### IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON October 15, 2002 Se ssion KUBOTA CREDIT CORPORATION, USA v. DOUG TI LLMAN, ET AL 

### .

Direct Appeal from the Circuit Court for Tipton County

No. 5431 Joseph H. Walker, Judge

No. W2002-00885-COA-R3-CV - Filed Dec ember 16, 2002

The plaintiff

credit or in th is case f

iled suit to

recove r a trac tor that w as subject to a sec urity agreement

and was pawned to the defendant pawnbroke r. The court below awarded s ummar y judgment to the creditor. The pawnbroker appeals, claiming the creditor’s secur ity agr eement was notproperl

y pe rfected, and that the creditor theref ore does not have a superior right to possession of the tr actor. We fin d iss ues of mater ial fa ct ex ist r egardin g w hether the security agreement was perfected, whether the pledgor had authority to pawn the tractor, and whether the pawn transaction was entered into in good faith. We reverse summar y judgment a

nd remand. Tenn. R. App.P. 3 Appe al as of Right ; Judgme nt of the Cir

cuit Cour

t; Reve rsed and Remanded
D AV ID R. F ARMER , J., delivered the opinion of the court, in which A LAN E. H IGHERS and H OLLY K. L ILLARD , J.J., joined. Roger A. Stone, M e mphis , Tennes see, for the appe llant, Dou g Tillma

n a/k/a B ud Tillman , d/b/a Millington Motors d/b/a AAA Collateral Loan & Jewelry Company.. William D. Wilson, Jr., Memphis, Tennessee, for the appellee, Kubota Credit Corporation.
OPINION
In April of 1999, Wooten Tractor Co. and Debo rah Hubb ard (Ms. Hubbard ) enter ed into two retail installme

nt contra cts and security

agree me nts f or Kubota

tractor s which we

re assig ned to Kubota C redit Cor

poration (“Kubot a”). The first tr

ansacti on was fo

r the pur chase of a Kubota Model B7300HSD

16-hp tractor and a box blade. T he second transa

ction occ urred a pproximate

ly two weeks later, and consisted of an exchange of the first tractor for a larger tractor, a Kubota Model L3010HST. The parties also completed a UCC-1 financing statement for $14,979.80 cove ring the larger tractor, which Wooten Tractor filed in the register’s office of Tipton County . The document s name only Ms. Hubbard as the buy er/debtor, and list her address as 5235 Simmons Road, Drummonds , TN. The second trac tor was picked up from Wooten Tractor by Ms. Hubbard’s-2-

brother, Donald

Long (Mr. Long), who br

ought it to his home. The tractor remained gar aged at Mr. Long’s homeuntil June of 1999, when he pawned it to Bud Tillman, d/b/a Collateral Loan & Jewelry Co. (Bud Tillman and Collateral Loan & Jewelry Co. will be referred to collectively as Mr. Tillman). The pawn d oc uments include an affidavit by Donald Long stating

that he was the owner of the tractor and warranting the tra ctor against lawful claims and demands.
In April of 2001, Kubota f iled a wa rrant the Tipton Coun

ty G eneral Sessions c ourt ag ainst Ms. Hubbardand Mr . Til lman, assert ing a purchase money security intere st and seeking to recover the tractor from Mr. Tillman. The court awarded Kubota possession upon the filing of a bond, and Kubota recovered

the trac tor. Mr. T

illman app ealed the gene

ral sessi ons’ orde

r to the circuit court, and counter-complained against Kubota, joining Ms. Hubba rd, Donald Long, and Long’s Construction as third-party de fendants, for conversion in the amount of $13,500. Ms. Hubbard subseque ntly fi le d f or ba nk ru pt cy. Kubota moved for summary judgmen t, argu ing it ha d a purch ase money security intere st in the tractor and that the tractor was pawned b y D onald L ong indiv idually and withoutauthority. The cour t awarded summary judgme

nt to Kubota. Mr. Tillman non-suited the third-party complaint ag ainst Ms. Hubbard, Donald Lon g and Long’s Constru ction, and perfected an appe al to this Court.
Issues
Mr. Tillma

n submits the

following

issues fo r revie w by

this Court: (1) Whether

a genu ine iss ue of

material fact exists regarding whe ther Deborah G. Hubbard

gave D onald L

ong the authority to place the tractor

which is the subject matter of this litigation wi th a p awnbroker, the appellant Bud Ti ll ma n, d/ b/ a C ol la te ra l Lo an & J ew el ry C om pa ny. (2) Whether

a genu in e is sue of ma

terial f act exists r

egard ing whe ther Kub ota Credit Corp’s security intere st was properly pe rfected, giving

it priority over the in ter est of t he a ppe ll ant Bud Til lm an, d/ b/ a Co ll ate ral Lo an & Jewelry Co mp an y. Kubota a sserts tha

t the dispo sitive issu e is:
Whether Doug Tillman has shown that he has any rig ht to possession of the tractor that is superior to Kubota Credit’s claim for possession. Standard of Review
S ummary judgment should be awarded when the moving pa rty can de monstrate that there are no genu

ine issue s rega

rding ma terial f acts of the cause of action and that it is entitled to a judgment as a matter

of law. Tenn . R. Civ. P. 56 .04; Byrd v. Ha ll , 847 S.W.2d 208, 214 (Tenn. 1993); McCarley v. West Qu ality Food Serv. , 960 S.W.2d 585, 588 (Tenn. 1998). Mere assertions-3-

that the nonmoving party

has no ev idenc e does not suffice to entitle the movant to summary judgmen t. McCarley , 960 S.W.2d a t 588. The

moving pa

rty must either

conclusi vely

demonstr ate an affirmative defen se or affirmatively negate an element which is essential to the nonmoving pa rty’s claim. Id. If th

e moving party can demo nstrate t

hat the no nmoving p arty

will not be able to carry its burden of

proof at trial on an essential element of its case, summary judgment is appropriate. Id.
When a party make s a properly suppor ted motion for summary judg ment, the burden shifts to the nonmoving party

to establish the existence of disputed material

facts or that the mo ving pa

rty is not entitled to summary judgment as a matter of law. Id. ; Staples v. CBL & Assocs. , 15 S.W.3d 83, 89 (Tenn. 2 000). The nonmo ving pa rty cannot me

rely rely on the ple adings, but must demonstr ate that essential elements of a claim exist by: 1) pointingto evidence that creates a factual dispute; 2) re-enforcing evidenc e challenged by the moving party ; 3) o f

fering additional evidence which establishes a material dispute; 4) submitting a Tenn. R. Civ. P. 56.06 affidavit explaining the need for additional time for discovery

. McCarley , 960 S.W.2d at 588.
We re vi ew an aw ar d o f s um ma ry judgme nt de novo , with no pr esumption

of corr ectness afforded to the tria

l court. Guy v. Mut. of

Omaha Ins. Co. , 79 S. W. 3d 5 28, 534 (Te nn. 200 2). In determining whether

to award summary judgmen t, the cour t must view

the evide nce in the light most favora ble to the n onmo vi ng pa rt y, d ra wi ng al l r ea so na bl e i nfer en ce s i n f av or of th e n on mo vi ng pa rt y. Staples , 15 S.W.3d at 89. Summary judgment should be awar ded only when a

reas onab le person could reach only

one conclusion based onthe facts a nd infer ences dr awn fro m those fa

cts. Id. If there is any doubt about whether a genuineissue exists, summary judgment should not be awarded. McCarley , 960 S.W.2d at 588.
Kubota’s Se curity Inte rest Mr. Tillman submits that a genuine issue of fact exists reg arding

whether Kubota pr

operly perfected its security ag

reement covering the tractor at dispute in this case. He co ntends that the tractor was neither

farm equipment nor a

consumer good, but equipment purchased for use by Long’s Construction, a partne

rship of M s. Hubbard, Donald Long , and their father, John Long. He a sserts that Kubota’ s security

agreement was acc ordingly not per fected by filing the UCC-1 with the register for Tipton Coun

ty, nor as a

purchase money

security intere st in consumer goods which is perfected without filing. The perfection of security agreements is governe d by Tenn. Code Ann. § 47-9- 101 et seq ., Article Nine of the Uniform Commercial Code as adopted in Tennes see. Thistransaction and c ause of action is governed by

the terms of Article Nine which were in effect prior to July 1, 2001, when substantia l chang es to the a

rticle w ent into effect. The code provides : A financing statement must be filed to perfect all sec urity inte rests except the follo wing:

. . . . (d) a purchase money

security intere st in consumer goods . . . .1 Neither K ubota no r Ms. H ubba rd assert that the tractor was farm e quipm ent or used in farm ing opera tions.
2 A pawnb roker is by de finition not a buyer in the ordinary co urse of bus ines s. Tenn. Code Ann. § 47-1-201(9). -4- Tenn. Cod

e Ann. § 47 -9-302( 1)(d)( 1996). Th e code f urther p rovides: The prop er plac e to file in order t o perfe ct a security

interest is as follo ws: (a) W hen the c ollatera

l is equipme

nt used in f

arming operati ons . . . o r consumer go od s, th en in th e o ff

ic e o f t he re gi st er in th e c ou nt y o f the deb tor’s residence . . . .

. . . . (c) In all other c ases, in the office of the secretar y of state. Tenn. Code Ann. § 47-9-401 (1)(1996).
Mr. Tillman argues that since the tractor was not a consumer good, Kubota doe s not have a perfected security ag

reement and has no superior interest in the tractor. 1 He further argues that since Kubota’s security intere st was unperfe cted, the sale of th e tracto r to him by

Donald L

ong is gover ned by Tenn. Cod

e Ann § 47- 9-301(1) (c), wh ich provi des: Exceptas otherwise provided in subse ction (2) , an unpe rfecte d security in

terest is subordinate to the rights of :

. . . . (c) in the case of goods, instruments, documents and chattel paper, a person who is not a secured party and who is a transferee in bulk or other buy er not in the ordinary course o f busines s, or is a buyer of farm products in the ordinary course of business, to the extent that he gives va lue and r eceives delivery of the collateral without knowledge of the security interest and before it is perfected. 2 Tenn. Code Ann § 47-9-301(1)(c)(1996). Mr. Tillman contends tha t since he is not a buyer in the ordinary course of business, and since he gave val ue for th e tr actor and received delivery without knowl edge of the se curity interest , his owne

rship inte rest is su perior to Kubota’s. Mr. Tillman further refers the Court to Title 45, Chapter 6 of the Tennessee Code, which gover ns pawnbr

okers. The code provides : (b) If the pledgor

fails to redeem

the pledg ed good s with

thirty (30) day s after the matur ity date of the pawn transaction, the pledgo r shall the reby forfeit all righ t, title and interest of, in and to the pledged goods to the pawnbroker , who shall thereby acquire an absolute title to the pledged goods and the debt becomes satisfied, and the pawnbroker

shall have the authority to sell of dispose of the unredeemed pledged goods as the pawnbroker’s own and may sell the unredeemed pledged g oods.-5-

Tenn. Code Ann. § 45-6-211(b)(1999 Supp.)
Kubota contends that the tractor was purchased by Ms. Hubbard as a consumer good, and that its purchase mon ey security interest theref ore was perfected withou t filing. In su

pport of t his assertion, Kubota su

bmits an af

fidavit by M s. Hubbard in which she states that she purchased the tractor for her own use a

nd not for the benefit of L

ong Const

ruction. Also inclu ded in the record is an affidavit of

Steve Wooten, an owner and manager of Wooten Tractor. Mr. Wooten asserts that the tractor was sold for the personal use of Ms. Hubbard, a nd that Ms. Hubbarddid not disclose any contemplatedbusiness uses for the tractor. Mr. Tillman notes, however, that the credit application completedby Ms. Hubbard does not state a contemplated use for the tractor, an d that stat ements made by M s. Hubbard in her deposition support the contention that the trac tor was pu

rchase d, at lea st in part, for use by

Long Construction.
In her deposition, Ms. Hubbard stated that she purchased the original, smaller tractor at the direction of her br

other and partne

r, Donal d Long, and that the down- payment was pr ovided by her father, also a pa

rtner in Long’s Construction. She stated that the exchang e of this tractor for a larger one also was completed

at Donald Long’s direction, and that she did not know for what purpose the t ractor was needed. When asked whether the tractor was intended for use in the construc tio n business, Ms. Hubbard replied, “part of it.” Ms. Hu

bbard al so stated that Donald Long picked up the tractor from Wooten Tractor, and that it re mained on

his prope rty from the t ime of pur

chase un til it was pawned. She additionally stated that Donald Long

previously had pawned several other pieces of larg e equipme

nt to Mr. Ti llman, ap

parentl y w ithout inci dent.
Donald Long stated

in his deposition that Long’s Construction provided the down-pa yment forthe tract or, and that the tractor was purchased for use by the construction partnership. H e explained that the original, smaller tractor was exchanged for the larg er model because the smaller tractor had nearly

flipped over when used on a con s truction site. Donald Long furthe r stated that DeborahHubbard purchased the tractor in her na me beca use the part

nership l acked su

fficien t credit to finance it in its own name. He confirmed that he picked up the tra ctor from Wooten Tractor and that it remained at his home, which was also the location of the construction business. Donald Long further stated that the tractor wa s used f or construction business purposes shortly a fter it was purchased.
The determinative factor for establishing the classification of g oods is the purpose for which they are bought and used. In re James Fri tz Bu tler v. Murfreesboro Prod. Credit Ass’n , 3 B.R. 182, 183 (Ba

nkr. E.D. Tenn. Ma

rch 5, 19 80). When c lassify ing go ods in

order to determine whether a security intere st has been perfected, the court looks to the actua l use of the goods, n ot to what u se the goods could be put. Id. at 184. Upon review of this record, we find a genuine issue of material fact exists regarding whether

the tractor is properly

classified as a consumer good or equipment, and whether Kubota’s security interest was perfected.3 Te nn. Co de A nn. § 4 7-6-2 13 g ove rns pa wn tran saction s involv ing stole n pro perty. -6- Authority of Donald Long to Pawn the Tractor
Kubota submits tha

t the issue

of whether its sec

urity agree ment was p erfec ted is not a material issue because “the record lacks a ny affida vit or other credible evidence that Appellant had lawful possession of the tractor. That . . . is dispositive of the appeal.” Kubota’s argument, as we understandit, is that Ms. Hubbard purchased the tractor individually , and no t on behalf of the partnership, that the tractor was pawned by Donald Long without

her knowledge or

permission, and that Donald Long

had no own

ership in terest in the tractor which could be transferred to Mr. T illman. Kubota further asserts that

Mr. Tillman knew Donald Long ha d no ownership interest in the tractor, despite the affidavit signed by

Donald Long as pa

rt of the pawn transaction that he was the rightf ul owner of the tractor. Kubota contends that where the Code pr ovides that

“[a] purcha ser of goods acquires all title w

hich his transferor had or had power to transf er,” Tenn. Code Ann. § 47-2-403(1), since Donald Long had no title to the tractor, Mr. Tillma n could ac quire no t

itle. We dis agree

with this assertion.
We first a ddress Te nn. Code A

nn. § 47-2 -403, whi ch provid es, in per tinent pa rt: (1) A purchaser of

goods acquires all title which his transferor had or had power to transfer except tha

t a purch aser of

limited inte

rest ac quires r

ights only to the extent of the interest purchased. A person w ith voidab le title has power to transfer a good title to a good faith purch aser for value. When goods have bee n delivered under a transaction of purchase the purchaser has such power even though: (a) the transferor

was deceived as to the identity of the purchaser, or

. . . . (d) the delivery

was proc ured thr ough fr aud punish able

as larcenous under the criminal law.

. . . . (4) The rights of

other purchasers of

good and of lien creditors are g overned by the chapters on Se cured T ransac tions (ch apter 9 o f this titl e) and Documents of Title (chapter 7 of this title). Tenn. Code Ann. § 47-2-403(1)(1999 Supp.). Although a thief

has void title, one w

ho is in poss ession of

goods a s a

result of a voluntary deliver y is not a thief in the ordinary

sense. 3 Alsafi Oriental Rugs v. Am. Loan Co. , 864 S.W.2d 41, 44 (Tenn. Ct. App. 1993). Evena swindle r who indu ces a victim throug h fraud t o voluntar

ily deliver a good is a purchaser under the code, albeit one with voidable title. Id. A purcha ser with vo idable title confers good title upon a good faith purcha ser for value, even where de live ry wa s procured through actionable fraud. Id. Tenn. Code Ann. § 47-2-403(1). Theparties d o not disput

e that Mr. Long was in possession of the tra ctor by virtue of a voluntar

y delivery by both Ms. Hubbard and Kubota. T

hus he ha d the powe

r to conf er goo d title toa

good fa ith purch aser fo

r value. Kubota-7-

contends , however, that Mr. Tillman is not a good faith purchaser because he knew that

Ms. Hubbard was the rightful owner of the tractor and that Mr. Long

had no au

thority to pawn it. This pres ents an issue o f materi al fact f or deter mination by

the trial court. Second, Mr. Tillman asserts that Donald Long had authority to pawn the tractor since it was equipment

of the partnership, and not the personal proper ty of Ms. Hubbard. I n light of the circumstances surround

ing the p urchase and delivery of

the tractor as discussed above, we ag ree that this is an is sue of ma

terial f act which also must b e deter mined by the trial court. Conclusion
This case raises an issue

of material fact regar

ding the classification

of the tra ctor whic h is the subject of this dispute. The dete rmination of this issu e is necessary

to establish whether Kubota’s security agreement was perfected. The evi de nce also raises is sues of D onald L ong’s a uthority to pawn the tractor and whether Mr. Tillman was a g ood faith purchaser.
In light of the fore going , we rev erse summary judgme

nt and remand for a

trial on th e merits. In so doing, we empha size the ob ligation s of goo d faith a nd honesty

in fact w hich are require d in every transaction under chapters one throug h nine of the Uniform Commercial Code. Tenn. Code Ann. § 47-1-10 2( 3)(1996) . Costs of th is appea l are taxe d to the ap

pellee, Kubota Cr

edit Corporation, USA.

___________________________________ DAVID R. FARMER, JUDGE