American Clipper Corp. v. Howerton

277 S.E.2d 136 (1981)

AMERICAN CLIPPER CORPORATION v. Walter Scott HOWERTON and FinanceAmerica Corporation.

No. 8018SC674.

Court of Appeals of North Carolina.

April 21, 1981.

*138 Turner, Enochs, Foster, Sparrow & Burnley, P. A. by Wendell H. Ott, Greensboro, for plaintiff-appellee.

Richard M. Pearman, Jr., Greensboro, for defendant-appellant.

BECTON, Judge.

The only issue raised on appeal is whether the trial judge committed error in granting summary judgment for Clipper in this Declaratory Judgment action.

In its complaint for Declaratory Judgment, Clipper incorporates by reference the Partial Settlement Agreement entered into by all the parties which states in pertinent part that:

All parties agree that if Clipper shall obtain a favorable final judgment in the declaratory judgment action referred to above, holding that its right to ownership, title, possession or a security interest with respect to said vehicle is superior to that of either Howerton or Finance, it will receive and accept from Finance the sum of Fifteen Thousand Seventy-Six Dollars ($15,076) plus interest at the rate of eight percent (8%) per annum ... in lieu of reclaiming possession of and/or title to said vehicle.... (Emphasis added.)

Appellant, Finance, contends that the Uniform Commercial Code [UCC], G.S. 25-1-101 et seq., as adopted by North Carolina should govern the rights of the parties in this dispute. Relying on the UCC, Finance argues that ownership, title and possession of the Clipper Recreational Vehicle vested in the vehicle purchaser, Howerton, once he took possession, and therefore prevents Clipper from asserting any rights in the vehicle. Since, under the UCC, Clipper could not prevail over the purchaser, Howerton, Finance argues that Clipper cannot prevail over Finance. Finance's reliance on the legal relationship between Clipper and Howerton is misplaced with reference to its own rights and liabilities vis-a-vis Clipper. As stated in their Partial Settlement Agreement incorporated in Clipper's complaint, the trial judge need only have found that Clipper's rights to the vehicle were "superior to that of either Howerton or Finance ...." Clipper clearly has superior title in the vehicle as between itself and Finance.

G.S. 20-52.1(c) states in pertinent part that:

(c) Upon sale of a new vehicle by a dealer to a consumer-purchaser, the dealer shall execute in the presence of a person authorized to administer oaths an assignment of the manufacturer's certificate of origin for the vehicle, including in such assignment the name and address of the transferee and no title to a new motor vehicle acquired by a dealer under the provisions of subsections (a) and (b) of this section shall pass or vest until such assignment is executed and the motor vehicle delivered to the transferee. Any dealer transferring title to, or an interest in, a new vehicle shall deliver the manufacturer's certificate of origin duly assigned in accordance with the foregoing provision to the transferee at the time of delivering the vehicle, except that where a security interest is obtained in the motor vehicle from the transferee in payment of the purchase price or otherwise, the transferor shall deliver the manufacturer's certificate of origin to the lienholder and the lienholder shall forthwith forward the manufacturer's certificate of origin together with the transferee's application for certificate of title and necessary fees to the Division.

It is stipulated by the parties that the Chrysler MSO and the Clipper supplemental MSO were at all times in the possession of Clipper. Adventure sold the vehicle without assigning the MSO to Howerton as required under the statute. Finance loaned money and took a security interest in the *139 vehicle without taking possession of the MSO or even inquiring about its whereabouts. In all respects, the transactions involving the vehicle were conducted in violation of G.S. 20-52.1. Under the statute, record title to the new vehicle cannot "pass or vest" until the MSO is properly assigned. Hence, record, paper title remained in the name of Clipper.

Although G.S. 25-2-401 provides that the provisions of the UCC apply to the rights and liabilities of parties to a sales transaction "irrespective of title to the goods," the motor vehicle certificate of title statutes, including G.S. 20-52.1, still have vitality and are not implicitly replaced by the adoption of the UCC. See Anderson, Uniform Commercial Code, "Motor Vehicles," § 2-401:9 (1971); Insurance Co. v. Hayes, 276 N.C. 620, 174 S.E.2d 511 (1970).

Pursuant to G.S. 20-52.1 then, Clipper was record title holder to the recreational vehicle in the possession of Howerton. According to the record, Finance never filed or perfected its security interest in the vehicle. If Finance had taken the steps necessary to file or perfect its security interest, it would have discovered that Adventure did not have record title to the vehicle, nor did Howerton. In allocating the risk of loss between Clipper and Finance, Finance was in the best position to prevent the title confusion which ensued. Finance incurred the risk of loss when it loaned money on collateral without first determining whether its assignor, Adventure, or its debtor, Howerton, had record title to the vehicle. Clipper did the most that it could as a manufacturer; it held onto its MSO and awaited acceptance by Adventure of its offer to sell the vehicle in question. As between Clipper and Finance, then, the trial judge properly found that Clipper held title to the vehicle superior to the rights and title held by Finance. Finance, therefore, should bear the risk of loss accompanying the sale and financing of this vehicle.

It should be noted that this case in no way decides the right to ownership, title and possession of the vehicle as between the manufacturer, Clipper, and the consumer, Howerton. Even if Howerton were found to have superior title to Clipper, under the facts and agreements of this case, Clipper would still have title superior to Finance and would prevail against Finance.

Based on the stipulated facts and Partial Settlement Agreement entered into by the parties, we find that the trial judge acted properly in granting Clipper's motion for summary judgment.

Affirmed.

MORRIS, C. J., and VAUGHN, J., concur.