Ray Duffy v. Danny Elam
W2015-01456-COA-R3-CV
| Tenn. Ct. App. | Aug 24, 2016Background
- Plaintiffs Hynes and Duffy (International Turf/App.) originally owned a 1999 Clark 53-ft trailer; Duffy held the certificate of title.
- Hynes allowed Charles Smith/Tennessee Materials to use the trailer to move equipment; Smith retained possession for years and later claimed the trailer was stolen.
- In 2012 law enforcement found the trailer on defendant Elam’s property; Elam, who buys and rebuilds trailers, said Smith sold it to him as scrap for $2,000 and produced a bill of sale.
- Plaintiffs demanded return; Elam demanded $7,500 for repairs; Plaintiffs sued in general sessions to recover the trailer; general sessions ruled for Elam as a good-faith purchaser; Plaintiffs appealed to circuit court.
- The circuit court awarded possession to Plaintiffs (title-holder) and allowed Elam to keep removable improvements; Elam appealed to this Court.
Issues
| Issue | Plaintiff's Argument (Hynes/Duffy) | Defendant's Argument (Elam) | Held |
|---|---|---|---|
| Whether Elam is protected under UCC § 2-403 as a buyer in ordinary course via entrustment | Title-holder (Duffy) has superior right; entrustment inapplicable because Smith wasn’t a merchant dealing in such trailers | Elam: Smith/Tennessee Materials had possession and sold in ordinary course; § 2-403 protects Elam as a buyer in ordinary course | Not a buyer-in-ordinary-course under § 2-403 — entrustment requires entrustee who regularly deals in that kind of goods, which record does not show for Smith/Tennessee Materials |
| Whether bona fide purchaser status alone conveys title against the certificate-holder | Title-holder’s certificate controls; mere good-faith purchase does not overcome title where entrustment protection is absent | Elam: he paid fair scrap value and relied on bill of sale; was a good-faith purchaser for value | Bona fide purchaser status alone insufficient to defeat titled owner when entrustment statute does not apply |
| Whether Plaintiffs had to make a prima facie showing of Elam’s bad faith to rescind the sale | Plaintiffs rely on title and lack of UCC protection to recover trailer; no special burden to show Elam’s bad faith beyond defeating § 2-403 defense | Elam: court should require Plaintiffs to show bad faith to avoid transfer | Court rejected defendant’s cited older authority; UCC governs and the cited pre-UCC/real-property cases are inapplicable |
| Whether Plaintiffs are estopped from recovery by acquiescence in Smith’s authority | Plaintiffs: did not raise estoppel at trial; no waiver preserved on appeal | Elam: Plaintiffs sat on rights and created apparent/actual authority in Smith to sell; Elam relied on that authority | Estoppel argument waived because not raised below; appeal cannot consider it |
Key Cases Cited
- In re Estate of Ledford, 419 S.W.3d 269 (Tenn. Ct. App. 2013) (deference to trial court factual findings)
- Watson v. Watson, 196 S.W.3d 695 (Tenn. Ct. App. 2005) (preponderance standard for overturning bench findings)
- Kelly v. Kelly, 445 S.W.3d 685 (Tenn. 2014) (trial court’s credibility findings entitled to deference)
- 1963 Jackson, Inc. v. De Vos, 436 S.W.3d 278 (Tenn. Ct. App. 2013) (legal questions reviewed de novo)
- Audio Visual Artistry v. Tanzer, 403 S.W.3d 789 (Tenn. Ct. App. 2012) (UCC governs sales of goods)
- Land Developers, Inc. v. Maxwell, 537 S.W.2d 904 (Tenn. 1976) (authority cited on real property law not controlling for UCC-governed goods)
- Hewgley v. Gen. Motors Acceptance Corp., 286 S.W.2d 355 (Tenn. Ct. App. 1955) (illustrative pre-UCC authority; not controlling for UCC transactions)
- In re Estate of Smallman, 398 S.W.3d 134 (Tenn. 2013) (issues not raised at trial are waived on appeal)
- Welch v. Board of Professional Responsibility, 193 S.W.3d 457 (Tenn. 2006) (general rule barring appellate review of issues not raised below)