USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 97-1175
DEWELDON, LTD.,
Plaintiff - Appellant,
v.
ROBERT MCKEAN,
Defendant - Appellee.
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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. ___________________
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September 24, 1997
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* 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.
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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
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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.
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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
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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.
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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
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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
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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
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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 ________
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