Court Opinion

ID: 9761918
Source: CourtListenerOpinion
Date Created: 2023-08-29 01:59:41.52319+00
Date Added: 2024-06-11T10:48:41.513857
License: Public Domain

WOLCOTT, Chief Justice
(dissenting):
I do not agree with the conclusion reached by the majority of the Court. This is a case in which action by a third party, Dover Motors, has caused a loss which will fall upon one of two parties not responsible for the action. In a sense, therefore, they may be regarded as innocent parties injured as a result of the illegal action of Dover Motors, not a party to this lawsuit.
The basic purpose of the U.C.C., as L understand it in such situations, is to put the loss on the party whose conduct is most responsible for the loss.
If these parties were a secured creditor and an ordinary buyer of an automobile purchasing from an automobile dealer, unquestionably Article 9 of the U.C.C. would protect the innocent purchaser against the claim of the secured creditor. 5A Del.C. § 9-307(1). In my opinion, however, Sher-rock Brothers does not fit within the definition of “buyers in the ordinary course of business” as used in Article 9.
Sherrock was a fellow automobile dealer purchasing automobiles from Dover Mo*652tors, which sold them “out-of-trust”. As such Sherrock is not therefore an innocent buyer in the ordinary course of business. It was, in fact, a merchant buyer knowing of the customs and usages of the trade of one automobile dealer purchasing from another. Expert testimony in the trial below upon this point indicates quite conclusively that Sherrock’s course of conduct in the purchase of the two cars in question from Dover Motors did not conform to the usual practices of two automobile .dealers purchasing and selling one from the other. All of this is set forth in detail in the Opinion of the court below. Sherrock v. Commercial Credit Corporation, 277 A.2d 708 (Del.Super.1971).
It is said by the majority that this transaction must be governed in its entirety by Article 9 and specifically by § 9-307(1). I think, however, this cannot be, because that section speaks of a buyer in the ordinary course of business which means, it seems to me, that he must be a purchaser not familiar with the usages of automobile dealers dealing with each other. Since Sher-rock is not such a buyer, but is in fact a fellow car dealer knowing of the customary usages in the trade where one dealer purchases from another, it must be considered in that light. It is, therefore, a merchant buyer, the standard of conduct for which is prescribed in § 2-103(1) (b), which provides that good faith in the case of a merchant means honesty in fact and “the observance of reasonable commercial standards of fair dealing in the trade.”
The violation of the standards by Sher-rock was that it paid in full for the two cars purchased, but did not take delivery. This is in direct violation of all of the practices of intercar dealers. The fact that Sherrock permitted the two cars to be left on the showroom floor of Dover Motors misled Commercial Credit when it made its check after finding out that Dover Motors was selling out-of-trust. That Commercial Credit was in fact misled by this action is apparent. It inventoried the cars in the possession of Dover Motors, among which were the two in question. It was entitled to rely on the presence of those cars in the showroom and to assume that they were still subject to their floor plan lending. This being so it made no effort to reach the proceeds received by Dover Motors from Sherrock. I think it cannot be said, therefore, that Commercial Credit acted other than reasonably. It repossessed the cars with no knowledge that Dover Motors had received payment in full for them, but had not credited that payment to the secured position of Commercial Credit.
For this reason, the conduct of Sherrock which permitted the loss to arise necessarily means that it failed to observe the reasonable commercial standards of fair dealing in the trade. This being so, I agree with the Trial Judge and I would affirm this appeal on the basis of his Opinion below.