Kenneth James WEST, Petitioner v. Tammy ROBERTS, a/k/a Tammie Roberts, Respondent.
No. 05SC358.
Supreme Court of Colorado, En Banc.
Oct. 10, 2006.
143 P.3d 1037
Law Offices of Joaquin G. Padilla, PLLC, Joaquin G. Padilla, Lucia Padilla Gallery, Denver, Colorado, Attorneys for Respondent.
Justice BENDER delivered the Opinion of the Court.
I. Introduction
We review on certiorari an appellate decision from the district court, which construed
Kenneth James West relinquished his car in exchange for a cashier“s check that appeared valid, but which thereafter proved to be a worthless counterfeit. When he later located the car in the possession of a subsequent purchaser, Tammy Roberts, West sued to recover the car under
We agree with the district court“s conclusion and hold that, although “theft” in our criminal code includes theft by deception, UCC section 2-403 abrogates
Thus we affirm the district court and hold that Tammy Roberts, as a good faith purchaser for value, obtained good title to the car under
II. Facts and Proceedings Below
West agreed to sell his car, a 1975 Corvette, to a man representing himself as Rob
The trial court determined that the stolen property statute did not apply in this case. Instead, the court found that the UCC, specifically
In reaching the conclusion that section 2-403 of the UCC applies in this case and that Roberts was the rightful owner of the Corvette, the trial court relied on Keybank Nat“l Ass“n v. Mascarenas, 17 P.3d 209 (Colo.App. 2000). In Keybank, the court of appeals held that a theft in which the owner willingly entrusts his property to another is different than “ordinary theft,” in which the owner is unaware of the taking and does not intend to part with the property. Id. at 214. The trial court found that, under the Keybank holding, theft by deception or fraud is not covered under the stolen property statute if the theft involves a transfer of goods in which the seller voluntarily parts with the goods in exchange for something else. Accordingly, the trial court held that the UCC applies in this case and that, because title can be legally transferred to a bona fide purchaser even if the transferor did not have proper authority to do so, Roberts possessed good title to the Corvette.
On appeal, the district court, acting as an appellate court, upheld the trial court“s decision on two grounds. First, the court considered whether a theft had occurred for the purposes of the stolen property statute. Citing Keybank, the court found that a theft has not taken place if, as in this case, the owner was aware of a taking and had intended to part with the property. Thus, the court found the stolen property statute does not apply in this case. Second, the court found that the trial court correctly applied section 2-403 of the UCC. Even though the cashier“s
We accepted certiorari to reconcile the apparent conflict between the two statutes—section 2-403 of the UCC and the stolen property statute—and to determine which statute applies in this case.3 We first examine the stolen property statute and UCC section 2-403 and determine whether either statute applies in this case. We then reconcile the apparent conflict between the two statutes.
III. Analysis
The Stolen Property Statute
We begin by examining whether the stolen property statute applies in this case. Matters of statutory interpretation are questions of law, which we review de novo. E.g., Ryals v. St. Mary-Corwin Reg“l Med. Ctr., 10 P.3d 654, 659 (Colo.2000). When interpreting a statute, we look first to its plain language. E.g., Spahmer v. Gullette, 113 P.3d 158, 162 (Colo.2005).
The stolen property statute permits the rightful owner of stolen property to recover that property from the possession of another person.
The language of the stolen property statute states that the statute applies to property obtained by theft and that even a good faith purchaser of such property may be divested of it. The definition of theft contained in section 18-4-401 is clear. Use of the word “or” in a statute is presumed to be disjunctive. Armintrout v. People, 864 P.2d 576, 581 (Colo.1993) (citations omitted). Thus, though a theft may occur when one takes property without the owner“s authorization, the use of the word “or” indicates that a theft may also occur if the property is taken by deception, even with the owner“s authorization.
The trial court found that Wilson deceived West into relinquishing the Corvette and its title in exchange for a fraudulent cashier“s check and, accordingly, that Wilson could be charged with theft. A theft therefore occurred for the purposes of the stolen property statute. Hence, based upon the plain language of the stolen property statute and section 18-4-401, we determine that the stolen property statute appears to apply in this case.
Having analyzed the stolen property statute, we now examine section 2-403 of the UCC.
The Uniform Commercial Code
West asserts that the trial and district courts should not have applied section 2-403 of the UCC in this case. He offers two primary arguments in support of his position: (1) the entrustment provisions of section 2-403 only protect those who purchase from
West argues that, because Wilson was not a merchant, no entrustment occurred under section 2-403 and, therefore, Roberts did not acquire valid title to the car. We agree that an entrustment did not occur, which calls upon us to clarify the statute“s relevance in merchant and non-merchant transactions.
We again turn to the statutory language as the starting point in our analysis. E.g., Spahmer, 113 P.3d at 162. The language of section 2-403 does not indicate that all transactions falling within the statute“s purview must involve a merchant; indeed, subsection (2) is the only portion of the statute that mentions the word “merchant.”
Comments to a statute are relevant in its interpretation. See People v. Yascavage, 101 P.3d 1090, 1092 (Colo.2004). As such, we turn to the official comments to section 2-403 for additional guidance in determining whether the statute applies to transactions involving non-merchants. The language of the official comments to section 2-403 strongly suggests that subsections (2), (3), and (4) apply specifically to merchant transactions, while subsection 2-403(1) is applicable to non-merchant transactions. Comment 2 states that subsections (2), (3), and (4) serve to protect persons who buy “in ordinary course out of inventory.”4 The UCC defines a “buyer in ordinary course of business” as someone who buys “from a person... in the business of selling goods of that kind.”
Comment 1, which applies to subsection (1), states that the provision protects “good faith purchaser[s] for value.” Within the context of the UCC, the concept of good faith purchaser for value does not appear to require that the purchaser buy from a merchant or dealer. Several provisions of the UCC must be combined to define good faith purchaser for value. The UCC defines good faith as “honesty in fact and the observance of reasonable commercial standards of fair dealing.”
When a Colorado statute is patterned after a model code, this court may draw upon outside authority in interpreting the provision. E.g., Szaloczi v. John R. Behrmann Revocable Trust, 90 P.3d 835, 838-39 (Colo. 2004). Leading treatises on the UCC support an interpretation of subsection 2-403(1) as applying beyond merchant transactions. The Uniform Commercial Code Series explains that, under subsection (2), a protected purchaser must be a buyer in the ordinary course of business, which is different than the type of purchaser addressed in subsection (1):
It should be noted that [a buyer in the ordinary course of business] is not the equivalent of the common law “bona fide purchaser” or the concept of “good faith purchaser for value” used in the voidable title situations addressed by Section 2-403(1).6 The principal difference between “buyer in the ordinary course of business” and these other terms lies [in] the fact that the buyer in the ordinary course must buy goods from a merchant in the business of selling goods of that kind and must buy them in the usual way in which such items of inventory are bought.
2 William D. Hawkland, Uniform Commercial Code Series § 2-403:7 (1982).
White & Summers“s treatise also suggests that subsection (1) applies to non-merchant transactions. As its title implies,7 section 2-403 addresses three separate topics: (1) “the general powers of a transferor of goods to transfer title or interests [in subsection (1) ]“; (2) “the title of a good faith purchaser of goods [in subsection (1)]“; and (3) “the rights of a buyer in ordinary course from a merchant to whom goods have been entrusted [in subsections (2) and (3)].” 1 James J. White & Robert S. Summers, Uniform Commercial Code § 3-12 (4th ed.1995) (emphasis added). According to another treatise, for subsection 2-403(1), “the good faith of the purchaser is the focus of inquiry.” Robert A. Hillman et al., Common Law and Equity Under the Uniform Commercial Code ¶ 5.04[1] (1985). In contrast, Hillman“s analyses of subsections 2-403(2) and (3) indicate that they apply to merchant transactions. For example, Hillman explains that the purpose of subsection 2-403(2) is ” “to enhance the reliability of commercial sales by merchants.” ” Id. ¶ 5.04[2] (quoting Porter v. Wertz, 53 N.Y.2d 696, 439 N.Y.S.2d 105, 421 N.E.2d 500 (1981)).
Finally, we note that courts in other jurisdictions have applied UCC section 2-403 to non-merchant sales transactions. E.g., Cooper v. Pac. Auto. Ins. Co., 95 Nev. 798, 603 P.2d 281 (1979); Dartmouth Motor Sales, Inc. v. Wilcox, 128 N.H. 526, 517 A.2d 804 (1986); Atlas Auto Rental Corp. v. Weisberg, 54 Misc.2d 168, 281 N.Y.S.2d 400 (N.Y.Civ. Ct.1967); Creggin Group, Ltd. v. Crown Diversified Indus. Corp., 113 Ohio App.3d 853, 682 N.E.2d 692 (1996).
Because subsection 2-403(1) does not refer to merchant transactions or buyers in ordinary course, because the definition of good faith purchaser for value does not require purchase from a merchant or dealer, and because the official comments to UCC section 2-403 indicate that only subsections (2), (3), and (4) apply solely to merchant transactions, we conclude that subsection 2-403(1) applies to non-merchant transactions. Thus, we continue our analysis to determine whether subsection 2-403(1) applies in this case.
West also contends that, because the Corvette was stolen, he did not pass voidable title to the initial purchaser-cum-thief, Wilson.8 Thus, argues West, Roberts could not have obtained good title under subsection 2-403(1). West“s primary argument in support of his assertion that he did not pass voidable title is that no purchase took place because he relinquished title to the car in exchange for a worthless cashier“s check. We disagree.
Subsection 2-403(1) protects good faith purchasers for value. The provision requires that goods be “delivered under a transaction of purchase.”
Indeed, the plain language of the statute itself bolsters this conclusion. Subsection 4-2-403(1) provides, in pertinent part, that “[w]hen goods have been delivered under a transaction of purchase, the purchaser has such power [to transfer good title to a good faith purchaser for value] even though... [t]he delivery was in exchange for a check which is later dishonored, or... [t]he delivery was procured through fraud punishable as larcenous under the criminal law.”
The addition of subsection 1.5 by the legislature to Colorado“s UCC statute also indicates that a transaction of purchase could encompass a fraud-based exchange. The General Assembly added subsection 1.5, which is not part of the UCC model code, in 1975. That provision specifies that, if a seller of livestock has not received payment, the purchaser “does not have power to transfer good title to a good faith purchaser for value until payment is made.”
Various authorities provide additional support for our conclusion. “[T]he general rule seems to be that the physical delivery of the goods to a transferor-purchaser by the true owner sufficiently empowers that transferor-purchaser to transfer good title to a good faith purchaser for value even though the delivery was in exchange for a check which was later dishonored.” 3 Patricia F. Fonseca & John R. Fonseca, Williston on Sales § 23:38 (5th ed.1994). “Subsection 1(d) of 2-403 provides that even where delivery was procured through criminal fraud, voidable title passes.” White & Summers, supra, § 3-12(b). The argument that the term “transaction of purchase” indicates that the true owner did not intend to enter such a fraudulent transaction fails “in light of the clear policy of Section 2-403(1) to enable the good-faith purchaser to prevail.” Hillman, supra, ¶ 5.04[2] n. 95 (citing 3A R. Dusenberg & L. King, Sales & Bulk Transfers Under the Uniform Commercial Code § 10.06[1] (1982)).
We note that courts in other jurisdictions have applied subsection 2-403(1) to similar types of fraudulent, though voluntary, transactions. “A transfer that is fraudulently induced... is considered a “purchase” under the Code, and meets the threshold of being “voluntary.” ” Demoulas v. Demoulas, 428 Mass. 555, 703 N.E.2d 1149, 1164 (1998) (invoking subsection 2-403(1) to determine whether defendants were bona fide purchasers in a case in which a stock owner was defrauded into voluntarily transferring the stock). Accord Cooper, 603 P.2d at 283 (finding implicitly that a man who purchased a car with an invalid cashier“s check obtained voidable title); Kenyon v. Abel, 36 P.3d 1161, 1165-66 (Wyo.2001) (explaining that subsection 2-403(1)(d) effectively provides that “voidable title is created whenever the transferor voluntarily delivers goods to a purchaser even though that delivery was procured through fraud” in ultimately holding that no voluntary transfer had occurred); Creggin Group, Ltd., 682 N.E.2d at 696-97 (holding that an exchange in which a man purchased
Having concluded that West delivered the Corvette under a transaction of purchase, we continue our examination of subsection 2-403(1) in order to determine if Roberts obtained good title to the Corvette. The provision allows a person with voidable title to transfer good title to a good faith purchaser for value even under certain conditions, including when the transferor paid in cash or with a check that was later dishonored, or when the transferor otherwise procured the delivery through fraud punishable under criminal law.
IV. Application
Because both the stolen property statute and subsection 2-403(1) of the UCC appear to apply in this case, we must next determine which statute prevails. When two statutes conflict, this Court favors a construction that avoids conflict between the provisions. People v. Mojica-Simental, 73 P.3d 15, 17-18 (Colo.2003). If we cannot reconcile statutes passed at different legislative sessions, the statute with the latest effective date controls.
The General Assembly enacted the UCC in 1965. The first version of the stolen property statute, which is effectively identical to the current provision,10 was enacted in 1861 as a territorial law. The UCC provision, which addresses in detail several types of scenarios, is more specific than the stolen property statute. We therefore hold that UCC section 2-403 prevails over the stolen property statute.
Further analysis bolsters our holding. The general rule, embodied in the stolen property statute, is that “[a] thief has no title and can pass none, not even to a buyer in the ordinary course.” Fonseca & Fonseca, supra, § 23:35. See also, e.g., Thomas M. Quinn, Uniform Commercial Code Commentary and Law Digest ¶ 2-403[A][5] (1978) (“Where the goods are stolen from the original owner, both the common law and the Code preserve the original owner“s ownership rights... notwithstanding subsequent sales.“). However, UCC section 2-403 provides an exception to that general rule.
Again, treatises on the UCC support this conclusion. White and Summers explain that theft by fraud should be distinguished from robbery-type theft because the original seller has a better opportunity to prevent that type of theft:
In general voidable title passes to those who lie in the middle of the spectrum that runs from best faith buyer at one end to robber at the other. These are buyers who commit fraud, or are otherwise guilty of naughty acts (bounced checks), but who conform to the appearance of a voluntary transaction; they would never pull a gun or crawl in through a second story window. Presumably these fraudulent buyers get voidable title from their targets, but second story men get only void title because the targets of fraud are themselves more culpable than the targets of burglary.
White & Summers, supra, § 3-12(b). See also Quinn, supra, ¶ 2-403[A][5] (“Where the original owner parts with the goods voluntarily in circumstances which, while deplorable, do not constitute outright theft, there is always the chance that the transferee will acquire apparent ownership or “voidable title” and, thanks to this altered state, may be able to pass along better title to a good faith purchaser than he himself may have.“). By relinquishing possession of the goods to the buyer, even when fraudulently induced to do so, the original seller cloaks the “thief” with the apparent authority to sell the goods. Fonseca & Fonseca, supra, § 23:35.
We note that other jurisdictions have distinguished theft by fraud that results in a voluntary transfer of the stolen property from theft by wrongful taking. E.g., Kenyon, 36 P.3d at 1165-66; Demoulas, 703 N.E.2d at 1164. This Court has also hinted at that distinction, explaining that the stolen property statute “allows an owner to regain only property “obtained by theft, robbery, or burglary” rather than any property that has been “wrongfully taken or detained.” ” In re Marriage of Allen, 724 P.2d 651, 656 (Colo. 1986). Indeed, our court of appeals made this distinction in the context of section 2-403 in Keybank, upon which the trial and district courts relied in finding that Roberts acquired good title to the Corvette. Our decision today serves to extend the Keybank distinction beyond the context in which it was rendered—the entrustment provisions of subsections 2-403(2) and (3)—to transactions under subsection 2-403(1). However, we disagree with the Keybank rationale to the extent that it suggests that a distinction between theft and fraud exists within our criminal code.
We therefore hold that, although “theft” in our criminal code includes theft by deception, UCC section 2-403 abrogates the stolen property statute so that “theft” in that provision does not include any theft in which an owner voluntarily relinquishes property to a thief under a transaction of purchase.
We acknowledge that such a rule can, as in this case, result in loss to an innocent party. But a determination that West is entitled to recover the car would also be a determination that Roberts, another innocent party, must relinquish a vehicle that she purchased in good faith. The policy behind subsection 2-403(1) is to protect the party least able to protect herself—the good faith purchaser for value.
Where an owner has voluntarily parted with possession of his chattel, even though induced by a criminal act, a bona fide purchaser can acquire good title, under the theory that where one of two innocent parties must suffer because of the wrongdoing of a third person, the loss must fall
V. Conclusion
For the reasons stated, we affirm the judgment of the district court acting as an appellate court.
Justice EID dissents, Justice COATS joins in the dissent.
Justice EID, dissenting.
The factual scenario presented in this case—where a third party obtains property through theft by fraud from the owner and subsequently sells it to a good faith purchaser—is covered by both the stolen property statute (
While I agree with the majority that the two statutes conflict, maj. op. at 1044-1045, I disagree with its resolution of that conflict in favor of the UCC provision. “When statutes dealing with the same or related subjects cannot be reconciled, a more specific statute prevails as an exception to a general statute unless the general provision is the later adoption and the manifest legislative intent is that the general provision prevail.” B.G.“s, Inc. v. Gross, 23 P.3d 691, 696 (Colo.2001) (citing
But the comprehensive nature of the UCC actually goes toward showing its generality, not its specificity. See B.G.“s, 23 P.3d at 696 (noting that a particular statute was more general, and hence did not control, because it applied to a larger class of cases). The stolen property statute deals with one subject and one subject only: who gets to keep stolen property. And it does so in a single and quite specific sentence: “All property obtained by theft, robbery, or burglary shall be restored to the owner, and no sale, whether in good faith on the part of the purchaser or not, shall divest the owner of his right to such property.”
It is true, as the majority points out, that the UCC was adopted by this state in 1965, and the stolen property statute was enacted more than a hundred years earlier as territorial law. Maj. op. at 1044-1045 & 1044 n. 10. Significantly, however, the General Assembly has revisited and made substantive changes to the stolen property statute on two occasions since that time. See 1973 Colo. Sess. Laws 536; 1987 Colo. Sess. Laws 668. In 1973, it amended the remedial portion of the statute to state that “treble damages and attorney“s fees shall not be recoverable from
While these amendments do not impact the theft victim“s retained ownership in the stolen property—ownership that has been recognized in Colorado since 1861—they unmistakably demonstrate that the legislature has repeatedly considered the stolen property statute after the UCC was adopted. Thus, the stolen property statute is arguably the “later adoption.” At the very least, it is difficult to conclude from the legislature“s relatively recent attention to the stolen property statute that its intent was “manifest” that the UCC control the outcome in cases like the one before us today. See B.G.“s, 23 P.3d at 696;
The majority makes clear that, in its view, resolution in favor of the UCC makes for better public policy. As it points out, the owner is “better positioned to take precautions to prevent loss than a [good-faith] purchaser... On the other hand, to place the onus on the good faith purchaser to fully investigate every purchase in order to determine whether it originated in fraud would unduly burden trade.” Maj. op. at 1046. That may be so, but it is for the legislature, not us, to decide. In the future, the legislature may very well expressly resolve the conflict between the two statutes in the UCC“s favor. Until it does so, however, we must look at what it has done up to this point, which has been to adopt and amend a narrow statute that particularly targets the very factual scenario raised by this case, and nothing more. Because I believe the more specific stolen property statute controls over the more general UCC provision, I respectfully dissent from the majority“s opinion.
I am authorized to state that Justice COATS joins in this dissent.
ALLISON H. EID
JUSTICE, SUPREME COURT OF COLORADO