Tom W. Carpenter Equip. Co. v. General Electric Credit Corp., 10-69.

• Decision Date: 24 October 1969
• Docket Number: No. 10-69.,10-69.
• Parties: TOM W. CARPENTER EQUIPMENT COMPANY, Inc., a Texas corporation, Plaintiff-Appellee, v. GENERAL ELECTRIC CREDIT CORPORATION, a New York corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

417 F.2d 988 (1969)

TOM W. CARPENTER EQUIPMENT COMPANY, Inc., a Texas corporation, Plaintiff-Appellee, v. GENERAL ELECTRIC CREDIT CORPORATION, a New York corporation, Defendant-Appellant.

No. 10-69.

United States Court of Appeals Tenth Circuit.

October 24, 1969.

Richard A. Lonnquist, Denver, Colo. (Abe L. Hoffman, Denver, Colo., with him on the brief), for plaintiff-appellee.

Stephen A. Hellerstein, Denver, Colo. (F. J. Manning, Denver, Colo., with him on the briefs), for defendant-appellant.

Before MURRAH, PICKETT and HICKEY, Circuit Judges.

PICKETT, Circuit Judge.

Tom W. Carpenter Equipment Company, Inc., a Texas corporation, doing business at Amarillo, Texas, alleging ownership of a large construction machine, sued appellant General Electric Credit Corporation for conversion of the equipment. General Electric claimed title to the equipment through a third party in possession thereof. The trial court found for the plaintiff and entered judgment for the amount found to be the reasonable value of the equipment.

On April 24, 1965 Carpenter, who was engaged in the business of renting, selling, servicing and repairing construction equipment, purchased a new tractor-loader from the Allis-Chalmers Manufacturing Company. The evidence of ownership obtained by Carpenter from Allis-Chalmers was the dealer's invoice, a bill of lading, the dealer's settlement transmittal, and the canceled check for the purchase price.¹ Carpenter directed Allis-Chalmers to ship the tractor-loader to Fred H. Linneman, Inc., whose business was principally that of excavating and laying pipelines in the vicinity of Denver, Colorado. On May 6, 1965, after delivery of the equipment, a "Machinery Lease Agreement" was entered into between Carpenter and Linneman. The agreement provided that Linneman was to pay Carpenter a monthly rental of $950 for eleven consecutive months beginning June 6, 1965. The agreement further provided that on May 6, 1966 a twelfth and final payment was to be made in the amount of $19,974.38. Carpenter testified that the final payment was for the purpose of allowing Linneman an opportunity to renegotiate the lease; that he did not expect the final lump-sum payment to be made. Linneman had rented equipment from Carpenter on prior occasions under similar agreements.

During the month of August 1965 Linneman, whose need for the use of the machine had not materialized, was authorized by Carpenter to deliver the equipment to Fincham Equipment Company of Denver, Colorado, a new and used equipment dealer, for leasing purposes. Carpenter knew the nature of Fincham's business, but authorized delivery of the equipment with the understanding that it was to be leased to one of Fincham's customers for a short period of time.² The record does not disclose whether Carpenter had any dealings with Fincham with reference to the equipment prior to the transfer of possession from Linneman to Fincham. The $950 monthly rental payments were thereafter made to Carpenter by Fincham in the manner provided for in the agreement between Carpenter and Linneman, but there was no evidence of an assignment of the lease to Fincham.

On September 7, 1965, without the knowledge or consent of Carpenter, Fincham sold the tractor-loader to Tri-State Drilling Company on a lease purchase arrangement. On the same day, Fincham assigned the Tri-State contract to General Electric, which duly filed financing statements in Colorado, Montana and Idaho because Tri-State moved the tractor-loader from place to place. Fincham had no title to the property when the sale was consummated.

On January 23, 1966 Carpenter and Fincham entered into a "Machinery Lease Agreement" similar to the Linneman contract, providing for six consecutive monthly payments of $950 per month beginning February 23, 1966, with a seventh and final payment of $19,814.57 due August 23, 1966. When this transaction was consummated Carpenter did not know that Fincham had sold the equipment in September 1965 and had received payment in full.

On November 24, 1966 General Electric Credit Corporation repossessed the tractor-loader from Tri-State in Idaho, returned it to Colorado, and stored it with Power Motive Corporation.³ On November 25, 1966 Tri-State filed a bankruptcy petition in the United States District Court for the District of Colorado. In the bankruptcy proceeding of Tri-State, Carpenter filed a petition to reclaim the tractor-loader and served notice thereof upon General Electric. General Electric disregarded the notice and did not contest Carpenter's petition or in any manner appear in the bankruptcy proceeding, although General Electric was listed as a secured creditor. When the bankruptcy court entered judgment in favor of Carpenter, General Electric was in possession and control of the tractor-loader, as it had been during the bankruptcy proceedings. It does not appear from the record whether Carpenter had knowledge of the sale to Tri-State or the claim of General Electric until after the institution of the bankruptcy proceedings.

The court concluded that "Fincham had no legal power to create a title by virtue of possession of the equipment; mere possession does not create an indicia of ownership, nor are there present other facts which would create a waiver of estoppel to bar plaintiff's claim to title, and the court would not be justified in holding that the plaintiff through negligence misled the defendant, General Electric Credit Corporation." The validity of this finding and conclusion is the primary issue presented on this appeal.

It is the contention of General Electric that when Carpenter consented to Fincham's possession of the equipment, knowing Fincham to be a dealer in like equipment, Carpenter is estopped to deny the title of an innocent purchaser for value from Fincham.

The Colorado courts have recognized the general rule that the owner of personal property cannot assert his title against an innocent purchaser for value from a third person in whom the owner has...