Case Title: Mid-East Services v. Enterprise Ford Tractor

Citation: 

Docket Number: 992543

State: virginia

Court: Virginia Supreme Court

Date: 2000-09-15T00:00:00Z

Document:
Present:  All the Justices 
 
MID-EAST SERVICES, INC. 
 
v.  Record No. 992543    OPINION BY JUSTICE DONALD W. LEMONS 
 
 
 
September 15, 2000 
ENTERPRISE FORD TRACTOR, INC. 
 
FROM THE CIRCUIT COURT OF YORK COUNTY 
Thomas B. Hoover, Judge 
 
 
In this appeal, we consider whether the trial court erred 
in finding that Enterprise Ford Tractor, Inc. (“Enterprise”) 
was not a seller or an agent for a seller in a transaction 
involving the sale of lawn servicing equipment to Mid-East 
Services, Inc. (“Mid-East”). 
I 
 
On June 4, 1997, Mid-East, by its agent, Robert L. 
Phillips, executed a bill of sale and tendered a check in the 
amount of $47,000 to purchase certain lawn servicing equipment1 
from William T. Hall, the owner and operator of York River 
Services, Inc. (“York River”).2  The equipment was located in a 
compound at Fort Bragg, North Carolina, where York River had 
been performing a maintenance contract at the military base.  
Apparently, for reasons undisclosed in the record, York River 
                     
1 The equipment consisted of three Ford Tractors, five 
Alamo Flail Mowers, one swing trim, one 500-gallon fuel tank, 
one bush hog, two 20-foot storage vans, one 40-foot storage 
van, one base radio station, and nine hand-held radios. 
2 Although the bill of sale listed William T. Hall, 
individually, as “seller,” testimony revealed that the 
was not able to complete its contract and Mid-East had been 
requested to perform the services.  During the period 
pertinent to this dispute, Enterprise never took possession of 
the equipment. 
 
On the day after the check was issued, Mid-East stopped 
payment on the check ostensibly because of concerns that “Mr. 
Hall was not legitimate.”  Also on the same day, Phillips 
contacted Enterprise and spoke with its representative, Bruce 
E. Strack, about the equipment itemized on the bill of sale 
from Hall.  Strack informed Phillips of an existing lien held 
by Ford New Holland Credit (“New Holland”) on the equipment, 
for which Enterprise was a guarantor.  Strack told Phillips 
that he would contact New Holland to determine the pay-off 
amounts.  With Strack acting as intermediary, a facsimile 
transmission was sent from Strack to Phillips indicating that 
a “check in the amount of ($47,000.00) will pay for” certain 
equipment listed.  Mid-East had been willing to pay $47,000 
for the equipment listed on the bill of sale with Hall.  
However, not all of the equipment listed on the bill of sale 
was specified on the facsimile from Strack.  Consequently, the 
price was negotiated to $38,500 and Mid-East tendered its 
check in that amount.  Enterprise sent New Holland a check for 
                                                                
equipment had been previously sold by Enterprise to York 
River, not to William T. Hall. 
 
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$30,000 and applied the balance of $8,500 toward Hall’s past-
due account of $20,000 with Enterprise.  The parties agreed 
that, at the time of this transaction, Enterprise did not have 
knowledge of a lien on the equipment held by United Leasing 
Corporation.  At least for this transaction, Mid-East alleges 
that Strack told Phillips that Enterprise owned the equipment.  
Strack denies ever making such a statement. 
 
Approximately three weeks later, Phillips contacted 
Strack again regarding the purchase of an additional tractor 
subject to New Holland’s liens.  Strack confirmed the 
conversation with a facsimile stating, “Per our conversation, 
you have a signed retail sales agreement with Bill Hall of 
York River Services for a 3930 s/n BD75226 in the amount of 
$9,000.  If you send us the money we will forward it to New 
Holland to release the [lien].”  According to Strack, this 
second facsimile was more specific because United Leasing had 
since called to inform him of its lien on the equipment.  
Strack also testified that he had informed Phillips about the 
United Leasing lien.  Nonetheless, Mid-East tendered its check 
for $9,000 to Strack, who forwarded it to New Holland. 
 
Toward the end of June 1997, a representative of United 
Leasing and a deputy sheriff went to the compound at Fort 
Bragg with legal documents authorizing the repossession of the 
subject equipment.  Mid-East needed the equipment to perform 
 
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its contract at Fort Bragg and, on July 1, 1997, Mid-East and 
United Leasing entered into a lease agreement for the use of 
some of the equipment in question for two months at a cost of 
$2,500 per month.  At the end of August, United Leasing took 
possession of the equipment. 
 
On January 9, 1998, Mid-East filed a motion for judgment 
contending that Enterprise “induce[d]” Mid-East to enter into 
the two contracts for the subject equipment by stating that 
“it had full ownership and authority to sell the equipment 
free of liens.”  Mid-East alleged that Enterprise breached an 
express contract, perpetrated fraud, and violated various 
provisions of the Uniform Commercial Code as adopted in 
Virginia,3 as well as Code § 18.2-217(a).4  Mid-East sought to 
recover actual damages of $52,500 and $50,000 in punitive 
damages, plus interest and costs. 
 
On July 15, 1999, the circuit court heard evidence and 
dismissed the case, stating in its order, “the [c]ourt is of 
the opinion that the Plaintiff, MID-EAST SERVICES, INC. has 
                     
3Specifically, Mid-East alleges violations of Code §§ 8.2-
206, 8.2-301, 8.2-312, 8.2-313, and 8.2-721. 
4Code § 18.2-217(a) states, in pertinent part: 
 
Any person, firm, corporation or association 
 
who in any manner advertises or offers for sale 
 
to the public any merchandise, goods, 
 
commodity, service or thing with intent not to 
 
sell, or with intent not to sell at the price 
 
or upon the terms advertised or offered, shall 
 
be guilty of a Class 1 misdemeanor. 
 
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not proven its case on any count and, therefore, the Defendant 
should prevail.”  Specifically, the trial court found that 
Enterprise acted “only as lienholder or agent for the 
lienholder.  They’re not the seller, they’re not the dealer, 
they’re not an agent for the seller.” 
II 
 
In this appeal, Mid-East alleges that the trial court 
erred as a matter of law when it: (1) failed to enforce the 
statutory warranty of good title created by Code § 8.2-312; 
(2) failed to find that the goods were entrusted to Enterprise 
pursuant to Code § 8.2-403(2); (3) ruled that a formal bill of 
sale was required to transfer ownership of the goods to Mid-
East; (4) “disregarded the complete failure of consideration 
where the parties intended to transfer the goods with good 
title and Mid-East paid Enterprise but received goods with 
defective title and Enterprise refused to return Mid-East’s 
consideration”; and (5) found Enterprise was acting as a 
lienholder when no action pertaining to secured transactions 
under Title 8.9 took place.5  
 
Enterprise argues it was not a “seller” under Title 8.2 
of the Code and that, even if Code § 8.2-312 applied in this 
case, the warranty of good title was excluded under subsection 
                     
5 The allegations of fraud and violation of Code § 18.2-
217(a) are not the subject of assignments of error. 
 
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(2) because the circumstances gave Phillips reason to know 
that Enterprise did not claim title to the equipment.  
Additionally, Enterprise maintains that the evidence is 
sufficient to support the trial court’s conclusion that 
Enterprise acted as a “lienholder or agent of a lienholder” in 
this transaction.  Further, Enterprise argues that it did not 
act as a merchant under an entrustment within the meaning of 
Code § 8.2-403(2) and, finally, that because it did not act as 
a seller or agent for the seller, it could not be accountable 
for any failure of consideration. 
III 
 
A review of the record reveals that Mid-East never 
alleged that Enterprise acted as a merchant entrusted with 
goods pursuant to Code § 8.2-403(2).  Because the matter was 
not presented to the trial court, we will not consider the 
argument on appeal.  See Rule 5:25; Pulliam v. Coastal 
Emergency Servs., 257 Va. 1, 16, 509 S.E.2d 307, 316 (1999). 
IV 
 
The remaining assignments of error are resolved by the 
trial court’s factual finding that Enterprise was not the 
seller or an agent for the seller in this transaction.   
 
On appeal, we review the facts in the light most 
favorable to the prevailing party at trial.  Nationwide Mut. 
Ins. Co. v. St. John, 259 Va. 71, 76, 524 S.E.2d 649, 651 
 
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(2000).  A trial court’s judgment is presumed to be correct 
and, on appeal, we will not set it aside unless the judgment 
is plainly wrong or not supported by the evidence.  Ravenwood 
Towers, Inc. v. Woodyard, 244 Va. 51, 57, 419 S.E.2d 627, 630 
(1992). 
 
The trial court found that the only bill of sale in this 
transaction was from Hall as seller to Mid-East as buyer.  All 
of the items referred to in the facsimile dated June 5, 1997 
are identified in the bill of sale dated June 4, 1997.  A 
fourth tractor referred to in the facsimile dated June 17, 
1997 was not listed in the bill of sale; however, Strack, on 
behalf of Enterprise, clearly indicated in the facsimile that 
a retail sales agreement existed between Mid-East and “Bill 
Hall of York River Services” for the purchase of this 
additional tractor.  In both transactions Strack, on behalf of 
Enterprise, identified his role as “negotiations middleman” 
and the trial court found that he was acting for Enterprise 
and for New Holland.  The trial court specifically found that 
Strack, acting on behalf of Enterprise, was not an agent for 
Hall or York River. 
A. 
 
Mid-East asserts that Title 8.2 of the Uniform Commercial 
Code as adopted in Virginia applies to these transactions.  
Most assuredly it does.  However, Mid-East mischaracterizes 
 
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the parties to these transactions.  As the trial court found, 
the seller was Hall and the buyer was Mid-East.  Enterprise 
acted on its own behalf and on behalf of New Holland, a 
lienholder.  Enterprise was not a seller or an agent for a 
seller under Title 8.2. 
 
Mid-East’s arguments are dependent upon characterizing 
Enterprise as a “seller” under Title 8.2 of the Code.  See 
Code § 8.2-103(d) (“seller” defined as “a person who sells or 
contracts to sell goods”).  If Enterprise is a “seller” under 
Title 8.2, then Code § 8.2-312(1) provides, subject to 
exclusion or modification under subsection (2), a warranty 
from the seller that: 
(a) the title conveyed shall be good, 
and its transfer rightful; and 
(b) the goods shall be delivered free 
from any security interest or 
other lien or encumbrance of which 
the buyer at the time of 
contracting has no knowledge. 
 
Because Hall, not Enterprise, was the seller in 
these transactions, Mid-East may not look to Enterprise 
for a warranty under Code § 8.2-312(1).  See, e.g., Moore 
v. Allied Chem. Corp., 480 F. Supp. 364, 375 (E.D. Va. 
1979)(breach of warranty within the meaning of Commercial 
Code of Virginia requires a sale which “must involve the 
passing of title of goods from the seller to the buyer 
for a price”). 
 
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B. 
 
Mid-East maintains that the trial court was plainly 
wrong in its finding that Enterprise was an agent for the 
lienholder because Enterprise never utilized any of the 
provisions of Title 8.9 of the Uniform Commercial Code 
pertaining to secured transactions.  Again Mid-East 
misunderstands the nature of the transactions that took 
place.  Enterprise, acting for itself or as an agent for 
New Holland, was not seeking to create, perfect, or 
enforce a security interest.  As the trial court found, 
Enterprise was the “negotiations middleman” for the 
purpose of the pay-off of New Holland’s lien and 
Enterprise’s overdue account with York River. 
C. 
 
Mid-East states as an assignment of error that “[t]he 
trial court erred in ruling that a formal bill of sale was 
required to transfer ownership of the goods to Mid-East.”  
Nowhere in the record was such a ruling made by the trial 
court.  Presumably, Mid-East’s quarrel is that the trial court 
rejected the characterization of the two facsimiles as bills 
of sale.  What the trial court did find is that there was a 
bill of sale, dated June 4, 1997, between Hall and Mid-East.  
The evidence further supports the trial court’s conclusion 
 
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that the transfer of the fourth tractor was the subject of a 
“signed retail sales agreement” between Hall and Mid-East. 
D. 
 
Finally, Mid-East complains that “[t]he trial court erred 
when it disregarded the complete failure of consideration 
where the parties intended to transfer the goods with good 
title and Mid-East paid Enterprise but received goods with 
defective title and Enterprise refused to return Mid-East’s 
consideration.”  There may have been a failure of 
consideration in this transaction, but once again Mid-East 
mistakes the roles played by the various parties.   
 
The trial court did not make a finding concerning failure 
of consideration.  With ample support in the record, the trial 
court found that Enterprise was neither the seller nor an 
agent for the seller.  The consideration paid was to Hall in 
the form of direct payment of Hall’s or York River’s 
indebtedness.  If a failure of consideration occurred, it was 
between Mid-East and Hall rather than between Mid-East and 
Enterprise. 
V 
 
For the reasons stated, we conclude that the trial court 
was not plainly wrong or without evidence to support its 
dismissal of the motion for judgment.  See Wright & Hunt v. 
 
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Wright, 205 Va. 454, 460, 137 S.E.2d 902, 907 (1964).  
Accordingly, we will affirm the judgment of the trial court. 
Affirmed. 
 
 
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