Madrid v. Bloomington Auto Co., Inc.

• Decision Date: 22 January 2003
• Docket Number: No. 79A04-0206-CV-277.,79A04-0206-CV-277.
• Citation: 782 N.E.2d 386
• Parties: Michael MADRID and Pamela Madrid, Appellants-Plaintiffs, v. BLOOMINGTON AUTO COMPANY, INC. d/b/a Royal Lincoln Mercury Nissan, Appellee-Defendant.
• Court: Indiana Appellate Court

782 N.E.2d 386

Michael MADRID and Pamela Madrid, Appellants-Plaintiffs, v. BLOOMINGTON AUTO COMPANY, INC. d/b/a Royal Lincoln Mercury Nissan, Appellee-Defendant.

No. 79A04-0206-CV-277.

Court of Appeals of Indiana.

January 22, 2003.

Jason W. Bennett, Stuart P. Boehning, Bennett Boehning & Clary, Lafayette, IN, Attorneys for Appellants.

Geoffrey M. Grodner, Kendra Gowdy Gherdingen, Mallor Clendening Grodner & Bohrer, Bloomington, IN, Attorneys for Appellee.

Steve Carter, Attorney General of Indiana, David L. Steiner, Mary Ann Wehmueller, Deputy Attorney General, Indianapolis, IN, for Amicus Curiae.

OPINION

SHARPNACK, Judge.

Michael and Pamela Madrid (the "Madrids") appeal the trial court's denial of a motion for summary judgment filed by the Madrids, the trial court's grant of a cross-motion for summary judgment filed by Bloomington Auto Company, Inc., d/b/a Royal Lincoln Mercury Nissan ("Royal"), and the denial of a motion to correct error filed by the Madrids.¹ The Madrids raise two issues, which we restate as:

I. Whether legal title to a motor vehicle is governed by Indiana's Certificate of Title Act or the sales provisions of Indiana's Uniform Commercial Code ("UCC"); and

II. Whether the purchasers of a motor vehicle received legal title to the vehicle pursuant to Ind.Code § 26-1-2-403, the entrustment provisions of the UCC.

We reverse and remand.

The relevant facts designated by the parties in their summary judgment motions follow. The Madrids and Michael Madrid's company had previously purchased both new and used vehicles from Gary Pratt University Motors, Inc. ("University Motors"). University Motors is a used car dealer in West Lafayette, Indiana. In May 2001, the Madrids became interested in purchasing a Lincoln Navigator and asked University Motors to locate "one with low miles that was `loaded.'" Appellants' Appendix at 111. On June 1, 2001, Gary Pratt located a new 2000-model-year Navigator at Royal's dealership in Bloomington, Indiana. Pratt called Royal's sales manager and stated that he had a customer who was interested in the Navigator. Pratt asked if Royal would bring the Navigator to University Motors so that the customer could inspect the vehicle.

Several times in the past, University Motors had requested that Royal drive a new vehicle to University Motors so that University Motors could show the vehicle to a potential customer. If the customer decided to purchase the vehicle, a Royal employee would fill out the sales paperwork and the customer would pay Royal directly for the vehicle. Royal would then pay University Motors a finder's fee for "putting Royal in contact with the customer." Id. at 119. Because University Motors is not an authorized Lincoln dealership, it is prohibited from selling new Lincoln vehicles. See Ind.Code § 9-23-3-4 (1998) ("It is an unfair practice for a dealer to sell any new motor vehicle having a trade name, trade or service mark, or related characteristics for which the dealer does not have a franchise in effect at the time of the sale."). To sell a new Lincoln directly to a customer, University Motors would have to purchase the vehicle from Royal and pay state sales tax. University Motors would then sell the vehicle to a customer, and the customer would also be required to pay state sales tax.

Rather than purchase the vehicle from Royal, University Motors agreed to receive a finder's fee from Royal if University Motors had a customer for the vehicle. A Royal employee drove the Navigator to University Motors on June 2, 2001 so that University Motors could show the Navigator to the Madrids. Royal retained the vehicle's certificate of origin, built-in mobile phone, owner's manuals, and extra keys. The same day, the Madrids came to University Motors to look at the vehicle. Pratt told the Madrids that University Motors had purchased the Navigator for $40,000 and he would like to make $3,000 on the sale to them. They agreed on a purchase price of $41,500. After the Madrids paid the purchase price and took possession of the vehicle, University Motors promised to deliver the title, paperwork, and mobile phone the next day by Federal Express. Despite daily telephone calls from the Madrids, University Motors never delivered any of the documents or vehicle accessories to the Madrids.

Royal also called University Motors for updates regarding the potential sale of the Navigator. Pratt first told Royal that "he was 99% sure that the customers were going to buy the Navigator and that he was going to get a non-refundable deposit for the vehicle." Appellants' Appendix at 122-123. Royal reminded Pratt that all payments had to be made to Royal. The next day, Pratt told Royal that the customers were out of town, but would purchase the Navigator when they returned. Pratt continued to give Royal various excuses until June 23, 2001, when Royal learned that there was a police seizure at University Motors. Royal's general manager drove to West Lafayette to retrieve the Navigator, but was informed that the Navigator was not one of the vehicles seized. Pratt informed Royal that the customers had possession of the Navigator.

The Madrids filed a complaint against Royal and University Motors requesting that Royal surrender the title to the Madrids or that the trial court "administratively issue title to the vehicle" to the Madrids. Id. at 9. The Madrids filed a motion for summary judgment, and Royal filed a cross-motion for summary judgment. The trial court granted Royal's cross-motion for summary judgment and denied the Madrids' motion for summary judgment. Specifically, the trial court found that Royal was entitled to summary judgment under Ind.Code § 9-17, Indiana's Certificate of Title Act, "because Royal preserved its ownership of the vehicle by retaining the [certificate of origin] and, therefore, as a matter of law, the Navigator, or its equivalent monetary value, must be returned to Royal." Id. at 73. Alternatively, the trial court found that under Ind.Code § 26-1-2, the sales provisions of the UCC, Royal retained ownership of the Navigator because: (1) Royal did not "entrust" the vehicle to University Motors; (2) University Motors was not a "merchant who deals in goods of that kind;" and (3) the Madrids knew or should have known that University Motors was not authorized to sell them the new vehicle and did not own the vehicle. Id. at 75. The trial court also noted that no Indiana court has discussed the effect of the current Indiana Certificate of Title Act on the sales provisions of the UCC. However, relying upon cases from Ohio and Texas, the trial court held that even assuming that Royal entrusted the Navigator to University Motors within the meaning of the UCC, "Royal is still the owner of the Navigator, because a dealer cannot sell a vehicle without giving the buyer a [certificate of origin]." Id. at 76. The Madrids filed a motion to correct error, which the trial court denied.

Our standard of review for a trial court's grant of a motion for summary judgment is well settled. On appeal, the standard of review of a grant or denial of a motion for summary judgment is the same as that used in the trial court: summary judgment is appropriate only where the designated evidence shows that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law. Corr v. Am. Family Ins., 767 N.E.2d 535, 537-538 (Ind.2002). The moving party must designate sufficient evidence to eliminate any genuine factual issues, and once the moving party has done so, the burden shifts to the nonmoving party to come forth with contrary evidence. Shambaugh & Son, Inc. v. Carlisle, 763 N.E.2d 459, 460-461 (Ind.2002). The court must accept as true those facts alleged by the nonmoving party, construe the evidence in favor of the nonmoving party, and resolve all doubts against the moving party. Id. The fact that the parties made cross-motions for summary judgment does not alter our standard of review. Hartford Acc. & Indem. Co. v. Dana Corp., 690 N.E.2d 285, 291 (Ind.Ct. App.1997),trans. denied. Instead, we must consider each motion separately to determine whether the moving party is entitled to judgment as a matter of law. Id.

Where a trial court enters findings of fact and conclusions thereon in granting a motion for summary judgment, as the trial court did in this case, the entry of specific findings and conclusions does not alter the nature of our review. Rice v. Strunk, 670 N.E.2d 1280, 1283 (Ind.1996). In the summary judgment context, we are not bound by the trial court's specific findings of fact and conclusions thereon. Id. They merely aid our review by providing us with a statement of reasons for the trial court's actions. Id.

I.

The first issue is whether legal title to a motor vehicle is governed by Indiana's Certificate of Title Act or the sales provisions of the UCC. According to the Madrids, two separate motor vehicle certificate of title structures are utilized by states—an "ownership" system and a "registration" system. Appellant's Brief at 7-8. Under an ownership system, "legal title does not pass until a title certificate passes" and the certificate of title statutes displace standard commercial law with respect to motor vehicle ownership. Id. at 11. Under a registration system, standard commercial law governs automobile ownership and a certificate of title only creates a right to register and use a vehicle on public roads.

The Madrids argue that prior to the enactment of Indiana's current Certificate of Title Act in 1991, we had interpreted Indiana's title acts as a registration system rather than an ownership system. The Madrids assert that the enactment of the new Certificate of Title Act in 1991 did not change this focus of the Act. The trial court, according to the Madrids, misconstrued the relationship between the Indiana Certificate of Title Act and the UCC "breaking from this Court's long-established precedent,...