure to perfect does not result in the loss of all rights in that chattel. Rather the
unperfected interest is simply subordinated to properly perfected interests to certain lien creditors. Perhaps
in seeing the inequities that arose from such strict compliance with the Mississippi Motor Vehicle Title Law,
and the inconsistencies that arise between the Mississippi Motor Vehicle Title Law and the U.C.C., the
Legislature amended section 63-21-43(2). The 1995 amended section 63-21-43(2) now allows for
perfection according to the U.C.C., allowing for lien creditors, who fail to comply with the statutory scheme
of perfecting, the status of an unperfected secured party. But, the Regans' claim comes before this section
was amended. Since the Regans failed to perfect their security interest according to the previous provision,
their interest is not secured and not valid against the Bank's perfected lien. With the amended section,
perhaps now the inequities which arose to one not so savvy in secured transactions, will not arise, but these
changes occurred too late for the Regans.

¶13. In the alternative, the Regans state that they do not base their claim upon priority rights, but rather
upon the right to notice of the sale by the Bank because the Bank had actual notice of their security interest.
The Regans state that they had given the Bank notice of the existence of their security interests in the motor
vehicles. The Regans' argument, that they were required notice because they had given the Bank notice of
their interest, is faulty because they are relying on the fact that they are a secured party and should receive
the rights afforded an unperfected secured party under Article 9 of the U.C.C. However, as stated above,
the Mississippi Motor Vehicle Title Law contains language which makes a secured interest invalid if the
parties do not follow statutory procedures. The Regans therefore never received a right to the vehicles, and
therefore had no claim to assert. The Regans' argument has no merit.

¶14. AFFIRMED.

LEE, C.J., PRATHER, P.J., PITTMAN, BANKS, McRAE, ROBERTS, SMITH AND MILLS,
JJ., CONCUR.


1. A security interest in an automobile held as inventory is perfected pursuant to the U.C.C. Miss. Code
Ann. § 75-9-302(3)(b).

2. Most jurisdictions have provided exceptions to the Motor Vehicle Title Act to protect innocent
purchasers and goods purchased in the ordinary course of business.
