Case Title: Cherry Creek Dodge, Inc. v. Carter

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1987-03-09T00:00:00Z

Document:
Cherry Creek Dodge, Inc. v. Carter1987 WY 27733 P.2d 1024Case Number: 86-195Decided: 03/09/1987Supreme Court of Wyoming
CHERRY CREEK DODGE, INC., 
A COLORADO CORPORATION, APPELLANT (PLAINTIFF),

 
 
v.

 
 
BRUCE CARTER AND PEGGY 
CARTER, HUSBAND AND WIFE, APPELLEES (DEFENDANTS).

 
 
Appeal from the District 
Court, UintaCounty, John D. Troughton, 
J.

 
 
John A. Thomas, of 
Phillips, Lancaster and Thomas, P.C., Evanston, and Blair J. Trautwein, of Hathaway, Speight and 
Kunz, Cheyenne, 
for appellant 
(plaintiff).

 
 
Kay Snider Coffman, 
Cheyenne, for appellees 
(defendants).

 
 
Before THOMAS, C.J., and BROWN, CARDINE, URBIGKIT 
and MACY, JJ.

 
 

URBIGKIT, 
Justice.

 
 

[¶1.]     Appellant, Cherry Creek 
Dodge, Inc., a Colorado new-car dealership, sued to replevy a 
vehicle from appellees, the Carters, who were the final purchasers of the 
vehicle. Cherry Creek Dodge first sold the vehicle to Executive Leasing Ltd. 
(Executive), a Colorado leasing and vehicle 
dealership, which resold and delivered the vehicle to the Carters in Evanston, Wyoming. The Carters paid Executive, but 
Executive failed to honor their draft to Cherry Creek Dodge which had retained 
the manufacturer's statement of origin (MSO). The trial court granted summary 
judgment to the Carters. We affirm.

 
 

[¶2.]     At issue is the 
priority between a retail buyer who in good faith has paid his purchase price, 
and a supplier who is unpaid when the dealer's payment draft was dishonored. The 
case is complicated by the fact that the supplier issued no vehicle title when 
retaining the MSO received from the dealer. Only a bill of sale and a written 
promise of title to be provided "in a few days" were furnished to the retail 
buyer upon vehicle delivery. Conflict-of-law and Uniform Commercial Code issues 
result.

 
 
FACTS

 
 

[¶3.]     Bruce and Peggy Carter, 
appellees, were members of the United Consumer Club of Salt Lake City, Utah. 
Through that organization, contact was made with Executive, of Denver, Colorado, and negotiations were pursued by 
telephone for the purchase of a 1985 Dodge Ramcharger.

 
 

[¶4.]     Executive consummated 
the transaction by delivering the new 1985 Dodge to the Carters' residence in 
Evanston on July 
19, 1985, with a signed purchase order and handwritten bill of sale and receipt 
of a cashier's check for the sale price of $13,060.35. Executive had, on the 
same day, purchased the vehicle from Cherry Creek Dodge in Denver, by delivery of a 
bank draft for purchase payment. Cherry Creek Dodge had retained the MSO until 
satisfaction of outstanding manufacturer sales financing and the purchase draft 
cleared, which it never did.

 
 

[¶5.]     Cherry Creek Dodge 
filed this replevin action in Uinta 
County, Wyoming to 
reclaim the vehicle. Essential facts were the subjects of stipulation, 
affidavits of Carters, and a minimally informative deposition of a Cherry Creek 
Dodge employee. It was established by deposition comment of its employee that 
Cherry Creek Dodge knew that the vehicle was acquired from them by Executive for 
possible resale: "They contacted me by phone and expressed that they had a 
customer for such and such a vehicle [to lease it or resell 
it]."

 
 

[¶6.]     The trial court's 
statement of facts, approved by the parties, included:

 
 
"1. Cherry Creek Dodge is 
engaged in the business of selling new motor vehicles. Its principal place of 
business is the State of Colorado.

 
 
"2. At all times 
pertinent to this action, Executive Leasing Ltd. was engaged in the business of 
leasing and selling motor vehicles. Its principal place of business was in 
Colorado.

 
 
"3. On July 18, 1985 by a 
telephone call, Executive Leasing agreed to sell a 1985 Dodge Ramcharger to 
Bruce Carter and Peggy Carter, residents of the State of Wyoming.

 
 
"4. Thereafter, on July 
19, 1985, in the normal course of its business, Cherry Creek Dodge sold and 
delivered a new 1985 Dodge Ramcharger to Executive 
Leasing.

 
 
"5. In return for 
delivery of the vehicle Executive Leasing gave to Cherry Creek Dodge a bank 
draft. The Manufacturer's Statement of Origin (MSO) which was subject to a lien 
in favor of Chrysler Credit Corporation, was retained by Cherry Creek Dodge 
pending receipt of payment of the draft.

 
 
"6. On the same day, July 
19, 1985, Executive Leasing brought the vehicle to Wyoming and delivered it to Mr. and Mrs. Carter in 
Evanston. The 
Carters gave Executive Leasing a cashier's check in full payment for the 
vehicle. In return, Executive Leasing gave to the Carters a handwritten bill of 
sale, together with an oral promise to send the title in a few 
days.

 
 
"7. On July 23, 1985, 
Cherry Creek Dodge paid off Chrysler Credit Corporation. However, the draft of 
Executive Leasing was dishonored; and Executive Leasing has never paid Cherry 
Creek Dodge for the vehicle.

 
 
"8. Cherry Creek Dodge 
has never filed any document contemplated by the Uniform Commercial Code of the 
State of Colorado or the Uniform Commercial 
Code of the State of Wyoming.

 
 
"9. Both Cherry Creek 
Dodge and the Carters now claim the right to title and possession of the 
vehicle."

 
 
The facts are not 
contested, and consequently summary judgment disposition was proper as a matter 
of law. Hensley v. Williams, Wyo., 726 P.2d 90 
(1986); Cordova v. Gosar, 
Wyo., 719 P.2d 625 
(1986).

 
 

[¶7.]     The initial issue is a 
question of conflict of law: do we apply the majority rule followed in 
Wyoming or the minority rule adopted in 
Colorado to 
determine the priority between a supplier who has retained the vehicle title 
document and a retail purchaser for value without notice?

 
 
CONFLICT OF 
LAW

 
 

[¶8.]     Executive obtained 
possession of the vehicle from Cherry Creek Dodge for resale. We find no issue 
raised about resale possibilities out of Colorado with evidence about the initial sale 
not defining any restriction on delivery area.

 
 

[¶9.]     Consequently, with 
legal possession delivered by the sales transaction, Cherry Creek Dodge 
subjected itself to the U.C.C. in effect here when the resale did occur in 
Wyoming. 
Public policy and case precedent require this state to apply Wyoming law if the transaction between Executive and the 
Carters was a Wyoming sale as a conflict-of-law 
decision.

 
 

[¶10.]  Under § 34-21-105, W.S. 1977 (U.C.C. § 
1-105), where the transaction bears a reasonable relation to more than one 
state, and the parties have not agreed on which state law applies, the Wyoming 
statutes embodying the U.C.C. apply to transactions bearing an appropriate 
relation to Wyoming. In Park County Implement Co. v. Craig, Wyo., 397 P.2d 800 
(1964), this court followed that choice of law statute in a similar factual 
situation by concluding that the Wyoming provisions of the U.C.C. applied. In 
that case, the vehicle had been ordered in Wyoming and was picked up in Montana. An MSO was not 
immediately available, and the vehicle was brought to Cody, Wyoming, where the buyer was in the process of 
converting the vehicle for use when it was substantially destroyed in an 
accident. The ultimate issue in that case was risk of loss, and the court held 
that the sale was a Wyoming transaction under the U.C.C., and that under those 
provisions a completed sale had occurred in Wyoming without regard for 
non-delivery of the certificate of title by the Montana dealership. Park County 
Implement Co. v. Craig, supra, 397 P.2d  at 802-803.

 
 

[¶11.]  In this case, negotiations, delivery and 
payment occurred in Wyoming, affording a reasonable forum 
relationship. Restatement (Second) Conflict of Laws § 188. Consequently, this 
was a Wyoming 
sale, with legal attributes now to be determined under the U.C.C. existent here, 
for the purpose of determining priority of interest in the vehicle. Cherry Creek 
Dodge, in selling and releasing possession of the vehicle to Executive for 
resale, subjected itself to the law of the state where the vehicle might then be 
taken for resale. We therefore apply Wyoming substantive law because it is the law 
of the state bearing an appropriate relation to the totality of the transaction. 
Park County Implement Co. v. Craig, supra; § 34-21-105, W.S. 1977 (U.C.C. § 
1-105).1

 
 
PRIORITY UNDER THE 
UNIFORM COMMERCIAL CODE

 
 

[¶12.]  The priority issue has also been settled 
for this jurisdiction by Park County Implement Co. v. Craig, supra. We do not 
now elect to join the minority view followed only by Colorado and possibly Missouri, but confirm our adherence to the 
majority rule that without regard to the transfer of title, the rights of the 
innocent third-party purchaser are to be protected over those of the unpaid 
supplier. We find significant support for this principle in an exhaustive 
discussion authored by Epling, Priorities Disputes in Motor Vehicles and in 
Other Certificated Goods, 41 Bus.Law., February 1983, at 
361.

 
 

[¶13.]  The U.C.C. provisions applicable to the 
transaction are § 34-21-248, W.S. 1977 (U.C.C. § 2-403):

 
 
"(a) A purchaser of goods 
acquires all title which his transferor had or had power to transfer except that 
a purchaser of a limited interest acquires rights only to the extent of the 
interest purchased. A person with voidable title has power to transfer a good 
title to a good faith purchaser for value. When goods have been delivered under 
a transaction of purchase the purchaser has such power even 
though:

 
 
* * * * * 
*

 
 
"(ii) The delivery was in 
exchange for a check which is later dishonored; * *

 
 
* * * * * 
*

 
 
"(b) Any entrusting of 
possession of goods to a merchant who deals in goods of that kind gives him 
power to transfer all rights of the entruster to a buyer in ordinary course of 
business."

 
 
and § 34-21-936(a), W.S. 
1977, 1986 Cum. Supp. (U.C.C. § 9-307):

 
 
"(a) A buyer in ordinary 
course of business (W.S. 34-21-120(a)(ix) (1-201(9)) other than a person buying 
farm products from a person engaged in farming operations takes free of a 
security interest created by his seller even though the security interest is 
perfected and even though the buyer knows of its 
existence."

 
 

[¶14.]  In this case, Executive was empowered to 
transfer good title to a good-faith purchaser for value, despite the fact that 
Executive obtained the vehicle in exchange for a draft which was later 
dishonored. Furthermore, Cherry Creek Dodge entrusted possession of the vehicle 
to Executive, a merchant dealing in vehicle sales, which gave Executive the 
power to transfer all of Cherry Creek Dodge's rights to a buyer in the ordinary 
course of business. The Carters were such buyers.

 
 

[¶15.]  We are also persuaded by the logic of the 
Mississippi Supreme Court in Atwood Chevrolet-Olds, Inc. v. Aberdeen Municipal 
School District, Miss., 431 So. 2d 926 (1983). In that case, Atwood purchased the 
bus chassis out of state from General Motors; Brantley purchased it from Atwood, 
out of state, and resold it to AberdeenSchool 
District in state, with delivery of possession upon 
receipt of payment. Upon nonpayment from Brantley, Atwood filed a replevin 
action against the school district. The court held in favor of the school 
district as the innocent purchaser, and determined that the provisions of the 
title statutes would not supersede the U.C.C. The court noted that the title 
statutes in some aspects are concerned with the same subject as the U.C.C., and 
said:

 
 
"* * * Several 
jurisdictions have encountered the same disputes arising from similar 
conflicting statutes, and those jurisdictions have reasoned that a good faith 
purchaser should prevail.

 
 
"Some of those courts 
have recognized that the intent and spirit of the title statutes would not be 
served in preventing the passage of ownership to a bona fide purchaser for value 
without notice. * * *

 
 
"Another reason for 
protecting the innocent purchaser is the observation that the owner or 
manufacturer was the party who set in motion the chain of events leading to the 
title dispute by entrusting the vehicle to an insolvent dealer." 431 So. 2d  at 
928.

 
 
The article cited supra 
is helpful in understanding the conflict between the U.C.C. and title 
statutes:

 
 
"The vast majority of 
states, however, seem to place primacy on the entrustment doctrine as enunciated 
in U.C.C. section 2-403(2), which provides that `entrusting of possession of 
goods to a merchant who deals in goods of that kind gives him power to transfer 
all rights of the entrustor to a buyer in the ordinary course of business.' 
These courts generally have held that one who pays cash or gives other value for 
the vehicle to the dealer does not lose his good-faith status by the absence of 
receipt of the title certificate or MSO at the time of purchase. Other states 
following this majority rule and reaching this result are Mississippi [Atwood 
Chevrolet-Olds, Inc. v. Aberdeen Municipal School District, supra], New Jersey 
[Shannon v. Snedeker, 192 N.J. Super. 366, 470 A.2d 25 (1983); Martin v. Nager, 
192 N.J. Super. 189, 469 A.2d 519 (1983)], New York [Sheridan Suzuki, Inc. v. 
Caruso Auto Sales, Inc., 110 Misc.2d 823, 442 N.Y.S.2d 957 (1981)], Ohio [Fuqua 
Homes, Inc. v. Evanston Bldg. & Loan Co., 52 Ohio App.2d 399, 370 N.E.2d 780 
(1977)], South Dakota [Island v. Warkenthien, S.D., 287 N.W.2d 487 (1980)], 
Tennessee [In re Tom Woods Used Cars, Inc., 21 B.R. 560 (E.D. Tenn. 1982)], and 
Washington [Williams v. Western Surety Co., 6 Wn. App. 300, 492 P.2d 596 
(1972)]." Epling, supra, 41 Bus.Law. at 368.

 
 

[¶16.]  Within this singularly litigated subject, 
we agree with the majority rule and follow the plain language of the Wyoming 
Uniform Commercial Code. See United 
States v. Wyoming National Bank of Casper, 505 F.2d 1064 (10th Cir. 1974); Price v. Universal 
C.I.T. Credit Corp., 102 Ariz. 227, 427 P.2d 919 (1967); Murray, Commercial Law, 30 U.Miami L.Rev. 63 at 
101, (1975); Townsend, The Case of the Mysterious Accessory, 16 Law & 
Contemp.Probs. 197 (1951).

 
 

[¶17.]  Bruce and Peggy Carter were buyers in the 
ordinary course of the business relationship transacted with Executive. 
Consequently, the entrusting activity of Cherry Creek Dodge in releasing the 
vehicle to Executive conferred to these buyers the rights afforded by Wyoming 
statutes, to take title free and clear of Cherry Creek Dodge's residual claims 
against Executive.

 
 

[¶18.]  Affirmed.

 
 
FOOTNOTES

 
 

1 In trial court 
presentation, the case was alternatively defined as an issue of interpretation 
of Colorado Motor Vehicle - U.C.C. issues, or as a conflict-of-law case. The 
district court decided the case by resolution under Colorado law, and the briefs to this court similarly 
relied on the application of Colorado law. We find that the situs of the 
ultimate sale is the dispositive principle, and need not consider the 
conflicting contentions about the interpretation of the Colorado law. Bryant v. 
Hornbuckle, Wyo., 728 P.2d 1132 (1986); Colorado National Bank v. 
Miles, Wyo., 711 P.2d 390 
(1985).