Court Opinion

ID: 2964871
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:32:26.887602+00
Date Added: 2024-06-11T11:43:02.867673
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

          No. 97-1175

                                   DEWELDON, LTD.,

                                Plaintiff - Appellant,

                                          v.

                                    ROBERT MCKEAN,

                                Defendant - Appellee.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

                     [Hon. Ernest C. Torres, U.S. District Judge]
                                             ___________________

                                 ____________________

                                        Before

                                Lynch, Circuit Judge,
                                       _____________

                  Hill* and John R. Gibson,** Senior Circuit Judges.
                                              _____________________

                                _____________________

               Keven  A. McKenna,  with whom  Karen A.  Clark and  Keven A.
               _________________              _______________      ________
          McKenna, P.C. were on brief for appellant.
          _____________
               Matthew T. Oliverio for appellee.
               ___________________

                                 ____________________

                                  September 24, 1997
                                 ____________________

                              
          ____________________

          *  Of the Eleventh Circuit, sitting by designation.

          **  Of the Eighth Circuit, sitting by designation.

                    HILL, Senior  Circuit Judge.   DeWeldon,  Ltd. sued  in
                    HILL, Senior  Circuit Judge.
                          _____________________

          district court to  recover three paintings it alleges  are in the

          possession  of Robert  McKean but  to which  he is  not entitled.

          After  a bench  trial, the  district court  ruled that  McKean is

          entitled  to retain  possession  of  the  paintings  and  entered

          judgment for McKean.  This appeal ensued.

                                          I.

                    Felix  DeWeldon   is  a  well-known  sculptor  and  art

          collector.   He  owned three  paintings  valued at  $26,000.   He

          displayed  these, and  other collection-grade  paintings, on  the

          walls of  his home--Beacon  Rock, in Newport,  Rhode Island.   He

          declared  bankruptcy in 1991.   In 1992, Deweldon, Ltd. purchased

          all  Felix  DeWeldon's  personal  property  from  the  bankruptcy

          trustee.   In  1993,  Nancy  Wardell,  the  sole  shareholder  of

          DeWeldon, Ltd.,  sold all her  DeWeldon, Ltd. stock to  the Byron

          Preservation Trust, which  in turn sold Felix DeWeldon  an option

          to repurchase the  paintings and a contractual  right to continue

          to retain  possession of the paintings until  the option expired.

          At all times, Felix DeWeldon continued to possess and display the

          paintings  at Beacon  Rock.   In 1994,  his son  Byron approached

          Robert McKean, an acquaintance, and  told him that his father was

          interested  in selling some  of his paintings.  McKean viewed the

          paintings at Beacon Rock and subsequently purchased the paintings

          at issue for  $50,000.  DeWeldon, Ltd. sued in  district court to

          recover the paintings.   The district court entered  judgment for

          McKean.  For the following reasons, we affirm.

                                         -2-

                                         II.

                    We conclude that the evidence sufficiently  establishes

          the following facts found by  the district court.  Felix DeWeldon

          was a "well-known artist" and "collector."   After DeWeldon, Ltd.

          purchased Felix DeWeldon's paintings from his  bankruptcy estate,

          Frederick Crevoiserat, director of DeWeldon, Ltd., entrusted  the

          paintings to Felix DeWeldon as custodian.  DeWeldon, Ltd. allowed

          Felix DeWeldon to maintain possession of the paintings; it put no

          signs  on the  premises,  nor  tags or  labels  on the  paintings

          themselves to  indicate that Felix  DeWeldon no longer  owned the

          paintings.  The paintings remained on the walls of Beacon Rock.

                    McKean  viewed the  paintings on  the  walls at  Beacon

          Rock.  The only  tags on the back of the  paintings were those of

          Christie's--the auction house.1   McKean inquired  of Christie's,

          and was informed that the paintings  had not sold at auction  and

          DeWeldon had  "re-purchased" them.2   McKean paid  more than  the

          appraised value  of the paintings  and Felix DeWeldon gave  him a

          bill of sale.

                    In June of 1993, a  Mr. Panteleakis recorded a UCC lien

          in  Newport, Rhode  Island  claiming a  security interest  in the

          paintings.3  The  lien had been granted by DeWeldon,  Ltd. of 646

                              
          ____________________

          1  At some time prior to the filing of bankruptcy, Felix DeWeldon
          had commissioned Christie's to auction the paintings.

          2   This term of  art in the trade  means that DeWeldon had taken
          the paintings back when they did not sell at auction.

          3  Apparently  Mr. Panteleakis had underwritten  DeWeldon, Ltd.'s
          purchase of DeWeldon's personal property.

                                         -3-

          Bellevue Ave, not by Felix  DeWeldon of 145 Harrison Ave.   There

          is  no  evidence  of  any  recorded  interest  in the  paintings,

          security or otherwise, having been granted by Felix DeWeldon.

                    In December of 1993, DeWeldon, Ltd. sued Felix DeWeldon

          seeking possession  of the  paintings.   The  Rhode Island  court

          denied  the  relief   based  upon  Felix  DeWeldon's   option  to

          repurchase and right  of possession, but enjoined  Felix DeWeldon

          from transferring or removing the paintings from Beacon Rock.

                                         III.

                    The  district court  concluded  from  these facts  that

          DeWeldon,  Ltd.  is equitably  estopped  from  asserting, against

          McKean, its  ownership interest  in the paintings.   We  need not

          review  this holding,  as we  conclude that  the judgment  of the

          district court may be affirmed on other grounds under the laws of

          Rhode Island.4

                    As  a general rule,  a seller cannot  pass better title

          than he has  himself.  Nevertheless, the  Uniform Commercial Code

          (UCC)  as adopted  by Rhode  Island  provides that  an owner  who

          entrusts  items to a  merchant who  deals in  goods of  that kind

          gives him or her power to transfer all rights of the entruster to

          a buyer in the ordinary course of business.  R.I. Gen. Laws   6A-

          2-403(2).5     "'Entrusting'  includes   any  delivery  and   any

                              
          ____________________

          4   We may  affirm the judgment  on any  independently sufficient
          ground  established by the record of  the case.  Ticketmaster-New
                                                           ________________
          York, Inc.  v. Alioto, 26 F.3d 201,  204 (1st Cir. 1994); Inmates
          __________     ______                                     _______
          of Suffolk County Jail v. Rufo, 12 F.3d 286, 291 (1st Cir. 1993).
          ______________________    ____

          5  Rhode Island law applies to this diversity action.

                                         -4-

          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."  R.I. Gen. Laws

            6A-2-403(3).   Under  this provision, a  buyer in  the ordinary

          course of business  will prevail  over the claim  of a party  who

          entrusted such items to the merchant.  In order for  McKean to be

          protected by    6A-2-403, DeWeldon, Ltd. must  have allowed Felix

          DeWeldon to retain possession of the paintings.  McKean must have

          bought the paintings in the ordinary course of business.  He must

          have  given   value  for   the  paintings,   without  actual   or

          constructive  notice of  DeWeldon Ltd.'s  claim  of ownership  to

          them.   Finally,  Felix DeWeldon  must  have been  a merchant  as

          defined  by R.I.  Gen. Laws    6A-2-104.   Under this  section, a

          merchant is one who  has special knowledge or skill and  deals in

          goods of the kind  or "otherwise by  his or her occupation  holds

          him  or herself out as having knowledge  or skill peculiar to the

          practices or goods involved in the transaction. . . ."  Id.
                                                                  ___

                    Under the facts  found by the district  court, McKean's

          purchase  of  the  paintings  is  protected  by  the  entrustment

          doctrine.  First, DeWeldon, Ltd. entrusted the paintings to Felix

          DeWeldon.    After  DeWeldon, Ltd.  purchased  the  paintings, it

          acquiesced  in  Felix  DeWeldon's retention  of  them.   Although

          DeWeldon, Ltd. made some late efforts to regain possession of the

          paintings, these efforts  were frustrated by its  own prior grant

                                         -5-

          to Felix  DeWeldon of an option and right of possession until the

          expiration of the option.

                    Second, McKean was  a buyer in  the ordinary course  of

          business.   Byron informed  McKean that Felix  DeWeldon wished to

          sell  some paintings.    The  paintings  were  hanging  in  Felix

          DeWeldon's  home when McKean viewed and subsequently bought them.

          He knew that Felix  DeWeldon had sold paintings  out of his  home

          before.  McKean gave value for  the paintings.  In fact, he  paid

          more than their appraised value.

                    McKean had no actual notice  that Felix DeWeldon was no

          longer  the true  owner of  the  paintings.   DeWeldon, Ltd.  did

          nothing to  shield the paintings  in the cloak of  its ownership.

          It did  not place  markings on the  paintings, as  Christie's had

          when the paintings were in its possession; it posted no notice of

          ownership  by  or near  the  paintings;  it  failed to  post  the

          injunction  it secured against transfer of the paintings by Felix

          DeWeldon; it  posted, but  then terminated,  a security  guard at

          DeWeldon's  residence  despite  such  a guard's  being  expressly

          permitted  in the  injunction;  it  posted  no  warnings  against

          removal  of the  paintings from  the  residence.   There were  no

          markings on the paintings or  other notice that Felix DeWeldon no

          longer owned the paintings.   The paintings were hanging in Felix

          DeWeldon's home.

                    Neither  did McKean  have  any  constructive notice  of

          another's ownership interest in the paintings.  The lien recorded

          by Mr. Panteleakis  did not constitute such  notice because there

                                         -6-

          was  no way  McKean could  have discovered  it upon  a reasonable

          inquiry.  It was not granted by Felix DeWeldon.

                    Third, under  the facts  of this  case, Felix  DeWeldon

          acted  as a  merchant  within  the meaning  of  the Rhode  Island

          Commercial  Code.    Under  the  Code,  "merchant"  is  given  an

          expansive definition. Providence & Worcester R.  Co. v. Sargent &
                                ______________________________    _________

          Greenleaf, Inc., 802 F.  Supp. 680, 684 n.2  (D.R.I. 1992).   The
          _______________

          Code provides that a merchant is "one who . . . by his occupation

          holds himself  out as having  knowledge or skill peculiar  to the

          practices . . . involved in the transaction  . . . ."   R.I. Gen.

          Laws    6A-2-104.  Comment  2 to this section notes that  "almost

          every  person in  business would,  therefore, be  deemed to  be a

          'merchant'."  Id.
                        ___

                    The entrustment  provision of  the UCC  is designed  to

          enhance the reliability of commercial sales by merchants who deal

          in the kind of goods sold.  Porter v. Wertz, 421 N.E.2d 500 (N.Y.
                                      ______    _____

          1981) (art  dealer is  a merchant when  dealing in  goods of  the

          kind--paintings).  It shifts  the risk of resale  to the one  who

          leaves his property with the merchant.  Id. at 500-01.   See also
                                                  ___              ________

          Atlas Auto Rental Corp. v.  Weisberg, 281 N.Y.S.2d 400 (N.Y. City
          _______________________     ________

          1967).

                    The  district court  found that  Felix  DeWeldon was  a

          "well-known" artist  whose work was  for sale commercially  and a

          "collector."  There was art  work all over Felix DeWeldon's home.

          He had  recently sold  paintings to a  European buyer.     By his

          occupation  he held  himself out  as having  knowledge and  skill

                                         -7-

          peculiar  to art and the art trade.   McKean viewed him as an art

          dealer.

                    We conclude from  these facts that Felix DeWeldon was a

          "merchant" within the meaning of the entrustment provision of the

          UCC as adopted by the Rhode Island Commercial Code.

                    When  a person knowingly delivers his property into the

          possession  of a  merchant dealing  in goods  of that  kind, that

          person assumes the  risk of the merchant's  acting unscrupulously

          by  selling   the  property  to  an  innocent   purchaser.    The

          entrustment provision places  the loss upon the  party who vested

          the  merchant with  the  ability to  transfer  the property  with

          apparent good title.  The entrustor in this case, DeWeldon, Ltd.,

          took that risk and bears the consequences.

                                          V.

                    DeWeldon, Ltd. entrusted three paintings to the care of

          Felix DeWeldon.   Felix  DeWeldon was a  merchant who  bought and

          sold paintings.   Robert McKean  was a purchaser in  the ordinary

          course  of  business who  paid  value for  the  paintings without

          notice of any  claim of ownership by  another.  Under the  law of

          Rhode  Island, McKean  took good  title  to the  paintings.   The

          judgment of the district court is affirmed.
                                            affirmed
                                            ________

            

                                         -8-