[192 NJSuper Page 367] This is a case of first impression in New Jersey. It involves a statutory face-off between provisions of the Uniform Commercial Code, N.J.S.A. 12A:1-101 et seq., and the Motor Vehicle Act, N.J.S.A. 39:1-1 et seq. The case arises out of a troublesome situation involving two innocent parties, the seller and the buyer of an automobile who were compromised by their middleman, a fly-by-night automobile dealer. For the reasons expressed below I have concluded that the statutes in question are reconcilable and that the Code provisions require that the seller bear the loss in this transaction.
The facts in the case are as follows: In February of 1983 defendant Terry Watros (hereinafter Watros) took his 1977 TVR automobile which was registered and titled in New Jersey to defendant Hopewell Motor Imports (hereinafter Hopewell) in an effort to find a buyer for the car. He entered into a contract with Hopewell which provided: "I hereby give Hopewell Motor Imports power of attorney to sell my 77 1/2 TVR 2500 M. vehicle I.D. # 3774 TM." Pursuant to that agreement, Watros gave possession of his car to Hopewell. His license plates and his inspection sticker were removed from the automobile which was then prepared for sale by Hopewell. According to Watros, he retained the documents of title which he intended to transfer when he was paid in full.*fn1 The original contract between Watros and Hopewell contemplated a sales price of $6900 and was later modified to $5000.
The automobile was in the possession of Hopewell on May 13, 1983 when it was purchased by plaintiff Arthur Shannon, III (hereinafter Shannon). The contract price was $6900 plus $294 N.J. sales tax, $8 title document fee, and a $38 New Jersey vehicle registration all of which totaled $7240. Shannon traded in a 1980 Datsun for which he was allowed $2000 towards the purchase price. He also obtained insurance for the car. On May 16, 1983 Shannon received a $5000 auto loan from First National Bank of Princeton, and the entire purchase price was paid in full to Hopewell. Shannon then requested Hopewell to keep the car for repairs which were in fact performed and which he subsequently paid for. The work was completed on May 27, 1983 and Shannon took delivery of the automobile from Hopewell. At that time, Hopewell, a licensed New Jersey automobile dealer, issued to Shannon temporary registration number A288364 and New Jersey license plates bearing the license number 836 VVE. The temporary registration form bore the following relevant information:
1. The dealer will obtain for you the New Jersey title and registration certificate. If there is no lien on your vehicle, the dealer will also give you the New Jersey title. If there is a lien on your vehicle, the original New Jersey title will be presented to the lien-holder until the lien has been satisfied.
2. When you receive your registration certificate from the dealer, please check the expiration date appearing in the expiration box on the registration certificate. YOUR VEHICLE REGISTRATION MUST BE RENEWED DURING THE MONTH AND YEAR INDICATED ON THE REGISTRATION CERTIFICATE IN THE EXPIRATION BOX.
On June 1st Hopewell sent a check for $1000 to Watros in partial payment for the car. (Watros has not cashed the check.)
Shannon did not receive his permanent passenger vehicle registration in the mail, and the First National Bank of Princeton did not receive the encumbered certificate of ownership as promised. Despite repeated assurances by the dealer, no documents or funds have been sent to either the Division of Motor Vehicles or Watros. Hopewell discontinued its business on Thursday, September 22, 1983. Defendant Director of Motor Vehicles has directed Hopewell to turn in all supplies of New Jersey license plates, all temporary registrations and its New Jersey dealers' license.
By this action Shannon is seeking a declaratory judgment that he is the owner of the automobile subject to the security interest of the First National Bank of Princeton and that Watros has no further rights in the vehicle. He also seeks an order requiring the Director of the Division of Motor Vehicles to issue a New Jersey certificate of ownership and New Jersey license plates. The Director of Motor Vehicles has acknowledged service of process, and has indicated by letter that the division will abide by whatever order the court enters. He does not desire to be heard on these matters.
Implicated here are two statutes, the entrustment provision of the Uniform Commercial Code, N.J.S.A. 12:2-403(2) and (3), invoked by Shannon and the certificate of ownership provisions of the Motor Vehicle Act, N.J.S.A. 39:10-1 et seq., invoked by Watros. N.J.S.A. 12A:2-403(2) and (3) provide:
(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 entruster 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 ...