Prenger v. Baker, 94-813

• Decision Date: 20 December 1995
• Docket Number: No. 94-813,94-813
• Citation: 542 N.W.2d 805
• Parties: 28 UCC Rep.Serv.2d 835 Gary PRENGER and Carol Prenger, Appellees, v. Gene BAKER, Appellant, v. Donald R. BAKER, Intervenor-Appellant. MISSOURI RATITE CENTER, INC., Appellee, v. Gene BAKER, Appellant, v. Donald R. BAKER, Intervenor-Appellant.
• Court: Iowa Supreme Court

Page 805

542 N.W.2d 805

28 UCC Rep.Serv.2d 835

Gary PRENGER and Carol Prenger, Appellees, v. Gene BAKER, Appellant, v. Donald R. BAKER, Intervenor-Appellant.

MISSOURI RATITE CENTER, INC., Appellee, v. Gene BAKER, Appellant, v. Donald R. BAKER, Intervenor-Appellant.

No. 94-813.

Supreme Court of Iowa.

Dec. 20, 1995.

Rehearing Denied Feb. 14, 1996.

B. Michael Dunn, Mason City, and James M. Stanton of Stanton & Sorensen, Clear Lake, for appellants.

Joel J. Yunek of Laird, Heiny, McManigal, Winga, Duffy & Stambaugh, P.L.C., Mason City, for appellees Prengers.

Scott D. Brown of Brown, Kinsey & Funkhouser, Mason City, for appellee Missouri Ratite.

Considered by McGIVERIN, C.J., and HARRIS, CARTER, LAVORATO, and SNELL, JJ.

SNELL, Justice.

Appellants, Gene and Donald Baker, appeal the trial court's decree in a replevin action establishing ownership of one male ostrich in the appellees Gary and Carol Prenger, and establishing ownership of another male ostrich in appellee Missouri Ratite Center, Inc. We affirm.

I. Factual and Procedural Background

In approximately 1988, Ron Rasmus entered into the business of buying, selling, and raising exotic animals including ostriches. He conducted these activities at his Hancock County, Iowa farm. In 1988, defendant, Gene Baker began purchasing ostriches and other flightless birds (known as ratites) for investment purposes. For some time previously, Baker, a livestock farmer, had been boarding his extra swine at Rasmus' farm. According to their agreement, Baker could place and remove swine at will, and Rasmus was paid out of the profits when the swine were sold. Because this agreement had proven beneficial, Baker chose to enter into an agreement for a similar arrangement to board ostriches. Under the boarding contract, Rasmus was to receive a portion of the profits from any sales from the breeding ostriches as well as $25 per month for the care of the juvenile ostriches. Between the years 1990 and 1993, Baker purchased what eventually became two adult breeding pairs of ostriches.

On January 12, 1992, Gene Baker sold one of the breeding pairs to his father, Don Baker, for $25,000. Don Baker also chose to leave the birds in the care of Rasmus under the agreement.

On June 18, 1993, Mike Pickard, acting on behalf of Missouri Ratite Center, Inc. (MRC), purchased for MRC the two adult ostrich breeding pair from Rasmus for $75,000. Pickard then proceeded to sell one pair to Gary Prenger for $37,500. Prenger also traded Rasmus two adult emus in return for two juvenile ostrich pairs. Both Prenger and MRC left the ostriches with Rasmus; Prenger did so pending the preparation of his own facilities and both did so to avoid disturbing the birds during the egg laying season.

On September 10, 1993, Gene Baker removed several animals from the Rasmus farm and transported them to his farm. These included the following: the breeding pair purchased by Prengers, the male purchased by MRC (by Pickard), and several juvenile ostriches. The female of the pair claimed by Pickard (MRC) was not found at this time. One of the juvenile birds was later identified by microchip as belonging to Prenger and was immediately delivered to him. The female of the Prenger pair later died in January, 1994 of aspergillosis while at Baker's farm. Baker never informed plaintiffs of the bird's death prior to trial; rather, he replaced the bird with another in order to test Rasmus' ability to identify the bird. Other than the bird positively identified by microchip, the plaintiffs were unable to positively identify any of the juvenile birds present at Baker's farm.

On December 22, 1993, Gary and Carol Prenger filed an action in replevin against Gene Baker alleging he wrongfully retained possession of the birds and requesting return of the birds as well as damages for the value of any of the birds destroyed or disposed of by Baker. MRC also filed an action in replevin against Baker seeking possession of their pair or the sum of $37,500 in the alternative.

Gene Baker answered, alleging the birds at issue were owned by Donald Baker and himself and they were entitled to possession. Donald Baker next filed a petition of intervention alleging he had purchased a pair of the ostriches from Gene Baker for $25,000 and was therefore a good faith purchaser and therefore entitled to possession of the birds.

On April 28, 1994, trial began before the district court for Cerro Gordo County. The court then issued its Findings of Fact, Conclusions of Law, and Judgment. It decreed the Plaintiffs, Gary and Carol Prenger, were absolute owners of one male ostrich denominated the "Prenger Male" and entitled to immediate possession thereof, and MRC was absolute owner of one male ostrich denominated the "Pickard Male" and entitled to immediate possession thereof. The findings were later expanded to set the value of the "Pickard Male" at $12,500 and the "Prenger Male" at $12,500 at the date of the taking.

Defendant, Gene Baker, and intervenor, Donald Baker, appeal from the trial court's determination of ownership of the "Prenger Male" in Gary and Carol Prenger and ownership of the "Pickard Male" in MRC. Plaintiff MRC cross-appeals on the trial court's failure to find the "Pickard Female" was wrongfully converted by the defendant, seeking possession of the bird and or damages. Plaintiffs Prengers cross-appeal the trial court's failure to find the "Prenger Female" was wrongfully converted by the defendant, seeking possession and damages for its death. Prengers also appeal the trial court's findings with regard to the cause of death of the "Prenger Female" and the trial court's findings the three juvenile birds were never owned by Gene or Donald Baker. We affirm on all issues.

II. Scope of Review

The standard of review in this replevin action is for correction of errors of law. Iowa R.App.P. 4. We will not disturb the trial court's findings of fact as long as they are supported by substantial evidence in the record. Iowa R.App.P. 14(f)(1).

III. Entrustment

This case is controlled by Iowa Code chapter 554, the Iowa adoption of the Uniform Commercial Code. See Iowa Code § 554.2102 (1993). Iowa Code section 554.2403(2) provides as follows:

Any entrusting of possession of goods to a merchant who deals in goods of that kind gives the merchant the power to transfer all rights of the entruster to a buyer in the ordinary course of business.

The code further defines "entrusting" as follows:

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.

Id. § 554.2403(3).

The term "merchant" is defined, for U.C.C. purposes, as follows:

a person who deals in goods of the kind or otherwise by the person's occupation holds that person out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by the person's employment of an agent or broker or other intermediary who by the intermediary's occupation holds the intermediary out as having such knowledge or skill.

Id. § 554.2104(1). The determination of whether a party to a transaction is a merchant is a question of fact. Bauer v. Curran, 360 N.W.2d 88, 90 (Iowa 1984); see also Greater Southern Dist. Co. v. Usry, 124 Ga.App. 525, 184 S.E.2d 486, 487 (1971); Canterra Petroleum, Inc. v. Western Drilling & Mining Supply, 418 N.W.2d 267, 270 (N.D.1987). Additionally, the inquiry is of necessity highly dependent on the factual setting of the transaction in question. Consequently, whether a person is a merchant is to be determined according to the circumstances of each case. 1 Ronald A. Anderson, Uniform Commercial Code § 2-104:25 (3d ed. 1981); see also Ferragamo v. Massachusetts Bay Transp. Auth., 395 Mass. 581, 481 N.E.2d 477, 480 (1985). The requirement that the party "deals in goods of that kind" is generally interpreted to mean one who is engaged in regularly selling goods of the kind at issue. Canterra, 418 N.W.2d at 271; see also Toyomenka, Inc. v. Mount Hope Finishing Co., 432 F.2d 722, 727 (4th Cir.1970); 3 Anderson § 2-403:31.

The phrase "buyer in the ordinary course of business" is also defined in the code:

a person who in good faith and without knowledge that the sale to that person is in violation of the ownership rights or security interest of a third party in the goods buys in the ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker.... "Buying" may be for cash or by exchange of other property or on secured or unsecured credit and includes receiving goods or documents of title under a pre-existing contract for sale but does not include a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

Id. § 554.1201(9).

The code defines good faith as "honesty in fact in the conduct or transaction concerned." Id. § 554.1201(19). This definition has been universally interpreted to require a wholly subjective test examining what the party actually believed at the time of the transaction. First Nat'l Bank v. Creston Livestock, 447 N.W.2d 132, 134 (Iowa 1989); Farmers Coop. Elevator, Inc. v. State Bank, 236 N.W.2d 674, 678 (Iowa 1975); see also Bowling Green, Inc. v. State Street Bank & Trust Co., 425 F.2d 81, 85 (1st Cir.1970); Third Nat'l Bank v. Hardi-Gardens Supply, 380 F.Supp. 930, 940-41 (M.D.Tenn.1974). The purpose of the good faith purchaser doctrine is to "promote commerce by reducing transaction costs;" it allows the consumer to safely purchase goods without conducting an extensive investigation of the conduct and rights of every previous possessor through the product's chain of distribution. Johnson & Johnson Products, Inc. v. Dal Int'l Trading Co., 798 F.2d 100,...