Consumer Consignments Are No Longer a Commercial Matter
By In In Re Music City RV, LLC, the Bankruptcy Court for the Middle District of Tennessee certified to the Tennessee Supreme Court the question of whether a consumer’s consignment of a recreational vehicle (RV) to a dealer for the purpose of selling the RV is a transaction covered under the UCC. Nine individuals, including Dudley King, consigned their RV to Music City for sale. Thereafter, an involuntary Chapter 7 bankruptcy was filed against Music City. The Chapter 7 Trustee argued that the RVs on the Music City consignment lot were property of the bankruptcy estate.
The answer to the certified question turned on the effect of a 2001 change to Tennessee’s UCC. Prior to that time, UCC § 2-326 included a specific provision on consignment. However, in the amendments effective July 1, 2001, T.C.A. § 47-2-326 was amended to delete that provision entirely. In fact, the Official Comments to the UCC stated that the “provisions have been deleted and have been replaced.”
Mr. King and the Trustee agreed that Article 9 did not apply because it specifically excluded consignments of consumer goods. But what was the effect of the amendments to Article 2? Mr. King argued that the changes to § 47-2-326 made it inapplicable to consignment transactions. Instead, he asserted that the consignments were governed by the common law of bailments. The Trustee countered that any consignments not governed by Article 9 continued to fall within Article 2.
Although the Court noted the absence of case law on this issue, it ultimately felt that the statutory language was clear. T.C.A. 47-2-326 was amended to take out all references to consignments and expressly applied to buyers, which Article 2 defined as “a person who buys or contracts to buy goods.” There was no evidence that Music City contracted to purchase the RVs, and there was no indication that title left Mr. King’s name.
The Tennessee Supreme Court employed tried and true principles of statutory construction in its ruling. As a result, we now know that effective July 1, 2001, consumer consignments are not governed by the UCC in Tennessee.
For more information, see In re Music City RV, LLC, 2010 WL 520999 (Tenn. Feb. 12, 2010).
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