Heinrich v. Titus-Will Sales, Inc.
| Decision Date | 24 February 1994 |
| Docket Number | No. 15042-5-II,TITUS-WILL,15042-5-II |
| Citation | 868 P.2d 169,73 Wn.App. 147 |
| Parties | , 23 UCC Rep.Serv.2d 1143 Michael HEINRICH, Respondent, v.SALES, INC., a Washington Corporation; Dale Wilson and Shiela Wilson, his wife, Appellants. |
| Court | Washington Court of Appeals |
Charles Frederic Diesen, Redmond, WA, for respondent.
Wayne Beale Knight, Stouffer & Knight, Tacoma, WA, for appellants.
Titus-Will Ford Sales, Inc. 1 appeals a judgment for replevin of a 1990 Ford pickup truck that Titus-Will had previously sold to dealer/broker James Wilson. Upon consideration of the entrustment and voidable title provisions of the Uniform Commercial Code, we agree that Titus-Will must bear the burden of loss of payment for the vehicle. Accordingly, we affirm the judgment in favor of Michael Heinrich, a third party bona fide purchaser for value.
In 1989 Michael Heinrich wished to buy a particular model new Ford pickup truck. James Wilson held himself out as a dealer/broker, licensed to buy and sell vehicles. Heinrich retained Wilson to make the purchase, but did not direct Wilson to any particular automobile dealer. Unbeknownst to Heinrich, Wilson had lost his Washington vehicle dealer license the previous year.
Wilson negotiated with Titus-Will for the purchase of a Ford pickup truck with Heinrich's desired options. Titus-Will had been involved in hundreds of transactions with Wilson over the years and also was unaware that Wilson was no longer licensed to act as a vehicle dealer.
Heinrich made two initial payments to Wilson: an $1,800 down payment and a $3,000 payment when Titus-Will ordered the truck. Wilson gave Heinrich a receipt using a "Used Car Wholesale Purchase Order" that displayed Wilson's alleged vehicle dealer license number. Wilson then ordered the truck from Titus-Will, using his own check to make a $7,000 down payment. The purchase order indicated the truck was being sold to Wilson. "Dealer" was written in the space on the form for tax. Wilson told the Titus-Will salesman handling the sale that he was ordering the truck for resale.
On October 13, 1989, Wilson told Heinrich the truck was ready for delivery. Heinrich paid Wilson $15,549.55 as final payment, including tax and license fees. Wilson gave Heinrich a copy of the purchase order and of an options checklist with corresponding prices. These documents indicated that Wilson was buying the truck from Titus-Will. The Titus-Will salesman had signed off on the options list; Wilson marked it "paid in full" and signed it after Heinrich paid him. On the same day, at Wilson's behest, Heinrich signed a Washington application for motor vehicle title.
Wilson agreed to deliver the truck to Heinrich at Titus-Will on Saturday, October 21, 1989. He arranged with a Titus-Will salesman to deliver a check on the morning of October 21 to a clerk in the Titus-Will office and, in return, to receive the truck keys and paperwork. The clerk accepted Wilson's check for $11,288.00, post-dated to Monday, October 23, 1989, and delivered to Wilson a packet containing the keys to the truck, the owner's manual, an odometer disclosure statement, and a warranty card. The odometer statement, which Wilson and the Titus-Will salesman signed, showed Wilson as the transferor. Titus-Will did not fill out the warranty card with the name and address of the purchaser because the sale appeared to be dealer to dealer, with the warranty to benefit the ultimate purchaser.
Titus-Will retained the manufacturer's certificate of origin. The certificate of origin is apparently a "pre-title" document used to obtain state title documents when a car is sold to a non-dealer. Titus-Will, believing this to be a dealer to dealer transaction, planned to give the certificate to Wilson when his check cleared. Wilson could then obtain title to the vehicle in the name of his customer.
Wilson immediately taped Heinrich's application for title in the rear window of the truck that was parked on the Titus-Will lot. When Heinrich arrived, Wilson gave him the keys and documents and Heinrich drove off in the truck.
Wilson's check did not clear. Titus-Will demanded return of the truck. On November 6, Wilson picked up the truck from Heinrich, telling him he would have Titus-Will make certain repairs under the warranty. Wilson returned the truck to Titus-Will.
On November 9, 1989, Wilson admitted to Heinrich that he did not have funds to cover his check to Titus-Will and that Titus-Will would not release the truck without payment. Heinrich then asked Titus-Will for the truck; it refused. By a pretrial arrangement, Heinrich regained possession of, but not clear title to, the truck on April 1, 1990.
Heinrich sued Titus-Will and Wilson, seeking replevin of the truck and damages for his loss of use. Heinrich obtained a default order against Wilson. After a bench trial, the court awarded Heinrich title to the truck and $3,050 in damages for loss of its use.
On appeal, Titus Will argues that the trial court erroneously applied the entrustment doctrine of RCW 62A.2-403; it also argues the law of agency, not the Uniform Commercial Code (UCC), controls and requires reversal. Heinrich contends that in addition to the entrustment doctrine, the trial court's findings also support application of the voidable title doctrine contained in RCW 62A.2-403. As Titus-Will assigns error only to the trial court's legal conclusions, our review is de novo. Hoffer v. State, 110 Wash.2d 415, 420, 755 P.2d 781 (1988), aff'd on reconsideration, 113 Wash.2d 148, 776 P.2d 963 (1989).
RCW 62A.2-403(2) and (3) contain the entrustment provisions of the Uniform Commercial Code (UCC). The statute provides as follows:
(2) 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 ordinary course of business.
(3) "Entrusting" includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law.
RCW 62A.2-403(2), (3). To prevail under this statute, Heinrich must show 1) Titus-Will "entrusted" the truck to Wilson and, thus, empowered Wilson subsequently to transfer all rights of Titus-Will in the truck to Heinrich; 2) Wilson was a merchant dealing in automobiles; and 3) Heinrich bought the truck from Wilson as a "buyer in ordinary course of business." See Williams v. Western Sur. Co., 6 Wash.App. 300, 302, 492 P.2d 596, review denied, 80 Wash.2d 1007 (1972).
Three general policies support RCW 62A.2-403(2), the UCC provision placing the risk of loss on the entruster. First, it protects the innocent buyer who, based on his observation of goods in the possession of a merchant of those goods, believes that the merchant has legal title to the goods and can, therefore, pass title in the goods to another. See Official Comment 2, RCWA 62A.2.403. The statute carries forward the pre-Uniform Commercial Code law of estoppel under which an owner, who clothes a merchant with apparent ownership of or authority to sell goods, is estopped from denying such authority as against one buying the goods from the merchant in good faith. 3 R. Anderson, Uniform Commercial Code § 2-403:29 (3d ed. 1983); see, e.g., Gramm-Bernstein Motor Truck Co. v. Todd, 121 Wash. 145, 147-48, 209 P. 3 (1922).
Secondly, the entrustment clause reflects the idea that the entruster is in a better position than the innocent buyer to protect against the risk that an intermediary merchant will not pay for or not deliver the goods. 2 Correria v. Orlando Bank & Trust Co., 235 So.2d 20, 25 (Fla.Dist.Ct.App.1970); Sacks v. State, 172 Ind.App. 185, 360 N.E.2d 21, 28 (1977); Canterra Petroleum, Inc. v. Western Drilling & Mining Supply, 418 N.W.2d 267, 273-74 (N.D.1987); Apeco Corp. v. Bishop Mobile Homes, Inc., 506 S.W.2d 711, 718-19 (Tex.Civ.App.1974).
Thirdly, the entrustment clause facilitates the flow of commerce by allowing purchasers to rely on a merchant's apparent legal right to sell the goods. Cugnini v. Reynolds Cattle Co., 687 P.2d 962, 967 (Colo.1984); Standard Leasing Corp. v. Missouri Rock Co., 693 S.W.2d 232, 237 (Mo.Ct.App.1985); Canterra, 418 N.W.2d at 273; 3 Anderson, supra, § 2-403:4 at 570; 1 J. White & R. Summers, Uniform Commercial Code 193 (3d prac. ed. 1988); see also First Nat'l Bank v. Carbajal, 132 Ariz. 263, 645 P.2d 778, 781 (1982); Welch v. Cayton, 183 W.Va. 252, 395 S.E.2d 496, 501 n. 7 (1990). Without the safeguards of the entrustment provision, a prudent buyer would have to delay the finalization of any sizeable sales transaction for the time necessary to research the merchant's ownership rights to the goods.
The UCC definition of "entrusting," contained in RCW 62A.2-403(3), is broad. Cugnini, 687 P.2d at 966. The statute declares that "any delivery and any acquiescence in retention of possession" constitutes entrustment. RCW 62A.2-403(3). A person can entrust goods to a merchant by a variety of methods, such as consigning them, creating a bailment, taking a security interest in inventory, leaving them with the merchant after purchase, and delivering them for purposes of repair. Official Comment 2, RCWA 62A.2-403; 1 White & Summers, supra, at 191-92. A sale can also constitute an entrustment when some aspect of the transaction remains incomplete. 1 White & Summers, supra, at 191 & n. 25 (); see English v. Ralph Williams Ford, 17 Cal.App.3d 1038, 95 Cal.Rptr. 501, 503, 505, 507 (1971); Perimeter Ford, Inc. v. Edwards, 197 Ga.App. 747, 399 S.E.2d 520, 521, 522 (1990).
Titus-Will properly concedes that it entrusted the truck to Wilson. However, it argues Wilson was not...
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