1. What was odd about the Tolbert purchase of the Corvette?

2. What is the impact of the court’s decision on Tolbert? Does he end up paying twice for the car?

3. What lessons do you learn from this case about buying a car?

In 2003, Automotive Finance Corporation (“AFC”) executed a contract to provide “floorplan financing” to R American Auto, Inc., a used car dealership, for the purchase of inventory. As collateral for the financing, AFC took a security interest in all of R American’s present and future inventory. AFC filed a UCC Financing Statement to record the security interest on December 16, 2003.

On August 24, 2006, R American purchased a white 2006 Corvette for its inventory. AFC took possession of the Corvette’s certificate of title. On January 31, 2007, Kip Rowley, the owner of R American, gave AFC a business check for $43,220 as payment in full for the Corvette, and AFC provided Rowley with the certificate of title to the Corvette. The check was dishonored because R American’s bank account had been closed. An agent of AFC went to R American’s car lot to secure possession of the Corvette and discovered that it was not on the lot. AFC filed a lien on the missing vehicle.

On March 4, 2008, Steven Tolbert filed a petition seeking a release of AFC’s lien on the Corvette because he claimed to be a “bona fide purchaser” of the Corvette from Ultimate Motor Cars, LLC, on January 21, 2007. AFC filed an answer to the petition and a counterclaim against Tolbert for conversion, seeking damages for the value of the Corvette.

Tolbert testified that he paid $52,000 to Kip Rowley on November 2, 2006, and immediately took possession of the Corvette. He gave Rowley a check made out to “R American” for $50,900 and also paid $1,100 in cash. Tolbert did not receive a bill of sale and the certificate of title to the Corvette until nearly three months later on January 21, 2007. The bill of sale, issued by “Ultimate Motor Cars, Inc.,” indicated that the sale was completed on January 21, 2007, and that the purchase price was $52,099. The certificate of title indicated that R American acquired the Corvette on August 24, 2006, and then transferred the Corvette to Ultimate Motor Cars on October 20, 2006. Tolbert’s name was listed both as the seller of the Corvette as agent for R American and as the buyer of the Corvette as agent for Ultimate Motor Cars. Tolbert testified that he inadvertently signed in the wrong spot as seller on the Corvette’s certificate of title. Nevertheless, Tolbert was not concerned with these discrepancies because he believed Rowley did business as both R American and Ultimate Motor Cars. Tolbert said he was unaware of AFC’s security interest until February 2007, when he attempted to have the Corvette titled in his name and learned about the lien.

Jason Yount, branch manager for AFC, testified that on September 7, 2006, R American paid AFC for the Corvette, and that AFC gave R American the certificate of title to the Corvette. On December 12, 2006, R American gave the certificate of title back to AFC, AFC advanced R American credit for the Corvette, and R American “refloored” the Corvette. Before reclaiming the title, on December 12, 2006, an agent of AFC physically inspected the Corvette on R American’s lot, verified the Corvette’s VIN, and ensured that the Corvette’s certificate of title indicated that R American owned the Corvette. Yount explained that AFC would not have advanced credit to R American and accepted the Corvette’s certificate of title on December 12, 2006, if at that time the certificate of title indicated that R American had transferred the Corvette to Ultimate Motor Cars on October 20, 2006.

The court issued a judgment awarding AFC $53,904.41. Tolbert appealed the judgment. JUDICIAL OPINION HARDWICK, Chief Judge … A bona fide purchaser is one who pays valuable consideration, has no notice of outstanding rights of others, and acts in good faith. A party claiming ………….