Case Title: Cappo Management V, Inc. v. Britt

Citation: 

Docket Number: 100797

State: virginia

Court: Virginia Supreme Court

Date: 2011-06-09T00:00:00Z

Document:
Present:  Kinser, C.J., Lemons, Goodwyn, Millette, and Mims, 
JJ., and Carrico and Koontz, S.JJ. 
 
CAPPO MANAGEMENT V, INC., T/A VICTORY NISSAN OF CHESAPEAKE 
 
v.  Record No. 100797 
OPINION BY JUSTICE DONALD W. LEMONS 
 
 
 
 
 
 
 
June 9, 2011 
BRENDA BRITT 
 
FROM THE CIRCUIT COURT OF THE CITY OF NEWPORT NEWS 
David F. Pugh, Judge 
In this appeal, we consider whether the Circuit Court of 
the City of Newport News (the "trial court") erred when it 
ruled that Cappo Management V, Inc., trading as Victory Nissan 
of Chesapeake ("Victory Nissan"), violated Article Nine of the 
Uniform Commercial Code as adopted by Virginia in Title 8.9A 
("Article Nine") by not providing a notice of disposition to 
Brenda Britt ("Britt") after Victory Nissan repossessed and 
disposed of a car it previously had sold to Britt. 
I.  Facts and Proceedings Below 
In November 2004, Britt went to Victory Nissan in 
Chesapeake, Virginia, to inquire about purchasing a car.  
Finding a car she desired to purchase, Britt completed and 
signed a "Credit Application," a "Buyer's Order," a "Retail 
Installment Sales Contract" ("RISC"), a "Supplement to Purchase 
Contract," and an "Agreement to Furnish Insurance Policy."  The 
"Buyer's Order" stated that the "buyer's order, along with 
other documents signed by [Britt] in connection with this 
order, comprise the entire agreement between the parties 
affecting this purchase." As a down payment on the purchase of 
the new car, Britt traded in her old vehicle and wrote Victory 
Nissan a check for $1,500. 
Victory Nissan subsequently attempted to obtain financing 
for the sale of the car to Britt through Capital One, but 
Capital One "withdrew financing."  Thereafter, Victory Nissan 
sought to void its contract with Britt and, in January 2005, 
Victory Nissan repossessed the car from Britt's home in North 
Carolina.  Victory Nissan later disposed of the vehicle without 
providing prior notice to Britt. 
Britt subsequently filed a warrant in debt against Victory 
Nissan in the General District Court for the City of Newport 
News.  Britt alleged that Victory Nissan violated Article Nine, 
and sought liquidated statutory damages pursuant to Code 
§ 8.9A-625(c)(2).  At trial, the General District Court entered 
judgment in Britt's favor at the court's jurisdictional limit 
of $15,000.  Victory Nissan appealed, and the suit was heard de 
novo by the trial court. 
Upon the parties' stipulations of fact and exhibits, the 
trial court found that Victory Nissan sold the car to Britt by 
a conditional sale.  The trial court held that Victory Nissan's 
subsequent repossession of the car was governed by Article 
Nine.  The trial court also found that Victory Nissan failed to 
provide Britt the notice of disposition required by Article 
 
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Nine; accordingly, the trial court entered judgment against 
Victory Nissan for $15,000, plus interest. 
Victory Nissan timely filed its notice of appeal and we 
granted an appeal on the following assignment of error:   
1. The trial court erred in ruling that [Victory Nissan] 
violated Va. Code §§ 8.9A-611 through [-]614 by not 
providing a notice of disposition to [Britt]. 
 
II.  Analysis 
A. 
Standard of Review 
 
“The interpretation of a contract presents a question of 
law subject to de novo review.”  PMA Capital Ins. Co. v. US 
Airways, Inc., 271 Va. 352, 357-58, 626 S.E.2d 369, 372 (2006). 
B.  Victory Nissan Violated Article Nine 
On appeal, Victory Nissan contends that the trial court 
erred in ruling that Victory Nissan violated Article Nine 
because those sections of the Virginia Code apply only after a 
default, which never occurred in this case.  Specifically, 
Victory Nissan argues that it was not a secured creditor under 
Article Nine because the contract documents were conditioned 
upon final approval by a lender – a condition which never 
occurred, thereby making Victory Nissan's agreement with Britt 
void.  Britt contends that the trial court properly held that 
Victory Nissan was a secured creditor in this case and Victory 
Nissan failed to comply with its Article Nine obligations after 
 
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it cancelled the sale.  We agree with the trial court and 
Britt. 
We have stated that, "when considering the meaning of any 
part of a contract, we will construe the contract as a whole."  
Lansdowne Dev. Co. v. Xerox Realty Corp., 257 Va. 392, 401, 514 
S.E.2d 157, 161 (1999).  We have also held that "[i]n the event 
of an ambiguity in the written contract, such ambiguity must be 
construed against the drafter of the agreement."  Martin & 
Martin, Inc. v. Bradley Enters., Inc., 256 Va. 288, 291, 504 
S.E.2d 849, 851 (1998).  Viewing the agreement between Victory 
Nissan and Britt as a whole, there is a conflict between the 
"Bailment Agreement" provision in the "Supplement to Purchase 
Contract," which declares that the car was to "remain the 
property of [Victory Nissan]" pending "approval of a lender," 
and the other contract documents, all of which treat the 
vehicle as Britt's property as of November 28, 2004, the date 
of the sale. 
Specifically, the "Agreement to Furnish Insurance Policy" 
required Britt "to furnish [her] own Insurance Policy" covering 
the vehicle, and further stated that Britt "assume[s] forthwith 
any and all responsibility for . . . the vehicle."  The "RISC" 
states that Victory Nissan "will figure [Britt's] Finance 
Charge on a daily basis at the Annual Percentage Rate," 
effective as of the date of the sale, November 28, 2004.  
 
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Lastly, Victory Nissan conceded, and the "RISC" and the 
"Buyer's Order" evidence, that Britt took possession of the 
vehicle on November 28, 2004, after trading in her previous 
vehicle and after making a down payment on the new car.  All 
three of these documents treat the vehicle as Britt's property 
and are effective as of the date they were entered into, 
November 28, 2004.  In this case, Victory Nissan was the 
drafter of the agreement.  Accordingly, the ambiguity must be 
construed against Victory Nissan. 
 
Applying this principle, we hold that the agreement 
between Victory Nissan and Britt constituted a conditional 
sales contract, and that the vehicle became Britt's property on 
November 28, 2004, pursuant to the terms of the agreement.  We 
also agree with Britt that the language in the "Supplement to 
Purchase Contract," that Britt "understand[s] that the 
completion of this sales transaction is contingent upon 
approval of a lender," is a condition subsequent which, when 
not fulfilled, provided Victory Nissan the right to cancel the 
sale and the contract.  This is not the end of the inquiry, 
however. 
Article Nine of the UCC governs secured transactions and 
applies to "a[ny] transaction, regardless of its form, that 
creates a security interest in personal property . . . by 
contract . . . ."  Code §§ 8.9A-101 and 8.9A-109 (emphasis 
 
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added).  Under Article Nine, a secured party includes "a person 
in whose favor a security interest is created or provided for 
under a security agreement" as well as "a trustee, indenture 
trustee, agent, collateral agent, or other representative in 
whose favor a security interest . . . is created or provided 
for."  Code § 8.9A-102(a)(72)(A) & (E).  In this case, Victory 
Nissan acquired a security interest in the car by virtue of the 
terms of the "Buyer's Order" and the "RISC."  The "Buyer's 
Order" declares that "[Britt] hereby grants [Victory Nissan] a 
security interest in the motor vehicle . . . to be purchased 
pursuant to this agreement, and such security interest shall 
remain in effect until all sums due hereunder have been paid in 
full."  Similarly, the "RISC" lists Victory Nissan as the 
"Creditor-Seller" and states that, "[Britt is] giving [Victory 
Nissan] a security interest in the vehicle being purchased." 
In order for Britt to avail herself of the protections of 
Article Nine and recover statutory damages, she must have been 
a debtor.  Code § 8.9A-625(c).  A "debtor" is "a person having 
an interest, other than a security interest or other lien, in 
the collateral, whether or not the person is an obligor."  Code 
§ 8.9A-102(a)(28)(A).  In this case, Britt made a down payment 
on the car, traded in her old vehicle, and assumed an 
obligation to pay monthly installments.  As a result, Britt 
obtained an interest in the collateral (the car) as a debtor.  
 
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See Barnette v. Brook Road, Inc., 457 F. Supp. 2d 647, 658 
(E.D. Va. 2006) (citing Rhoten v. United Va. Bank, 221 Va. 222, 
225-29, 269 S.E.2d 781, 783-85 (1980)) (holding that because 
the plaintiff made a down payment on the car and assumed an 
obligation to pay monthly installments "she obtained an 
interest in the collateral as a debtor").  Notably, the 
provisions of Article Nine apply "whether title to collateral 
is in the secured party or the debtor."  Code § 8.9A-202. 
Having held Britt to be a debtor under Article Nine, our 
focus shifts to the validity of Victory Nissan's repossession 
of the car.  "After default, a secured party . . . may take 
possession of the collateral . . . ."  Code § 8.9A-609(a)(1).  
Victory Nissan concedes that no default occurred in this case.  
"Typically, a secured creditor may not take possession of the 
collateral until the debtor defaults."  Barnette, 457 F. Supp. 
2d at 658 (citation omitted).  However, the parties may vary 
the provisions of the Uniform Commercial Code, as adopted into 
Virginia law, by agreement, as long as they act in good faith.  
Code § 8.1A-302; Becker v. National Bank & Trust Co., 222 Va. 
716, 719, 284 S.E.2d 793, 794 (1981).  See Barnette, 457 F. 
Supp. 2d at 658.  Accordingly, the parties were free to agree 
that Victory Nissan, as the secured creditor, may repossess the 
vehicle after the occurrence of something other than default.  
This is exactly what the parties in this case did. 
 
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The "Buyer's Order" stated: 
If [Victory Nissan] does not receive approval 
from a financial source for [the] proposed 
[RISC, it] may cancel the sale and the contract, 
and [Britt] will return the vehicle . . . .  If 
[Britt fails] to return the vehicle [Victory 
Nissan] shall be entitled to repossess the 
vehicle and shall have all other rights under 
. . . the Code of Virginia . . . and common law. 
 
Accordingly, when financing fell through, Victory Nissan gained 
the right to repossess the vehicle.  Because Victory Nissan was 
a secured party and Britt was a debtor under Article Nine, 
however, Victory Nissan also "incurred certain obligations when 
it repossessed the car."  Barnette, 457 F. Supp. 2d at 659. 
After repossessing the collateral, a secured party may 
dispose of it in a commercially reasonable manner, Code § 8.9A-
610(a), but it must provide notice to the debtor 10 days before 
doing so.  Code §§ 8.9A-611 through -614.  Significantly, "[i]t 
is the secured party's repossession of the collateral, not 
necessarily the default, that triggers the notice requirement.  
Absent valid waiver by the debtor in a written agreement made 
after default, the parties could not alter the notice 
provisions."  Barnette, 457 F. Supp. 2d at 659 (citing, inter 
alia, Code §§ 8.9A-602(7) and 8.9A-624(a)).  The parties did 
not waive the notice requirement in this case.  Additionally, 
Britt, as a debtor, retained an interest in the car after 
Victory Nissan repossessed it, at least to the extent that she 
 
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had a right of redemption under the "RISC" and Virginia law.  
See Code § 8.9A-623(c)(2).  Therefore, Victory Nissan was 
required to provide notice to Britt prior to disposition of the 
car.  Victory Nissan concedes that it did not do so. 
III.  Conclusion 
We hold that the trial court did not err in its judgment 
that Victory Nissan's repossession of the car in this case was 
governed by Article Nine and that Victory Nissan failed to 
provide Britt the required notice of disposition required by 
Article Nine.  Accordingly, the judgment of the trial court is 
affirmed. 
Affirmed. 
 
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