Hammer v. Thompson
| Decision Date | 03 March 2006 |
| Docket Number | No. 93,526.,93,526. |
| Citation | 129 P.3d 609 |
| Parties | Steve HAMMER and Ron Howe, Appellants, v. Kevin THOMPSON, Roger Morris d/b/a Morris Cattle Company and Auction Service, Nick Hunt d/b/a Clan Farms, Inc., IBP Foods, Inc., and Farm Bureau Management Corporation d/b/a BIC Cattle, Appellees. |
| Court | Kansas Court of Appeals |
Elizabeth A. Carson, of Bruce, Bruce & Lehman, L.L.C., of Wichita, for appellants.
M. Kathryn Webb and Donald H. Snook, of McDonald, Tinker, Skaer, Quinn & Herrington, P.A., of Wichita, for appellee Roger Morris d/b/a Morris Cattle Company and Auction Service, and Brad LaForge, of Hite, Fanning & Honeyman, of Wichita, for appellee Nick Hunt d/b/a Clan Farms, Inc.
Jeffery A. Jordan, of Foulston Siefkin, LLP, of Wichita, and E. Lawrence Oldfield, of Oldfield & Fox, P.C., of Oak Brook, Illinois, for appellees Farm Bureau Management Corp. d/b/a BIC Cattle and IBP Foods, Inc.
Before RULON, C.J., GREENE, J., and BRAZIL, S.J.
Steve Hammer and Ron Howe appeal the district court's decision to grant the summary judgment motions of Roger Morris d/b/a Morris Cattle Company and Auction Service (Morris), Nick Hunt d/b/a Clan Farms, Inc. (Hunt), IBP Foods, Inc., now known as Tyson Fresh Meats (Tyson), and Farm Bureau Management Corporation d/b/a BIC Cattle (BIC) in their action for conversion of cattle and the denial of the appellants' motion for partial summary judgment. The district court found that the entrustment doctrine pursuant to K.S.A. 84-2-403 protected these appellees. We affirm the court's denial of Hammer and Howe's motion for partial summary judgment and reverse and remand the summary judgment granted to the appellees.
Steve Hammer and Ron Howe filed a petition in chapter 61, limited actions, against Kevin Thompson, Morris, Hunt, and Tyson. The petition stated that Hammer and Howe placed 150 breeding heifers with Thompson for grazing on pasture land. Hammer and Howe alleged that Thompson transferred the cattle to Morris for $131,750, thus converting the cattle for Thompson's own use and purpose. Morris then transferred the cattle to Hunt who transferred the cattle to Tyson. Hammer and Howe alleged that all defendants were jointly and severally liable for the conversion of the cattle.
Tyson raised the affirmative defenses of the entrustment doctrine and buyer in the ordinary course of business in its answer. Tyson also cross-claimed against Hunt for indemnification.
In his answer, Morris admitted that he gave Thompson $83,188 for 150 head of cattle. Morris specifically denied that he converted the cattle. He claimed he was a buyer in the ordinary course of business and that Thompson was a merchant under the Uniform Commercial Code (UCC). Therefore, the entrustment doctrine barred the claims.
Thompson did not answer the petition, and a default judgment of $131,750 was entered against him.
Hammer and Howe filed an amended petition on January 29, 2004. BIC was added as a defendant. The petition alleged that Morris transferred the cattle to Hunt through BIC and that BIC also converted the cattle.
In his answer, Hunt raised the defense of the entrustment doctrine and buyer in the ordinary course of business. Hunt raised a cross-claim against BIC for indemnification. BIC also raised the defenses of entrustment and buyer in the ordinary course of business. BIC filed a cross-claim against Morris for indemnification.
BIC and Tyson filed a joint motion for summary judgment, arguing that they were protected from liability by the entrustment doctrine found in the UCC. Hunt filed a motion for summary judgment, incorporating BIC and Tyson's memorandum of law and requesting summary judgment pursuant to the entrustment doctrine. Morris also filed a motion for summary judgment based on the entrustment doctrine. Hammer and Howe moved for partial summary judgment against all defendants on the issue of liability.
The district court adopted the uncontroverted facts set forth by the moving defendants and concluded as a matter of law that the entrustment doctrine applied to the case. The district court found that Thompson was a merchant and that Morris was a buyer in the ordinary course of business pursuant to the entrustment doctrine. Therefore, Morris and all subsequent purchasers obtained and passed good title to the cattle. The district court granted the defendants' motions for summary judgment and denied Hammer and Howe's motion for partial summary judgment. The cross-claims were dismissed as moot.
Hammer and Howe timely appeal.
"` " State ex rel. Stovall v. Reliance Ins. Co., 278 Kan. 777, 788, 107 P.3d 1219 (2005).
The filing of cross-motions for summary judgment does not obligate a trial court to enter summary judgment. Rather, the trial court must independently determine whether a genuine issue of material fact exists, 73 Am.Jur.2d, Summary Judgment § 43, pp. 684-85.
Hammer and Howe's motion for partial summary judgment
We have jurisdiction to consider the denial of Hammer and Howe's own summary judgment motion because the district court granted the opposing parties' summary judgment motion. See Southwest Nat'l Bank v. Simpson & Son, Inc., 14 Kan.App.2d 763, 768, 799 P.2d 512 (1990), rev. denied 248 Kan. 997 (1991).
Hammer and Howe argue that they established conversion as a matter of law through the following uncontroverted facts: Thompson did not have title to the cattle; Morris bought the cattle from Thompson for the benefit of Hunt who used BIC as its agent to purchase the cattle; Hunt sold 142 of the 150 cattle to Tyson; and Hammer and Howe did not give authority to Thompson to sell the cattle on the date of sale. Hammer and Howe contend that although the entrustment doctrine provides an exception to the general rule that a thief cannot pass good title, the defendants had the burden to establish each element of their affirmative defense and failed to do so.
Conversion is defined as "the unauthorized assumption or exercise of the right of ownership over goods or personal chattels belonging to another to the exclusion of the other's rights." Moore v. State Bank of Burden, 240 Kan. 382, 386, 729 P.2d 1205 (1986), cert. denied 482 U.S. 906, 107 S.Ct. 2484, 96 L.Ed.2d 376 (1987).
Hammer and Howe contend that the defendants were not authorized to exercise the right of ownership as a matter of law. In order to overcome the motion, the appellees must raise a genuine issue of material fact as to their authority to exercise ownership. Appellees argue that authority is provided by the UCC's entrustment doctrine.
There is no dispute between the parties that Article 2 of the UCC applies to this case.
Kansas statutes set forth the UCC entrustment doctrine, applicable in transactions of goods, as follows: "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 the ordinary course of business." K.S.A. 84-2-403(2). The statute also provides in part: "`Entrusting' includes any delivery and any acquiescence in retention of possession. . . ." K.S.A. 84-2-403(3). Hammer and Howe do not dispute that they delivered possession of the cattle to Thompson.
Case law has defined three steps required for the doctrine to be applicable. "(1) An entrustment of goods to (2) a merchant who deals in goods of that kind followed by a sale by such merchant to (3) a buyer in the ordinary course of business." Executive Financial Services, Inc. v. Pagel, 238 Kan. 809, 816, 715 P.2d 381 (1986).
The parties' briefs do not point out that the UCC limits the definition of merchant under the entrustment doctrine to a person who "deals in goods of that kind" even though the definition of merchant in K.S.A. 84-2-104(1) includes those who are merchants because of their knowledge or skill peculiar to the goods involved in the transaction or who hold themselves out as having such knowledge and skill. See K.S.A. 84-2-403, Kansas Comment, 1996, subsection 4 ().
Hammer and Howe rely on the interpretation of the term "merchant" in Decatur Cooperative Association v. Urban, 219 Kan. 171, 547 P.2d 323 (1976), and Musil v. Hendrich, 6 Kan.App.2d 196, 627 P.2d 367 (1981).
In Decatur, the Kansas Supreme Court reviewed the issue of whether a farmer was a merchant pursuant to the UCC in an action where a cooperative sought to obtain possession of wheat purchased under an oral contract with a farmer. If the farmer was a merchant, then the statute of frauds would not apply to the contract. 219 Kan. at 172, 176, 547 P.2d 323. The opinion found that under the UCC there are three criteria for determining merchant status:
"(1) a dealer who deals in goods of the kind involved, or (2) one who by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction, even though he may not actually have such knowledge, or (3...
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