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Priority of Security Interests

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Court of Appeals (Arizona) Departs from Quartz Analysis: Finds Buyers of Vehicles from Dealers are Buyers in the Ordinary Course Because Holding that a Purchaser is Presumed to Know the Contents of a Title Certificate for the Vehicle the Purchaser is Buying from a Licensed Auto Dealer Would Be Onerous to the Consumer and Substantially Impede Commercial Transactions

by Scott J. Hyman |

In DIANA PIMENTEL GARCIA, v. DEALERS AUTO AUCTION OF THE SOUTHWEST, LLC,  No. 1 CA-CV 23-0171, 2023 WL 8827231, at *1 (Ariz. Ct. App. Dec. 21, 2023), the Arizona Court of Appeals seemingly would depart from the analysis applied by the California Court of Appeal in the Quartz decision. The material facts are not in dispute. Auto Auction had a business… Read More

District Court (N.J.) Addresses Whether SoT Dealer’s Manager was BiOC in Dispute Between Floorplan Lender and Credit Union

by Scott J. Hyman |

In Auto. Fin. Corp. v. DZ Motors, LLC, Civil Action No. 16-7955 (MAS) (DEA), 2021 U.S. Dist. LEXIS 69915 (D.N.J. Apr. 9, 2021), Judge Shipp reached different conclusions on a lien priority dispute between a Floorplan lender and credit union with respect to 2 luxury vehicles “purchased” by an SoT dealer’s manager. With respect to the Bentley, the Court found… Read More

Court of Appeal (Tex.) Confirms City’s Right to Demand Proof of Title from Auto Finance Lender Before Returning Possession of Impounded Vehicles

by Scott J. Hyman |

In Santander Consumer USA, Inc. v. City of San Antonio, No. 04-20-00341-CV, 2020 Tex. App. LEXIS 10314 (Tex. App. Dec. 30, 2020), the Court of Appeal found no conflict between Gramm-Leach Bliley and the City’s impound laws.  The facts were as follows: In San Antonio, when a vehicle is abandoned, towed from a collision site, or seized in connection with… Read More

Virgin Islands Supreme Court (“SCOTVI”?) Gets it Right: The Grant of a Security Interest and Perfection of a Security Interest Are Not the Same; Erroneous Filing of Termination Statement Does Not Release the Security Interested Granted by the RISC, and Repossession Was Proper

by Scott J. Hyman |

The legalese used in the opinion made the decision almost incomprehensible, and would have made Bryan Garner throw a fit.  But, the Supreme Court of the Virgin Islands nevertheless got it right in Cornelius v. Bank of Nova Scotia, 2017 WL 3412202, at *6–8 (V.I., 2017), when it held that an unperfected lender who erroneously filed a termination statement still held… Read More

District Court (Ark.) Says Automobile RISC Assignee Security Interest Was Superior to Floorplan Finance Company’s Security Interest

by Scott J. Hyman |

In Ford Motor Credit Company v. First National Bank of Crossett, 2016 WL 4916829, at *5–8 (Ark.App., 2016), the Arkansas Court of Appeal held that a RISC assignee's security interest was superior to that of a floorplan finance company's. FNBC acknowledges that a buyer in the ordinary course of business takes free of any underlying security interest created by the seller,… Read More

District Court (Va.) Allows Title Dispute Between Floorplan Lender and Purported B-O-I-C to Go to the Jury

by Scott J. Hyman |

In Mahdavi v. NextGear Capital, Inc., 2015 WL 1526538 (E.D. Va. 2015), Judge Buchanan found that a triable issue of fact existed as to whether a floorplan lender’s security interest was superior to a buyer-in-the-ordinary-course’s interest. Courts have used a variety of factors to determine if someone is a buyer in the ordinary course of business including where the sale… Read More

Court of Appeal (Oh.) Addresses Priority of Security Interests: Finds for Commercial Lender in Possession of Title over Dealer’s Bona-Fide Purchaser

by Scott J. Hyman |

In La Gar Marketing, Inc. v. W. Finance & Lease, Inc., 2012 WL 4898785 (Ohio App. 9 Dist. 2012), the Ohio Court of Appeal found in favor of a commercial lender as against a bona-fide consumer purchaser of a vehicle under Ohio law.  The Court of Appeal relied on precedent finding dealer’s floor plan lender’s security interest superior to a… Read More

Auto Finance Credit Union (Cal.) Able to Sue Body Shop for Conversion for Interfering with Security Interest

by Scott J. Hyman |

In Los Angeles Federal Credit Union v. Madatyan (2012) 2012 WL 4830255, the customer purchased a 2000 Bentley, financed by his credit union.   The RISC required the customer to insure the car against collision damage and name the credit union as a loss payee.  The car was damaged.  The customer's repair shop estimated repair costs at $39,000.  The insurer paid… Read More

District Court (Ala.) Holds that Consumer Who Consigned Vehicle to Dirty Dealer Retained No Interest in Consigned Vehicle after Dealer’s Sale to BFP

by Scott J. Hyman |

In New v. CitiFinancial Auto Credit, Inc., 2011 WL 3503128 (M.D.Ala. 2011), Judge Watkins found that a consumer’s delivery of a vehicle to a dealer on consignment extinguished the consumer’s ownership interest in the vehicle, depriving the consumer of any rights to the vehicle – or against the consumer’s finance company – when the consignment dealer failed to pay off… Read More

Court of Appeals (Mo.) Holds Floorplan Finance Company’s Interest in Vehicle was Superior to Purchaser’s

by Scott J. Hyman |

In Tolbert v. Automotive Finance Corporation, --- S.W.3d ----, 2011 WL 1842723 (Mo. App. W.D. 2011), the Missouri Court of Appeals upheld an automobile floorplan finance company’s claim against a subsequent consumer purchaser’s claim to a vehicle, where the selling dealer bounced its check to the floorplanner for the vehicle. The Court engaged in little to no UCC analysis, but… Read More

Cal. Court of Appeal Finds that Vehicle Wholesaler Consigned Vehicle to Defunct Auto Dealer, but Floorplanner’s Security Interest Held Subordinate to Wholesaler’s Because Floorplanner Knew of Consignment

by Scott J. Hyman |

In Fariba v. Dealer Services Corp., 2009 WL 3191538 (2009), the California Court of Appeal for the Fourth District held that a floorplan lender's security interest was subordinate to an automobile wholesaler's ownership interest because, under consignment law, the floorplan lender knew that the defunct dealer dealt in consignment sales.  The facts were as follows: Plaintiff Behyar Fariba is an automobile… Read More