City Finance Co. v. Massey Motor Co.

383 S.E.2d 454, 95 N.C. App. 623, 11 U.C.C. Rep. Serv. 2d (West) 1021, 1989 N.C. App. LEXIS 808

• Court: Court of Appeals of North Carolina
• Decided: September 19, 1989
• Docket: No. 888DC1291
• Status: Published

Opinion

ARNOLD, Judge.

The trial court did not err in dismissing plaintiffs complaint for failure to state a claim on which relief can be granted.

A motion made pursuant to N.C.R. Civ. Pro. 12(b)(6) tests the legal sufficiency of the complaint. Sutton v. Duke, 277 N.C. 94, 106, 176 S.E.2d 161, 168 (1970). In judging a motion made pursuant to N.C.R. Civ. Pro. 12(b)(6), the allegations of the complaint must be taken as true. Smith v. Ford Motor Co., 289 N.C. 71, 80, 221 S.E.2d 282, 288 (1976). “A claim should not be dismissed under Rule 12(b)(6) unless it appears that the plaintiff is entitled to no relief under any statement of facts which could be proved in support of the claim.” W. Shuford, N.C. Civil Practice and Procedure § 12-10 (1988).

The Uniform Commercial Code, Chapter 25, Article 9 of the North Carolina General Statutes governs security interests in goods. N.C.G.S. § 25-9-504(3) states the law which governs the outcome of this appeal:

§ 25-9-504. Secured party’s right to dispose of collateral after default; effect of disposition.

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(3) Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts. Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms but every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable. Unless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the secured party to the débtor, if he has not signed after default a statement renouncing or modifying his right to notification of sale. In the case of consumer goods no other notification need be sent. In other cases notification shall be sent to any other secured party from whom the secured party has received (before sending his notification to the debtor or before the debtor’s renunciation of his rights) written notice of a claim of an interest in the collateral.

Whether the defendant must give the plaintiff notice depends entirely upon the classification of the car under the Uniform Commercial Code. Plaintiff argues that when the dealer repossessed the automobile, “it ceased to be consumer goods and became inventory.” Plaintiff correctly states that if the automobile was inventory, further notice may have been required, if plaintiff had made written notice of a claim of interest in the collateral. However, the weight of authority defies plaintiffs interpretation of the statute.

A car, such as the collateral in this case, is a consumer good if used or bought primarily for personal use. N.C.G.S. § 25-9-109. See Joyce v. Cloverbrook Homes, Inc., 81 N.C. App. 270, 273, 344 S.E.2d 58, 60 (1986). “The manner in which a product is classified is determined at the time of agreement between the parties giving rise to the security interest, and, as to them, the categorization remains unaffected by a later transfer of the product in question.” Franklin Investment Co. v. Homburg, 252 A. 2d 95, 98 (1968); see 77 A.L.R.3d 1225, 1235; White and Summers Uniform Commercial Code § 22-9 (Third Edition 1988). Therefore, the issue in this case turns on the classification of the car at the time plaintiff entered into a security agreement with the individual who owned the car.

In its complaint plaintiff does no more than identify by name the individual who bought the car, and who, in 1986, made a finance agreement with the plaintiff. Plaintiff contends that “when the dealer repossessed the automobile, it ceased to be consumer goods,” thereby admitting, at least until the time of repossession, that the car was consumer goods. Nothing else appearing, we conclude that the car was consumer goods at the time plaintiff entered into the finance arrangement.

N.C.G.S. § 25-9-504(1) addresses the question of how proceeds from the sale of collateral are to be applied. To have protected its interest in the collateral as a subordinate secured party, plaintiff could have, at the time the loan was made, notified defendant (or its assignor) by letter of its demand that any proceeds remaining after a disposition of collateral by defendant be applied toward satisfaction of plaintiff’s security interest. N.C.G.S. § 25-9-504(l)(c).

The order of the trial court dismissing plaintiff’s complaint for failure to state a claim is

Affirmed.

Judges Becton and COZORT concur.