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August 8, 2007

The Rototilling Corvette: Davenport v. Bates, 61 U.C.C. Rep. Serv. 2d 542.

    Owning a Corvette is the life-long dream of the typical American male – a dream which for some turns into an insatiable search for the fountain of youth sometime after turning 40.  So, in May of 2000, when Michael Davenport, a self-employed landscaper,  purchased a 1995 Corvette he had achieved the American Dream in the eyes of many of us (males).  And even though he could only get it with financing provided by the seller ( Rick Bates, no known relation to the undersigned), who retained a security interest in the Vette just in case the good people in Davidson County Tennessee someday decided to plant their gardens themselves, no diminution of status was suffered because Davenport technically shared the Vette with the seller until he fully paid for it.

    But for Davenport, the Vette was not the realization of  “the Dream” itself, but was instead simply the means to get to a different, more altruistic goal, or so he testified at trial after the seller had repossessed the Vette and sold it – along with another vehicle Davenport had purchased on credit from the same seller.  For Davenport, the Vette was just another tool of his trade, which, along with the shovels and rakes and other implements of destruction he carried with him, allowed him to make a living as a “professional” landscaper.

    Now, if you’ve ever ridden in a Vette, or really looked at a Vette, you must be wondering what role it could possibly play in landscaping.  Vettes have no trunk, no back seat (you might squeeze a brief case into the “hatch” behind the seats), no place to put anything that won’t fit onto the two seats, and are too low to the ground to drive on rough, uneven surfaces, etc.  As it turns out, there’s more to landscaping than playing in the dirt.  When asked by counsel what he did with the Corvette once he purchased it, Davenport explained:

    " I bought it to use in my landscaping business. ... [o]f course I didn’t haul dirt in it, it was a  Corvette,    I went and looked at jobs in it, went and collected money in it, and went and done proposals in it, things like that."

Why did this matter?  One of the issues before the Tennessee Court of Appeals (Davenport v. Bates)   was whether the trial court had correctly classified the Vette as consumer goods when it  added $7,777 to the damages it ordered the seller to pay after the jury had determined that the seller had failed to properly notice the resale.  Classifying the Vette as consumer goods triggered application of 9-625(c)(2) which comes with the optional title “Persons entitled to recover damages; statutory damages in consumer-goods transactions,” and  provides that in addition to recovering damages for any loss caused by the secured party’s failure to comply with Article 9:

    "if the collateral is consumer goods, a person that was a debtor ... at the time the secured party failed to comply with this part may recover for that failure in any event an amount no less than than the credit service charge plus 10 percent of the principal amount of the obligation or the time-price differential plus 10 percent of the cash price."

9-625(c)(2).  As the Court noted, this section entitled Davenport to a  “sizeable statutory penalty” for the seller’s non-compliance with part 6 of Article 9.

    But could the Vette really be consumer goods in the hands of Davenport, even though he refused to haul dirt in it,  in light of his testimony that he bought it for use in his business and in fact had used it to conduct that business.  Davenport argued it could, because, he claimed on appeal, that  the evidence actually established that the Vette “was a collector’s item, and thus, inherently for personal use,” which made it consumer goods as defined by Article 9 – “goods  used or bought for use primarily for personal, family, or household purposes.”  Davenport reminded the Court that in Tennessee, “it is the actual use to which [something] is put and not the occupational status of the owner which is determinative.” 

    Turning to the record, Davenport pointed out that the testimony at trial established that the Vette was garaged, that he had it cleaned on a regular basis, that he never drove it in the rain, and, most importantly, witnesses had testified that he referred to the Vette as his “baby” and told people that he loved it.  This was, Davenport asserted, “conclusive proof” that the Vette had been purchased for personal use.  Attempting to cabin his trial testimony, he explained that because landscaping was not a business that required the use of a Corvette, the Vette’s only connection to his business was as a means of transport to and from his employment, a use the Court had determined was personal in a prior decision.

    The Court easily identified the flaw in Davenport’s argument: none of the evidence he claimed supported the trial court’s classification of the Vette went to his actual use of the Vette.  The court explained

    "[i]n searching the extensive transcript of the testimony in this case, we are unable to locate a single reference to an occasion of [Davenport] driving the car for personal or family use.  To the contrary, all of [Davenport’s] testimony relates to his use of the car in his business."

The Court also rejected Davenport’s assertion that he had no use for the Vette in his landscaping business.  Noting that he had identified various commercial uses for the Vette when he testified at trial, the Court opined that his occupation would “qualify as a business requiring the use of an automobile.”  The Court went on to explain:

    "Although he  may not have needed a Corvette, specifically, he needed some type of vehicle and chose to purchase a Corvette.  If [Davenport] had used another truck or a less expensive car and testified that he used it for these same commercial purposes, the vehicle would clearly not be classified as a consumer good."

Because the evidence was inconsistent with his claim that the Vette was for personal use, the Court refused to accept Davenport’s argument based on the ‘inherent nature” of a corvette as a collector’s item.  Accordingly, it vacated the $7,777 awarded by the trial court as a statutory penalty under 9-625(c)(2).

    Why did Davenport work so hard at trial to paint the Vette into his landscape business?  (Forgive me!)  Surely if he was seeking the statutory damages the trial court awarded, his lawyer must have understood the need to establish that the Vette was a consumer good in Davenport’s  hands.  Why, then, was it  Davenport’s lawyer that solicited the testimony that gutted his claim?  That the Vette was a consumer good should have been a slam dunk – what else could a car with such limited utility possibly be?  Did the lawyer think that to establish a “commercially” unreasonable disposition he had to establish that the Vette was used in a “commercial” operation?  If that is the solution to our little mystery, I’d love to see the big smile on Grant Gilmore’s face right now.    LTB

August 8, 2007 | Permalink

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