First Nat. Bank of Amarillo v. LaJoie

• Decision Date: 24 June 1975
• Docket Number: No. 47423,47423
• Citation: 537 P.2d 1207
• Parties: FIRST NATIONAL BANK OF AMARILLO, a Texas Banking Corporation, Appellant, v. Robert L. LaJOIE, Appellee.
• Court: Oklahoma Supreme Court

Page 1207

537 P.2d 1207

86 A.L.R.3d 309

FIRST NATIONAL BANK OF AMARILLO, a Texas Banking Corporation, Appellant, v. Robert L. LaJOIE, Appellee.

No. 47423.

Supreme Court of Oklahoma.

June 24, 1975.

LaMar, Tryon, Sweet, Field & Petty by Larry L. Field, Guymon, for appellant.

Ogden, Ogden & Board, Guymon, Benefield, Shelton, Lee, Wilson & Tyree by Jim W. Lee, Charles L. Freede, Oklahoma City, for appellee.

BERRY, Justice:

This is appeal from trial court's judgment in replevin action.

First National Bank of Amarillo filed replevin action against Robert L. LaJoie (appellee). It alleged right to possession of 1964 Chevrolet Corvette pursuant to terms of security agreement executed by appellee. While action was pending, bank acquired possession of Corvette and it was sold. Appellee filed answer and cross-petition alleging bank's security interest was void and requesting Corvette, or value thereof, be returned to him.

After hearing bank's evidence, trial court found bank's security interest in Corvette was void under 14A O.S.1971 § 2--407, and appellee was entitled to recover its value. The question of value was submitted to jury and it returned verdict for $3,000. Trial court entered judgment awarding appellee $3,000, plus costs and attorney fees. Bank appeals.

Subject to exceptions not herein applicable, § 2--407, supra, prohibits seller in consumer credit sale from taking security interest in property other than property sold. It provides in part:

'(1) With respect to a consumer credit sale, a seller may take a security interest in the property sold. * * * Except as provided with respect to cross-collateral (§ 2--408), a seller may not otherwise take a security interest in property of the buyer to secure the debt arising from a consumer credit sale.

'(3). A security interest taken in violation of this section is void.'

Bank's evidence indicates its security interest arose out of transaction which occurred on November 24, 1972, in Amarillo, Texas, wherein appellee purchased a 1973 Chevrolet Vega from Plains Chevrolet (Plains).

Plains and appellee executed instrument entitled 'Motor Vehicle Retail Installment Sales Contract and Security Agreement.' Bank's name is printed at top of agreement form. However, form designates Plains as Seller and appellee as Purchaser.

In agreement appellee agreed to pay 36 monthly payments of $132.29, and granted Plains security interest in the Vega and Corvette to secure payment. Payments were payable at bank.

The agreement contained provisions entitled 'Non-Recourse Assignment' and 'Repurchase Agreement.' On November 29, 1972, Plains executed these provisions assigning its right in contract, and property described therein, to bank. In repurchase agreement Plains agreed to pay unpaid balance in event bank repossessed property and returned it to Plains.

Bank's evidence indicates it buys thousands of contracts from Plains each year.

When Plains' salesmen and customer agree upon credit sale, Plains' credit manager calls bank, and bank checks purchaser's credit. Bank then telephones and states whether bank will give credit and conditions thereof. Purpose of this is to ensure bank will buy contract after Plains executes it.

On this occasion bank imposed requirement that appellee have larger down-payment, additional collateral, or cosigner.

Plains' credit manager related this information to appellee, and appellee offered Corvette as additional collateral. Parties then executed agreement and Plains sent papers to bank.

Appellee has never been in bank, all papers were prepared at Plains, and contract was signed by Plains and appellee. However, appellee knew contract would be financed at bank.

Bank subsequently repossessed the two automobiles and returned them to Plains. Plains paid bank pursuant to repurchase agreement.

Bank also introduced financing statements executed by appellee, as debtor, and bank as secured party. These financing statements recognized bank had security interest in Vega and Corvette.

After hearing bank's evidence, trial court found transaction between Plains and appellee constituted consumer credit sale as defined by 14A O.S.1971 § 2--104; that even though contract was executed in Texas, provisions of § 2--407, supra, were applicable and security interest in Corvette was void; that bank was assignee of Plains' rights; and bank did not have valid security interest in Corvette.

Section 2--407, supra, applies only to consumer credit sales as defined in § 2--104, supra. There is no similar prohibition applicable to consumer loans as defined in 14A O.S.1971 § 3--104.

Bank first contends trial court erred in finding transaction between bank and appellee was consumer credit sale rather than consumer loan.

14A O.S.1971 § 2--104(1) provides that, except as provided in subsection 2, consumer credit sale is sale of goods, services or interest in land in which (a) credit is granted by person who regularly engages as seller in credit transactions of same kind (b) buyer is person other than organization (c) the goods, services or interest in land are purchased primarily for personal, household or agricultural purpose (d) either debt is payable in installments or credit service charge is made and (e) with respect to sale of goods or services, amount financed does not exceed $25,000.

Section 2--104(2)(a) provides unless sale is made subject to act by agreement, consumer credit sale does not include sale in which seller allows buyer to purchase goods or services pursuant to lender credit card or similar arrangement.

Bank admits transaction between appellee and Plains constituted consumer credit sale, and installment sales contract was assigned to it.

It argues after appellee selected car, Plains and appellee contacted bank requesting loan, that sale of Vega was complete at that time, and application for loan was second transaction. It contends it rejected application and only accepted it after additional security was offered, and contends this arrangement constituted loan between it and appellee.

If appellee had borrowed money from bank to purchase automobile, and then used proceeds of loan to purchase automobile in cash transaction, the transaction between bank and appellee would probably be held to be a loan. See Peoples Finance and Thrift Company of Ogden v. Perry, 30 Utah 2d 282, 516 P.2d 1400.

However, in present case appellee dealt only with Plains. He entered installment sales contract referring to him as Purchaser and Plains as Seller. He did not execute a note or any instrument of indebtedness with bank. Bank took assignment of Plains' rights under contract. After appellee defaulted, bank repossessed automobiles, returned them to Plains, and Plains repurchased sales contract from bank by paying bank amount of unpaid balance.

We conclude only inference which can be drawn from these facts is that there was no consumer loan transaction between appellee and bank. The transaction between Plains and appellee was consumer credit sale and bank was merely assignee of Plains' rights under sales contract.

Bank next contends court erred in ruling it was improper to take additional security in a consumer transaction.

Under this contention bank first argues transaction between it and appellee was consumer loan. Since we have previously determined there was no loan by bank to appellee, we need not consider this contention.

Bank further...