612 N.E.2d 408 | Ohio Ct. App. | 1992
Plaintiff-appellant, Executive Coach Builders, appeals a decision denying its replevin action which sought to recover possession of its limousine and ordering it to deliver the limousine's statement of origin to defendant-appellee, Bush Cook Leasing, Inc.
Appellant is a manufacturer/seller of customized limousines. In 1988, appellant entered into an agreement with Gold Key Limousine, Inc., whereby Gold Key agreed to purchase certain limousines from appellant. Gold Key, a limousine service organization, franchises Gold Key Limousine Service to individuals who are planning to enter the limousine business. Gold Key's operation includes putting individuals planning to open a limousine franchise in touch with a leasing agent and arranging the financing and leasing of limousines.
In early 1989, appellee entered into a business arrangement with Gold Key whereby Gold Key agreed to find a franchisee to whom appellee could lease a limousine. Pursuant to the agreement, Gold Key located Royce Mason ("Mason") as a franchisee. As a consequence, appellee agreed to purchase a *810 limousine from Gold Key. On March 23, 1989, Gold Key placed an order with appellant for the construction of a limousine. Gold Key's cost for the limousine was $39,200. Gold Key in turn contracted to sell the limousine to appellee for $57,645, and appellee arranged to lease the vehicle to Gold Key's franchisee, Mason. On May 5, Mason picked the vehicle up at appellant's place of business in Springfield, Missouri.
Gold Key subsequently notified appellee that the vehicle had been delivered and that Mason was in possession of the limousine. Gold Key then telefaxed appellee an invoice specifying the price of the vehicle and the terms of the sale. After appellee was assured that Mason had possession of the limousine, appellee issued a check to Gold Key in the amount of $57,645 on May 12, 1989. Gold Key, however, failed to pay appellant the $39,200 purchase price.
Having not received payment for the vehicle, appellant decided that it was in their best interest not to furnish the manufacturer's statement of origin to appellee. Since appellee did not have the statement of origin in its possession, it could not properly license the limousine. Consequently, Mason rescinded his lease with appellee.
On December 7, 1989, appellant brought a replevin action in the Clinton County Court of Common Pleas seeking to recover possession of the limousine from appellee. On December 22, 1989, appellee filed its answer and counterclaim seeking a dismissal of the complaint, transfer of the statement of origin to it and damages. On November 21, 1991, the trial court issued a decision dismissing appellant's replevin action and ordering appellant to deliver the manufacturer's statement of origin to appellee. The court also ordered that the matter be set for a hearing on the alleged damages incurred by appellee. From that decision, appellant has filed this timely appeal asserting the following three assignments of error:
Assignment of Error No. 1:
"The trial court erred when it applied the provisions of Chapter
Assignment of Error No. 2:
"The trial court erred when it found that appellant `entrusted' the limousine to Gold Key."
Assignment of Error No. 3:
"The trial court erred when it ordered appellant to convey title to appellee."
Since the assignments raise the same error, they will be considered together. *811
At issue is the apparent conflict between the provisions of the Ohio Certificate of Motor Vehicle Title Act (R.C.
R.C.
"No person acquiring a motor vehicle from its owner, whether the owner is a manufacturer, importer, dealer, or any other person, shall acquire any right, title, claim, or interest in or to the motor vehicle until such person has had issued to him a certificate of title to the motor vehicle, or delivered to him a manufacturer's or importer's certificate for it * * *."
The language found in R.C.
In Fuqua Homes, Inc. v. Evanston Bldg. Loan Co. (1977),
The UCC entrustment rule is found in R.C.
"(B) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.
"(C) `Entrusting' includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law."
According to appellee, appellant's contract with Gold Key constituted an "entrusting of possession" within the meaning of the UCC and clothed Gold Key with the power to transfer appellant's ownership rights to appellee. Appellant concedes that it entered into a contract with Gold Key. However, appellant argues that it never entrusted the limousine to Gold Key. Instead, appellant contends that the vehicle in question bypassed Gold Key altogether and was delivered directly to appellee's agent, Royce Mason. Thus, according to appellant, appellee or its agent should have demanded the certificate of origin before paying for the limousine, and failing that, appellee has no ownership rights or claim to the vehicle.
No one disputes that the limousine is a "good" as defined by R.C.
Under UCC 2-403(2) and (3), any entrusting of possession of goods to a merchant who deals in goods of that kind gives the merchant the power to transfer all rights of the entruster to a buyer in the ordinary course of business. "Entrusting" is defined to include any delivery as well as any acquiescence and retention of possession.
Entrustment should be given a liberal reading. Professor Grant Gilmore, one of the drafters of the UCC, stated that the Code "defines `entrusting' as including everything short of armed robbery (larceny is expressly approved)." Gilmore, The Good Faith Purchase Idea and The Uniform Commercial Code: Confessions of a Repentant Draftsman (1981), 15 Ga.L.Rev. 605, 618. See, also, 3A Duesenberg King, Sales and Bulk Transfers (1992), Section 10.06[3] *813 ("entrustment" should be given wide as possible interpretation). The general thrust of the cases involving entrustment of goods to a dealer is aimed at the protection of the purchaser, where the latter acts in "good faith" and the owner takes the risk by placing or leaving the good with a merchant of his own choosing who could convert or otherwise misdeal it. See Fuqua, supra.
Here, the core issue is whether a merchant must receive actual physical possession of the good to gain "entrustee" status. Neither the Ohio Revised Code nor the UCC provides this court with any assistance since they do not define "possession." While Comment 2 to UCC 2-403 refers to "inventory," nothing in the section itself or the Code definition of "buyer in ordinary course" requires the goods to be physically located in the seller's inventory. White Summers, Uniform Commercial Code (1980) 143. According to White Summers, in determining whether there is possession for the purpose of entrustment, a court should look to the merchant's appearance of control over the goods. Id.
Under the "appearance of control" test, we find that Gold Key had possession of the limousine for entrustment purposes. Even though the merchant here did not have actual physical possession of the limousine at the time of the sale to appellee, Gold Key nevertheless manifested its ability to control and dispose of the limousine as if it was in its inventory. The facts indicate that Gold Key informed appellee that the limousine would be delivered to it at appellant's place of business in Springfield, Missouri. The vehicle was subsequently picked up by Mason, appellee's agent.2 Thus, focusing on Gold Key's appearance of control over the limousine, we find that Gold Key had possession, albeit constructive possession, of the vehicle.
Two cases that are on all fours with the instant action come to us from the Colorado Supreme Court. Both Schneider v. J.W.Metz Lumber Co. (Colo. 1986),
In Cugnini, supra, the Colorado Supreme Court found that the entrustment rule was applicable even though the goods were never placed on the merchant's property or place of business. The court found that the merchant demonstrated sufficient control over the goods when he instructed the seller to ship the goods directly to a third party. Once again, the court focused on the merchant's appearance of control over the goods.
Relying upon the liberal interpretation that should be given to the entrustment rule, and the limited case law that has been written on this particular issue, we hold that appellant entrusted possession of the limousine to Gold Key within the meaning of R.C.
In summary, we find, as did the court below, that appellant entrusted the limousine to a merchant who deals in goods of that kind. The merchant was empowered to transfer appellant's rights to a buyer in the ordinary course of business and did so. Accordingly, appellant's assignments of error are overruled.
The judgment of the trial court is affirmed.
Judgment affirmed.
KOEHLER, P.J., and WALSH, J., concur.