Court Opinion

ID: 6782996
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:58:19.046016+00
Date Added: 2024-06-11T16:02:53.978066
License: Public Domain

Cook, J.,
dissenting. As the majority opinion suggests, the interplay between Ohio’s Certificate of Title Act, R.C. 4505.01 et seq. (“CTA”) and the entrustment *521provisions of Ohio’s version of the Uniform Commercial Code (the “Code”), specifically R.C. 1302.44, is complex. Commentators have noted a “lack of consistency” in an “astounding array of cases” on this issue. See, e.g., Kunz, Motor Vehicle Ownership Disputes Involving Certificate-of-Title Acts and Article Two of the U.C.C. (Aug.1984), 39 Bus.Law 1599, 1599-1600. In two cases decided since our General Assembly adopted the Code, this court deemed the Code dispositive. See Hughes v. Al Green, Inc. (1981), 65 Ohio St.2d 110, 19 O.O.3d 307, 418 N.E.2d 1355; Smith v. Nationwide Mut. Ins. Co. (1988), 37 Ohio St.3d 150, 524 N.E.2d 507. Relying on dicta from these cases, today’s majority reaches the opposite conclusion, deciding that the CTA controls when it comes to “determining competing claims of ownership” of motor vehicles. For the following reasons, however, I respectfully dissent.
I. Statutory Purpose
The majority notes — on two separate occasions — that the General Assembly enacted Ohio’s CTA in order to, among other things, “protect innocent purchasers of motor vehicles.” Kelley Kar Co. v. Finkler (1951), 155 Ohio St. 541, 545, 44 O.O. 494, 496, 99 N.E.2d 665, 667; see, also, Hughes, 65 Ohio St.2d at 115, 19 O.O.3d at 310, 418 N.E.2d at 1358. Yet, the majority’s elevation of the CTA over the Code in the instant case thwarts that purpose by favoring the seller/title holder (“Saturn”) — not the apparently innocent party (“Mike Albert”) who purchased the vehicles from Saturn’s vendee (“Gallatin”).
If the purpose of the CTA is to protect innocent purchasers of motor vehicles, as everyone seems to agree, then the Code’s entrustment provisions that shelter the “buyer in [the] ordinary course of business” seem better adapted to fulfill that purpose in this case than the CTA. See R.C. 1302.44(B); 1301.01(1); see, also, Kunz, Motor Vehicle Ownership, 39 Bus.Law at 1604. It is for this reason that “[t]he vast majority of states” have decided to “place primacy on the entrustment doctrine” when confronted with apparently conflicting CTA and Code provisions. Epling, Priorities Disputes in Motor Vehicles and in Other Certificated Goods (Feb.1986), 41 Bus.Law 361, 368. “Under a variety of theories, the vast majority of state courts hold that the buyer from the dealer prevails over the unpaid supplier holding the title certificate * * *. While some courts have paid lip service to harmonizing the U.C.C. with the state motor vehicle laws, a reading of the cases suggests that, with the exception of Colorado and Missouri, the courts have in effect reached a policy decision that the loss in such a situation is better borne by the unpaid supplier.” Id. at 369.
II. Hughes and Smith
I also disagree with the manner in which the majority first distinguishes, then deems “dispositive,” this court’s decisions in Hughes and Smith. According to *522the majority, “it bears repeating that the issues [in those cases] were risk of loss and insurance coverage. Conversely, the question now before us involves competing claims of ownership of three motor vehicles.” (Emphasis added.) To justify its departure from those cases’ preference for the Code, the majority draws a questionable distinction, because to suggest that Smith did not concern the concept of motor vehicle “ownership” overlooks syllabus language from that very case. Smith’s syllabus provides that “the criteria found in R.C. 1302.42(B), and not the Certificate of Title Act, identify the owner of a motor vehicle for purposes of determining insurance coverage in case of an accident.” (Emphasis added.) Id., 37 Ohio St.3d 150, 524 N.E.2d 507, syllabus. “Ownership” embraces a “collection of rights,” Black’s Law Dictionary (7 Ed.1999) 1131, and it is not entirely clear why the majority decides that the Code now controls some of the rights in that bundle (Hughes and Smith) but not others.
As an additional justification for distinguishing Hughes and Smith and finding the CTA controlling, the majority asserts that “[h]ere, contractual rights between the parties are not at issue.” This assertion oversimplifies the case. Saturn’s complaint includes a breach-of-contract claim against Gallatin, and Saturn attached the relevant “Vehicle Purchase Contract” as Exhibit A to its complaint. Although Saturn’s breach-of-contract claim is not before us now, given the trial court’s grant of summary judgment in favor of Saturn on its replevin claim, the trial court expressly relied on the purchase agreement between Saturn and Gallatin when it disposed of Saturn’s replevin claim.4 In any event, the applicability of the Code’s entrustment provisions does not depend upon the terms of a sales contract. R.C. 1302.44(B) applies to any “entrusting of possession” of goods to a merchant who deals in goods of that kind. The Code defines “entrusting” as “any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence.” (Emphasis added.) R.C. 1302.44(C). Accordingly, it would seem that the lack of a dispute about “contractual rights” between Saturn and Mike Albert should not, as the majority implies, militate against applying the Code’s entrustment provisions in Mike Albert’s favor.
In all events, I would eschew resolving our new cases on the basis of dicta from old cases that involved different issues. I agree with the majority insofar as dicta from Hughes, later resurrected in Smith, states that the CTA — not the Code— should control litigation “where the parties [are] rival claimants to title.” (Emphasis added.) Hughes, 65 Ohio St.2d at 115-116, 19 O.O.3d at 310, 418 N.E.2d at 1358; see, also, Smith, 37 Ohio St.3d at 152-153, 524 N.E.2d at 509, *523citing Hughes. But this dicta from Hughes and Smith, so central to the majority’s decision today, is traceable to a case decided in 1951 — a decade before the General Assembly had even adopted the Code. See Hughes, 65 Ohio St.2d at 115-116, 19 O.O.3d at 310, 418 N.E.2d at 1358, citing Kelley Kar Co., 155 Ohio St. 541, 44 O.O. 494, 99 N.E.2d 665. Because the case before us presents an alleged conflict between the CTA and the Code, I disagree with the majority’s reliance on what is, at bottom, pre-Code dicta to resolve it. When the General Assembly adopted Ohio’s version of Article 2, it likewise adopted the drafters’ stated intent to diminish the role that the concept of “title” should play in the sale of goods. See R.C. Chapter 1302, 1961 Legislative Service Commission Commentary (“The most striking change is the subordination of the concept of title as the prime determinant of the rights of the parties under a sales contract”); see, also, Kunz, Motor Vehicle Ownership, 39 Bus.Law at 1601 (citing Professor Karl Llewellyn, a Code drafter, for the proposition that “[t]he purpose [of the Code] is to avoid making practical issues between practical men turn on the location of an intangible something, the passing of which no man can prove by evidence”).
III. Pfluger v. Colquitt
Finally, I disagree with the majority’s application of Pfluger v. Colquitt (Tex.Civ.App.1981), 620 S.W.2d 739. The majority applies Pfluger in support of its argument that, even if the Act and the Code conflict, the sections may be construed so as to give effect to each per R.C. 1.51. By its terms, however, R.C. 1.51 requires an initial determination that statutes actually conflict. See Cater v. Cleveland (1998), 83 Ohio St.3d 24, 29, 697 N.E.2d 610, 615 (finding R.C. 1.51 inapplicable due to lack of statutory conflict). Given that the Pfluger court expressly found that Texas’s CTA did not conflict with the relevant commerce code provisions, Pfluger is not a persuasive case to apply in an R.C. 1.51 analysis. See id., 620 S.W.2d at 741 (“We do not agree that section 2.403[b] of the Code conflicts with the Certificate of Title Act”).
The majority also fails to note that the Pfluger court ultimately decided in favor of the innocent consumer of the vehicles at issue — a disposition completely at odds with the majority’s disposition here in favor of Saturn. See id. at 743 (deciding that, as between the seller/title holder and the ultimate consumer, the defalcation of the seller’s agent should be borne by the seller). In any event, the Pfluger majority’s analysis is suspect. The concurring judge in Pfluger noted that the majority’s application of the general law of agency in this context was unprecedented since the enactment of Texas’s CTA four decades earlier. See id. at 744 (Stephens, J., concurring, arguing that “the Code should govern”). More recent authority from Texas states that “the Code controls over the Act’s provision that purports to void the sale of an automobile absent the transfer of *524the certificate of title.” Hudson Buick, Pontiac, GMC Truck Co. v. Gooch (Tex.App.1999), 7 S.W.3d 191, 198.
IV. Conclusion
For the foregoing reasons, I respectfully dissent. In disputes such as this one between a seller/title holder and a third party who has purchased motor vehicles from the seller’s merchant-entrustee, application of the Code’s entrustment provisions would advance the shared purpose of both the CTA and the Code to protect innocent purchasers, and would align this court with the apparent weight of authority on the subject. See Epling, Priorities Disputes, 41 Bus.Law at 368-369; see, also, Martin v. Nager (1983), 192 N.J.Super. 189, 205-206, 469 A.2d 519, 527 (collecting cases from twelve jurisdictions); Fuqua Homes, Inc. v. Evanston Bldg. & Loan Co. (1977), 52 Ohio App.2d 399, 6 O.O.3d 440, 370 N.E.2d 780; Executive Coach Builders v. Bush & Cook Leasing, Inc. (1992), 81 Ohio App.3d 808, 612 N.E.2d 408. Moreover, application of the Code’s entrustment provisions in these cases would correspond to the equitable principle that, where one of two innocent persons (Saturn or Mike Albert) must suffer a loss by reason of the fraud or deceit of another (Gallatin), the loss should fall upon the individual whose act.or omission has enabled the wrongdoer to commit the fraud (Saturn).5 See, generally, Kunz, Motor Vehicle Ownership, 39 Bus.Law at 1604; Epling, Priorities Disputes, 41 Bus.Law at 369; Executive Coach, 81 Ohio App.3d at 814, 612 N.E.2d at 411-412. For purposes of this dissent, I express no opinion regarding that portion of the court of appeals’ disposition addressing the parties’ stipulation that Mike Albert purchased the vehicles “in the ordinary course of business.”6
Cors & Bassett and Curtis L. Cornett, for appellant and cross-appellee Saturn of Kings Automall, Inc.
Spraul, Veith & Doan and Terrence M. Veith, for appellant and cross-appellee Cronin Motor Company LLC.
Barron, Peck & Bennie and Michael S. Barron, for appellee and cross-appellant Mike Albert Leasing, Inc.
Cooper & Elliott and David Brown, urging reversal for amicus curiae, Ohio Automobile Dealers’ Association.

. In its letter opinion, the trial court stated that “[Saturn] never intended to entrust the vehicles to Gallatin. The purchase agreement was for the sale of the vehicles and was not contingent upon what Gallatin intended to do with them.”

. Incidentally, it should be noted that if this court were to apply the Code’s entrustment provisions in the replevin action between Saturn and Mike Albert, as the court of appeals did, this would not impair Saturn’s ability to mitigate its losses by seeking recovery of damages in its separate and independent action for breach of contract against Gallatin.

. The court of appeals determined that, as a matter of law, an “entrustment” occurred under R.C. 1302.44(C) when Saturn allowed Gallatin to take possession of the vehicles. Though the court of appeals also noted that the parties stipulated that Mike Albert had purchased the vehicles from Gallatin “in the ordinary course of business,” the court remanded the cause with the following instructions:
“Should the trial court choose to construe the parties’ stipulation that Mike Albert purchased the vehicles ‘in the ordinary course of business’ as a stipulation that Mike Albert acted in good faith and observed reasonable commercial standards, then Mike Albert is entitled to judgment as a matter of law. If not, the trial court must either make a determination on this issue as the record presently exists, allow the parties to expand upon the stipulated record, or proceed to trial.
“ * * * Absent a determination by the trial court as to the construction of the parties’ stipulation, we cannot say that the trial court erred in denying summary judgment to Mike Albert.”