Commercial Bank at Alma v. Hales

• Decision Date: 27 February 1984
• Docket Number: No. 83-248,83-248
• Citation: 281 Ark. 439,665 S.W.2d 857
• Parties: , 38 UCC Rep.Serv. 680 COMMERCIAL BANK AT ALMA, Appellant, v. James A. HALES d/b/a Johnson-Hales Livestock Commission, Appellee.
• Court: Arkansas Supreme Court

Page 857

665 S.W.2d 857

281 Ark. 439, 38 UCC Rep.Serv. 680

COMMERCIAL BANK AT ALMA, Appellant, v. James A. HALES d/b/a Johnson-Hales Livestock Commission, Appellee.

No. 83-248.

Supreme Court of Arkansas.

Feb. 27, 1984.

Rehearing Denied April 9, 1984.

Shaw & Ledbetter, Fort Smith, for appellant.

Daily, West, Core, Coffman & Canfield by Thomas A. Daily and Douglas M. Carson, Fort Smith, for appellee.

ADKISSON, Chief Justice.

The appellant, Commercial Bank at Alma, hereinafter bank, instituted this action against appellee, James A. Hales, hereinafter auctioneer, claiming that he had committed conversion by selling cattle which were the subject of a security agreement in favor of the bank. The trial court granted a summary judgment in favor of the auctioneer. The bank appeals.

The bank's security interest in the cattle arose as collateral for a loan made to Don Tison, a rancher in Crawford County, Arkansas. The bank had perfected its security interest by filing the necessary papers with the Circuit Clerk of Crawford County.

Unbeknown to the bank, Mr. Tison delivered the cattle to the auctioneer in Oklahoma where they were sold. The net proceeds were then paid to Tison by the auctioneer. Tison then absconded. The bank was unaware of the sale and did not consent to it. Also, the bank did not refile its security agreement in Oklahoma.

Appellant bank argues that the trial court erred in granting summary judgment based on an exception to the common law rule of auctioneer liability. Under common law, the general rule is that an agent (auctioneer) is liable for conversion when he sells property on behalf of his principal who holds the property subject to a lien with no right to sell the property. The overwhelming majority of jurisdictions are in accord with this rule. See 7 Am.Jur.2d Auctions and Auctioneers, § 69 (1980); Annot., 96 A.L.R.2d 208 (1964). Arkansas follows the majority view. In Eureka Springs Sales Company v. Ward, 226 Ark. 424, 290 S.W.2d 434 (1956), the auctioneer was sued by the true owner for selling the stolen cattle; this Court held that by selling the cattle at auction, the auctioneer became liable for conversion. The Court further held that knowledge was not a factor in deciding an auctioneer's liability.

Appellee auctioneer claims an exception to this general rule arises because the Packers and Stockyards Act, 7 U.S.C. § 181 et seq. destroys the voluntariness on the part of the agent which is necessary to hold him liable. The auctioneer further argues that this Act so heavily regulates the area as to cause an auction house to become a utility. The Packers and Stockyards Act was passed to remedy abuses practiced by auction houses against its customers. From a close reading of the Act and its history, we see no indication of an intention to shield market agencies (auctioneers) from liability on account of wrongful sales. In a similar situation, the Court in U.S. v. Sommerville, 211 F.Supp. 843 (W.D.Pa.1962), found that the Packers and Stockyards Act did not relieve auctioneers of liability for conversion for selling cattle which were covered by a security agreement. This position follows the greater weight of authority. Also see, Mason City Production Cr. Ass'n v. Sig Ellingson & Co., 205 Minn. 537, 286 N.W. 713 (1939); Birmingham v. Rice Bros., 238 Iowa 410, 26 N.W.2d 39 (1947); Allen Driver, Inc. v. Mills, 199 Md. 420, 86 A.2d 724 (1952); U.S. v. Matthews, 244 F.2d 626 (9th Cir.1957); Annot., 2 A.L.R.2d 1124 (1948).

Even though the Act provides that auctioneers shall not refuse services on an unreasonable or unjustly discriminatory basis, it...