556 N.W.2d 893 | Mich. Ct. App. | 1996
James ROAN, Plaintiff-Appellant,
v.
Steven Charles MURRAY, Defendant-Appellee.
Court of Appeals of Michigan.
*894 Steve Lehto, Bloomfield Hills, for plaintiff-appellant.
Kane, Clemons and Joachim by Thomas M. Clemons, Algonac, for defendant-appellee.
Before REILLY, P.J., and MARK J. CAVANAGH and R.C. ANDERSON,[*] JJ.
PER CURIAM.
Plaintiff appeals by leave granted a trial court order granting judgment for plaintiff in the amount of $2,400. We affirm in part, reverse in part, and remand for proceedings consistent with this opinion.
The facts of this case are essentially undisputed. On March 13, 1987, plaintiff sold defendant a 1968 Chevrolet Corvette for $3,500. Plaintiff is listed as the first secured party on defendant's application to the Secretary of State for the certificate of title, which was signed by defendant. The purchase price of the vehicle was listed on the title transfer application as $500.
The parties agreed that defendant would pay plaintiff in installments, without interest. Defendant made sporadic payments of $100 to plaintiff until August 21, 1989, by which *895 time defendant had paid a total of $1,100. Defendant then failed to make additional payments, and plaintiff sought the return of the vehicle. According to plaintiff, defendant refused to either return the vehicle or pay the remaining $2,400 owed on it. Defendant asserts, however, that he has offered to pay the entire amount from the beginning of the dispute and opposes only repossession of the vehicle.
Plaintiff filed a complaint on January 21, 1993. Plaintiff argued that the application for certificate of title constitutes a security agreement for purposes of § 9-203 of the Uniform Commercial Code, M.C.L. § 440.9203; M.S.A. § 19.9203. The trial court agreed and ruled that plaintiff had a valid security agreement. However, the trial court then ruled that because defendant listed the price of the vehicle as $500 on the application, defendant's security interest was only for that amount. The trial court further concluded that because defendant had already made more than $500 in payments for the car, plaintiff's security interest had already been extinguished. Accordingly, the trial court entered a money judgment for plaintiff in the amount of $2,400, but ordered plaintiff to execute a release of his security interest on the title of the vehicle. This appeal followed.
I
Plaintiff argues that the trial court erred in ruling that his security interest in the Corvette has been discharged and that plaintiff is not entitled to the return of the vehicle. This is a question of law that we review de novo on appeal. McCaw v. T & L Operations, Inc., 217 Mich.App. 181, 185, 550 N.W.2d 852 (1996).
Plaintiff essentially contends that the trial court erred in relying upon defendant's false representation of the vehicle purchase price in the application for certificate of title to conclude that plaintiff's security interest was limited to $500. In response, defendant argues that plaintiff failed to establish any enforceable security interest at all because the title application is insufficient to constitute the type of written security agreement required by § 9-203 of the UCC.
The necessary components of a security agreement under the UCC are minimal. Article 9 defines a "security agreement" as "an agreement which creates or provides for a security interest." M.C.L. § 440.9105(1); M.S.A. § 19.9105(1). Section 9-203(1), M.C.L. § 440.9203(1); M.S.A. § 19.9203(1), which is essentially a statute of frauds, provides that a security interest is not enforceable against a debtor and does not attach unless the secured party retains possession of the collateral or the agreement is in writing, signed by the debtor, and contains a description of the collateral.[1]
The question presented, then, is whether the vehicle title application was sufficient to create a security interest in the Corvette. Other jurisdictions have addressed this issue and arrived at opposite conclusions. In White v. Household Finance Corp., 158 Ind. App. 394, 406; 302 N.E.2d 828 (1973), the court held that the application for certificate of title was not sufficient to create a security interest because it was not the agreement of the parties, but merely evidence that there may be an agreement. However, in Kreiger v. Hartig, 11 Wash.App. 898, 900-902, 527 P.2d 483 (1974), the court held that, in view of the UCC's general policy to avoid technical formalities, the application for transfer of title was sufficient to create a security interest in compliance with § 9-203.
Under Michigan law, *896 "[a]greement" 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 1205 and 2208). [M.C.L. § 440.1201(3); M.S.A. § 19.1201(3).]
The Supreme Court has recognized that, although a signed writing describing the collateral is required, the other requirements of an "agreement" under the UCC may be established by parol evidence of course of dealings, usage of trade, or course of performance. See NBD-Sandusky Bank v. Ritter, 437 Mich. 354, 364-365, 471 N.W.2d 340 (1991). The application for a certificate of title showed unequivocally that plaintiff was to have a security interest in the Corvette. Thus, we conclude that the title application constituted a security agreement that gave plaintiff a security interest in the vehicle.
However, while we hold that the trial court correctly concluded that defendant's title certificate application was sufficient evidence of the security agreement for purposes of § 9-203(1) of the UCC, we find that the trial court erred in ruling that plaintiff's security interest is necessarily limited to $500 of the purchase price, which the parties agree was $3,500. While the purchase price is listed as $500 on the title application, that figure is not necessarily a term of the security agreement itself. Indeed, it is highly questionable whether a written security agreement needs to state any terms of the security agreement other than to sufficiently describe the collateral. See M.C.L. § 440.9203(1)(a); M.S.A. § 19.9203(1)(a). A security agreement is not required to state the amount of the debt secured. 68A Am.Jur.2d, Secured Transactions, § 179, p. 179. At most, the representation on the application that the purchase price was $500 creates only a question of fact concerning the intended scope of plaintiff's security interest, not a conclusive statement of the amount of security involved.
Furthermore, even if it were established that plaintiff's security interest is limited to $500, we reject the trial court's conclusion that defendant's initial payment of $1,100 on the debt necessarily discharges plaintiff's security interest. It could be argued that defendant's $1,100 in payments were made on the $3,000 of unsecured debt and that none of the $500 of secured debt has yet been paid by defendant. This interpretation seems more consistent with the parties' actual course of conduct, as apparently neither party sought the removal of plaintiff's lien on the title once $500 of the debt had been paid.
Plaintiff also argues that he is entitled to repossession of the vehicle pursuant to M.C.L. § 440.9503; M.S.A. § 19.9503, which states that "[u]nless otherwise agreed a secured party has on default the right to take possession of the collateral." Because we find that the trial court erred in holding that plaintiff's security interest had been extinguished and that a question of fact exists as to the extent of plaintiff's interest, we direct the trial court to address this issue on remand. We note that if plaintiff is entitled to repossession of the Corvette and he elects to retain it, he must provide written notice to defendant. Defendant will then have twenty-one days to object in writing, in which case plaintiff must dispose of the vehicle in a commercially reasonable manner and account to defendant for any surplus.[2] See M.C.L. § 440.9504(2); M.S.A. § 19.9504(2) and M.C.L. § 440. 9505; M.S.A. § 19.9505. We do not decide here whether defendant is entitled to recoup the costs of labor and materials expended in renovating the Corvette.
II
Plaintiff also argues that the trial court erred in ruling that he was not entitled to attorney fees and court costs. Michigan adheres to the "American rule" that attorney fees are not recoverable unless expressly authorized by statute or court rule. Matras v. Amoco Oil Co., 424 Mich. 675, 695, 385 N.W.2d 586 (1986); In re Sloan Estate, 212 *897 Mich.App. 357, 361, 538 N.W.2d 47 (1995). The general rationale of the rule is to ensure that private parties who pursue individual legal and equitable remedies bear the expenses of litigation in most instances. Id.
Plaintiff first relies on M.C.L. § 440.2715; M.S.A. § 19.2715. We find plaintiff's reliance on that statute to be misplaced, however, because it allows a buyer to recover incidental and consequential damages in the event of a seller's breach. Because plaintiff, the seller, has brought this lawsuit on the basis of the buyer's breach, he is not entitled to attorney fees and court costs under this section.
Plaintiff also claims that he is entitled to attorney fees and court costs under M.C.L. § 440.9504(1)(a); M.S.A. § 19.9504(1)(a), which allows secured parties to recover reasonable expenses incurred in retaking the collateral. However, that section allows recovery of reasonable attorneys' fees and legal expenses incurred by the secured party only "to the extent provided for in the agreement." The absence of any express agreement for payment of attorney fees and litigation costs in this case therefore precludes plaintiff's claim.
Affirmed in part, reversed in part, and remanded for proceedings consistent with this opinion. We do not retain jurisdiction.
NOTES
[*] Circuit judge, sitting on the Court of Appeals by assignment.
[1] M.C.L. § 440.9203(1); M.S.A. § 19.9203(1) provides:
Subject to the provisions of section 4208 on the security interest of a collecting bank, section 8321 on security interests in securities, and section 9113 on a security interest arising under the article on sales, a security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless:
(a) The collateral is in the possession of the secured party pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral and in addition, when the security interest covers crops growing or to be grown or timber to be cut, a description of the land concerned; and
(b) Value has been given; and
(c) The debtor has rights in the collateral.
[2] Defendant argues that because he made significant improvements to the Corvette, including repainting it, rebuilding the engine, and replacing the interior, the vehicle is now worth considerably more than the $3,500 purchase price.
