## Facts

- A vehicle purchaser executed a retail installment contract granting BMW Financial Services, N.A., LLC a security interest in a 2011 Porsche Panamera.
- The Illinois Secretary of State issued an original certificate of title listing BMW Financial as first lienholder, thereby perfecting BMW’s security interest under Illinois certificate-of-title law.
- The purchaser later submitted a lien release letter that BMW did not execute or authorize.
- Based on the lien release submission, the Secretary of State issued a duplicate certificate of title omitting BMW’s lien and stating that it was a duplicate that “may be subject to the rights of a person under the original certificate.”
- The purchaser sold the vehicle to an auto dealer, Auto Showcase, Inc., which checked computerized Secretary of State records and found no liens.
- Auto Showcase resold the vehicle to a retail buyer, Richard D. Felice, and later repurchased it from him.
- BMW sued in replevin for possession; after Felice was dismissed, BMW and Auto Showcase cross-moved for summary judgment on stipulated facts.
- The trial court granted summary judgment for BMW and awarded BMW possession; Auto Showcase appealed.

## Issues

1. Whether BMW’s security interest, properly perfected by notation on the original certificate of title, remained perfected and enforceable after a fraudulent lien release and issuance of a duplicate title omitting the lien.
2. Whether Auto Showcase (or its retail buyer) took the vehicle free of BMW’s security interest under UCC Article 9, including the buyer-in-ordinary-course doctrine.
3. Whether equitable considerations could defeat BMW’s lien rights where a third party’s fraud caused the lien to be omitted from the duplicate title and lien searches.

## Decision

- The appellate court affirmed summary judgment for BMW and the award of possession.
- BMW’s security interest remained perfected because it was properly noted on the original certificate of title and was not terminated by a fraudulently induced duplicate title.
- The duplicate title’s warning that it may be subject to rights under the original certificate reinforced that prior lien rights were not extinguished.
- The buyer-in-ordinary-course doctrine did not cut off BMW’s lien because the security interest was created by the debtor-seller (the purchaser), not by Auto Showcase, the immediate seller to the retail buyer.
- Equity did not reallocate the loss from the debtor’s fraud to BMW, which had complied with the statutory perfection method and did not participate in the fraud.

## Legal Principles

- For vehicles subject to Illinois certificate-of-title law, a security interest is perfected by the Secretary of State’s notation of the lien on the certificate of title.
- A fraudulently procured lien release and a duplicate certificate omitting the lien do not, by themselves, extinguish or unperfect a lien properly perfected on the original certificate when the duplicate is issued subject to rights under the original certificate.
- UCC buyer-in-ordinary-course protection against a security interest in goods generally applies only when the security interest was created by the buyer’s immediate seller; it does not defeat a lien created by a prior owner in the chain.
- Courts will not use equitable doctrines to override clear statutory perfection and priority rules where the secured party properly perfected and a third party’s fraud caused the conflicting title record.

## Conclusion

The court held that BMW’s lien, perfected on the original Illinois title, survived a fraudulent lien release and a lien-free duplicate title, and that neither UCC buyer-in-ordinary-course rules nor equitable arguments allowed Auto Showcase to take the vehicle free of BMW’s security interest.


BMW Fin. Servs. N.A., LLC v. Felice, 2017 IL App (2d) 160397