On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-9085-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE COMMITTEE ON OPINIONS
Before Judges Carchman and Baxter.
Defendant Cinemacar Leasing appeals from an order of the Law Division granting summary judgment in favor of plaintiff Brenner Financial, Inc., denying defendant's cross-motion for summary judgment, and awarding plaintiff damages in the amount of $69,506.65. Defendant raises three issues on appeal: 1) the trial court erred in finding that plaintiff's interest in a vehicle repossessed by defendant took priority over defendant's interest in the vehicle; 2) the trial court erred in its calculation of damages owed to plaintiff as a result of that repossession; and 3) the trial court failed to require that All Points Capital Corp. (All Points) be added as an indispensable party due to its status as a lienholder of the vehicle. We agree with defendant that the trial court erred in finding that plaintiff's interest in the vehicle took priority over defendant's interest. In fact, defendant's interest took priority over plaintiff's. However, our further conclusion that defendant's interest in the vehicle represents a security interest necessitates a remand for consideration of other issues. We reverse the trial court and remand for further proceedings consistent with this opinion.
We briefly set forth the facts adduced from the record presented on the motion for summary judgment. On November 1, 2007, defendant, a New Jersey company, entered into a motor vehicle sale-leaseback agreement (lease agreement) with Flexible Transport, Inc. d/b/a Luxury Limousine Dearborn, Inc. (Luxury), a Michigan company. Luxury agreed to sell defendant a 2007 stretch Hummer (the vehicle), and defendant agreed to lease the vehicle back to Luxury. The vehicle was to be used in Michigan in Luxury's limousine business. The agreement provided for a lease term of sixty months, not terminable by Luxury. Over the life of the lease, Luxury was contractually obligated to pay defendant in excess of $160,000 in total lease payments.*fn1 At the end of the lease term, Luxury had the option to purchase the vehicle for $106.05, together with an administrative fee and other potential charges, including rentals and taxes then due.
Pursuant to the lease agreement, on November 30, 2007, Luxury transferred title to the vehicle - which at the time was titled and registered in Michigan - to defendant. Defendant confirmed the transfer by executing the assignment section of the title. Shortly thereafter, on December 4, 2007, defendant re-titled the vehicle in New Jersey; that title noted defendant as the owner of the vehicle and All Points - which had financed defendant's purchase of the vehicle - as a lienholder. That same day, defendant executed a power of attorney in favor of Luxury limited to applying for a "registration and/or title" in Michigan for the vehicle, provided that such registration listed defendant as the titled owner and All Points as the lienholder.
Although the vehicle was now titled in New Jersey, it remained registered in Michigan, it displayed Michigan license plates, and Luxury continued to operate it primarily in Michigan.*fn2
Within days of the vehicle being titled in New Jersey, on December 12, 2007, Luxury entered into a financing agreement with plaintiff, a Pennsylvania company. In the financing agreement, Luxury pledged the vehicle as collateral for a $98,580 loan. On February 14, 2008, Michigan issued a certificate of title identifying Luxury as the owner of the vehicle, Citizens Bank of Pennsylvania as the first secured party, and plaintiff as the second secured party. During the course of Luxury's dealings with plaintiff, Luxury utilized an old Michigan certificate of title issued for the vehicle on November 1, 2007 (before title to the vehicle was transferred to defendant). That title noted GMAC as the first secured party on the vehicle. Luxury also presented a letter from GMAC, dated November 8, 2007, representing that this lien had been satisfied. In contrast, when Luxury transferred title to defendant, Luxury did so using a duplicate certificate of title, issued November 26, 2007, but identical to the November 1, 2007 title in all other pertinent respects.
Luxury defaulted on both the lease agreement with defendant and the financing agreement with plaintiff. Plaintiff repossessed the vehicle and moved it to an automobile sales facility in Ohio. Thereafter, defendant located the vehicle, repossessed it, and moved it to New Jersey.*fn3
In September 2010, plaintiff filed a replevin action against defendant by way of a verified complaint and an order to show cause. As plaintiff had by this time leased the vehicle to a third party, the court ordered defendant to post $52,000 in escrow in lieu of turning over the vehicle.
The parties cross-moved for summary judgment. The judge granted summary judgment in favor of plaintiff, denied defendant's cross-motion for summary judgment, and awarded plaintiff damages in the amount of $69,506.65.
With regard to defendant's liability to plaintiff, the motion judge found that Michigan law applied because "[t]he law of the jurisdiction where the collateral or debtor is located governs perfection and the priority of a security interest in collateral." The judge then noted that Michigan law "require[s] that when an owner transfers title, he 'shall' remove the registration plates and endorse the certificate of title before delivering it to the purchaser," and that, "within 15 days, the purchaser [shall] deliver the certificate of title and the registration certificate if the plates are transferred to another vehicle to the secretary of state whereupon a new certificate of title and registration certificate shall be issued." Then, because he found that these requirements had not been satisfied, the judge held that plaintiff was entitled to possession of the vehicle because defendant "never had a perfected security interest," whereas plaintiff "perfected [its] security interest." The judge also opined that "[i]f [defendant] had delivered the documents to the [Michigan] Secretary of State, [plaintiff] would have known that Luxury did not have valid title to the vehicle and would not have refinanced it."
With regard to the value of the vehicle, the trial court held that it was a question of law. The judge continued: if [plaintiff] was in possession of the vehicle it could have presumably entered into a lease agreement identical to [defendant's current] lease. As such, by preventing [plaintiff] from possessing the vehicle, ...