Re: Whychat, Lady, Scott, Vets...SOL and Article 2 of UCC

Posted by lawguy (216.30.212.58) on April 09, 2003 at 14:46:04:

In Reply to: Whychat, Lady, Scott, Vets...SOL and Article 2 of UCC posted by nc on April 09, 2003 at 13:38:28:

I posted on this in last months forum.

I am currently involved in two deficiency suits, pursuant to reposessions, involving Ford Motor Credit and governed by NC laws. (Suits are in W.Va. as clients have relocated here.)

If you look back to last months postings, you can see the citations for the cases I mention.

Yes, generally the 4-year Art.2 SOL applies to contracts "for the sale of goods" from "merchants" to consumers. This generally includes auto sales. And this generally supersedes a less specific state SOL.

Under NC law, the 4-year Art. 2 SOL applies only to the "pure sales aspects" of the sale of goods. Unlike most states, the NC courts have held that since Art. 9 governs the financing agreement/aspects of the sale, and since there is no Art. 9 SOL, then the general NC SOL's apply to breaches of the financing agreement. The court applied the 3 year NC SOL on contracts (written and oral) to breaches of the financing agreement. This includes repossession and deficiency suits.

The SOL begins to run on an installment contract (such as for the purchase of an auto) for EACH installment as that installment comes due. However, if in the case of default the creditor accelerates the note, such that the remaining balance is due, then the SOL for the unaccrued part of the note begins once notice of the acceleration is made to the debtor.

An example: I purchase a car with a 5 year installment contract. I pay on time for two years. At the beginning of the third year, I stop payments. At the beginning of the fourth year they reposess the vehicle.

In this case, the SOL on the unpaid payments during the third year begins as each payment was due. There would be 12 different SOL starting points for the 12 unpaid installments.

For the unpaid portion remaining for years 4 and 5, the SOL begins when the loan was accelerated. I'm not sure on the exact time this would be, whether upon repossession, notice of sale, or whatnot, but it would be around that time.

Thus, if your reposession was in 1999, the 3 year SOL applicable to a deficiency suit has certainly run.

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In general, a cause of action for a deficiency arises from breach of a financing agreement. This is a written contract, otherwise there would be no security interest in the property repossessed. The right to reposses comes from this same written contract. The suit for deficiency is really just a suit for breach of the financing agreement, subject to credit for the repossessed property. The laws governing deficiency suits were not made to create a new cause of action; they were made to prevent creditors from repossessing property and then not crediting the unpaid amount properly, or for selling the property at an unreasonably low rate and then seeking the remainder from the debtor.

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