Present: Kinser, C.J., Lemons, Goodwyn, Millette, and Mims,
JJ., and Carrico and Koontz, S.JJ.
CAPPO MANAGEMENT V, INC., T/A VICTORY NISSAN OF CHESAPEAKE
v. Record No. 100797 OPINION BY JUSTICE DONALD W. LEMONS
June 9, 2011
BRENDA BRITT
FROM THE CIRCUIT COURT OF THE CITY OF NEWPORT NEWS
David F. Pugh, Judge
In this appeal, we consider whether the Circuit Court of
the City of Newport News (the "trial court") erred when it
ruled that Cappo Management V, Inc., trading as Victory Nissan
of Chesapeake ("Victory Nissan"), violated Article Nine of the
Uniform Commercial Code as adopted by Virginia in Title 8.9A
("Article Nine") by not providing a notice of disposition to
Brenda Britt ("Britt") after Victory Nissan repossessed and
disposed of a car it previously had sold to Britt.
I. Facts and Proceedings Below
In November 2004, Britt went to Victory Nissan in
Chesapeake, Virginia, to inquire about purchasing a car.
Finding a car she desired to purchase, Britt completed and
signed a "Credit Application," a "Buyer's Order," a "Retail
Installment Sales Contract" ("RISC"), a "Supplement to Purchase
Contract," and an "Agreement to Furnish Insurance Policy." The
"Buyer's Order" stated that the "buyer's order, along with
other documents signed by [Britt] in connection with this
order, comprise the entire agreement between the parties
affecting this purchase." As a down payment on the purchase of
the new car, Britt traded in her old vehicle and wrote Victory
Nissan a check for $1,500.
Victory Nissan subsequently attempted to obtain financing
for the sale of the car to Britt through Capital One, but
Capital One "withdrew financing." Thereafter, Victory Nissan
sought to void its contract with Britt and, in January 2005,
Victory Nissan repossessed the car from Britt's home in North
Carolina. Victory Nissan later disposed of the vehicle without
providing prior notice to Britt.
Britt subsequently filed a warrant in debt against Victory
Nissan in the General District Court for the City of Newport
News. Britt alleged that Victory Nissan violated Article Nine,
and sought liquidated statutory damages pursuant to Code
§ 8.9A-625(c)(2). At trial, the General District Court entered
judgment in Britt's favor at the court's jurisdictional limit
of $15,000. Victory Nissan appealed, and the suit was heard de
novo by the trial court.
Upon the parties' stipulations of fact and exhibits, the
trial court found that Victory Nissan sold the car to Britt by
a conditional sale. The trial court held that Victory Nissan's
subsequent repossession of the car was governed by Article
Nine. The trial court also found that Victory Nissan failed to
provide Britt the notice of disposition required by Article
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Nine; accordingly, the trial court entered judgment against
Victory Nissan for $15,000, plus interest.
Victory Nissan timely filed its notice of appeal and we
granted an appeal on the following assignment of error:
1. The trial court erred in ruling that [Victory Nissan]
violated Va. Code §§ 8.9A-611 through [-]614 by not
providing a notice of disposition to [Britt].
II. Analysis
A. Standard of Review
“The interpretation of a contract presents a question of
law subject to de novo review.” PMA Capital Ins. Co. v. US
Airways, Inc., 271 Va. 352, 357-58, 626 S.E.2d 369, 372 (2006).
B. Victory Nissan Violated Article Nine
On appeal, Victory Nissan contends that the trial court
erred in ruling that Victory Nissan violated Article Nine
because those sections of the Virginia Code apply only after a
default, which never occurred in this case. Specifically,
Victory Nissan argues that it was not a secured creditor under
Article Nine because the contract documents were conditioned
upon final approval by a lender – a condition which never
occurred, thereby making Victory Nissan's agreement with Britt
void. Britt contends that the trial court properly held that
Victory Nissan was a secured creditor in this case and Victory
Nissan failed to comply with its Article Nine obligations after
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it cancelled the sale. We agree with the trial court and
Britt.
We have stated that, "when considering the meaning of any
part of a contract, we will construe the contract as a whole."
Lansdowne Dev. Co. v. Xerox Realty Corp., 257 Va. 392, 401, 514
S.E.2d 157, 161 (1999). We have also held that "[i]n the event
of an ambiguity in the written contract, such ambiguity must be
construed against the drafter of the agreement." Martin &
Martin, Inc. v. Bradley Enters., Inc., 256 Va. 288, 291, 504
S.E.2d 849, 851 (1998). Viewing the agreement between Victory
Nissan and Britt as a whole, there is a conflict between the
"Bailment Agreement" provision in the "Supplement to Purchase
Contract," which declares that the car was to "remain the
property of [Victory Nissan]" pending "approval of a lender,"
and the other contract documents, all of which treat the
vehicle as Britt's property as of November 28, 2004, the date
of the sale.
Specifically, the "Agreement to Furnish Insurance Policy"
required Britt "to furnish [her] own Insurance Policy" covering
the vehicle, and further stated that Britt "assume[s] forthwith
any and all responsibility for . . . the vehicle." The "RISC"
states that Victory Nissan "will figure [Britt's] Finance
Charge on a daily basis at the Annual Percentage Rate,"
effective as of the date of the sale, November 28, 2004.
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Lastly, Victory Nissan conceded, and the "RISC" and the
"Buyer's Order" evidence, that Britt took possession of the
vehicle on November 28, 2004, after trading in her previous
vehicle and after making a down payment on the new car. All
three of these documents treat the vehicle as Britt's property
and are effective as of the date they were entered into,
November 28, 2004. In this case, Victory Nissan was the
drafter of the agreement. Accordingly, the ambiguity must be
construed against Victory Nissan.
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
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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.
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See Barnette v. Brook Road, Inc., 457 F. Supp. 2d 647, 658
(E.D. Va. 2006) (citing Rhoten v. United Va. Bank, 221 Va. 222,
225-29, 269 S.E.2d 781, 783-85 (1980)) (holding that because
the plaintiff made a down payment on the car and assumed an
obligation to pay monthly installments "she obtained an
interest in the collateral 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 Nissan'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.
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The "Buyer's Order" stated:
If [Victory Nissan] does not receive approval
from a financial source for [the] proposed
[RISC, it] may cancel the sale and the contract,
and [Britt] will return the vehicle . . . . If
[Britt fails] to return the vehicle [Victory
Nissan] shall be entitled to repossess the
vehicle and shall have all other rights under
. . . the Code of Virginia . . . and common law.
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." Barnette, 457 F. Supp. 2d at 659.
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
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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.
III. Conclusion
We hold that the trial court did not err in its judgment
that Victory Nissan's repossession of the car in this case was
governed by Article Nine and that Victory Nissan failed to
provide Britt the required notice of disposition required by
Article Nine. Accordingly, the judgment of the trial court is
affirmed.
Affirmed.
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