Opinion ID: 1252056
Heading Depth: 1
Heading Rank: 1

Heading: breach of warranty of title

Text: Title 45 of the Alaska Statutes adopts Article 2 of the Uniform Commercial Code [3] as the applicable law of sales in Alaska. [4] Under AS 45.02.312, [5] an implied warranty of title accompanies the sale of goods in Alaska. [6] It may expressly be disclaimed. A focal point of the parties' dispute is whether Sumner excluded or modified by specific language the warranty of title. Sumner does not claim that he had good title to the Navajo, but rather alleges that he informed Fel-Air that he leased, but did not own, the Navajo. Fel-Air denies that it was so informed. The superior court specifically found that Sumner did not inform Fel-Air prior to the sale that he had neither title to the Navajo nor the right to sell it, and that the circumstances surrounding the transaction did not give Fel-Air any reason to know that Sumner did not claim title to the plane in himself. The court concluded that Sumner had therefore breached the warranty of title imposed by AS 45.02.312. Sumner concedes that the superior court's conclusion that there was no express or implied disclaimer of the AS 45.02.312 warranty was a finding of fact which may be reversed only if clearly erroneous. Alaska R.Civ.P. 52(a); [7] Uchitel Co. v. Telephone Co., 646 P.2d 229, 233 (Alaska 1982); Strack v. Miller, 645 P.2d 184, 186 (Alaska 1982). In the case at bar, the superior court's factual finding was based upon an assessment of the credibility of conflicting testimonial evidence. We have observed that [i]t is the trial court's function, and not that of a reviewing court, to judge the credibility of the witnesses and to weigh conflicting evidence. This is especially true where the trial court's decision depends largely upon oral testimony. Penn v. Ivey, 615 P.2d 1, 3 (Alaska 1980) (citations omitted). Thus, particular deference must be accorded to the superior court's finding that Sumner did not disclaim the AS 45.02.312 warranty of title. After review of the entire record before us, and guided by these principles of appellate review, we conclude that the superior court's finding that an implied warranty of title accompanied the sale of the Navajo must be upheld. The question now becomes whether or not Sumner breached that warranty. [8] Since Sumner did not have good title to the plane when he purported to convey it to Fel-Air, the answer to this question may seem obvious. Yet both parties agree that Century entrusted the plane to Sumner within the meaning of AS 45.02.403. [9] Under the UCC a merchant to whom goods have been entrusted may give a buyer a better title than the merchant himself possessed. To quote AS 45.02.403(b): An 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. Because Sumner had possession of the Navajo and was a dealer in airplanes, he had the power to transfer all of Century's rights, including its good title to the airplane. Given the facts as the parties have presented them, Fel-Air could have defeated any attempt by Century to regain possession of the Navajo. It does not follow from the fact that the parties now agree that Fel-Air's title was good that Sumner did not breach the implied warranty of title. This question has divided the commentators. Compare 1 Anderson, Uniform Commercial Code § 2-312:36 (3d ed. 1982) (warranty not breached) with 1 Alderman, A Transactional Guide to the Uniform Commercial Code § 1.53-52 (2d ed. 1983) (warranty breached, seller should have chance to cure). Alderman emphasizes the full text of UCC 2-312(a)(1), which provides: (a) Subject to (b) of this section there is in a contract for sale a warranty by the seller that (1) the title conveyed shall be good, and its transfer rightful. AS 45.02.312(a) and (a)(1) (emphasis added). As Alderman states, the entrustee's wrongfulness (lack of right) in making the conveyance ... is unquestionable, for the transfer of title [is] not made pursuant to any `right'. Alderman, supra, at 266-67. Here Sumner's lease-purchase arrangement with Century did not authorize him to transfer title to Fel-Air. The transfer he made to Fel-Air was wrongful, and thus we conclude that the warranty UCC 2-312(a)(1) establishes was breached. Wright v. Vickaryous, 611 P.2d 20 (Alaska 1980), supports this conclusion. Wright suggests that a court attempting to determine whether or not a warranty of title was breached must consider the facts as they appeared to the buyer at the time title was called into question. If a reasonable buyer would conclude that marketable title had not been conveyed to him, the seller  assuming that he does not save the transaction by showing that the facts are not what the buyer believes them to be  has breached the warranty of title. A substantial shadow on title is enough to justify the buyer's refusal to proceed with his contractual performance. [10] Similarly in the instant case the revelation of Century's interest in the Piper Navajo cast such a shadow on the transaction between Sumner and Fel-Air. To dispel a similar shadow, the buyer in Wright would have had to call all the people he believed to be lienholders; had he done so, he would have discovered that their liens had been released. To dispel the shadow of Century Aircraft, Fel-Air would have had to become an expert on the UCC [11] and would then have had to determine that Sumner had not stolen or borrowed the Navajo from Century, [12] that Sumner was indeed a merchant who deals in [airplanes] as the UCC defines merchant, and that Fel-Air itself qualified as a buyer in ordinary course of business. The parties' present agreement on these matters does not mean that these things were obvious at the time the transaction between Sumner and Fel-Air began to break down. Even if we decided to ignore AS 45.02.312's intimation that a wrongful transfer of title breaches the warranty which that section contains, we would be loath to conclude that a breach did not occur in this case. The superior court correctly decided that Sumner breached the implied warranty of title. [13]