For reversal -- Chief Justice Hughes and Justices Sullivan, Pashman, Clifford and Schreiber. For affirmance -- None. The opinion of the Court was delivered by Pashman, J.
The only question before the Court is whether the interest of a holder of a valid foreign lien remains superior to that of an innocent purchaser of the encumbered goods where the buyer is a dealer with respect to the goods and the purchase takes place within four months of the transfer of the property to New Jersey. Simply put, the issue is one of straightforward statutory construction involving N.J.S.A. 12A:9-103(3) and (4).
On August 2, 1976 Charles Ryan applied to IAC, Ltd., a Canadian corporation, to finance his purchase of a new Porsche automobile from Auto Hamer, Inc., a registered Porsche dealer located in Quebec, Canada. Ryan made a down payment of $5,700 and received financing for the purchase from IAC in the amount of $10,000. Later that day Auto Hamer was tendered the full purchase price and Ryan received his car.
Ryan had executed a conditional sales agreement with Auto Hamer in which title of the vehicle remained in the vendor until payment of the $10,000 loan principal and a $2,470.26 finance charge. The agreement further provided for an immediate assignment of the contract, title and all rights of the vendor to IAC. This contract fully complied with the applicable requirements of the Canadian Consumer Protection Act. According to the Appellate Division, "it is not disputed that . . . 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." 147 N.J. Super. 212, 215 (App. Div. 1977).
At some point between August 2 and August 6, 1976, Ryan acquired a certificate of registration in Quebec. This document did not require disclosure of the IAC security interest and no notation of the existence of the lien appeared
on its face. Ryan then drove the vehicle to Trenton, New Jersey, where he changed the Canadian registration to one in New Jersey and acquired a certificate of title from the Division of Motor Vehicles. The New Jersey certificate of title requires disclosure of any encumbrances on the vehicle. Nevertheless, as a result of Ryan's false representation that there were no such liens, he was issued a "clean" certificate of title.
On August 6, 1976 Ryan sold the car to defendant Princeton Porsche-Audi, a good faith purchaser without knowledge of the security interest, for $9,000. The vehicle had some 610 total miles on its odometer. Princeton Porsche-Audi would normally have paid $10,500 for a comparable vehicle in the wholesale market.
It is undisputed that at some point thereafter Princeton Porsche-Audi became aware of the lien. The exact time is contested, as is an alleged promise by defendant not to resell the auto. However, these factual disputes and the good faith of Princeton Porsche-Audi were disposed of by stipulation of the parties in order to permit summary disposition of the case.*fn1 At any rate, an attempted sale to a Pennsylvania dealer fell through when the buyer received notice of the lien. Defendant then sold the automobile to a customer of its own.
Plaintiff abandoned any effort to regain possession of the automobile through replevin, and sought damages for conversion. IAC's motion for summary judgment on the issue of defendant's liability was granted. The Appellate Division reversed the grant of summary judgment. 147 N.J. Super 212
. We granted certification to consider this troublesome issue under the Uniform Commercial Code (U.C.C.) which has spawned inconsistent results across the country. 74 N.J. 277 (1977).
Resolution of this dispute turns on our interpretation of the applicable conflict of laws rule of the U.C.C., codified in N.J.S.A. 12A:9-103(3) and the scope of the section which serves as an exception to that rule, N.J.S.A. 12A:9-103(4). These statutes provide, in pertinent part, as follows:
(3) If personal property * * * is already subject to a security interest when it is brought into this state, the validity of the security interest in this state is to be determined by the law (including the conflict of laws rules) of the jurisdiction where the property was when the security interest attached. * * * If the security interest was already perfected under the law of the jurisdiction where the property was when the security interest attached and before being brought into this state, the security interest continues perfected in this state for four months and also thereafter if within the four month period it is perfected in this state. * * *
(4) * * * [I]f personal property is covered by a certificate of title issued under a statute of this state or any other jurisdiction which requires indication on a certificate of title of any security interest in the property as a condition of perfection, then the perfection ...