Opinion ID: 1442291
Heading Depth: 1
Heading Rank: 1

Heading: official reasons for 1972 change

Text: The section has been completely rewritten to clarify the relationship of its several provisions to each other and to other sections defining the applicable law. [Uniform Commercial Code (U.L.A.) § 9-103. (1977 pamphlet)] Although our legislature has not yet enacted the 1972 amendments to Article 9, [2] we believe it is appropriate to accord some deference to the views of the Code drafters where they might shed light on the instant problem. Under the revised section 9-103, a professional buyer in the business of selling goods of the particular type involved, such as Princeton Porsche-Audi, would be defeated by the claim of the secured party, but a non-professional (consumer) buyer in such a position would prevail. U.C.C. 9-103(2)(d), the amended code section provides: If goods are brought into this state while a security interest therein is perfected in any manner under the law of the jurisdiction from which the goods are removed and a certificate of title is issued by this state and the certificate does not show that the goods are subject to the security interest or that they may be subject to security interests not shown on the certificate, the security interest is subordinate to the rights of a buyer of the goods who is not in the business of selling goods of that kind to the extent that he gives value and receives delivery of the goods after issuance of the certificate and without knowledge of the security interest. The commentary to revised section 9-103, applicable to 9-103(2)(d), states: (d) If a vehicle not described in the preceding paragraph (i.e., not covered by a certificate of title) is removed to a certificate state and a certificate is issued therefor, the holder of a security interest has the same 4-month protection, subject to the provision discussed in the next paragraph of Comment. (e) Where `this State' issues a certificate of title on collateral that has come from another state subject to a security interest perfected in any manner, problems will arise if this state, from whatever cause, fails to show on its certificate the security interest perfected in the other jurisdiction. This state will have every reason, nevertheless, to make its certificate of title reliable to the type of person who most needs to rely on it. Paragraph (2) (d) of the section therefore provides that the security interest perfected in the other jurisdiction is subordinate to the rights of a limited class of persons buying the goods while there is a clean certificate of title issued by this state, without knowledge of the security interest perfected in the other jurisdiction. The limited class are buyers who are non-professionals, i.e., not dealers and not secured parties, because these are ordinarily professionals. Turning to our statute in its present form, we feel constrained to differ with the Appellate Division's conclusion that under N.J.S.A. 12A:9-103(4) a professional buyer who purchases a vehicle with a clean certificate of title must prevail over the holder of a valid, but undisclosed, foreign lien. While we recognize that there is authority for this view, Phil Phillips Ford, Inc., supra, nevertheless we favor an interpretation of N.J.S.A. 12A:9-103(3) and (4) which protects the interest of the foreign lienholder. This position not only promotes interests of comity but also discourages the fraudulent conduct indirectly sanctioned by the Appellate Division's construction. We agree with the observation of the Supreme Court of Washington with respect to the narrow scope of subsection (4). Does the subsection apply to all security interests, or only to those which attach after the certificate is issued? If it was meant to apply to all such interests, there is no way in which a person in the appellant's [a foreign lienholder from a non-title jurisdiction] position can protect himself. It would seem that if the draftsmen and the legislature had intended such a harsh result, the intent would have been more clearly expressed. [ Associates Realty Credit Ltd. v. Brune, supra, 568 P. 2d at 790] Also pertinent is the succinct observation about subsection (4) in Judge Wright's special concurrence in General Motors Acceptance Corp. v. Long-Lewis Hardware Co., supra, 306 So. 2d at 281, that [i]t certainly was not intended to provide a loophole through which swindlers could pass and defeat a security interest legally perfected where it attached. Thus, we hold that N.J.S.A. 12A:9-103(4) should only be applied to goods which at the time of entry into this state are covered by a certificate of title. N.J.S.A. 12A:9-103(3) should apply to all goods which are moved into New Jersey from non-certificate of title jurisdictions. If a certificate of title is subsequently acquired, N.J.S.A. 12A:9-103(3) remains applicable according to its terms. With respect to professional buyers such as Princeton Porsche-Audi the four month grace period is absolute, and bona-fide status is no protection. Such buyers need look no further than the upper right hand corner of a Certificate of Ownership issued by New Jersey to know that a vehicle was once registered in another jurisdiction. Where such is the case, the alphabetic notation Z is prominently printed. Such a notation should put the buyer on notice that some investigation may be in order. To be completely safe without the necessity of further inquiries, the buyer should purchase such a vehicle only after four months have elapsed since the New Jersey registration date. Since this case involves a professional buyer, it is not necessary for us to consider whether the same result would occur if an innocent consumer had purchased the automobile directly from Ryan. The 1972 amendments were primarily concerned with clarification of the meaning of 9-103, which was inartfully drafted in the 1962 version, and our holding is supportive of the purposes sought to be served by those amendments and in no sense constitutes a usurpation of the legislative function. However, since resolution of the issue is unnecessary to our disposition of this case, we reserve consideration thereof for an appropriate future case. Thus, our holding is limited to professional buyers in the application of the statute. The judgment of the Appellate Division is reversed and the judgment of the trial court is reinstated. For reversal  Chief Justice HUGHES and Justices SULLIVAN, PASHMAN, CLIFFORD and SCHREIBER  5. For affirmance  None.