Without regard to the transfer of title, the rights of the innocent third-party purchaser are to be protected over those of the unpaid supplier.
Defendant buyers entered into a contact with the supplier and negotiations were pursued by telephone for the purchase of a vehicle. The supplier consummated the transaction by delivering a new vehicle to the buyers' residence in Utah, with a signed purchase order and handwritten bill of sale and receipt of a cashier's check for the sale price. The supplier had purchased the vehicle from the plaintiff dealer, a new-car dealership in the state. The purchase payment was by delivery of a bank draft. The dealer had retained the manufacturer's statement of origin until satisfaction of outstanding manufacturer sales financing and the purchase draft cleared, which it never did. The dealer filed a replevin action. The trial court granted the buyers' motion for summary judgment. Plaintiff dealer sought review. The court affirmed the judgment.
Was defendant a buyer in good faith?
The dealer was not entitled to a replevy of the vehicle because the buyers bought it in the ordinary course of the business relationship transacted with the supplier, therefore, the entrusting activity of the dealer in releasing the vehicle to the supplier conferred to the buyers the right to take free and clear of the dealer's residual claims against the supplier.