In Cappo Management V, Inc. v. Britt, — S.E.2d —-, 2011 WL 2277386 (Va. 2011), the Supreme Court of Virginia addressed a spot delivery situation where the dealer was unable to secure financing for the consumer and, accordingly, repossessed the car. The Court found the repossession proper under Article 9 of the UCC, explaining:
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 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. . . 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 Nis-san’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.
However, since the dealer retained a security interest under Article 9, it also triggered certain obligations to dispose of the vehicle, including a post-repossession notice and the obligation to sell the vehicle in a commercially reasonable fashion:
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.” . . .¶ 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 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.