645 P.2d 778 (Ariz. 1982), 15739, First Nat. Bank of Arizona v. Carbajal

Docket Nº:15739-PR.
Citation:645 P.2d 778, 132 Ariz. 263
Opinion Judge:[10] Cameron
Party Name:FIRST NATIONAL BANK OF ARIZONA, a national banking association, Plaintiff- Appellee, v. Richard CARBAJAL, dba Baja Vans and Fidelity and Deposit Company of Maryland, a Maryland insurance corporation, Defendants-Appellants.
Attorney:[7] Streich, Lang, Weeks & Cardon by William S. Hawgood II, Earl E. Weeks, Phoenix, for plaintiff-appellee. [8] Rawlins, Ellis, Burrus & Kiewit by Timothy C. Westfall, David A. Clarke, and Lewis & Roca by Paul G. Ulrich, Phoenix, for defendants-appellants.
Case Date:April 06, 1982
Court:Supreme Court of Arizona

Page 778

645 P.2d 778 (Ariz. 1982)

132 Ariz. 263

FIRST NATIONAL BANK OF ARIZONA, a national banking association, Plaintiff- Appellee,

v.

Richard CARBAJAL, dba Baja Vans and Fidelity and Deposit Company of Maryland, a Maryland insurance corporation, Defendants-Appellants.

No. 15739-PR.

Supreme Court of Arizona.

April 6, 1982

In Banc.

Rehearing Denied May 25, 1982.

Page 779

[132 Ariz. 264] Streich, Lang, Weeks & Cardon by William S. Hawgood II, Earl E. Weeks, Phoenix, for plaintiff-appellee.

Rawlins, Ellis, Burrus & Kiewit by Timothy C. Westfall, David A. Clarke, and Lewis & Roca by Paul G. Ulrich, Phoenix, for defendants-appellants.

CAMERON, Justice.

The First National Bank of Arizona filed a complaint against defendant Richard Carbajal, doing business as Baja Vans (hereinafter Baja), for the unlawful conversion of a certain customized van. The trial court granted summary judgment in favor of First National, and Baja appealed to Division One of the Court of Appeals. Finding the dispute governed by the Uniform Commercial Code, the Court of Appeals recognized the conflict as one between a cash seller's reclamation rights under Article 2 (A.R.S. § 44-2301 et seq.) and the rights of a holder of an unperfected security interest under Article 9 (A.R.S. § 44-3101 et seq.). The Court of Appeals held that First National's Article 9 unperfected purchase money security interest entitled it to priority over Baja's Article 2 reclamation rights and summary judgment in favor of First National was affirmed. First National Bank of Arizona v. Carbajal, 132 Ariz. 315, 645 P.2d 830 (App.1981). We accepted Baja's petition for review to correct what we believe to be a misstatement of the law regarding a cash seller's security interest. We have jurisdiction pursuant to A.R.S. § 12-120.24 and Rule 23, Arizona Rules of Civil Appellate Procedure, 17A A.R.S.

We must answer the following questions on appeal:

1. To what extent does the non-compliance with Arizona's Motor Vehicle Registration Code affect the rights of the parties?

2. What are the rights of a cash seller under Article 2 of the Uniform Commercial Code?

3. What are the rights of a seller under Article 9 of the Uniform Commercial Code?

The facts necessary for a determination of these issues are as follows. Baja Vans is in the business of customizing vans and selling them wholesale to motor vehicle dealers in Arizona. Sometime in the summer of 1977, Baja delivered a customized 1976 GMC van to Arizona Imports, a licensed motor vehicle dealer. In the preceding year, Baja had delivered approximately 12 vans to Arizona Imports. Of these vans, about half were paid for on the same day as delivery and the remainder were paid for shortly thereafter. Until paid, it was Baja's practice to retain the certificates of title and registration slips to the vans. Upon delivery of the van in question, Arizona Imports did not immediately tender payment,[132 Ariz. 265]

Page 780

and Baja therefore retained the various documents of ownership.

On 13 June 1977, Arthur and Mary Renner purchased the van from Arizona Imports. As part of the transaction, the Renners executed and delivered to Arizona Imports a purchase money security agreement pursuant to which Arizona Imports retained a security interest in the vehicle. On the same day, the purchase money security agreement was assigned by Arizona Imports to the First National Bank of Arizona for consideration and without recourse. Sometime thereafter, for reasons which do not appear in the record, the Renners returned the van to Arizona Imports. During this time, First National had no knowledge that the title documents to the vehicle had not been delivered to Arizona Imports by Baja or that the Renners had returned the van and revoked their acceptance of the vehicle. Likewise, Baja did not know that Arizona Imports had sold the vehicle and that chattel paper evidencing a purchase money security interest in the van had been issued by the Renners in favor of Arizona Imports and subsequently assigned to First National.

Throughout this period, Baja had been making repeated demands for payment from Arizona Imports. Finally, Baja received a telephone call from an employee of Arizona Imports who reported that the deal was off and that Baja had better come pick up the van because "everything was falling apart." By this, the employee was referring to the impending financial collapse of Arizona Imports. Baja took possession of the van and subsequently sold the vehicle in the normal course of business.

When First National did not receive...

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