Standard Leasing Corp. v. Missouri Rock Co., Inc.
| Decision Date | 14 May 1985 |
| Docket Number | No. WD,WD |
| Citation | 693 S.W.2d 232 |
| Parties | 41 UCC Rep.Serv. 1280 STANDARD LEASING CORPORATION, Federal Deposit Insurance Corporation, (formerly Farmers Bank and Trust of Winchester, Tennessee) and Charles N. Turner, Plaintiffs-Appellants, v. MISSOURI ROCK COMPANY, INC., Defendant-Respondent. 35565. |
| Court | Missouri Court of Appeals |
David H. Miller, Richmond, for plaintiffs-appellants.
Michael R. Roser, Kansas City, for defendant-respondent.
Before LOWENSTEIN, P.J., and SOMERVILLE and NUGENT, JJ.
Plaintiffs appeal from a verdict and judgment in favor of defendant on plaintiffs' suit for replevin of two untitled Euclid R-35 rock trucks and damages for conversion. Standard Leasing Corporation complains of alleged errors in instructing the jury and in the admission of certain evidence. We affirm.
This dispute arises between innocent parties. Standard Leasing at the time this dispute arose was in the business of leasing large pieces of equipment, discounting the leases and selling them to financial institutions. The two rock trucks in dispute here were originally owned by Standard Leasing. Standard leased the trucks to a Dr. Kutz of Kentucky in December, 1976. The leases were discounted and sold to Farmers Bank and Trust (now plaintiff Federal Deposit Insurance Corporation) and to Gamaliel Bank of Gamaliel, Kentucky. Gamaliel Bank later reassigned its interest to plaintiff Charles Turner.
Dr. Kutz was unable to make his payments and after negotiations with Standard returned the trucks to the company for sale or lease. Standard then arranged for the Herco corporation of Albany, Georgia, to pick up the trucks in Kentucky and transport them to Herco's facility in Albany for repair.
Herco was a Georgia corporation that was in the business of leasing, selling, repairing, purchasing, and reconditioning heavy construction equipment. Its extensive facilities in Albany included an office, a separate parts warehouse, two repair facilities, and a large fenced lot where equipment was stored and displayed. Herco's president was Robert Herring, who was also a stockholder in the corporation.
Standard Leasing had leased equipment to Herco in the past and had always made UCC-1 filings concerning the leases. See 400.9-401; 400.9-402. After Herco had transported the trucks at issue here to Albany, Herco and Standard entered into negotiations for the lease of the equipment, but apparently an agreement was never reached. In any event, Standard made no UCC filings concerning Herco's possession of the Euclid trucks.
Lenny Cash, the president of Standard testified that Herco was only supposed to have the trucks for a couple of weeks, the time it would take to make the repairs. The market for the trucks at the time was very strong, and Standard anticipated selling or leasing them soon after the repairs were completed. Mr. Cash further testified that the repairs were not completed in the anticipated period and after several months Standard became concerned. Standard's concern was magnified when an unknown party attempted to blow up two of Standard's front-end loaders held by Herco on its property. Mr. Cash visited Herco the day after the attempted destruction and found that the trucks were still on Herco's property but the repairs had not been completed. He immediately began to make arrangements for the removal of the front-end loaders from Herco's premises.
Several months after Mr. Cash's visit to Herco, another employee of Standard, Mr. Miller, visited the Herco company. At that time the trucks were no longer in Herco's possession. Mr. Herring explained to Mr. Miller that Herco had leased the trucks but that he could not identify the lessee because Herco's records had been stolen. Standard reported the alleged theft to the appropriate law enforcement agencies. The FBI eventually found the trucks in defendant Missouri Rock Company's possession and informed Standard of the discovery.
Missouri Rock is a Missouri corporation engaged in the rock quarry business. In November of 1977, Missouri Rock decided to purchase two Euclid R-35 rock trucks. It contacted its regular equipment dealer, Dean Company of Kansas City. Dean did not handle that particular brand but agreed to act in effect as purchasing agent for Missouri Rock. Dean eventually located two Euclid R-35's being offered for sale by Superior Equipment Corporation of Albany, Georgia.
Superior Equipment was a Georgia corporation whose chief executive officer was Robert Herring, president of Herco, its president was Mr. Herring's friend and ex-Herco salesman, Danny Hatcher. Former FBI agent John R. Mauer testified for the plaintiffs at trial. He stated that in February, 1978, the FBI began to investigate allegations that Mr. Herring was fraudulently dealing in heavy equipment. In the course of Mr. Mauer's investigation he investigated Superior Equipment.
He testified that when Superior was incorporated it did no actual business. In the fall of 1977, Mr. Herring began to transfer the assets of Herco and other property held by Herco to Superior. At that time, Herco was defaulting on its debts and was the defendant in several lawsuits. Mr. Mauer concluded that Superior never functioned as a separate corporation and its only real purpose was to receive and hold Herco's property. His testimony concerning Superior was not contradicted or disputed.
Dean and Superior entered into negotiations for the sale of the two Euclid R-35 trucks. Dean retained an attorney who conducted a UCC search and found no filings on the trucks. The attorney also found no tax or judgment liens filed against Superior on the trucks.
The credit manager of Dean, Robert Thomas, testified that he asked Superior where it had acquired the trucks. He was told that they had been purchased from Triple J Mining of Alabama and was given a telephone number. Mr. Thomas found the given number listed in the appropriate phone book as Triple J's number. He called and spoke to a Ray Wyatt. Mr. Wyatt told him that Triple J had bought the trucks from Herco and had traded them to Superior. Plaintiff objected to this testimony at trial on the grounds that it was irrelevant and was hearsay. The court admitted it for the limited purpose of showing the defendant's state of mind and good faith.
Satisfied with Superior's ownership, Dean agreed to purchase the trucks on the condition that before the purchase money was delivered Superior supply the bill of sale concerning the alleged sale of the trucks by Triple J. Superior complied, and the transaction was completed. The bill of sale was admitted into evidence at trial for the limited purpose of showing that Dean received such a document and not to show that the sale by Triple J had actually occurred. Dean sold and delivered the trucks to Missouri Rock.
As we have noted, Standard was eventually informed by the FBI that Missouri Rock was in possession of the trucks. Standard filed suit for replevin of the two trucks and for damages for conversion. Defendant in its answer asserted the affirmative defense of entrustment pursuant to § 400.2-403. 1 The case was tried to the jury. Defendant submitted the following instruction on entrustment which was read to the jury.
Your verdict must be for defendant Missouri Rock Company if you believe:
First, plaintiff Standard Leasing Corporation entrusted the rock trucks to Herco Corporation; and
Second, Herco Corporation was in the business of buying, repairing, and selling rock trucks and other heavy equipment; and
Third, Herco Corporation transferred the rock trucks to a buyer in ordinary course of business.
The instruction is derived from § 400.2-403(2) and (3), which are 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.
The jury returned a verdict in favor of defendant. Plaintiffs moved for a new trial which the court denied.
Standard Leasing raises two points on appeal: First, that the third part of defendant's entrustment instruction was not supported by any evidence admitted at trial. Standard concedes that parts one and two of the instruction were supported by the...
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