Atlas Auto Rental Corp. v. Weisberg

• Decision Date: 10 July 1967
• Citation: 281 N.Y.S.2d 400,54 Misc.2d 168
• Parties: , 4 UCC Rep.Serv. 572 ATLAS AUTO RENTAL CORP., Plaintiff, v. Edward WEISBERG and Eldorado Auto Wreckers, Defendants.
• Court: New York City Court

Page 400

281 N.Y.S.2d 400

54 Misc.2d 168, 4 UCC Rep.Serv. 572

ATLAS AUTO RENTAL CORP., Plaintiff, v. Edward WEISBERG and Eldorado Auto Wreckers, Defendants.

Civil Court of the City of New York, New York County, Trial

Term, Part 13.

July 10, 1967.

Sol Rosenberg, New York City, for plaintiff.

Irving G. Schleimer, New York City, for defendants.

EDWARD J. GREENFIELD, Judge.

Plaintiff is an automobile rental concern which from time to time would sell off its used automobiles as they were replenished with new ones. On August 23, 1965 plaintiff was offering for sale a two year old Chevrolet station wagon for $1250. One Herbert Schwartzman, who had previously attempted to lease a car, offered to purchase the station wagon, and tendered his check, but it was not certified, and plaintiff's manager testified he rejected it. Nevertheless, he permitted Schwartzman to take a test run. Schwartzman got into the station wagon, drove off, and was never seen again. Plaintiff's manager then had Schwartzman's check, which he says he found on his desk, deposited, but alas, it was returned marked 'No funds'.

A week later, the car was traced to the premises of defendant Weisberg, a licensed auto wrecker and junk dealer in the Bronx. Weisberg was also licensed as a used car dealer in Yonkers. Weisberg claimed he had purchased this car from Schwartzman for $900. He actually paid Schwartzman only $300 down, the balance to be paid at a later time. Schwartzman has never been heard from again. Weisberg received from him neither a bill of sale nor a registration certificate for the motor vehicle, but he immediately resold it the same day to a dealer for $1200.

Plaintiff now sues for conversion, seeking to recover from Weisberg and his firm the value of its station wagon. Defendant resists, insisting that he had acquired good title to the motor vehicle. He invokes the provisions of the Uniform Commercial Code to substantiate his argument that he could acquire good title from a merchant, or even from a thief. There appear to be no reported cases on these provisions of the Code.

At common law, one could convey only such title as he himself possessed. Thus no one could obtain good title from a thief, no matter how innocent the circumstances of his acquisition. Bassett v. Spofford, 45 N.Y. 387; Knox v. Eden Musee Americain Co., 148 N.Y. 441, 42 N.E. 988, 31 L.R.A. 779; Damis v. Barcia, 266 App.Div. 698, 40 N.Y.S.2d 107; Thompson v. Goldstone, 171 App.Div. 666, 157 N.Y.S. 621.

The harshness of this rule with respect to innocent purchasers who had paid their money in perfect good faith without any indication of anything amiss in the transaction led to statutory modifications of the common law rule, so that where the title owner had conveyed a voidable title he would not be permitted to revoke it as against a bona fide purchaser for value. Personal Property Law § 105. Innocence would thus transmute the imperfect title into a state of perfection and impregnability. Impeccable virtue would receive its just reward, and title would pass from a swindler, if not from a thief. Ross v. Leuci, 194 Misc. 345, 85 N.Y.S.2d 497; Stanton Motor Corp. v. Rosetti, 11 A.D.2d 296, 203 N.Y.S.2d 273.

The protection of the innocent was further developed to cover situations where the title owner had not conveyed even a voidable title, but had so clothed the transferor with apparent vestiges of authority and indicia of title that equitable principles of estoppel were invoked to preclude the title owner from asserting his title. This would cover such circumstances as the delivery of goods to a retail merchant on consignment, or other situations in which the transferor was permitted to retain and sell inventory, with title retained purely as a security device. Personal Property Law, § 104. Zendman v. Harry Winston, Inc., 305 N.Y. 180, 111 N.E.2d 871, 36 A.L.R.2d 1355; Oakland Mfg. Co. v. F. C. Linde Co., 162 App.Div. 543, 147 N.Y.S. 1045; First Nat. Bank of Binghamton, N.Y., v. Arthur Hermann Co., Inc., 275 App.Div. 415, 90 N.Y.S.2d 249. Possession alone by the transferor was ot enough; he must have been authorized to sell the goods. Barnard v. Campbell, 55 N.Y. 456; Farnham v. Eichin, 230 App.Div. 639, 246 N.Y.S. 133. Thus where the goods had been obtained by false representations the true owner was not estopped. Hentz v. Miller, 94 N.Y. 64.

The Uniform Commercial Code has expanded the rights of a third person who has purchased the property in all innocence, even from a thief, or from a person who has been entrusted with possession, even if not authorized to sell. UCC § 2--403. Under the Code, title ordinarily passes when goods are delivered, unless otherwise explicitly agreed. UCC Sec. 2--401(2). If passage of title is dependent upon the performance of some condition subsequent, this is a voidable title which can be transferred to a bona fide purchaser for value even if the transferor was deceived as to the identity of the purchaser, the delivery was in exchange for a check later dishonored, or procured through a fraud punishable as larcenous under the criminal law. Thus what was formerly ambiguous has been made explicit. UCC Sec. 2--403(1).

Subdivision (2) provides that the entrusting of goods to a person in the business of selling goods of that kind can validate a transfer to a buyer in the ordinary course of business. This so even if procurement of the entrusting was larcenous. (Subd. 3.)

Under these provisions, the first question posed is whether plaintiff conferred a voidable title upon Schwartzman, which could be perfected in the hands of a bona fide purchaser for value. Plaintiff put the vehicle in Schwartzman's hands, according to its testimony, solely for the purpose of permitting a test run, and not with any idea of conferring title upon him. The fact that this was done After Schwartzman's offer of purchase ostensibly had been rejected, and that after he took the car, plaintiff's manager 'found' his check and immediately...