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Martin v. Nager

Decided: August 5, 1983.


Deighan, J.s.c.


This controversy requires a determination of the ownership of an automobile and involves the interplay between the Motor Vehicle Certificate of Ownership Law (MVCOL), N.J.S.A. 39:10-1 et seq. and the Uniform Commercial Code-Sales (UCC), N.J.S.A. 12A:2-101 et seq. It arises out of a sale on consignment of a motor vehicle through an automobile dealer. Plaintiffs Rose and Gary Martin bought an automobile owned by defendant George Norton Nager through a dealer, Bellbrook Volkswagen, Inc., (Bellbrook) who converted the purchase price and is now insolvent. Plaintiffs and defendant both are victims of Bellbrook's fraud. Plaintiffs have possession of the automobile, defendant has possession of the certificate of title, Bellbrook is in bankruptcy and its two principals are in jail. The court is aware of at least 21 more transactions with the same or similar scenario involving Bellbrook.

The facts surrounding this controversy are not in dispute. In the fall of 1982 defendant placed ads in a local newspaper offering his 1975 BMW 530 automobile (BMW) for sale. He received a telephone call from a salesman from Bellbrook located in Brooklawn, New Jersey, who indicated that Bellbrook had been very successful in selling fine used cars under a consignment agreement. Under this arrangement Bellbrook would attempt to sell the automobile, absorb all the advertising costs and arrange for financing of the sale. If it were sold the defendant would receive an agreed price and Bellbrook would keep all proceeds of sale in excess of agreed price.*fn1

On October 18, 1982 defendant took the BMW to Bellbrook and met with one of the principals, Michael Sargent. Bellbrook was an authorized automobile dealer with a display room and a large outside area with a selection of many automobiles. Defendant agreed to accept $5,800 as his share of the sale and entered into a consignment agreement on the same date which provided:

I, George N. Nager, hereby deliver and consign to Bellbrook Volkswagen, Inc. for a period of 21 days my 1975 BMW 530 (vehicle identification No. 5020572), the receipt of which is hereby acknowledged by Bellbrook. If Bellbrook sells my BMW it shall pay me Five-Thousand Eight-Hundred Dollars ($5,800) at the time I deliver to it my certificate of title for the BMW duly endorsed to transfer, and it shall be entitled to retain all proceeds realized on such sale in excess of $5,800 . . . .

Defendant delivered the BMW together with the keys to Bellbrook but retained the certificate of ownership which he agreed to endorse when he was paid $5,800. He agreed to permit Bellbrook to offer for sale the BMW for a period of 21 days. In mid-November, defendant called Bellbrook to find out if it had any success in selling his automobile. He was informed that while the automobile had not been sold it had generated considerable interest. He agreed to leave the automobile with Bellbrook under the same conditions for another unspecified period of time.

On December 7, 1982 plaintiffs purchased defendant's vehicle from Bellbrook for $7,155 which included the sales tax and other miscellaneous charges. Bellbrook delivered the vehicle to the plaintiffs and assured them the certificate of title would be delivered promptly. After several unsuccessful attempts to get the certificate of title, on January 10, 1983, plaintiffs went to the Division of Motor Vehicles and, after presenting their proof of purchase, received a temporary registration which was effective only until January 31, 1983.

On January 25, 1983 defendant went to Bellbrook to retrieve his automobile since he had not been notified that it had been sold. He was shocked to learn that his automobile had been sold on December 7, 1982. He demanded his $5,800 but Sargent indicated that he was waiting for a check to clear the bank. Sargent gave defendant a check dated January 27, 1983. The check was deposited but returned with a notation that payment had been stopped. After several unsuccessful attempts to obtain payment from Bellbrook, defendant reported the matter to the Brooklawn chief of police.

On February 24, 1983 plaintiffs filed this action to restrain defendant from repossessing the automobile and to require transfer of the certificate of title to them. An order was entered restraining the defendant from repossessing the automobile. Subsequently, on defendant's application, an order was entered restraining plaintiffs from using the automobile and requiring them to provide for its storage as well as a certificate insuring defendant as a loss payee on their insurance policy.

Plaintiffs base their claim of ownership of the BMW on N.J.S.A. 12A:2-403(2) and (3) which provides:

(2) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entrustor to a buyer in the ordinary course of business.

(3) Entrusting includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law.

They contend they are buyers in the ordinary course of business. A "buyer in the ordinary course of business" is a "person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest of a third-party in the goods, buys in ordinary course from a person in the business of selling goods of that kind . . . ." N.J.S.A. 12A:1-201(9).

Plaintiffs maintain that these sections of the UCC control the present case because defendant entrusted his BMW to Bellbrook

with an express authorization to sell the automobile. Relying upon the representations of Bellbrook, plaintiffs assert they purchased the automobile in good faith without notice of the defendant's ownership interest. This, they contend, is in accord with a strong policy in New Jersey to protect buyers in the ordinary course of business and to facilitate commercial transactions.

Defendant counters by asserting that plaintiffs' purchase is in violation of the Motor Vehicle Certificate of Ownership Law, N.J.S.A. 39:10-1 et seq. and therefore void and unenforceable. He points out that under the MVCOL, "when a used motor vehicle is sold in this state, the seller shall . . . execute and deliver to the purchaser, an assignment of the certificate of ownership. . . ." N.J.S.A. 39:10-9. It further requires that no person shall sell or purchase any motor vehicle in this state, except in the manner and subject to the conditions provided in this chapter. N.J.S.A. 39:10-5. Since defendant never relinquished his certificate of ownership, he asserts that the sale of the automobile to plaintiffs was in contravention of the statute, and therefore void and unenforceable.

Defendant further argues that the MVCOL is a more specific legislative enactment on the appropriate method to transfer ownership to motor vehicles. It should, he concludes, be given greater effect than the more general provision of the UCC which does not address the unique problems of fraud and theft which give rise to the title system for motor vehicles. N.J.S.A. 39:10-3. Moreover, defendant asserts that plaintiffs did not act in good faith pursuant to N.J.S.A. 12A:1-201(9) because they took delivery of the BMW without receiving the certificate of title or at least making a demand to see the certificate of title at the time of the sale. Lastly, defendant contends that the mere delivery of the motor vehicle alone is insufficient to create an estoppel or otherwise defeat the owner's rights in the motor vehicle citing, Nelson v. Wolf, 4 N.J. 76 (1950) and Arsen v. Motor Vehicles Div. Director, 61 N.J. Super. 131 (Law Div.1960).

The arduousness of this decision is due to the fact that plaintiffs and defendant are both innocent victims of the fraud perpetrated by Bellbrook. The apparent conflict between the provisions of the UCC and the MVCOL arises because the transfer of a motor vehicle, unlike the transfer of other chattels, must be made in accordance with documentary evidence executed only in the method prescribed by the MVCOL. State v. Bott, 53 N.J. 391 (1969); Merchant's Security Corp. v. Lane, 106 N.J.L. 576 (E. & A.1930); U.S. v. One 1939 Cadillac, 36 F. Supp. 847 (D.N.J.1941). But these statutes should be read and construed together and given fair effect to both if possible. See Eastern Acceptance Corp. v. Camden Trust Corp., 33 N.J. 227, 234 (1968) where it was held that the MVCOL, while prescribing a statutory mode for transferring title, contained nothing to reveal the legislative intent to alter or impair provisions of the Uniform Trust Receipts Act. Also, N.J.S.A. 12A:10-104 of the UCC provides that the MVCOL, N.J.S.A. 39:10-1 et seq. and all amendments are specifically saved from repeal and shall remain in effect as provided in N.J.S.A. 12A:9-302. However, this latter section applies only to security interests. Muir v. Jefferson Credit Corp., 108 N.J. Super. 586, 591 (Law Div.1970); In re Manufacturers Credit Corp., 441 F.2d 1313, 1317 (3 Cir.1971).

The basic goals of the UCC and MVCOL are in perfect harmony; the UCC is to protect good faith purchasers and, as will be later discussed, the purpose of the MVCOL is to protect innocent purchasers of motor vehicles. Therefore, these statutes should complement and support each other rather than contradict or abrogate the other as suggested by defendant. Other jurisdictions have reconciled sections 2-403(2), (3) of the UCC with comparable motor vehicle titling acts. In Pfluger v. Colquitt, 620 S.W. 2d 739 (Tex.Civ.App.1981) the court stated: "We do not agree that section 2-403(b) of the Code conflicts with the Certificate Title Act." The court ". . . conclude[d] that the two statutes here in question may reasonably be construed so as to give effect to both." At 741.

In Security Pacific Nat'l Bank v. Goodman, 24 Cal.App. 3d 131, 100 Cal.Rptr. 763 (Ct.App.1972) the court observed that ". . . there is no inconsistency between section 2-403 [UCC ยง 2-403] and the registration statutes as applied to the facts of this case." The court held:

It is thus not inconsistent with the Vehicle Code to provide that an entrusting of possession of a boat or a motor vehicle to a merchant empowers him to transfer the interest of the ...

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