## Facts

- Music City RV, LLC operated an RV dealership in Tennessee, primarily selling RVs from its own inventory; consignment sales were ancillary.
- Dudley King and eight other individual RV owners consigned their RVs to Music City solely for Music City to sell the RVs to third parties.
- At the time an involuntary Chapter 7 bankruptcy petition was filed against Music City, the consigned RVs were on the dealer’s lot and in its possession.
- The consignors were consumers, and the RVs were consumer goods immediately before delivery to the dealer.
- The consignors did not file financing statements or otherwise perfect any interest under Article 9.
- A federal bankruptcy court certified a question to the Tennessee Supreme Court asking whether Tenn. Code Ann. § 47-2-326 applies to this consumer-to-dealer consignment arrangement.

## Issues

1. Whether a consumer’s delivery of an RV to a dealer for resale is a transaction covered by Tenn. Code Ann. § 47-2-326, treating the goods as “sale or return” as to the dealer’s creditors.
2. Whether Article 9’s exclusion for consignments of consumer goods removes such transactions from the UCC so that only common-law consignment principles apply.
3. Whether, absent filing or a statutory exception, the dealer’s creditors may claim priority in consigned goods in the dealer’s possession.

## Decision

- The Tennessee Supreme Court answered the certified question in favor of the bankruptcy trustee and creditor interests.
- The Court held that Tenn. Code Ann. § 47-2-326 covers a consumer’s consignment of an RV to a Tennessee dealer for sale to third parties.
- The Court concluded that Article 9’s exclusion of certain consumer-goods consignments does not eliminate the applicability of § 47-2-326 to allocate rights between consignors and the dealer’s creditors.
- Because the consignors did not file or otherwise qualify for an exception, the consigned RVs were subject to the claims of the dealer’s creditors and treated as part of the bankruptcy estate for creditor-claims purposes.

## Legal Principles

- Under Tenn. Code Ann. § 47-2-326, goods delivered to a merchant “for sale,” where the merchant deals in goods of that kind, are deemed held on “sale or return” as to the merchant’s creditors unless an exception applies.
- Post-2001 UCC revisions in Tennessee do not remove all consignments from Article 2; § 47-2-326 can still govern consignments that fall outside Article 9’s scope.
- Retained title or “true consignment” characterizations do not, by themselves, defeat creditor claims when the consignor leaves goods in a dealer’s possession for resale without filing/notice protections.
- The UCC’s consignment-related rules aim to protect creditors from hidden ownership claims when a dealer’s possession signals apparent ownership.

## Conclusion

The court held that consumer consignments of RVs to an RV dealer for resale fall within Tenn. Code Ann. § 47-2-326, so the consigned RVs are treated as “sale or return” goods subject to the dealer’s creditors unless the consignors take protective steps such as filing or providing required notice.


In re Music City RV, LLC, 304 S.W.3d 806 (Tenn. 2010)