978-1285770178 Case Printout Case CPC-12-05

subject Type Homework Help
subject Pages 5
subject Words 1857
subject Authors Roger LeRoy Miller

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page-pf1
, Judge.
The evidence demonstrated that in September 2001, Cory Babcock and Honest Air contracted with Cox Chevrolet
for the purchase of a new 2001 Chevrolet Corvette. The RISC, which was immediately assigned to GMAC,
obligated Mr. Babcock and Honest Air to make monthly payments beginning in November 2001 to satisfy the total
indebtedness of $52,516.20 at a zero percent interest rate.
In December 2002, Florida Auto Brokers sent its check in the amount necessary to satisfy the lien to GMAC.
Almost immediately upon receipt, GMAC placed the check for payment, released the lien, and forwarded the title
to the Corvette. Unfortunately, Florida Auto Brokers' check was dishonored for insufficient funds after the title
had been forwarded.
was successfully credited to its account. Furthermore, they contended, because the value of the collateral
exceeded the indebtedness after appropriate credit to the amount claimed by GMAC, no damages were due from
page-pf2
© 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.
At the nonjury trial, Honest Air and Mr. Babcock asserted that the RISC was a negotiable instrument and that they
were entitled to the application of and operation of sections 673.6051(6) and (7), which provide that either failure
to maintain perfection of the interest in collateral or to preserve the value of the collateral discharges the debtors
to the extent that the impairment would cause the debtors to pay more than they would have been obligated to
pay had the impairment not occurred. In its written judgment, the trial court concurred that section 673.6051
applied, found that the value of the collateral exceeded the amount claimed by GMAC, and rendered judgment in
favor of Honest Air and Mr. Babcock.
Our analysis of this case begins with chapter 673, which is titled Uniform Commercial Code: Negotiable
Instruments. generally defines a negotiable instrument as “an unconditional promise or order to pay a fixed
amount of money, with or without interest or other charges described in the promise on order.” Additionally, it
according to the payment schedule”; and to give “the creditor a security interest” in the vehicle. The RISC sets
forth additional instructions or undertakings by both the “person promising” payment and by the creditor *37
“ordering payment.” Among other things, the debtor agrees not to remove the vehicle from the United States and
to reimburse advances made by the creditor in payment of repair or storage bills, and the creditor agrees to
dispose of the collateral in certain ways following repossession. The RISC also obligates the buyer to pay fees
instrument and such words are frequently referred to as “words of negotiability.” Article 3 is not meant to apply to
contracts for the sale of goods or services or the sale or lease of real property or similar writings that may contain
a promise to pay money. The use of words of negotiability in such contracts would be an aberration.
The comment further provides:Although such a writing cannot be made a negotiable instrument within Article 3 by
contract or conduct of its parties, nothing in Section 3-104 or in Section 3-102 is intended to mean that in a
whether relief due to the alleged impairment of collateral is otherwise available. At the conclusion of the trial, the
court found that GMAC improvidently released its lien on the Corvette as a result of its business strategy. There
is ample competent, substantial evidence to support the trial court's finding that GMAC's business practices
resulted in the loss of its security. GMAC's representative testified that it was not the company's policy to verify
that a dealership check cleared with sufficient funds before releasing its lien. Because GMAC has such a large
policy regarding checks tendered in satisfaction of a RISC does not include insuring that the check is backed by
sufficient funds, GMAC cannot by following that policy transfer the risk of loss from nonpayment to an innocent
purchaser. When GMAC released the lien *38 prior to receipt of the funds, it permitted the Corvette to be
transferred to a third party for value, thus depriving Honest Air and Mr. Babcock of their right to dispose of the
Corvette in a manner that would satisfy their obligation under the RISC to pay GMAC in full. The Florida statutes
page-pf3
© 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.
At the nonjury trial, Honest Air and Mr. Babcock asserted that the RISC was a negotiable instrument and that they
were entitled to the application of and operation of sections 673.6051(6) and (7), which provide that either failure
to maintain perfection of the interest in collateral or to preserve the value of the collateral discharges the debtors
to the extent that the impairment would cause the debtors to pay more than they would have been obligated to
pay had the impairment not occurred. In its written judgment, the trial court concurred that section 673.6051
applied, found that the value of the collateral exceeded the amount claimed by GMAC, and rendered judgment in
favor of Honest Air and Mr. Babcock.
Our analysis of this case begins with chapter 673, which is titled Uniform Commercial Code: Negotiable
Instruments. generally defines a negotiable instrument as “an unconditional promise or order to pay a fixed
amount of money, with or without interest or other charges described in the promise on order.” Additionally, it
according to the payment schedule”; and to give “the creditor a security interest” in the vehicle. The RISC sets
forth additional instructions or undertakings by both the “person promising” payment and by the creditor *37
“ordering payment.” Among other things, the debtor agrees not to remove the vehicle from the United States and
to reimburse advances made by the creditor in payment of repair or storage bills, and the creditor agrees to
dispose of the collateral in certain ways following repossession. The RISC also obligates the buyer to pay fees
instrument and such words are frequently referred to as “words of negotiability.” Article 3 is not meant to apply to
contracts for the sale of goods or services or the sale or lease of real property or similar writings that may contain
a promise to pay money. The use of words of negotiability in such contracts would be an aberration.
The comment further provides:Although such a writing cannot be made a negotiable instrument within Article 3 by
contract or conduct of its parties, nothing in Section 3-104 or in Section 3-102 is intended to mean that in a
whether relief due to the alleged impairment of collateral is otherwise available. At the conclusion of the trial, the
court found that GMAC improvidently released its lien on the Corvette as a result of its business strategy. There
is ample competent, substantial evidence to support the trial court's finding that GMAC's business practices
resulted in the loss of its security. GMAC's representative testified that it was not the company's policy to verify
that a dealership check cleared with sufficient funds before releasing its lien. Because GMAC has such a large
policy regarding checks tendered in satisfaction of a RISC does not include insuring that the check is backed by
sufficient funds, GMAC cannot by following that policy transfer the risk of loss from nonpayment to an innocent
purchaser. When GMAC released the lien *38 prior to receipt of the funds, it permitted the Corvette to be
transferred to a third party for value, thus depriving Honest Air and Mr. Babcock of their right to dispose of the
Corvette in a manner that would satisfy their obligation under the RISC to pay GMAC in full. The Florida statutes

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