Summary
In National Shawmut Bank an individual sold a car, subject to a security interest, to a dealer, who then sold it to a buyer in the ordinary course of business.
Summary of this case from Matter of Gary Aircraft Corp.Opinion
No. 5644.
Argued November 7, 1967.
Decided December 29, 1967.
1. A purchaser in good faith of an automobile, without knowledge that the sale to him was in violation of the security interest of another and bought in the ordinary course from a person in the business of selling automobiles is a "buyer in ordinary course of business" under the Uniform Commercial Code (RSA 382-A:1-201 (9)).
2. The provisions of the Uniform Commercial Code (RSA 382-A:9-307 (1)) that a buyer of goods in the ordinary course of business "takes free of a security interest created by his seller even though the security interest is perfected," has no application to free the buyer of a security interest in such goods created not by "his seller" but by a previous seller.
3. Under the Uniform Commercial Code (RSA ch. 382-A) a security interest in goods, in the case of a subsequent sale without consent of the secured party, may be impaired only as provided in Article 9 and is unaffected by Article 2-402.
Action of replevin to recover possession of a 1964 Dodge Dart "270" station wagon. Defendant's motion for custody under RSA 536:5 was granted upon his filing a bond in the amount of $2,000 to secure payment of any judgment which might be rendered against him. According to an agreed statement of facts, Robert D. Wever of Hampton, New Hampshire, purchased the Dart from Wentworth Motor Company, Inc. of Exeter on February 15, 1965 under a conditional sale contract for personal, family or household purposes. He executed a "Retail Installment Contract" which was assigned by Wentworth to the plaintiff. This contract was filed with the town clerk of Hampton pursuant to RSA 382-A:9-401 on February 24, 1965. Sometime thereafter, without the consent of the plaintiff, Wever traded or sold the Dart to Hanson-Rock, Inc. of Hampton, an automobile dealer in the business of selling new and used cars to the public. RSA 382-A:1-201 (9). Defendant, a resident of Hampton, purchased the Dart from Hanson-Rock on April 8, 1966 for good and sufficient consideration in good faith and without any actual knowledge of any security interest of the plaintiff or anyone else. Neither the defendant nor the Hampton National Bank from which he borrowed the purchase price examined or searched for any filing in the office of the town clerk. (It was agreed at argument that unless a search was made under the name Wever, the retail installment contract could have been found only by examining all such contracts for the serial number of the vehicle). An unpaid balance of $1,490.17 is still due under the installment contract.
The following questions were transferred without ruling by Leahy, C.J.:
1. Whether the defendant is liable to the plaintiff in the amount of $1,490.17, the amount outstanding under the retail installment contract executed by Robert Wever in favor of Wentworth Motors, Inc., and subsequently assigned to the plaintiff.
2. Whether under the provisions of the Uniform Commercial Code in New Hampshire (RSA 382-A) a buyer in ordinary course of business takes free of a perfected security interest created by a person other than the seller from whom the buyer purchased the goods.
Perkins, Holland Donovan and William Beckett (Mr. Beckett orally), for the plaintiff.
William W. Treat and Robert G. Tetler (Mr. Tetler orally), for the defendant.
Since Wever purchased for personal, family or household purposes, the Dart is classified as consumer goods. RSA 382-A:9-109. The plaintiff's security interest was perfected by filing the financing statement with the town clerk of Hampton where Wever resided (RSA 382-A:9-401 (1) (a), and continues when the collateral is sold without its consent as was the case here unless Article 9 provides otherwise. RSA 382-A:9-306 (2). In the case of buyers of goods, Article 9-307 (1) does provide otherwise in certain instances, as follows:
"A buyer in ordinary course of business (subsection (9) of Section 1-201) other than a person buying farm products from a person engaged in farming operations takes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence."
Since defendant purchased in good faith without knowledge that the sale to him was in `violation of the security interest of another and bought in the ordinary course from a person in the business of selling automobiles, he was a "buyer in ordinary course of business." RSA 382-A:1-201 (9). However, Article 9-307 (1) permits him to take free only of"a security interest created by his seller." The security interest of the plaintiff was not created by Hanson-Rock, Inc., the defendant's seller, but by Wentworth Motor Co., Inc. Defendant, therefore, does not take free of the plaintiff's security interest under this section. Neither does he take free of the security interest by reason of the provisions of Article 9-307 (2) relating to consumer goods even if he purchased for his own personal, family or household purposes (a fact not agreed upon) because "prior to the purchase, the secured party . . . filed a financing statement. . . ." These are the only two provisions of Article 9 under which a buyer of goods can claim to take free of a security interest where a sale, exchange or other disposition of the collateral was without the consent of the secured party. The defendant does not benefit from either one. Article 9306 (2) gives the court no leeway to create any other exceptions to its dictates and no custom, usage or agreement has been brought to our attention which would permit us to do so. RSA 382-A:1-102 (2). See Lincoln Bank Trust Co. v. Queenan, 344 S.W.2d 383 (Ky. 1961).
Defendant contends that RSA 382-A:2-403 (1) provides an escape from plaintiff's security interest when it provides ". . . a person with voidable title has power to transfer a good title to a good faith purchaser for value. . . ."
The contention has two answers. Article 9-306 (2) provides for the continuance of the security interest "except when this Article otherwise provides" thereby limiting any exceptions to those contained in Article 9; and Article 2-403 (4) itself provides that the rights of "lien creditors are governed by the Articles on Secured Transactions (Article 9) . . . ." See also, Article 2-402 which provides "(3) Nothing in this Article shall be deemed to impair the rights of creditors of the seller (a) under the provisions of the Article on Secured Transactions (Article 9) . . . ." It is clear, therefore, that a security interest in the case of a sale without consent was to be impaired only as provided in Article 9 and is unaffected by Article 2-402.
Our answer to question 1 is in the affirmative and to question 2 is in the negative.
Remanded.
All concurred.