Gordon

This case involves the buyer and seller of a used Sarasota Country Coach motor home (the Coach), and the two lenders who provided financing of the Coach. The lawsuit was instituted to determine which of the four parties would bear the loss which was occasioned by the criminal conduct of the dealer, who is not a party to this action. The provisions of the California Uniform Commercial Code have direct application to this unfortunate situation. Because the Commercial Code provisions •were not properly applied below, we reverse the judgment.

Facts

In June 1991, Rick and Liana Hamm (the Hamms) purchased the Coach from a dealership in Oregon. The John Deere Company, predecessor in interest to Deere Credit, Inc. (Deere), provided the financing for the Hamms. The Hamms executed a written consumer loan contract and security agreement (the Hamm Agreement) wherein they promised to pay the John Deere Company approximately $144,000.

On or about November 1, 1992, the Hamms entered into a written agreement with Sunset Motors, whereby the Hamms were to purchase a new Monaco motor home from Sunset Motors. Sunset Motors was to take the Coach as a trade-in, in partial payment of the…