This matter came on for trial on October 5, 1987. Defendant Cipriotti and third-party defendant Darling Yacht Sales have defaulted. The facts in this case have been stipulated. On or around May 6, 1982, plaintiff Kusler was the title owner to a 1976 -- 26-foot Pacemaker, bearing the name Wahoo, and bearing hull no. 26436137M76. On that date plaintiff sold the vessel for $15,000 to defendant Frank Cipriotti, taking back an $8,000 mortgage and recording a U.C.C. -1 financing statement in the Office of the Clerk of Cape May County, thus perfecting the security interest that he had in that vessel. N.J.S.A. 12A:9-401.
Sometime thereafter, and prior to March 21, 1984, defendant Cipriotti gave possession of the boat to Darling Yacht Sales for the purposes of sale.
On March 21, 1984, defendant Lenzach purchased the boat from Cipriotti, through Darling, for $8,600 and financed the sale through Anchor Savings and Loan. Defendant Lenzach began making, and continues to make, timely payments to Anchor Savings and Loan on the amount owed on the purchase price.
Plaintiff sues to recover under his security interest. Defendant asserts that he is a buyer in the ordinary course of business
who has taken title free of plaintiff's perfected security interest.
Defendant Lenzach relies on N.J.S.A. 12A:1-201(9) to establish his status as a buyer in the ordinary course of business, which the section defines as:
Defendant Lenzach requests that the court apply that definition in conjunction with N.J.S.A. 12A:9-307(1), which provides: "A buyer in ordinary course of business (subsection (9) of N.J.S.A. 12A:1-201) . . . takes free of a security interest created by his seller even though the security interest is perfected and even though the buyer knows of its existence." Thus, Lenzach claims that he should prevail as against the lien of Kusler.
Plaintiff argues that defendant Lenzach's seller was not Darling but Cipriotti. Cipriotti is not in the business of selling boats and although he used Darling as a middleman, Darling never had title to the boat. Further, the security interest was not "created" by Darling (the merchant), but by Cipriotti (the private-party seller). For all of the above reasons, Kusler maintains that Lenzach cannot be a buyer in the ordinary course of business.
The cases of Cunningham v. Camelot Motors, 138 N.J. Super. 489 (Ch.Div.1975) and Martin v. Nager, 192 N.J. Super. 189 (Ch.Div.1983) relied upon by defendant Lenzach, involve motor vehicles which in some respects are treated sui generis due to many statutes specifically intended to govern transfers of their ownership. The Cunningham case is clearly distinguishable. It involves the purchase of a motor vehicle from a dealer's inventory, without knowledge of a security interest created under a floor-plan financing agreement with defendant Hudson United Bank. The security agreement between Hudson and Camelot specifically authorized Camelot to sell motor vehicles
out of its inventory. The purchaser received his claim to ...