## Facts

- Melvin Godfrey was the registered owner of a Toyota automobile.
- Commercial Credit Corporation held legal title as a secured party until Godfrey paid the remaining balance owed on the car.
- Seeking to sell the car, Godfrey removed the license plates and delivered the car to Auto Center, a used-car dealership, for sale.
- Gary Gilsdorf bought the car from Auto Center, paid a down payment, and financed the balance through Allstate Credit Corporation.
- Gilsdorf had no notice of Godfrey’s interest and believed Auto Center could sell the car; Allstate told Gilsdorf that Auto Center would send the title certificate directly to Allstate.
- Auto Center gave Gilsdorf a dealer’s report of sale, which Gilsdorf used at the Nevada Motor Vehicle Department to obtain license plates and a registration certificate.
- Godfrey went to Auto Center for payment, was told he would be paid after the check cleared, but he was never paid; Auto Center later ceased doing business.
- After paying off the balance to Commercial Credit, Godfrey received the certificate of title.
- Godfrey filed a replevin action and obtained possession of the car.
- Godfrey argued title could transfer only by compliance with Nevada’s motor vehicle title and registration statutes, which he claimed required signatures of the legal owner and lienholders on the certificate of ownership.
- Gilsdorf counterclaimed for title, relying on Nevada’s UCC entrustment statute, NRS 104.2403(2), which gives a merchant the power to transfer the entruster’s rights to a buyer in ordinary course.
- The trial court ruled for Gilsdorf and awarded him title; Godfrey appealed.

## Issues

1. When an owner entrusts a vehicle to a used-car dealer, does NRS 104.2403(2) allow the dealer to pass the owner’s rights to a good-faith buyer in ordinary course, even if motor-vehicle title-certificate formalities were not completed?
2. If the buyer is the true owner under the UCC, what corrections are required to the form of judgment and the monetary components after the seller has taken the vehicle through replevin?

## Decision

- The Nevada Supreme Court held that Gilsdorf, a good-faith buyer in ordinary course, obtained good title under NRS 104.2403(2) because Godfrey entrusted the car to a merchant dealing in cars.
- The court rejected Godfrey’s argument that Nevada’s motor vehicle title and registration statutes prevented application of the UCC entrustment rule in these circumstances.
- The court affirmed the determination that title belonged to Gilsdorf, placing the loss on Godfrey, who enabled the dealer to appear authorized to sell.
- The court ruled that other parts of the district court’s judgment were erroneous and required adjustment, directing that the judgment be modified to properly reflect ownership/possession and the related monetary treatment.

## Legal Principles

- An owner who entrusts goods to a merchant who deals in goods of that kind gives the merchant power to transfer the owner’s rights to a buyer in ordinary course of business. (NRS 104.2403(2); UCC § 2-403(2).)
- In an entrustment dispute between two innocent parties (entruster and buyer in ordinary course), the loss caused by the dishonest dealer is allocated to the entruster who placed the goods in the dealer’s possession for sale.
- Motor vehicle registration and title-certificate procedures do not, on these facts, defeat the UCC entrustment rule that protects a buyer in ordinary course purchasing from a dealer.
- In replevin-related judgments, the decree and any monetary components must match the determination of true ownership and rightful possession; if title is in the buyer, the judgment must be recast to award title/possession accordingly and to correct any associated monetary treatment.

## Conclusion

Godfrey entrusted his car to a used-car dealer that wrongfully sold it and failed to pay him; the Nevada Supreme Court held that NRS 104.2403(2) allowed the dealer to pass Godfrey’s rights to Gilsdorf as a buyer in ordinary course, despite incomplete title-certificate formalities, and affirmed title in Gilsdorf while ordering modifications to the judgment’s form and related monetary components.


Godfrey v. Gilsdorf, 476 P.2d 3 (1970)