Brasher’s Cascade Auto Auction, Inc. v. Leon

For the purposes of ORS 822.045(2), an “inventory financing security interest” occurs when a dealer finances the acquisition of vehicles for the dealer’s stock by creating an interest, held by the supplier, in the vehicles, which secures the obligation owed by the dealer.

Western Surety Company (WSC) appealed the trial court’s granting of summary judgment for Brasher’s Cascade Auto Auction, Inc. (Brasher’s) on the issue of awarding damages from the dealer’s bond as a result of Leon’s non-payment of contractual obligations that arose from an agreement to receive cars from auction to stock his inventory. ORS 822.030 specified recovery on the bond for certain violations of the vehicle code, and the trial court found that Leon violated two provisions of the code by breach of contract. WSC challenged the trial court’s ruling, claiming that an exception in subsection (2) following ORS 822.045(1)(j) applied because this transaction involved “inventory financing security interest(s),” and thus Leon did not violate the vehicle code in such a manner that allowed damages. Brasher’s contended that this exception only applied to narrow instances of “flooring contracts.” The Court of Appeals disagreed, finding nothing in the statutory text that suggested “inventory financing security interest” only included flooring contracts. Reversed and remanded, with instructions to enter judgment for defendant Western Surety Company.