Blackwell v. 2002 KIA 4 DOOR STL SEDAN

670 N.W.2d 19, 2003 Minn. App. LEXIS 1254, 2003 WL 22333073

Opinions

OPINION

HUDSON, Judge.

Appellant challenges the forfeiture of her vehicle, arguing that her mother, who loaned appellant money to purchase the vehicle, has a bona fide security interest in the vehicle. Because the evidence does not support a conclusion that appellant’s mother has a bona fide security interest in appellant’s vehicle, we affirm.

FACTS

On July 1, 2002, appellant Sharon Lynn Blackwell was arrested for driving under the influence of alcohol. After her arrest, the state served appellant with a notice of intent to forfeit the 2002 Kia 4-door STL Sedan (“the car”) she was driving at the time, as mandated by Minn.Stat. § 169A.63, subd. 6 (2002). The statute provides that a “motor vehicle is subject to forfeiture ... if it was used in the commission of a designated offense.” A designated offense includes a violation of section 169A.20, the driving-while-impaired statute. Minn.Stat. § 169A.63, subd. 1(d)(1) (2002). Appellant filed a petition for judicial determination of forfeiture of motor vehicle under Minn.Stat. § 169A.63, subd. 8(f) (2002). Appellant claimed that the forfeiture of her vehicle was unlawful, or at least subject to a private security interest because appellant’s mother, Onetta Viera, had loaned appellant money to purchase the motor vehicle, but Viera had not been served with a notice of forfeiture.

Nevertheless, Viera learned of the impending forfeiture, and at a judicial review hearing Viera testified that she paid $9,500 toward the purchase price of the vehicle while appellant paid the remaining amount. Viera also testified that she and appellant orally agreed the money was a loan and that appellant would repay the loan at a 6% interest rate. Viera produced a copy of a payment schedule created from what appears to be an amortization schedule for mortgage payments that Viera obtained from the Internet. Also entered into evidence were four cancelled checks with Viera as the payee and signed by appellant. Each check noted on the memo line that it was payment for the car loan. Viera testified she was unaware that in order to perfect her interest in the vehicle, she was required to register that interest with the State of Minnesota. Because Vi-era’s name does not appear on the vehicle’s title, respondent did not know of her interest in it, and accordingly did not serve her with the notice of forfeiture.

Appellant was subsequently convicted of driving while impaired and first-degree driving while impaired. The district court upheld the forfeiture of appellant’s vehicle. The district court concluded that the forfeiture statute did not require that Viera be notified of the forfeiture because Vi-era’s name does not appear on the vehicle’s title. This appeal follows.

ISSUE

Does appellant’s mother have a bona fide security interest in the vehicle under Minn.Stat. § 169A.63, subd. 7, in the absence of any evidence that the motor vehicle was collateral for the loan?

ANALYSIS

Appellant argues that the district court misinterpreted the forfeiture statute and erroneously concluded that appellant’s mother does not have a bona fide security interest in appellant’s vehicle. We note that the district court did not explicitly rule that Viera does not have a security interest in appellant’s vehicle. But implicit in its conclusion that the state was not required to notify Viera of the forfeiture is a determination that Viera does not have a bona fide security interest in appellant’s vehicle. Significantly, neither party appeals the district court’s notice ruling. Thus, the sole issue before us is whether Viera has a bona fide security interest in appellant’s vehicle within the meaning of the forfeiture statute, thereby precluding seizure of the vehicle by the state.

Statutory construction is a question of law, which this court reviews de novo. Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 393 (Minn.1998). When reviewing a district court’s findings of fact, this court may not set such findings aside unless they are clearly erroneous. Rife v. One 1987 Chevrolet Cavalier, 485 N.W.2d 318, 321 (Minn.App.1992), review denied (Minn. June 30, 1992). This court independently reviews the application of law to a given set of facts. A.J. Chromy Constr. Co. v. Commercial Mech. Servs., Inc., 260 N.W.2d 579, 582 (Minn.1977).

A vehicle is subject to forfeiture if the driver is convicted of the designated offense on which the forfeiture is based. Minn.Stat. § 169A.63, subd. 7(a)(1) (2002). “A vehicle encumbered by a bona fide security interest ... is subject to the interest of the secured party ... unless the party ... had knowledge of or consented to the act upon which the forfeiture is based.” Minn.Stat. § 169A.63, subd. 7(b) (2002). Appellant was convicted of driving while impaired and second-degree driving while impaired, and therefore her vehicle was clearly subject to forfeiture. It is less clear whether Viera has a bona fide security interest in the vehicle. To answer that question, we are guided by our recent decision in Stanton v. Mazda 2001, 660 N.W.2d 137 (Minn.App.2003).

In Stanton, granddaughter was stopped and arrested for driving under the influence of alcohol, which represented her third such violation in ten years. Stanton, 660 N.W.2d at 138. Granddaughter was served with a notice of intent to forfeit the Mazda that she was driving at the time, as mandated by section 169A.63, subd. 6. Id. Stanton filed a petition for judicial determination of forfeiture, claiming she had a bona fide security interest in the vehicle. Id. at 139. Stanton had co-signed the automobile loan for her granddaughter, and the loan was guaranteed by Stanton’s savings account. Id. at 138.

We concluded that a bona fide security interest in a vehicle under section 169A.63, subdivision 7, does not require that the interest be “perfected” pursuant to Minn. Stat. § 168A.17 (2002).¹ Id. at 140. We reasoned that section 169A.63, subdivision 7, only mandates that there be a “bona fide security interest,” not a “perfected security interest” or even a “security interest.” Id. at 139-40. We noted that the plain meaning of the phrase “bona fide,” as defined by this court, means “made in good faith without fraud or deceit,” or “in or with good faith; honestly, openly, and sincerely ... real, actual, genuine, and not feigned.” Id. at 139 (quoting Rogers v. Ponti-Peterson Post No. 1720, 495 N.W.2d 897, 901 (Minn.App.1993) (citations omitted)). We concluded that Stanton had a bona fide security interest in the Mazda because the granddaughter had sent Stanton a letter confirming that it was collateral for the loan. Id. at 139. We also noted that Stanton had presented an affidavit in which she stated that the Mazda was collateral for the granddaughter’s loan thus showing that Stanton had a bona fide security interest in it. Id.

Appellant argues that the facts here are similar to those in Stanton, and establish that Viera has a bona fide security in appellant’s vehicle. Appellant contends that Viera’s testimony at the hearing as to her interest in the vehicle, the payment schedule, and the cancelled checks evidencing appellant’s repayment of the loan, establishes Viera’s interest in the car. The state counters that Viera does not have a security interest in appellant’s vehicle because a security interest in another’s property requires a security agreement, and there is no security agreement in this case. The state relies on the definitions of a “security agreement,” a “security interest,” and a “secured party” in Chapter 168A.

But the state’s attempt to link the forfeiture statute with chapter 168A (Motor Vehicle Titles) is exactly the approach we rejected in Stanton. We reasoned in Stanton that the forfeiture statute provides for an interest in a vehicle even if the security interest is not perfected in accordance with section 168A.17. In so concluding, we noted that by using the phrase “bona fide,” the legislature intended that something less than a perfected security interest would suffice under the forfeiture statute. Stanton, 660 N.W.2d at 140. Therefore, it follows that under Stanton, a bona fide security interest under the forfeiture statute can exist in absence of an actual security agreement. Further, Stanton makes clear that a security interest, within the meaning of the forfeiture statute, is determined by the facts presented in each case and not by statutory requirements or definitions.

The state also contends that the facts in this case do not support a conclusion that Viera has a bona fide security interest in the car. The state argues that, unlike Stanton, Viera did not guarantee the loan with her savings account; the appellant did not write a letter pledging the motor vehicle as collateral for the loan; and neither party presented any evidence that appellant’s vehicle served as collateral for the loan. We find the state’s position here persuasive.

The district court was presented with an amortization schedule of payments that does not indicate what the payments are for, who is responsible for making the payments, or to whom the payments should be made. Viera testified that she loaned appellant $9,500 to purchase a vehicle. In the record are cancelled checks naming Viera as payee in the amount that appears in the monthly payment schedule. It is reasonably clear that the payment schedule relates to appellant’s repayment of the $9,500 loan made by Viera. But our analysis does not end here, because we must still decide whether this evidence establishes that Viera has a bona fide security interest in appellant’s vehicle. We conclude that it does not.

In Stanton, we defined the phrase “bona fide” as “made in good faith without fraud or deceit.” But we tied “good faith” to the clear evidence in that case that the vehicle served as collateral for the loan. In addition to the fact that Stanton co-signed the installment loan, the granddaughter sent Stanton a letter confirming that the vehicle was collateral for the loan. Stanton, 660 N.W.2d at 139. Stanton also presented an affidavit in which she stated that the vehicle was collateral for the granddaughter’s loan, thus demonstrating that Stanton had a bona fide security interest in the vehicle. Id.

Here, no such documentation exists. The payment schedule and cancelled checks connect Viera to the loan, but not to the car. We cannot reasonably infer from this evidence that the car served as collateral for the loan, and that in the event of default by appellant, Viera was entitled to possession. Viera certainly has an interest in repayment of the loan made to appellant for the vehicle’s purchase, but we hold that the evidence is insufficient to support a conclusion that Viera has a bona fide security interest in appellant’s vehicle.² We acknowledge that there was nothing fraudulent about Viera’s loan to appellant and that our holding today is a harsh result. But to hold otherwise would unwisely expand Stanton — something we decline to do where neither Viera nor appellant took any steps to pledge the motor vehicle as collateral for the loan, thus demonstrating a secured interest in the motor vehicle.

DECISION

In the absence of any evidence that appellant’s vehicle served as collateral for the loan, appellant’s mother did not have a bona fide security interest in the 2002 Kia.

Affirmed.

Footnotes

1

. Minn.Stat. § 168A.17, subd. 1 (2002), provides, "a security interest in a vehicle of a type for which a certificate of title is required is not valid against creditors of the owner or subsequent transferees or secured parties of the vehicle unless perfected....”

2

. The district court did not address whether Viera had a bona fide security interest under Stanton; basing its holding instead on the fact that respondent had no statutory obligation to notify Viera of the forfeiture proceeding because Viera’s interest was not registered pursuant to Minn.Stat. Ch. 168. We will not, however, reverse on appeal a correct decision simply because it is based on incorrect reasons. Wolf Motor Co. v. One 2000 Ford F-350, 658 N.W.2d 900, 903 n. 3 (Minn.App.2003); Katz v. Katz, 408 N.W.2d 835, 839 (Minn.1987).