Hughes v. Al Green, Inc., 80-744

• Decision Date: 31 March 1981
• Docket Number: No. 80-744,80-744
• Parties: , 19 O.O.3d 307, 31 UCC Rep.Serv. 890 HUGHES, Appellant, v. AL GREEN, INC., d.b.a. Mark Dodge-Lincoln Mercury, Appellee.
• Court: Ohio Supreme Court

Page 110

65 Ohio St.2d 110

418 N.E.2d 1355, 19 O.O.3d 307, 31 UCC Rep.Serv. 890

HUGHES, Appellant, v. AL GREEN, INC., d.b.a. Mark Dodge-Lincoln Mercury, Appellee.

No. 80-744.

Supreme Court of Ohio.

March 31, 1981.

Syllabus by the Court

Where a motion vehicle identified to a purchase contract is damaged, lost or destroyed prior to the issuance of a certificate of title in the buyer's name, the risk of such damage, loss or destruction lies with either the seller or the buyer as determined by the rules set forth in R.C. 1302.53 (U.C.C. 2-509).

On Saturday morning, September 10, 1977, Doris G. Hughes, plaintiff-appellant herein, entered into a contract with defendant-appellee, Al Green, Inc., d. b. a. Mark Dodge-Lincoln Mercury, for the purchase of a new 1977 Lincoln Continental, serial No. 7Y82A932511, at a price of $12,490. Hughes tendered a cash down payment of $1,490, the balance of the purchase price to be financed through a local bank. The parties agreed that Hughes would take immediate possession of the car but would return it to the dealership the following Monday for completion of certain new car preparations and installation of a CB radio. Before leaving the dealership, Hughes signed a purchase contract, an application for certificate of title (R.C. 4505.06, 4505.07), and other papers.

En route from the dealership to her home, and after driving to her son-in-law's place of employment to show the car to him, Hughes was involved in a collision with Carla Lyle. As a result, the automobile was damaged substantially and Hughes required hospitalization. Hughes was not cited in connection with the accident. The automobile was towed to the dealership where it remained thereafter.

Subsequently, on September 15, 1977, and after having been notified of the accident, the dealership presented Hughes' bank with a manufacturer's statement of origin to a motor vehicle showing Hughes as the first assignee, and the application for certificate of title bearing Hughes' signature. In return, the dealership received a check in the amount of $11,000 representing the balance of the purchase price. The bank forwarded the documents to the clerk of courts' office which, on September 21, 1977, issued a certificate of title to the damaged vehicle in Hughes' name.

On February 2, 1978, Hughes filed a complaint against the defendant alleging, in essence, that the dealership was liable to her for breach of contract in that the vehicle was transferred to her in a damaged condition. The case was tried to a jury, which resulted in a verdict in favor of the defendant, and judgment was entered upon the verdict. The Court of Appeals affirmed.

The cause is now before this court upon the allowance of a motion to certify the record.

Rumbaugh & DeNicola Co., L.P.A., and Richard L. Rumbaugh, Salineville, for appellant.

Geoffrey S. Goll and Robert L. Guehl, Salem, for appellee.

SWEENEY, Justice.

Since the adoption of Article 2 of the Uniform Commercial Code in 1962, the law in Ohio governing contracts for the sale of goods has been codified in R.C. Chapter 1302. Because the appellant-buyer's action is grounded upon what is in essence an alleged breach of a contract for the sale of a motor vehicle, "goods" as defined in R.C. 1302.1(A)(8), ¹ resolution of this dispute must be guided by the provisions of R.C. Chapter 1302, ² unless superseded by other statutory provisions.

Appellant's argument is based upon the Ohio Certificate of Title Act, R.C. 4505.01 et seq., and pre-U.C.C. case law. ³ Specifically, appellant points to R.C. 4505.04, which provides:

"No person acquiring a motor vehicle from the owner thereof, whether such owner is a manufacturer, importer, dealer, or otherwise, shall acquire any right, title, claim, or interest in or to said motor vehicle until such person has had issued to him a certificate of title to said motor vehicle, or delivered to him a manufacturer's or importer's certificate for it; nor shall any waiver or estoppel operate in favor of such person against a person having possession of such certificate of title, or manufacturer's or importer's certificate for said motor vehicle, for a valuable consideration.

"No court in any case at law or in equity shall recognize the right, title, claim, or interest of any person in or to any motor vehicle sold or disposed of, or mortgaged or encumbered, unless evidenced:

"(A) By a certificate of title or a manufacturer's or importer's certificate issued in accordance with sections 4505.01 to 4505.19, inclusive, of the Revised Code.

"(B) By admission in the pleadings or stipulation of the parties."

Simplified, appellant's argument is that the appellee car dealer was in breach of contract because on September 21, 1977, when the certificate of title was issued in appellant's name and ownership of the automobile thereby legally transferred to her, the appellant no longer possessed that for which she bargained, i. e., an undamaged 1977 Lincoln Continental, serial No. 7Y82A932511.

Resolution of this cause mandates that we determine whether the buyer or the seller bore the risk of loss or damage to the automobile at the time of the collision, for as summarized by White & Summers, Uniform Commercial Code, Section 5-1, at page 174:

"To say that buyer had the risk of loss at the time the goods were destroyed is to say that he is liable under 2-709 for the price. To say that seller had the risk of loss at the time the goods were destroyed is to say that he is liable in damages to the buyer for nondelivery unless he tenders a performance in replacement for the destroyed goods."

R.C. 1302.53(C) (U.C.C. 2-509) provides that in any case where the contract goods are neither delivered by carrier nor entrusted to a bailee, " * * * the risk of loss passes to the buyer on his receipt ⁴ of the goods if the seller is a merchant; otherwise the risk passes to the buyer on tender of delivery."

This provision represents a significant shift away from the prior importance of the concept of title in determining the point at which risk of loss passes from the seller to buyer. ⁵ Under the common law, not only did title to the contract goods determine risk of loss, but it also determined the issues of the buyer's right to the goods (through replevin), the seller's right to the purchase price, and the right to proceed against tortfeasors. ⁶ Under the U.C.C., however, "(e)ach provision of sections 1302.01 to 1302.98, inclusive, of the Revised Code with regard to the rights, obligations, and remedies of the seller, the buyer, purchasers, or other third parties applies irrespective of title to the goods except where the provision refers to such title." R.C. 1302.42 (U.C.C. 2-401).

Thus, as noted in Nordstrom, Sales, Section 130, at page 393:

"(T)here is * * * one principle which applies to all risk of loss problems. This principle is summarized in one sentence from the Comments:

" 'The underlying theory of these sections on risk of loss is the adoption of the contractual approach rather than an arbitrary shifting of the risk with the "property" in the goods.'

"No longer is the question of title of any importance in determining whether a buyer or a seller bears the risk of loss. It is true that the person with title will also (and incidentally) often bear the risk that the goods may be destroyed or lost; but the seller may have title and the buyer the risk, or the seller may have the risk and the buyer the title. In short, title is not a relevant consideration in deciding whether the risk has shifted to the buyer." (Emphasis added.)

Similarly, in 3A Bender's Uniform Commercial Code Service, Section 8.03, it is stated, at page 8-21, that U.C.C. 2-509 (R.C. 1302.53):

" * * * sets forth a contractual approach, as distinguished from the property concept of title, to solving the issues arising when goods are damaged or destroyed. The section focuses on specific acts, such as tender of delivery by the seller, or receipt of the goods or of documents representing the goods by the buyer. Title is relevant under this section only if the parties provide that risk of loss shall depend upon the location of title."

Courts in other states have applied the rules set forth in U.C.C. 2-509 to factual situations analogous to that in the instant cause. In Martin v. Melland's, Inc. (N.D.1979), 283 N.W.2d 76, a contract was entered into in June 1974, in which a farm implement dealer agreed to sell Israel Martin a new truck and attached haystack mover for $35,389. The purchase price was paid with $18,000 in cash and with Martin being credited $17,389 for the trade-in of a used truck with attached haymover. Pursuant to the agreement, Martin executed and delivered title to the used equipment to the dealer within a week. However, Martin retained possession of the used unit as the new unit required certain modifications and was not expected to be ready for delivery for two or three months. In August 1974, the used truck and haymover unit was destroyed by fire while Martin was moving hay.

In the action which followed, Martin argued that both title and the risk of the trade-in unit's loss had passed to the dealer. In applying the risk of loss rules set forth in U.C.C. 2-509, the Supreme Court of North Dakota expressly acknowledged the irrelevance of the location of title to the used truck and haymover. The court determined that with respect to the trade-in unit Martin could be considered a non-merchant seller. Because he had not yet tendered delivery of the trade-in unit to the dealer, Martin bore the risk of loss pursuant to U.C.C. 2-509, irrespective of whether the dealer was the titled owner at the time of the fire. ⁷

In the instant cause, the appellant-buyer had received possession of the automobile as partial execution of a merchant-seller's obligations under a purchase contract. Thus, unless other statutory provisions make R.C. 1302.53 inapplicable, the appellant, as a buyer in receipt of goods identified...