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Cunningham v. Camelot Motors Inc.

Decided: December 18, 1975.

JAMES E. CUNNINGHAM, PLAINTIFF,
v.
CAMELOT MOTORS, INC., BERNARD TREICH, LOUIS DI VITA, HUDSON UNITED BANK AND BRITISH LEYLAND MOTORS, INC., DEFENDANTS. EUGENE KOBLENTZ, PLAINTIFF, V. CAMELOT MOTORS, INC., BERNARD TREICH, LOUIS DI VITA, HUDSON UNITED BANK AND BRITISH LEYLAND MOTORS, INC., DEFENDANTS



Gelman, J.s.c.

Gelman

[138 NJSuper Page 490] These actions arise out of the failure of an automobile dealer to deliver certificates of ownership and motor vehicle registrations to purchasers of new automobiles. The relevant facts are undisputed, and both cases present a

common question of law involving the interpretation and application of § 9-307(1) of the Uniform Commercial Code, N.J.S.A. 12A:9-307(1), as well as the Motor Vehicle Certificate of Ownership Law, N.J.S.A. 39:10-1 et seq.

Camelot Motors, Inc. is an authorized and licensed new and used car dealer maintaining a sales office and showroom in Bergenfield, New Jersey. On August 19, 1975 plaintiff James Cunningham went to Camelot's showroom and selected a new Triumph motor vehicle to purchase for his personal use. He signed a purchase order and subsequently paid the purchase price of the automobile in full, together with the sales tax and registration fees. On August 21 Camelot turned over possession of the vehicle to him together with a temporary registration certificate. It was agreed that the permanent registration certificate would be mailed by Camelot to plaintiff's bank on the following day. Cunningham still has possession of the vehicle, but Camelot has failed to furnish to him a certificate of ownership of the automobile or to procure a proper registration of the vehicle in his name.

Plaintiff Eugene Koblentz also visited Camelot's showroom in August 1975, seeking a new automobile for his personal use. He selected a 1975 Jaguar and signed a purchase order on August 16, 1975. On August 22, 1975 Camelot delivered the new Jaguar to Koblentz, and he paid Camelot the full balance due on the purchase price, including the sales tax and registration fees. At the time of delivery, the principals of Camelot gave Koblentz the automobile with Camelot's own dealer license plates and registration. They promised to deliver the certificate of ownership and registration a few days later. As in the case of Cunningham, Camelot has failed to deliver to Koblentz a certificate of ownership or registration for the vehicle he purchased.

Three years prior to either of the above transactions Camelot had entered into a floor plan financing agreement with defendant Hudson United Bank (Hudson). Under the terms of the agreement Hudson advanced moneys to Camelot and

received a security interest in all motor vehicles then owned or thereafter acquired by Camelot. A UCC financing statement was filed reflecting Hudson's security interest in Camelot's inventory, and Hudson obtained possession of all of the certificates of origin issued by the manufacturer of new automobiles in Camelot's inventory. The agreement further authorized Camelot to sell any vehicles from its inventory in the regular course of its business, and Camelot was obligated to remit to Hudson the loan balances on the vehicles which Camelot sold.

Camelot failed to make the required remittances to Hudson on the automobiles which are the subject of these actions, and Hudson has refused to surrender the certificates of origin to Camelot or to either of the plaintiffs.*fn1 The result is that neither plaintiff has been able to obtain a certificate of ownership or to register his vehicle. See N.J.S.A. 39:10-11.

Plaintiffs have moved for summary judgment and both seek an order directing Camelot and Hudson to surrender and endorse the certificates of origin to them. While assuming that Hudson has a perfected security interest in the vehicles,*fn2 plaintiffs urge that under UCC § 9-307(1), Hudson's security interest is invalid as to them. The cited section of the Code is entitled "Protection of Buyers of Goods" and provides in pertinent part:

A buyer in ordinary course of business (subsection (9) of 12A:1-201) * * * takes free of a security interest created by his seller even though the security interest is perfected and even though the ...


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