Bischoff v. Thomasson
| Citation | 400 So.2d 359,31 U.C.C.Rep. 1 |
| Parties | 31 UCC Rep.Serv. 1 David J. BISCHOFF v. Albert F. THOMASSON. Albert F. THOMASSON v. David J. BISCHOFF. 79-538, 79-580. |
| Decision Date | 15 April 1981 |
| Court | Supreme Court of Alabama |
Carleton P. Ketcham, Jr., of Dominick, Fletcher, Yeilding, Acker, Wood & Lloyd, Birmingham, for appellant cross-appellee.
J. Michael Rediker, of Ritchie, Rediker & Warren, Birmingham, for appellee cross-appellant.
This detinue action involves the ownership of a diamond ring valued at about $35,000.00 Finding both parties innocent of any wrongdoing, the trial court ordered the ring to be sold and the proceeds divided between the two parties. Both parties appealed the judgment. The sale of the ring has been suspended pending disposition of these appeals. We reverse and remand with directions.
The plaintiff, David J. Bischoff, filed an action in detinue against the defendant, Albert F. Thomasson, to recover in specie a large platinum ring with diamonds belonging to Bischoff, or, in the alternative, to recover the fair market value of the ring at the time of the alleged conversion by Thomasson. Thomasson counterclaimed, seeking a judgment that he is the owner of the ring, or in the alternative, awarding damages of $27,000.00, resulting from Bischoff's negligence in his handling of the ring. In a nutshell, Bischoff had placed the ring with Candido Martinez, a diamond broker, to find a buyer. In the meantime, Martinez obtained a $35,000.00 business loan, guaranteed by Thomasson in return for a $5,000.00 fee and a pledge of the ring and other jewels. When Martinez defaulted on the loan, Thomasson paid off the loan and then took possession of the ring in satisfaction of Martinez's obligation to pay the loan balance of $18,139.46, and Thomasson's $5,000.00 fee.
Thomasson explicitly raised several affirmative defenses in his pleadings, primarily that his title to the ring is protected by either one of the following theories grounded in the Uniform Commercial Code:
1. His status of a bona fide purchaser for value. Code 1975, § 7-2-403(1).
2. His status of a buyer in the ordinary course of business. Code 1975, § 7-2-403(2).
3. His status of a secured creditor retaining collateral in satisfaction of an obligation. Code 1975, § 7-9-505(2).
Thomasson has since dropped his theory of buyer in the ordinary course of business on this appeal, and now claims he is protected as a creditor of a consignee pursuant to Code 1975, § 7-2-326(2). Admitting he did not explicitly plead this defense, Thomasson argues that his pleadings and the evidence in this case raise the consignment issue under our current liberal rules of pleading, specifically Rule 15(b), ARCP, allowing automatic amendment of pleadings to conform to the evidence.
Discovery consisted solely of the taking of depositions of the two principal parties. Documents pertaining to transactions involving the ring were obtained at the same time. The transcripts of the depositions were filed three weeks later. On the following day, the parties filed with the trial court their stipulation of facts which basically extrapolated and condensed the pertinent facts discovered via the depositions. The documents discovered were also made a part of the stipulation. We find the facts contained in the stipulation to be determinative of the issues at hand and find no need to refer to the depositions included in the record on appeal. Thus, for the purposes of our review, we will rely on the following relevant facts set out in part in the stipulation:
4. In their dealings with Candido Martinez, until early April 1979 when they learned of each other's respective claimed interest in the diamond, both parties felt Martinez was an honest businessman and did not suspect any untruth in the representations which they say, respectively, Martinez made to them.
5. Candido Martinez throughout the relevant time period was a diamond salesman or diamond broker and worked for the firm of DeBeers Diamond Investment, Ltd., Scottsdale, Arizona, during 1976, 1977 and until early 1978 when Martinez and one Ray Evans organized a diamond merchant or diamond trading company known as Intergem, Inc., of Scottsdale, Arizona (sometimes also represented as "International Gems, Incorporated").
6. The diamond was acquired by David J. Bischoff from another diamond dealer, Amiton Company, of New York City on about February 19, 1977. Within thirty days of its acquisition from Amiton, Bischoff mailed the diamond to Martinez, who was then with DeBeers Diamond Investment, Ltd. in Arizona, with instructions for Martinez to broker or sell the same for Bischoff (with Martinez to receive a 10% commission on the sale). On or about April 11, 1977 DeBeers Diamond Investment, Ltd. returned the diamond to Bischoff accompanied by a letter (Exhibit B). In May or June of 1977, Bischoff mailed the diamond back to DeBeers, who held it until early 1978, under an arrangement whereby it was to be offered for sale for Bischoff's account by Martinez subject to Bischoff's approval of terms. In early 1978 when Bischoff was advised that Martinez had left the employ of DeBeers Diamond Investment, Ltd. and had organized Intergem, Inc., Bischoff caused DeBeers Diamond Investment, Ltd. to return the diamond to him. Two or three months later, in or about April 1978, Bischoff mailed the diamond to Martinez at Intergem, Inc., in Arizona under the same arrangement as mentioned above. Martinez subsequently brought the diamond with him on a trip to Birmingham, Alabama when he met with Albert F. Thomasson, in June 1978, and then took the diamond back to Arizona with him when he left from the Birmingham meeting. On or about July 5, 1978 Martinez mailed the diamond by Federal Express and other precious stones from Arizona to Albert F. Thomasson, who picked up the package at the Birmingham Airport, and the diamond thereafter remained in the possession of Albert F. Thomasson between July 6, 1978 and the date this suit was filed as collateral for Thomasson's guarantee of Intergem's loan from BTNB and foreclosure thereof.
The arrangement between Intergem and Martinez ("Borrowers") on the one hand, and Thomasson ("guarantor"), on the other hand, was as follows:
(a) Birmingham Trust National Bank ("BTNB") would loan $35,000.00 to the Borrowers and the note would be signed by Intergem as a corporation and by Martinez individually,
(b) In consideration of a pledge of collateral described below and a $5,000 fee, Thomasson would endorse the $35,000 BTNB note as guarantor.
(c) The agreed collateral consisted of (i) 50 carats of sapphires, in one and two carat stones, and (ii) the diamond ring in question. The Borrowers, upon payment of one-half of the loan, could redeem either the sapphires or the ring, but not both.
Upon payment of $18,000 on principal of the note on July 18, 1978, Borrowers requested, and Thomasson delivered, a release to Borrowers of physical possession of the sapphires, thereafter leaving a $17,000 principal balance due on the note and solely the diamond in Thomasson's possession as collateral. Martinez represented to Thomasson that the diamond was his (Martinez) personal possession orally and in the writing attached as Exhibit I. Bischoff had no knowledge of and had given no permission for the above pledge transaction and Thomasson had no knowledge of Bischoff's title.
....
9. During the rest of 1978 following Bischoff's delivery of the diamond to Martinez and Intergem on about April, 1978, Martinez from time to time told Bischoff on several occasions that Martinez was attempting to sell the diamond. Martinez verbally and in writing (see Exhibit G) in June, 1978 requested that Bischoff permit Martinez to pledge the diamond in order that Intergem obtain working capital through borrowings, in exchange for a fee in the neighborhood of ten percent. Bischoff stated that he would consider such an arrangement if (i) the diamond were stored in a bank vault in Arizona and not removed therefrom without his permission and (ii) the loan arrangement details were cleared with Bischoff in advance. No specific loan or pledge details were furnished to Bischoff and Bischoff states he did not know of, or consent to, removal of the diamond from Arizona. Bischoff did not ask Intergem, Martinez or any banker for, or obtain, any safe deposit or other receipt from any bank in 1978 or 1979 showing custody or location of the diamond. Bischoff did not become concerned about the location of the diamond until he had difficulty reaching Martinez at the end of 1978 and first part of 1979. After he made specific inquiries of Ray Evans, then president of Intergem, in early 1979 as to the whereabouts of the diamond, he learned for the first time that the diamond had been sent to Birmingham, Alabama as a pledge in connection with a $35,000 loan to Intergem from BTNB. He then called BTNB who informed him of Thomasson's guarantee and possession under pledge of the diamond. When Bischoff thereafter reached Martinez and confronted him by telephone with the above facts which Bischoff had just learned, Martinez claimed he was authorized in 1978 by Bischoff to make this pledge. Bischoff responded that he had never given such authority and Martinez then replied that they must have "misunderstood" each other. Bischoff has now filed suit in Wisconsin against Martinez, Evans and Intergem for damages with respect to conversion or unauthorized use or taking of the diamond but to date has effected no recovery in such suit (the proceedings in which are at an early stage).
....
On this appeal, the parties have thoroughly briefed and argued the several defenses raised by Thomasson to this detinue action. We find it unnecessary to address all of them since, as will be shown, Thomasson is the rightful owner of the ring due to his status as a secured creditor of a consignee (Martinez), Code 1975, § 7-2-326(2), who has properly complied with Code 1975,...
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