Associates Discount Corp. v. Rattan Chevrolet, Inc.

462 S.W.2d 546, 8 U.C.C. Rep. Serv. (West) 117, 1970 Tex. LEXIS 214
CourtTexas Supreme Court
DecidedOctober 7, 1970
DocketB-1741, B-1742
StatusPublished
Cited by46 cases

This text of 462 S.W.2d 546 (Associates Discount Corp. v. Rattan Chevrolet, Inc.) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Associates Discount Corp. v. Rattan Chevrolet, Inc., 462 S.W.2d 546, 8 U.C.C. Rep. Serv. (West) 117, 1970 Tex. LEXIS 214 (Tex. 1970).

Opinions

WALKER, Justice.

These are companion cases involving substantially the same facts. The principal question to be decided is whether the purchase by an automobile dealer from another dealer of a new, unregistered motor vehicle that is subject to a security interest created by the seller is governed by the provisions of the Uniform Commercial Code that protect a buyer in ordinary course of business. We hold that it is.

The facts of only one of the cases will be stated in any detail. Associates Discount Corporation is in the business of financing the purchase of automobiles by dealers. On July 26, 1966, it filed with the Secretary of State a financing statement signed by R. A. Parker, a dealer who was engaged in business under the name of R. A. Parker Chevrolet, covering “New and Used Motor Vehicles. Chattel Paper” and all proceeds of the property. Thereafter during January, 1968, Parker acquired three new motor vehicles. In each instance the purchase money was advanced by Associates, and Parker executed to Associates a note for the amount of the loan and a security agreement specifically describing the vehicle and securing the note. The manufacturer’s certificates on the three vehicles were delivered to and held by Associates. The liens were not noted on the certificates, but there is no contention that Associates failed to do anything that was necessary to perfect its security interests.

The three vehicles were purchased from Parker by Rattan Chevrolet, Inc., another automobile dealer, in two transactions that occurred on and shortly after February 8, 1968. None of the manufacturer’s certificates was delivered to Rattan. About two weeks later Associates brought suit against Parker and Rattan to recover on the notes and for foreclosure of its security agreements. At least two of the vehicles were seized under writ of sequestration and sold as perishable property by order of the court. Rattan then amended its answer and filed a cross-action to recover actual and exemplary damages for conversion of the vehicles.

The other case involves one new Chevrolet automobile that was subject to a security interest held by Associates when it was sold by Parker to Banner Chevrolet, Inc. In each case the trial court rendered summary judgment for Associates, but the Court of Civil Appeals concluded that Rattan and Banner took free of the security interests. The judgments of the trial court [548]*548were reversed, and the causes were remanded for the limited purpose of determining the damages, if any, to which Rattan and Banner are entitled. Rattan Chevrolet, Inc. v. Associates Discount Corp., Tex.Civ.App., 443 S.W.2d 360; Banner Chevrolet, Inc. v. Associates Discount Corp., Tex.Civ.App., 443 S.W.2d 370. Although we agree with the Court of Civil Appeals that Rattan and Banner may be entitled to protection as buyers in ordinary course of business, the judgment of the intermediate court will be modified to order a general remand because of deficiencies in the summary judgment proofs concerning the sales.

Section 45 of the Certificate of Title Act, Vernon’s Ann.P.C., art. 1436-1, hereinafter referred to as the Act, which was enacted in 1939, provides as follows :

“Sec. 45. Exposure for sale of any motor vehicle by the owner thereof with the knowledge or consent of any mortgagee shall not affect the rights of any mortgagee as against all third parties.”

The definition of “owner” in Section 4 of the Act expressly excludes manufacturers, importers, distributors and dealers. It is settled, however, that Section 45 applies to every motor vehicle exposed for sale by the one to whom it belongs whether he be a manufacturer, importer, dealer or consumer. Motor Inv. Co. v. City of Hamlin, 142 Tex. 486, 179 S.W.2d 278. Under its provisions the rights of Associates as against Rattan and Banner would not be affected by the fact that the vehicles were exposed for sale by Parker with the knowledge and consent of Associates.

On the other hand Section 9.307 of the Uniform Commercial Code,1 which was adopted in 1965, provides that:

“ (a) A buyer in ordinary course of business (Subdivision (9) of Section 1.-201) other than a person buying farm products from a person engaged in farming operations 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.”

Associates insists that these cases are governed by the Act and the decisions thereunder and that the Code has no application. A somewhat similar problem was considered several years after the Act was adopted. Two earlier statutes, neither of which was mentioned in the Act, provided: (1) that every form of lien attempted to be given on merchandise daily exposed for sale should be deemed fraudulent and void, and (2) that while purchase money chattel mortgages on motor vehicles were superior to the claims of other creditors, the mortgage would be void as to bona fide purchasers when the vehicles were daily exposed for sale. Art. 4000, Tex.Rev.Civ. Stat. 1925, as amended by Acts 1935, 44th Leg., p. 302, ch. 115, § 1; Acts 1933, 43rd Leg., p. 305, ch. 117. It was held in Motor Inv. Co. v. City of Hamlin, 142 Tex. 486, 179 S.W.2d 278, that the Act repealed both the earlier statutes in so far as they pertained to motor vehicles. In reaching this conclusion, we pointed out that the Act is a special law dealing with motor vehicles only, that its purpose was to cover the whole field of sale and liens thereon, and that Section 45 was in direct conflict with the earlier statutes.

No part of the Act was expressly repealed when the Code was adopted in 1965, but Section 10-103 provides, with certain exceptions not material here, for the repeal of all acts and parts of acts that are in conflict therewith. One of the declared purposes of the Code is to simplify, clarify and modernize the law governing commercial transactions. Section 1.102.-It is a general body of law intended as a unified coverage of its subject matter. Section 1.104. Some transactions in motor vehicles are expressly governed thereby. [549]*549Section 9.302 provides, in effect, that a lien on a motor vehicle that is not inventory may be perfected only by indicating the security interest on a certificate of title or application therefor, but that a security interest in a motor vehicle that is inventory may be perfected only by complying with the filing provisions of Chapter 9. Section 2.403 provides that 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 ordinary course of business, and the broad definition of “goods” in Section 2.105 clearly includes motor vehicles. Since the Act and the Code thus deal, at least in part, with the same subject matter, we agree with the Court of Civil Appeals that they are in pari materia. When the two are considered together, as they must be, it is our opinion that Section 9.307 applies to the sale of a motor vehicle. See Medico Leasing Co. v. Smith, Okl., 457 P. 2d 548; Associates Discount Corp. v. Old Freeport Bank, 421 Pa.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

State Farm Mutual Automobile Insurance v. Scott
866 F. Supp. 2d 680 (S.D. Texas, 2012)
THPD, INC. v. Continental Imports, Inc.
260 S.W.3d 593 (Court of Appeals of Texas, 2008)
One Ford Mustang, VIN 1FAFP40471F207859 v. State
231 S.W.3d 445 (Court of Appeals of Texas, 2007)
McCaughey v. Garlyn Shelton, Inc.
208 F. App'x 427 (Sixth Circuit, 2006)
FIRST NAT. BANK OF EL CAMPO, TEXAS v. Buss
143 S.W.3d 915 (Court of Appeals of Texas, 2004)
Propulsion Technologies, Inc. v. Attwood Corp.
369 F.3d 896 (Fifth Circuit, 2004)
Tranessia Henry v. Ana Maria Zapata-Mundy
Court of Appeals of Texas, 2003
Michael Anthony Picard v. Leon Zarzoza
Court of Appeals of Texas, 2003
Lundy v. First National Bank (In Re Dota)
288 B.R. 448 (S.D. Texas, 2003)
Hudson Buick, Pontaic, GMC Truck Co. v. Gooch
7 S.W.3d 191 (Court of Appeals of Texas, 2000)
Lara v. Tri-Coastal Contractors, Inc.
925 S.W.2d 277 (Court of Appeals of Texas, 1996)
Gallas v. Car Biz, Inc.
914 S.W.2d 592 (Court of Appeals of Texas, 1995)
Bruckner Truck Sales, Inc. v. Farm Credit Leasing Services Corp.
909 S.W.2d 75 (Court of Appeals of Texas, 1995)
Hampton Bank v. River City Yachts, Inc.
528 N.W.2d 880 (Court of Appeals of Minnesota, 1995)
Franklin v. First National Bank of Morrill
848 P.2d 775 (Wyoming Supreme Court, 1993)

Cite This Page — Counsel Stack

Bluebook (online)
462 S.W.2d 546, 8 U.C.C. Rep. Serv. (West) 117, 1970 Tex. LEXIS 214, Counsel Stack Legal Research, https://law.counselstack.com/opinion/associates-discount-corp-v-rattan-chevrolet-inc-tex-1970.