This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1998).







Old Republic Surety Company,





Auto Dealers Exchange

of Minneapolis, LLC., et al.,



Filed July 3, 2000


Poritsky, Judge*


Hennepin County District Court

File No. CT 98-9269



David H. Gregerson, James W. Delaplain, Lang, Pauly, Gregerson, & Rosow, Ltd., U.S. Bank Place, 1600 Park Building, 650 Third Avenue South, Minneapolis, MN  55402-4337 (for appellant)


Steven A. Anderson, Law Office of Steven A. Anderson, P.A., 115 Roberts Avenue Northeast, P.O. Box 430, Warroad, MN  56763 (for respondents)


            Considered and decided by Lansing, Presiding Judge, Willis, Judge, and Poritsky, Judge.

U N P U B L I S H E D   O P I N I O N


            Appellant Old Republic Surety Company seeks review of the judgment in favor of respondent Auto Dealers Exchange of Minneapolis, L.L.C. (ADE).  Old Republic argues that ADE is not entitled to recover under a motor vehicle dealer bond issued to Old Republic’s insured, taking the position that ADE did not act as a traditional seller of motor vehicles as required for coverage under Minn. Stat. § 168.27, subd. 24 (Supp. 1997), but instead acted as a financier.  We affirm.


            The facts in this case are not disputed.  In 1996, Old Republic issued a motor vehicle dealer bond in conformance with Minn. Stat. § 168.27, subd. 24 (1996), naming TL Corporation, d/b/a Silver Motors, as bond principal.  The penal sum of the bond was originally $25,000, but it was later increased to $50,000, as required by an amendment to the statute.  ADE is in the automobile auction business.

            In 1997, Silver Motors bid and took possession of seven automobiles from ADE.  ADE did not require payment for five of the vehicles at the time of auction, but instead allowed Silver Motors a “45-day float” period on those five vehicles.  Under the 45-day float plan, Silver Motors was not required to make payment until the vehicles were sold, or at the end of 45 days, whichever occurred first.  During the 45-day float period, ADE retained title to the vehicles and would transfer title once the purchase price was paid in full.

            Silver Motors failed to pay for any of the vehicles it had received at the ADE auction.  It issued checks for four of the vehicles received from ADE, but none of the checks cleared the bank.  It failed to tender payment for the three remaining vehicles.  ADE submitted a claim to Old Republic against the motor vehicle dealer bond in the amount of $38,340.  Old Republic denied ADE’s claim.

            Old Republic commenced a declaratory judgment action against ADE in Hennepin County District Court, seeking a determination of the rights and legal relationship of the parties and a determination that ADE is not entitled to recover against the bond.  The matter was submitted to the district court on stipulated facts and the court concluded, as a matter of law, that ADE was entitled to recover under the bond.  The parties stipulated to damages.  The district court entered judgment in favor of ADE in the amount of $38,571.09.  This appeal follows.


            When there are no material facts in dispute, whether a party is protected under a motor vehicle dealer bond may be determined as a matter of law.  Minneapolis Auto Auction, Ltd. v. Spicer Auto Sales, Inc., 439 N.W.2d 23, 24 (Minn. 1989).  Generally, a bond written in conformity with a statute must be read with the statute, and the statute limits the scope of the bond.  Nelson Roofing & Contracting, Inc. v. C.W. Moore Co., 310 Minn. 140, 142-43, 245 N.W.2d 866, 868 (1976).

            The motor vehicle dealer bonding statute in effect at the time of the transfers provided that:

All persons licensed hereunder shall keep in full force and effect a bond with a corporate surety * * * in the amount of $50,000.  The bond shall be conditioned on the faithful performance by the licensee of the obligations imposed by the laws of this state, including the conduct required of a licensee by this section and other sections governing the sale or transfer of motor vehicles, and the payment of all taxes, license fees, and penalties.  The bond shall be for the benefit of the state of Minnesota and any transferor, seller, or purchaser of a motor vehicle for any monetary loss caused by failure of the licensee to meet the obligations enumerated above.


Minn. Stat. § 168.27, subd. 24, (Supp. 1997) (emphasis added).

            Old Republic argues that ADE is not entitled to protection under the motor vehicle dealer bond because ADE is a financier and not a transferor, seller, or purchaser of vehicles.  In Minneapolis Auto, an automobile auctioneer, Minneapolis Auto Auction, along with Alamo Rent-A-Car, Inc., brought an action to recover on a motor vehicle dealer bond.  439 N.W.2d at 24.  Spicer Auto Sales, Inc. purchased a car from Alamo at an auction conducted by Minneapolis Auto and tendered to Minneapolis Auto a check that was returned for insufficient funds.  Id.  The supreme court rejected the argument that only noncommercial parties can recover against a motor vehicle dealer bond, stating “the statute draws no distinction between commercial and noncommercial parties asserting claims arising out of the sale or transfer of motor vehicles.”  Id. at 25.  The court ruled further that the statute provides coverage under the bond not only for the failure of a motor vehicle dealer to perform obligations imposed on it as a licensee, but also for any violation of obligations imposed on it in connection with the sale or transfer of a motor vehicle.  Id.  The court held that Minneapolis Auto and Alamo could recover against the bond because “[t]he dealer’s issuance of checks without sufficient funds for the purchase of vehicles constitutes such a violation as to invoke the protection of the bond.”  Id.

            In United Fire & Cas. Co. v. First Fed. Sav. Bank, 460 N.W.2d 94 (Minn. App. 1990), this court addressed, in part, a financing bank’s ability to recover under a motor vehicle dealer bond.  In that case, a bank had provided financing to an automobile dealer for six different cars.  Id. at 95.  The bank retained title to the vehicles as security, but did not take possession of cars.  Id.  Because the cars were not selling on the lot, the bank provided the dealer with title to four of the cars so they could be sold at auction.  Id.  The four cars were sold at auction, but the bank did not receive any of the proceeds.  Id.  The bank surrendered title to the fifth car on the advice of counsel because the car was sold by the dealer without title, and it forfeited title to the sixth car after the car was involved in a collision.  Id.  This court held that “banks are not protected under the Minnesota bond statute.”  Id. at 97.  The court ruled that the bank in the case was not a transferor, seller, or purchaser of motor vehicles, but merely held the vehicle titles as security for the money it loaned to the dealer.  Id.  The court concluded that the bank’s claim against the bond “[was] not allowed because a security interest holder is not a protected party under the Minnesota bonding statute.”  Id. at 98.

Old Republic argues that by providing Silver Motors with up to 45 days to pay the purchase price of the seven vehicles, ADE acted not as a seller, transferor, or purchaser of motor vehicles, but as a financier.  It contends that because ADE’s loss was caused by ADE’s role as a financier and not as an auctioneer, under United Fire, ADE is not entitled to recover under the dealership bond.

However, we agree with the district court that United Fire is factually distinguishable and that Minneapolis Auto, although not on all fours,is controlling. The district court rejected Republic’s argument that ADE was acting solely as a financier merely by providing Silver Motors with a 45-day float while retaining title to the vehicles pending payment by Silver Motors.  The district court noted that the only distinguishing feature between this case and Minneapolis Auto is the 45-day float plan offered by ADE.  The court ruled that “[t]he simple act of providing dealers additional time to pay is alone insufficient to alter the fundamental purpose and functions of defendant ADE.”  The court found that ADE transferred possession of the vehicles to Silver Motors with the clear expectation that it would be paid in full.  The court concluded that it was illogical to assume that ADE’s claim would be permitted under the bonding statute “if ADE demanded payment up front, yet deny the claim simply because ADE extended Silver Motors the courtesy of 45 days additional time to pay.”

            As noted above, in Minneapolis Auto, the supreme court had little trouble holding that the automobile auctioneer was entitled to recover under Minn. Stat. § 168.27, subd. 24, for the loss caused by the dealer’s issuance of a bad check.  Minneapolis Auto, 439 N.W.2d at 25.  As an auctioneer, ADE facilitated the transfer of motor vehicles by providing auctioneers, individuals to handle the paperwork, a physical location for buyers and sellers to transact business, and a conduit for the transfer of funds between buyer and sellers.  This conforms with the statutory definition of one who is in the motor vehicle auction or brokering business.  See Minn. Stat. § 168.27, subd. 1(4) (Supp. 1997) (defining auction of motor vehicles as “arranging for and handling the sale of motor vehicles, not the property of the auctioneer, to the highest bidder”); see also Minn. Stat. § 168.27, subd. 1(2) (Supp. 1997) (defining brokering of motor vehicles as “arranging sales or leases between buyers and sellers, or lessees and lessors, of motor vehicles and receiving a fee for those services”).

As part of its appeal, Old Republic advances the argument that ADE disclaimed its status as seller or transferor. Old Republic points to the following language in ADE’s Dealer Registration Agreement:

ADE is not the seller of vehicles, but merely an auctioneer. ADE receives vehicles by consignment, and does not become the owner or take title to the vehicles.  The seller named on the bill of sale is the transferor.


Old Republic cites the statutory language that the bond is “for the benefit of * * * any transferor, seller, or purchaser of a motor vehicle.”  Minn. Stat. § 168.27, subd. 24. It is clear that in its transactions with Silver Motors, ADE was not a purchaser.  Old Republic argues that because ADE disclaimed its status as a seller or purchaser, the disclaimer standing alone bars recovery on the bond, regardless of whether or not ADE was a financier.

However, this specific argument was neither presented to nor ruled on by the district court.  While the above disclaimer was referred to in the parties’ briefs to the district court, the references were in connection with arguments as to whether ADE was a financier.  The disclaimer was never presented to the district court as an argument that, standing alone, would entitle Old Republic to judgment.  Because this argument was not presented to nor ruled on by the district court, it is not properly before this court on appeal and will not be considered.  See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (holding reviewing court will not consider issue if not presented to and passed on by district court). 

Finally, Old Republic argues that the public policy behind the motor vehicle bonding statute would be defeated if ADE is allowed to recover against the bond.  We are not persuaded by this argument because disposition of this case is controlled by statute and caselaw.  The situation presented in this case is that which is contemplated by the automobile dealer bonding statute, and allowing ADE to recover against the bond will not defeat the public policy considerations underlying the motor vehicle dealer bonding statute.


* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.