Ladd v. Ford Consumer Finance Co., Inc., Docket No. 180810

• Court: Court of Appeal of Michigan
• Writing for the Court: CORRIGAN
• Citation: Ladd v. Ford Consumer Finance Co., Inc., 550 N.W.2d 826, 217 Mich.App. 119 (Mich. App. 1996)
• Decision Date: 07 June 1996
• Docket Number: Docket No. 180810
• Parties: , 30 UCC Rep.Serv.2d 526 David D. LADD, Plaintiff-Appellee, and NBD Bank, N.A., Plaintiff-Appellee/Cross-Appellant, v. FORD CONSUMER FINANCE COMPANY, INC., Defendant-Appellant/Cross-Appellee.

Page 826

550 N.W.2d 826

217 Mich.App. 119, 30 UCC Rep.Serv.2d 526

David D. LADD, Plaintiff-Appellee and NBD Bank, N.A., Plaintiff-Appellee/Cross-Appellant, v. FORD CONSUMER FINANCE COMPANY, INC. Defendant-Appellant/Cross-Appellee.

Docket No. 180810.

Court of Appeals of Michigan.

Submitted March 13, 1996, at Lansing.

Decided June 7, 1996, at 9:15 a.m.

Released for Publication July 29, 1996.

Robert A. Betts, Caro, and Jaffe, Raitt, Heuer & Weiss by Brian G. Shannon and Melanie LaFave, Detroit, for David D. Ladd.

Charles Milne, Detroit, for NBD Bank, N.A.

Bodman, Longley & Dahling by Lawrence P. Hanson, David W. Barton, and Craig Klomparens, Cheboygan, for defendant.

Before: FITZGERALD, P.J., and CORRIGAN and SCHMUCKER, ^* JJ.

CORRIGAN, Judge.

In this case involving an issue of first impression, we hold that the specific provisions of the Mobile Home Commission Act (MHCA), M.C.L. § 125.2301 et seq.; M.S.A. § 19.855(101) et seq., supersede the general provisions of the Uniform Commercial Code, M.C.L. § 440.1101 et seq.; M.S.A. § 19.1101 et seq., regarding the transfer of title to mobile homes.

Defendant Ford Consumer Finance Company, Inc., (Ford) appeals as of right the order granting summary disposition in favor of plaintiffs David D. Ladd and NBD Bank, N.A., and vacating the court's previous order. Plaintiff NBD Bank, N.A., cross appeals the same order. We reverse the order granting summary disposition to plaintiffs and affirm the order on cross appeal denying plaintiff NBD's claim that Ford was liable for conversion.

I. UNDERLYING FACTS AND PROCEDURAL HISTORY

Colony Homes Center, Inc., operated a mobile-home dealership in Flint, Michigan. To obtain its inventory, Colony entered an inventory financing agreement ¹ with Ford in May 1988. Under this agreement, Colony would submit an invoice or other document to Ford describing the mobile-home unit that it desired to acquire. Ford would then advance funds directly to the mobile-home manufacturer to purchase the unit on Colony's behalf. Ford obtained a security interest in Colony's entire inventory as well as all proceeds and accounts pertaining to the inventory.

Ford required the manufacturer to deliver the certificate of origin to it as a condition of financing Colony's purchase. The certificate of origin identified the manufacturer, model and serial number of the mobile home, and the original purchaser. It provided temporary evidence of ownership. Colony agreed that upon the sale of a mobile home, it would immediately repay any sum that Ford had advanced for the purchase. Colony further agreed to hold the proceeds from the sale of the homes in trust for Ford's benefit. After Colony paid in full the amount due on a mobile home, Ford agreed to release the certificate of origin to Colony to attach to the title application. Possessing the certificate of origin gave Ford additional security because Michigan law requires the certificate of origin to accompany the title application submitted to the Department of Commerce before the department issues a certificate of title. 1985 AACS, R. 125.1232(1).

Plaintiff Ladd purchased a mobile home that cost $27,856.80 from Colony. Under a separate arrangement with Colony for consumer loans, plaintiff NBD financed Ladd's "out of trust" ² purchase, without verifying whether Ford held the certificate of origin and without requiring Colony to pay off Ford. Colony "cashed out" its contract with NBD, without informing Ford of the out of trust sale or paying off the balance due. Colony delivered the mobile home to Ladd, along with an application for a certificate of title for filing with the Department of Commerce. Colony itself never filed the application for certificate of title. However, because Colony never repaid Ford, Ford refused to relinquish the certificate of origin. Consequently, Ladd could not obtain a certificate of title for the mobile home and NBD could not perfect its security interest in the mobile home.

Predictably, Colony ceased doing business and had no assets. Ladd and NBD thereafter sued Ford, alleging a claim and an interest in the certificate of origin. Plaintiffs alleged potential losses because plaintiff Ladd could not obtain title to the mobile home and plaintiff NBD could not perfect its security interest in the mobile home. NBD also alleged that Ford was liable for conversion because it had wrongfully retained the certificate of origin, and sought declaratory relief regarding six other allegedly similar purchases.

The trial court initially granted Ford's motion for summary disposition under MCR 2.116(C)(8) and (C)(10), ruling that no sale of the mobile home had occurred. The court reasoned that the MHCA required a certificate of title to effect a transfer of ownership. Because Ford had refused to deliver the certificate of origin to Colony, the certificate of title could not be issued. Thus, the out of trust sale was void and did not transfer an interest in the mobile home to plaintiff Ladd.

On rehearing, the court held that plaintiff Ladd was a buyer in the ordinary course of business under the UCC, M.C.L. § 440.1201(9); M.S.A. § 19.1201(9), who was protected by M.C.L. § 440.9307; M.S.A. § 19.9307. The trial court reasoned that title to the mobile home passed from Colony to Ladd upon physical delivery of the home under M.C.L. § 440.2401(2); M.S.A. § 19.2401(2). The trial court further opined that plaintiff Ladd's status as a buyer in the ordinary course of business protected plaintiff NBD's security interest. Finally, the trial court determined that plaintiff NBD had not proved its claim of conversion against defendant Ford and denied declaratory relief regarding the six other purchases.

II. TITLE TRANSFER: DOES THE MHCA OR THE UCC GOVERN?

Ford initially contends that the trial court erred in holding that Colony validly transferred ownership to plaintiff Ladd under the UCC, M.C.L. § 440.2401(2); M.S.A. § 19.2401(2), at the time Ladd accepted delivery of the mobile home. We agree. This Court reviews de novo a trial court's ruling on a motion for summary disposition, Johnson v. Wayne Co., 213 Mich.App. 143, 148-149, 540 N.W.2d 66 (1995). MCR 2.116(C)(10) tests the factual basis underlying a plaintiff's claim and permits summary disposition when "[e]xcept as to the amount of damages, there is no genuine issue as to any material fact, and the moving party is entitled to judgment or partial judgment as a matter of law." Id. When deciding the motion, the court must consider the pleadings, affidavits, depositions, admissions, and other documentary evidence available to it in a light most favorable to the opposing party. Id.

A motion for summary disposition under MCR 2.116(C)(8) tests the legal sufficiency of the complaint. It should be granted only if the claims are so clearly unenforceable as a matter of law that no factual development could possibly justify recovery. Gazette v. Pontiac, 212 Mich.App. 162, 167, 536 N.W.2d 854 (1995). A motion under MCR 2.116(C)(8) tests the legal sufficiency of a claim by the pleadings alone. Patterson v. Kleiman, 447 Mich. 429, 432, 526 N.W.2d 879 (1994).

The MHCA subjects all mobile-home sales or transfers to the certificate of title provisions of the act, except for any new mobile home owned by a manufacturer or a licensed mobile-home dealer and held for sale. M.C.L. § 125.2330(1); M.S.A. § 19.855(130)(1). Thus, a manufacturer or dealer need not apply for a certificate of title while holding the home for sale. However, upon a sale, a new owner must apply for a certificate of title with the assistance of the dealer. The effective date of the transfer of title is the date of execution of either the application for title or the certificate of title. M.C.L. § 125.2330c(2); M.S.A. § 19.855(130c)(2). M.C.L. § 125.2330(3); M.S.A. § 19.855(130)(3) specifically provides that "a mobile home shall not be sold or transferred except by transfer of the certificate of title for the mobile home pursuant to this act."

The Department of Commerce issues certificates of title for mobile homes. M.C.L. § 125.2330b; M.S.A. § 19.855(130b). Under the rules promulgated by the Mobile Home Commission under authority of the MHCA, a mobile-home dealer must prepare and file an application for a certificate of title with the Department of Commerce. 1991 AACS, R. 125.1217(2). The manufacturer's certificate of origin must be attached to the original application for the certificate of title. 1985 AACS, R. 125.1232(1). To facilitate the attachment of the certificate of origin to the application for title, a lender holding the certificate of origin must surrender it to the mobile-home dealer upon request. 1985 AACS, R. 125.1232(2).

The provisions of the UCC governing transfer of ownership differ radically from the MHCA. Under the UCC, without regard to a certificate of title, title to goods ³ passes to the buyer at the time and place at which the seller completes performance with respect to delivery of the goods, unless otherwise stated in the contract. People v. Lee, 447 Mich. 552, 562, 526 N.W.2d 882 (1994) (citing M.C.L. § 440.2401; M.S.A. § 19.2401. Accordingly, we must determine whether the general provisions of the UCC or the specific provisions of the MHCA control the transfer of legal ownership.

No Michigan case has considered this precise question. However, this Court has considered similar issues involving the transfer of title to automobiles and watercraft and held that the title transfer provisions of the watercraft certificates of title act (WCTA) and the Michigan Vehicle Code (MVC) preempt the UCC. Jerry v. Second Nat'l Bank of Saginaw, 208 Mich.App. 87, 527 N.W.2d 788 (1994); Whitcraft v. Wolfe, 148 Mich.App. 40, 384 N.W.2d 400 (1985); Messer v. Averill, 28 Mich.App. 62, 183 N.W.2d 802 (1970). Whitcraft, supra at 50, 384 N.W.2d 400, applied the principle that a specific and particular act governs over a general act when the acts are contemporaneous and involve...