Minor v. Stevenson
| Decision Date | 28 February 1991 |
| Docket Number | No. E007231,E007231 |
| Citation | 278 Cal.Rptr. 558,227 Cal.App.3d 1613 |
| Court | California Court of Appeals Court of Appeals |
| Parties | , 14 UCC Rep.Serv.2d 452 Wayne M. MINOR, Plaintiff and Appellant, v. Kenneth L. STEVENSON, et al., Defendant, Peter Pan Motors, Claimant and Respondent. |
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In this appeal, in the context of the Commercial Code, we are called upon to resolve a dispute over possession of a BMW automobile. Such dispute is between defendant's attaching creditor and a third-party claimant who delivered the BMW to defendant. The dispute arose when plaintiff, the attaching creditor, levied on the BMW, purportedly owned by defendant, an automobile dealer. The third-party claimant-seller then asserted ownership of the BMW. As we shall explain, if the three prerequisites specified in section 2326, subdivision (3) of the California Uniform Commercial Code have been met, the transaction will be deemed a "sale or return" with respect only to the claim of an attaching or lien creditor of the dealer. This obtains regardless of the intended nature of the transaction between the dealer and the seller, with the result that goods in the dealer's possession will be subject to the claims of the dealer's attaching creditors. Therefore, because the three prerequisites noted were present here, the attaching creditor of defendant-dealer must prevail over the third-party claimant-seller who delivered the BMW to defendant-dealer. Accordingly, we shall reverse with directions the trial court's order in favor of the third party claimant.
Wayne M. Minor (plaintiff), obtained a default judgment against Kenneth L. Stevenson, T & S Enterprises (together, defendant) and others. Defendant operates an automobile retail accessory business and is a licensed California vehicle dealer. To realize upon the judgment, plaintiff caused a writ of execution to be issued by the trial court, and instructed the marshal to levy upon a number of automobiles carrying dealer plates, purportedly owned by defendant. Thereafter, Peter Pan Motors (claimant) asserted a right to possession of a certain BMW automobile which had been caught in the levy by the marshal.
In the events leading to this dispute, defendant called Howard Johnson, claimant's assistant manager, to ask whether claimant could locate a white BMW 735 iL. Johnson said he could, and the deal was arranged. Claimant then located and purchased the BMW in Palm Springs. The Certificate of Ownership was transferred from the Palm Springs owner to claimant showing claimant as the automobile's owner. Having arranged with the party in Palm Springs for someone with dealer plates to collect the car, claimant informed defendant of the BMW's location. Thereupon, defendant picked up the car, using dealer plates.
Depositions of three of claimant's employees reveal considerable confusion over whether claimant intended the BMW to be sold directly to defendant and later resold to a final buyer, or whether defendant would be an intermediate step through whom the car would pass from claimant to an ultimate purchaser. In past deals with defendant, Johnson stated he sold cars Johnson would register the car in the name of T & S Enterprises who would in turn register the car in the name of the ultimate buyer. With respect to the BMW's transfer to defendant, Johnson did not When asked how delivery of this BMW was to be handled, Johnson replied, "Well, once we know all the funds have been good, then we'll send him down the title with the Bill of Sale." Johnson explained that a car cannot be released until it is paid for, and one cannot own the car until the documentation is transferred. Another of claimant's employees stated,
Of dispositive significance, the foregoing recitation of the facts which were before the trial court showed: 1) the BMW was delivered to defendant for sale; 2) defendant is a person who maintains a place of business at which automobiles are sold; and 3) this business was conducted under a name other than Peter Pan Motors, the party who delivered the BMW to defendant.
As agreed, defendant deposited full payment for the car in claimant's local bank and faxed claimant a copy of the deposit slip as evidence of payment. However, for reasons not explained in the record, defendant later stopped payment on the check and told Johnson that he would not be buying the BMW.
After a hearing on the third-party claim, the trial court issued its order, ruling that defendant's right to possession and title had been conditioned upon payment by check, with the result that defendant's "stop payment" order defeated defendant's title under section 2511 of the California Uniform Commercial Code, and thus, the court determined that claimant's title and right to possession of the BMW was superior to that of the attaching creditor (plaintiff) and defendant.
Plaintiff has appealed from the order, claiming a right in the BMW, as an attaching creditor, superior to that of claimant pursuant to California Uniform Commercial Code section 2326, subdivision (3). 1 We hold, when the elements of section 2326, subdivision (3) are present, as they were here, that a transaction between dealers or between a wholesaler and retailer must be deemed on sale or return, regardless of the intention of the parties. Thus, goods in the possession of defendant-dealer are vulnerable to levies of execution by defendant's creditors, and once a levy of execution has been perfected, the goods are secure against attack by third-party claimants asserting rights based on title.
The sole issue before us is whether subdivision (3) of section 2326 governs the respective rights of the parties to the automobile. Statutory interpretation is "a question of law, and we are not bound by the trial court's interpretation." (California Ins. Guarantee Assn. v. Liemsakul (1987) 193 Cal.App.3d 433, 438, 238 Cal.Rptr. 346; 9 Witkin, Appeal (3d ed. 1985) § 242, p. 247.) In short, we must independently review the statute "with due consideration being given to the trial court's interpretation." (California Ins. Guarantee Assn., supra, at p. 438, 238 Cal.Rptr. 346.) Proceeding within the ambit of the foregoing guidelines, if it be determined that section 2326, subdivision 3 is controlling, then delivery of the BMW to defendant must be deemed on sale or return, thus subjecting the BMW to plaintiff's successful levy. 2
In an earlier case, we determined that a sale or return is deemed to exist if the elements of section 2326, subdivision (3) are present. (Escrow Connection v. Haas (1987) 189 Cal.App.3d 1640, 1644-1645, 235 Cal.Rptr. 200.) Those elements are: " Where goods are delivered to a person for sale and the person maintains a place of business at which he or she deals in goods of the kind involved, under a name other than the name of the person making delivery...." (Cal.U.Com.Code, § 2326, subd. (3).)
Parsing out the three requirements of subdivision (3), as earlier summarized, the evidence shows that the BMW was transferred to defendant for resale. Not only was defendant in the business of selling cars, but in the past, claimant sold cars to defendant for sale to others. Indeed, whether or not defendant already had a purchaser in mind, there is no question but that he would ultimately sell the BMW to another. Also, defendant kept the BMW under dealer plates. These facts established that the BMW's transfer to defendant was for resale, thereby satisfying the first element of subdivision (3).
Second, defendant maintains a business of selling automobiles in Mission Viejo, California. Although the BMW was levied on at a residence rather than at the Mission Viejo address, the BMW, along with other automobiles seized at the same time, was sporting defendant's dealer plates.
Third, defendant sells automobiles under the name of T & S Enterprises, not under the name of Peter Pan Motors, Inc., Johnson or any other name related to that of third-party claimant. The aggregate result of the foregoing was that all three of the prerequisites of section 2326, subdivision (3) were established and thus the transaction between plaintiff and defendant must be "deemed to be on sale or return...." with respect to the claims of defendant's creditors. (Cal.U.Com.Code, § 2326, subd. (3).)
Our analysis of this provision in Escrow Connection v. Haas, supra, 189 Cal.App.3d 1640, 235 Cal.Rptr. 200, is controlling. That case concerned competing claims of a lien creditor and an unsecured consignor after a transfer of a vehicle for resale, where the unsecured consignor claimed it had a secret lien not evidenced by a financing statement. (Id., at p. 1643, 235 Cal.Rptr. 200.) In Escrow Connection, we reversed the trial court's finding in favor of third-party claimants, holding that "the code creates a presumption that [transactions fitting the elements of section 2326, subdivision (3) ] are held on a 'sale or return' basis...." relieving the court of the task of determining whether an asserted consignment is really a sale. (Id., at pp. 1644-1645, 235 Cal.Rptr. 200.) Here, then, we are relieved of the task of inquiring into the nature of the transaction to determine whether the transfer involved an outright sale of the car to defendant or whether the transfer was on consignment. Given that the circumstances surrounding the transfer of the BMW fulfilled the three requirements of...
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