Casterline v. General Motors Acceptance Corp.

• Decision Date: 15 June 1961
• Citation: 171 A.2d 813,195 Pa.Super. 344
• Parties: , 1 UCC Rep.Serv. 380 Samuel CASTERLINE, Joseph Casterline and Frank Casterline, Individually and t/a Casterline's Auto Mart, Appellants, v. GENERAL MOTORS ACCEPTANCE CORPORATION.
• Court: Pennsylvania Superior Court

Page 813

171 A.2d 813

195 Pa.Super. 344, 1 UCC Rep.Serv. 380

Samuel CASTERLINE, Joseph Casterline and Frank Casterline, Individually and t/a Casterline's Auto Mart, Appellants, v. GENERAL MOTORS ACCEPTANCE CORPORATION.

Superior Court of Pennsylvania.

June 15, 1961.

Herman E. Cardoni, Wilkes-Barre, for appellants.

Raymond F. Lowery, Wilkes-Barre, for appellee.

Before ERVIN, Acting P. J., and WRIGHT, WOODSIDE, WATKINS, MONTGOMERY and FLOOD, JJ.

FLOOD, Judge.

This case requires us to consider the competing claims to an automobile asserted by the defendant, the assignee of a New York conditional sales contract, and the plaintiffs who are subsequent purchasers of the car in Pennsylvania.

The problem arises out of the following sequence of events:

On October 14, 1957, in New York, Old Reliable Motors Sales sold the car to Jules Simon on a conditional sales contract and assigned the contract to General Motors Acceptance Corporation, the defendant.

Later that day Simon transferred title to the car to John E. Schwartz, who thereupon obtained a New York passenger vehicle registration certificate in his own name.

Still later on the same day, Schwartz drove the car from New York to Wilkes-Barre, Pa., and there sold and delivered it to the Casterlines, the plaintiffs. He also executed an assignment on the New York registration certificate and delivered it to the plaintiffs. The plaintiffs paid Schwartz $2,530 for the car and at the time of the purchase they had no notice of any lien, encumbrance or interest which the defendant may have had in the car.

On the next day, October 15, 1957, the plaintiffs applied for a Pennsylvania certificate of title for the car, and in the course of their business, sold it to Reverend Leo A. Burns, who obtained a new Pennsylvania Title Certificate for the car.

On October 21, 1957, the defendant filed the conditional sales contract in Bronx County, New York.

On December 5, 1957, no payments having been made under the conditional sales contract, the defendant repossessed the car from Father Burns without court proceedings, as it was entitled to do under New York law.

Thereafter Father Burns notified the plaintiffs of the repossession and requested them to rescind the sale and repay the purchase price to him.

On December 12, 1957, after the defendant had refused to redeliver the car to Father Burns, plaintiffs rescinded the sale to Father Burns, refunded the full amount of consideration paid by him, and thereafter on January 12, 1958, brought this action in replevin against the defendant, seeking possession of the car or the cost of replacing it.

1. The original sale in New York was governed by the New York Conditional Sales Act, 40 McKinney's Consol.Laws, c. 41, Personal Property Law, §§ 60-81, which requires no notation of the security interest on the title certificate, and no notation thereof appeared on the title certificate delivered to the plaintiffs by Schwartz. Section 64 of this act provides that any provision in a conditional sale reserving property in the seller shall be valid as to all persons except as otherwise provided in the act. Section 65 makes the conditional sale void as to any purchaser from or creditor of, the buyer who, without notice, purchases the goods or acquires a lien thereon by levy or attachment before the contract or a copy thereof is filed, unless the contract or copy is filed within ten days after the conditional sale. The only other limitation on the conditional seller's rights is contained in Section 69 which provides that when the conditional seller expressly or impliedly consents that the buyer may resell the goods prior to the performance of the condition, the reservation of property shall be void as against purchasers from the buyer for value in the ordinary course of business, even though the contract or a copy is properly filed. ¹

Since there is nothing in the stipulation to indicate that in the original sale to Jules Simon, there was any implied or express consent that Simon might resell and no statement that Simon was a dealer, the defendant's security interest was valid against all persons under the New York law since the contract was filed within ten days of the conditional sale. Its interest would not prevail over the plaintiff if it had been created in Pennsylvania because of the absence of a notation on the title certificate, as required by the Uniform Commercial Code, Act of April 6, 1953, P.L. 3, § 9-302, 12A P.S. § 9-302, ² Motor Vehicle Code, Act of May 1, 1929, P.L. 905, Art. II, § 203(b), as amended by the Act of May 18, 1949, P.L. 1412, § 3, which was in effect when these transactions took place and which is identical in this respect with Section 203 of the revised Motor Vehicle Code Act of April 29, 1959, P.L. 58, § 203(b), 75 P.S. § 203(b). ³

The determination as to law governing the right of the parties depends upon the conflict of laws rules in Pennsylvania, the jurisdiction in which the property was located when it was replevied. 14 C.J.S. Chattel Mortgages § 14, p. 606. The applicable conflict of laws rule is therefore found in the Uniform Commercial Code itself, in § 9-103(3), 12A P.S. § 9-103(3) which provides:

'(3) If personal property is already subject to a security interest when it is brought into this state, the validity of the security interest is to be determined by the law of the jurisdiction where the property was when the security interest attached, unless the parties understood at that time that the property would be kept in this state and it was brought here within thirty days thereafter for purposes other than transportation through this state. If the security interest was already perfected under the law of the jurisdiction where the property was kept before being brought into this state, the security interest continues perfected here for four months and also thereafter if within the four month period it is perfected here. The security interest may also be perfected here after the expiration of the four month period; in such case perfection dates from the time of perfection in this state. If the security interest was not perfected under the law of the jurisdiction where the property was kept before being brought into this state, it may be perfected here; in such case perfection dates from the time of perfection in this state.'

Plaintiffs claim that the security interest, even though valid under the first sentence of § 9-103(3) above, had not been perfected, as required under the later sentences of that sub-section to give it priority over them, when the car was brought into Pennsylvania. They argue that at the time it was brought into this state and sold to the plaintiffs, the conditional sale contract had not yet been filed in New York and therefore all the steps necessary to perfection had not then taken place.

The defendant contends, and the court below held, that the security interest must be considered as having been perfected when the car was brought into Pennsylvania since the contract was thereafter filed in New York within the time limit provided in the New York Conditional Sales Act.

The question then is whether the security interest is 'perfected' as that word is used in Article 9-103(3) of the Commercial Code, when the car is brought into Pennsylvania before all the steps necessary to protect the secured creditor in New York have been taken, but also before the time for taking those steps under the New York Act has expired, and those steps are later taken in New York within the prescribed time.

1. The word 'perfect' is not used in the New York Conditional Sales Act. The court below concluded that since the language of the New York Act protects the secured creditor against a purchaser during the ten day period allowed for filing, the security interest is deemed perfected during that period. We think its reasoning is sound.

The purpose of perfection under the Uniform Commercial Code is to secure the priority of the holder of a perfected security interest in goods against subsequent purchasers and lien holders, other than purchasers of consumer goods and certain buyers in the ordinary course of business or liens for services or materials in connection with the goods. Uniform Commercial Code, §§ 9-201, 9-301, 9-303(2), 9-307, 9-310.

The purpose of filing under the New York Conditional Sales Act is very similar. It is the protection of the security holder's interest in the property against subsequent purchasers and persons acquiring liens by levy or attachment, other than buyers in the ordinary course from the purchaser when there is an implied or express consent to resale prior to the performance of the condition.

Both statutes provide for the attainment of protection for the security interest holder by some method of giving public notice, although when the subject of the security interest is an automobile, the two statutes provide quite different methods of notice. New York requires public notice by filing in the county of the debtor's residence while Pennsylvania requires a notation on the title certificate.

The similarity of purpose and the general method of protection of the public by some form of public notice make us conclude that the filing provision of Section 65 is equivalent to perfection as that phrase is used in Section 9-103(3) of the Commercial Code. Therefore, if the provision of Section 65 is complied with by the creditor in New York, he is protected in Pennsylvania under the Uniform Commercial Code, § 9-103(3), at least to the extent that a perfected Pennsylvania security interest holder would be protected. That provision was complied with here and the defendant's security interest takes priority over the plaintiffs', since they do not claim, nor is there anything in the stipulation to the effect, that they are buyers of consumer goods, buyers in the ordinary course of business under § 1-201(9) and § 9-307(1) or purchasers from a buyer with express or...