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Iac v. Porsche-Audi

Decided: February 7, 1977.

IAC, LTD., PLAINTIFF-RESPONDENT,
v.
PRINCETON PORSCHE-AUDI, DEFENDANT-APPELLANT



Matthews, Seidman and Horn. The opinion of the court was delivered by Horn, J.A.D.

Horn

The primary question which is presented by this appeal is whether a security interest which was taken on a vehicle sold in Canada and which was valid and enforceable under Canadian law is also enforceable in New Jersey against a purchaser (defendant) for value without notice of the lien after the vehicle was brought to New Jersey and a "clear" New Jersey certificate of ownership was issued and transferred properly to the New Jersey purchaser.*fn1

The trial judge in an action for conversion brought by plaintiff, the Canadian security-interest holder, against the New Jersey purchaser answered the question affirmatively by granting a summary judgment in favor of plaintiff on the limited issue of defendant's liability.*fn2 We granted defendant leave to appeal pursuant to R:2:2-3(b) and elected to determine the appeal on the motion and after oral argument. R. 2:11-2.

On August 2, 1976 one Charles Ryan, who has since absconded and is not a party to this action, applied to plaintiff IAC, Ltd., to finance his purchase of a 1977 Porsche automobile from Auto Hamer, Inc., a registered Porsche dealer in Quebec, Canada. The automobile cost $15,700, of which $5,700 was a down-payment. Ryan applied to plaintiff to finance the remaining $10,000. Plaintiff approved the application after a credit check, and full payment for the automobile was given to Auto Hamer, Inc., at which time they delivered the Porsche to Ryan.

In connection with the financing Ryan executed a conditional sales agreement with IAC, Ltd., which reserved title to the vehicle thereunder until payment to it of $12,470.76, the sum of the principal loaned and the finance charges. It is not disputed that, as the trial judge appropriately found, the security interest of plaintiff was perfected in Canada and that plaintiff thereby obtained a valid lien on the automobile under the law of Canada.

Four days later Ryan sold the automobile, which had a total mileage of 610 miles, to defendant Princeton Porsche-Audi for $9,000. In the sale of the vehicle from Ryan to defendant, Ryan presented a certificate of ownership issued by the New Jersey State Motor Vehicle Department which did not show any lien held by IAC, Ltd., or any other entity, because Ryan falsely represented that there were no encumbrances.

The following three items from the files of the New Jersey Division of Motor Vehicles were submitted to the trial court. They consist of:

(1) A Canadian motor vehicle document which on its face identifies Ryan as the owner of the subject motor vehicle and which contains no lien information, although on the reverse side of the document a space which provided for the inscription of "Restrictions" remained without notation therein.*fn3

(2) Ryan's application for a New Jersey certificate of ownership, on which no security interest is noted.

(3) A copy of the New Jersey certificate of ownership (showing no security interest) which was issued to Ryan in New Jersey and thereafter tendered to defendant in connection with the purchase by the latter.

For the purpose of the motion for summary judgment plaintiff stipulated that defendant acted in good faith. The record is somewhat obscure ...


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