56 Misc. 2d 261 | N.Y. Sup. Ct. | 1968
This is an action brought against Dorothy Mae Sharp, as buyer, upon a retail installment contract to recover the amount due upon an automobile sales contract, and also to recover against the Marine Midland Trust Company of Western New York, the bank which provided floor-plan financing to the automobile dealer, on the theory of conversion for the reasonable market value of an automobile seized and sold by the said defendant bank. The action against Alfred M. Heintzman, individually, sounding in fraud, has been withdrawn from the consideration of the court by stipulation. The defendant, Dorothy Mae Sharp, has never been served and her whereabouts are unknown. The determinations are based on a nonjury trial of the issues.
Upon the evidence, in February, 1966, Mrs. Sharp contacted a car dealer in the City of Buffalo, Heintzman-McRae Motors, Inc., through its sales manager, William Peterson, and sought the purchase of a 1963 Chevrolet automobile. On February 16, 1966, she signed a printed form captioned ‘ ‘ car order ’ ’ which was received by the dealer subject to acceptance after a credit investigation by the plaintiff as proposed retail finaneer. The proposed purchase was, according to records of the plaintiff, phoned into for approval at 9:40 o’clock and approved at 10:30 o’clock by the plaintiff. Thereafter, a formal printed instrument entitled ‘ ‘ Retail Installment Contract ’ ’ was signed by Mrs. Sharp and by the dealer’s office manager. The contract follows the form requirements of article 9 of the Personal Property Law. It was dated February 16, 1966. On the following day, it was indorsed by the president of the dealer corporation to the plaintiff. Payment of the cash balance received by the dealer from the sale of the retail finance contract to the plaintiff was deposited by the dealer in its deposit account with the defendant bank on February 17, 1966. On February 24, 1966, a financing statement, form UCC-1, was filed in the office of the Clerk of the County of Erie to perfect the security interest of the plaintiff, as required by paragraph (d) of subdivision (1) of section 9-302 of the Uniform Commercial Code and paragraph (b) of subdivision (1) of section 9-401 of the Uniform Commercial Code. The retail installment contract contained, in a printed portion, an acknowledgment of delivery and acceptance of the car by the buyer. In fine print on the reverse side under the assignment portion of the contract, the dealer war
In determining the rights of the parties, we are dealing with a question of first impression under the newly enacted Uniform Commercial Code as to which neither party nor the court has uncovered any decisive interpretive case law on the issues herein in this or any other jurisdiction governed by the new code. The Uniform Commercial Code has been law in New York since September 27, 1964 (L. 1962, eh. 553, as amd.). Situations such as this are, moreover, commonplace, according to counsel, in insolvent automobile dealerships and with major appliance dealers.
Various authorities have been cited by both parties with reference to venerable principles of contract law affecting the passage of title as claimed to be determinative of the issue of whether Mrs. Sharp was a “ buyer in the ordinary course of business ” under subdivision (9) of section 1-201 of the Uniform Commercial Code. These cases are largely distinguishable as being interpretations of repealed statutes not consistent with the broad changes of the Uniform Commerical Code or not otherwise applicable to this particular situation. Doyle’s Main Motors v. Davis (118 N. Y. S. 2d 867) applies to the literal interpretation of former rule 1 of section 100 of the Personal Property Law changed in format and over-all effect by subdivision (3) of section 2-401 of the Uniform Commercial Code in cases where title is determinative. Bank of Italy v. Merchants’ Nat. Bank (113 Misc. 314) similarly turns on former rule 1 of section 100 of the Personal Property Law and the
The New York State car registration was never transferred in the instant case. The fact that the delivery of such papers (Motor Vehicle Form MV-50) is evidence of the passage of title (Ferris v. Sterling, 214 N. Y. 249) does not control herein if the intention of the parties was to delay delivery of the otherwise “sold” car until a later date. The case merely confirms such intention as a rule of evidence.
This court is inclined to feel that, while title questions may be of significance in determining many issues under the Uniform Commercial Code, the theory of the act and its relation to the problem relegate the issue of title in this case to a subordinate position. The Uniform Commercial Code is the result of the rapid expansion of credit operations in the business world, both wholesale and .retail, to the position where traditional paper in the form of chattel mortgages, conditional sales forms, and even trust receipt floor planning do not, in large, fast-moving operations, meet the needs of a rapid flow of credit. The financing of inventories, particularly, has long baffled those accustomed to the country store with its annual inventory and slow movement of goods. A car dealer with hundreds of transactions a month, or a major appliance shop with transactions running into the thousands, must keep inventory controls by modern business machinery and have a constant flow of cash and credit. To meet these demands the Uniform Commercial Code provides for greater flexibility and, in some respects to the uninitiate, will, during the transition
Under section 1-201 of the Uniform Commercial Code General definitions, such a buyer is defined in subdivision (9) as follows: “ (9) ‘ Buyer in ordinary course of business ’ means a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker. ‘ Buying ’ may be for cash or by exchange of other property or on secured or unsecured credit and includes receiving goods or documents of title under a preexisting contract for sale but does not include a transfer in bulk or as security for or total or partial satisfaction of a money debt. ’ ’
An “agreement” is defined in subdivision (3) as follows: “ (3) ‘ Agreement ’ means the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this Act (Sections 1-205 and 2-208) Whether an agreement has legal consequences is determined by the provisions of this Act, if applicable; otherwise by the law of contracts (Section 1-103). (Compare ‘ Contract ’.) ”
A “contract” is defined in subdivision (11) as follows: “ (11) ‘ Contract ’ means the total legal obligation which results from the parties ’ agreement as affected by this Act and any other applicable rules of law. (Compare ‘ Agreement ’.) ”
A “purchaser” is defined in subdivision (33) as follows: “ (33) ‘Purchaser’ means a person who takes by purchase.”
Subdivision (1) of section 2-106, containing further definitions with regard to “sales” under article 2, provides as follows: “ (1) In this Article unless the context otherwise requires ‘ contract ’ and ‘ agreement ’ are limited to those relating to the present or future sale of goods. ‘ Contract for sale ’ includes both a present sale of goods and a contract to sell goods at a future time. A ‘ sale ’ consists in the passing of title from the seller to the buyer for a price (Section 2-401). A ‘ present sale ’ means a sale which is accomplished by the making of the contract.”
The first sentence of section 2-401 of the Uniform Commercial Code limits this application and restricts its use as follows: “ § 2-401. Passing of Title; Reservation for security; Limited Application of this Section. Bach provision of this Article with regard to the rights, obligations and remedies of the seller, the buyer, purchasers or other third parties applies irrespective of title to the goods except where the provision refers to such title.”
Other applicable definitions include section 1-204 of the Uniform Commercial Code:
“§ 1-204. Time; Reasonable Time; ‘Seasonably’”. (1) Whenever this Act requires any action to be taken within a reasonable time, any time which is not manifestly unreasonable may be fixed by agreement.
“ (2) What is a reasonable time for taking any action depends on the nature, purpose and circumstances of such action.
“ (3) An action is taken ‘ seasonably ’ when it is taken at or within the time agreed or if no time is agreed at or within a reasonable time.”
Subdivision (2) of section 1-205 of the Uniform Commercial Code provides: “ (2) A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage are to be proved as facts. If it is established that such a usage is embodied in a written trade code or similar writing, the interpretation of the writing is for the court. ”
Applying the definitions and constructions indicated above, we find that Mrs. Sharp entered into a contract with the dealer to purchase the car by (1) delivery of her trade-in or exchange of property, (2) by cash, not actually paid but secured by a deferred delivery of the vehicle under a collateral oral agreement, (3) by cash, unsecured, to be paid at a later date, and (4) by a secured credit agreement sold by the dealer to the plaintiff. The dispute, arising out of the attempt to enforce the secured credit agreement or retail installment contract comes from the contention of the defendant bank that the entire transaction with Mrs. Sharp was executory only, that it was never consummated, title did not pass and it was null and void. The plaintiff, as a retail financier, on the other hand, contends that Mrs. Sharp was a buyer out of inventory in the ordinary course of business on her partly performed contract.
Applying the definitions to the evidence, it may be said that Mrs. Sharp entered into a specific written contract to purchase the car owned by the dealer. She gave valuable consideration in goods, she traded in her old Vehicle, and she signed a binding installment contract. She agreed to pay in cash a down payment and a deferred payment. By agreement, orally, she specified the course of her down payment, an anticipated income tax refund, and she certainly, in good faith expected to receive the car and to make her payments, upon the evidence (Uniform Commercial Code, § 1-102, subd. [3]). According to the testimony, she attempted to pay her cash deficiency a few days after the repossession by the bank, but, finding the car gone, abandoned her rights. The sales manager testified, without contradiction, that they frequently took and negotiated contracts with the car to be held for a time for the cash down payment, that it was common practice in his 20 years’ experience in the car business to take contracts without actual receipt of the recited cash down payment. He said he would fire a salesman who failed to do so and that in his experience and opinion a number of dealers would go out of business if they failed to follow this practice.
It is agreed by the parties that both the plaintiff and the defendant have formally perfected security interests and that the value of the collateral is $1,200. The question, therefore, becomes one of the priority of rights in the proceeds of the sale of the 1963 Chevrolet automobile. A security interest is
This is the very type of floating lien contemplated by section 9-204 of the Uniform Commercial Code and by section 9-205 of the Uniform Commercial Code, which offsets the restrictive rulings of Benedict v. Ratner (268 U. S. 353). Pursuant to this clause in the contract, the dealer received the funds obtained by assignments of Mrs. Sharp’s retail installment contract and deposited these moneys to the dealer’s account in the defendant bank. If it became commingled by the time of the insolvency, having, however, been traced into the bank account, it still remained a part of the gross remaining assets of the dealer enuring to the benefit of the bank on its seizure, under
Under paragraph 12 of its floor-plan agreement the bank is completely subrogated to all rights of the dealer in the business transactions and assets of the dealer on insolvency in implementation of the “floating lien” type transaction and for the protection of its rights thereunder. This includes its rights in and to the trade-in and its proceeds, if any, in the rights, if any, and in the contract rights of the dealer against Mrs. Sharp, had they been pursued on the contract, or for damages (Howarth, supra.).
By the same token, the plaintiff finance company, having furnished new value which has been paid to the dealer on the assignment, and having purchased the chattel paper in due course, is entitled to the returned or repossessed goods under paragraphs (b), (c) and (d) of subdivision (5) of section 9-306 and section 9-308 of the Uniform Commercial Code, provided, as in this case, its interest has been perfected (Uniform Commercial Code, § 9-306, subd. [5], par. [d]; § 9-302, subd. [1], par. [d]; § 9-401, subd. [1], par. [b]; § 9-312, subd. [1]). See, also, 2 Hawkland, Transactional Guide to Uniform Commercial Code, pp. 730-732, 700-701; 1 Anderson’s Uniform Commercial Code, pp. 562-566 inclusive, for discussions of this point.)
In making this determination, the court has, of course, by inference, determined that the buyer of goods was a buyer in the ordinary course of business out of inventory. A discussion of this has been left to the close of this memorandum by reason of the fact that the entire relation of the parties as indicated above relates to whether the irregularities of the transaction would make Mrs. Sharp other than such a buyer. As indicated at the beginning, section 1-102 of the Uniform Commercial Code requires a construction of all terms to carry out the underlying purposes and policies set forth in the statute, which is discussed at length in the practice commentaries of McKinney’s Consolidated Laws of New York and in the Official Comments. Any interpretation of the entire transaction, where both the retail financer and bank entruster acted in good faith, which became so technical as to abort the intention of the act and where a dealer has acted in
The plaintiff shall have judgment against the defendant, Marine Midland Trust Company of Western New York, in the amount of $1,200 and interest from the 18th day of March, 1966.