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Central Nat'l Bk. of Mattoon v. Worden-martin

OPINION FILED DECEMBER 1, 1980.

CENTRAL NATIONAL BANK OF MATTOON, PLAINTIFF-APPELLEE,

v.

WORDEN-MARTIN, INC., DEFENDANT-APPELLEE. — (CHAMPAIGN AUTO AUCTION, INC., THIRD-PARTY INTERVENOR-APPELLANT.)



APPEAL from the Circuit Court of Champaign County; the Hon. CREED D. TUCKER, Judge, presiding.

MR. JUSTICE WEBBER DELIVERED THE OPINION OF THE COURT:

This appeal concerns priority as between a seller of an automobile who claims title to it, and a bank which claims a security interest in it. The basic dispute revolves about a question as to the necessity of formal transfer of title. This, in turn, requires an analysis of related sections of the Illinois Vehicle Code (Ill. Rev. Stat. 1979, ch. 95 1/2, par. 3-201 et seq.) and the Uniform Commercial Code — Secured Transactions (Ill. Rev. Stat. 1979, ch. 26, par. 9-101 et seq.).

The object of the controversy is a 1980 Lincoln automobile. It was sold at auction by the Champaign Auto Auction, Inc., intervenor herein (Auction), to one Smith, a dealer in Mattoon, through a third party who made the actual bid. The Auction was informed that Smith was the buyer and that he would pay for the car. The Auction approved the arrangement and gave possession of the car to Smith upon his representation of later payment therefor. In the meanwhile, the Auction retained the certificate of origin for the car but filed no financing statement.

During the same interval, that is, before payment by Smith and while Auction was holding the certificate of origin, Smith executed a security agreement with the Central National Bank of Mattoon, plaintiff herein (Bank), covering some 10 automobiles as collateral and including the 1980 Lincoln. The Bank had floor-planned Smith's operation and had previously filed financing statements covering his inventory and after-acquired inventory.

The auction of the car took place on October 24, 1979, and Smith executed the security agreement and trust receipt on the Lincoln on October 29, 1979. The Bank was awaiting receipt of the title to the Lincoln and did not transfer funds into Smith's account until November 12 or 13, 1979. There was conflict in the testimony as to when the title was in fact delivered to the Bank.

Smith delivered his check in payment for the Lincoln to the Auction on November 15, 1979. On the same date, the Bank, having learned of Smith's insolvency and also having learned that his new-car inventory had been repossessed by General Motors Acceptance Corporation, which held security interests on it, repossessed all of Smith's used-car inventory, including the Lincoln. On November 20, 1979, Smith stopped payment on his check to the Auction.

At the time the Bank repossessed the Lincoln, it was physically located at Worden-Martin, Inc., another dealership, where it had been taken for repairs. Worden-Martin refused to deliver possession to the Bank, which brought a suit in replevin. The Auction intervened in that suit. Thus, the basic controversy is between the Bank and the Auction. The trial court held in favor of the Bank, and this appeal followed. We affirm.

The dispute must be resolved according to the provisions of the Uniform Commercial Code — Secured Transactions, and not under the Illinois Vehicle Code. It must first be determined whether the Bank may qualify as a secured creditor and, if so, whether it may then take precedence over a frustrated seller.

A security interest in an automobile is ordinarily perfected according to the provisions of chapter 3, article II, of the Illinois Vehicle Code (Ill. Rev. Stat. 1979, ch. 95 1/2, par. 3-201 et seq.). However, a specific exemption for a transaction of the type presented by the instant case exists as follows: "This Article does not apply to or affect: * * * (c) A security interest in a vehicle created by * * *." Ill. Rev. Stat. 1979, ch. 95 1/2, par. 3-201.

This statutory provision is fortified by a complementary provision of the Uniform Commercial Code — Secured Transactions as follows:

"* * * (3) The filing of a financing statement otherwise required by this Article is not necessary or effective to perfect a security interest in property subject to

* * *

(b) the following statute of this State:

`The Illinois Vehicle Code'; but during any period in which collateral is inventory held for sale by a person who is in the business of selling goods of that kind, the filing provisions of this Article (Part 4) apply to a security ...


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