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Contracts intended to create security interests have special requirements of form. La. Rev. Stat. Ann. § 10:9-203.
The owner attempted to obtain a loan from the finance company, but did not bring sufficient documentation of income. The owner then entered into a contract with the manger, whereby the owner agreed to sell his vehicle to the manager for $225. The manager did not take possession of the vehicle at the time. The manager later recovered the vehicle from the owner's home. The owner stated that he understood that he was putting his vehicle up for collateral for a loan, and that he would lose his vehicle if the loan were not repaid. The owner stated that when he went to repay the loan, the manager indicated that the vehicle had already been sold. A used vehicle sales manager at a local dealership testified that the owner's vehicle was worth roughly $ 2,450. The owner, filed suit against defendants, finance company and office manager, seeking the value of his vehicle and damages under the Louisiana Unfair Trade Practices and Consumer Protection Law, La. Rev. Stat. Ann. § 51:1401 et seq. The Monroe City Court for the Parish of Ouachita, Louisiana, found no cause of action, and the owner appealed.
Did the manager have a right to take possession of the owner’s automobile?
The appellate court determined that the intent of the parties to the transaction was to perfect a security interest for the loan from the manager to the owner. The appellate court ruled that the manager had no right to take possession of the owner's vehicle because the formal requirements for creating a security interest were not met, thus the security interest intended to be created never came into being.