Brief Fact Summary. Plaintiff- Appellant allowed Von Maker (who posed as Wertz) borrow a painting to decide if Von Maker wished to buy the painting. Von Maker eventually sold the painting to a third party who resold the painting to a person in Venezuela, and Plaintiff- Appellant seeks to recover the painting.
Synopsis of Rule of Law. Equitable estoppel as a defense against the rightful owner is not available to Defendants unless each element of the defense is proven, specifically, that the rightful owner gave indicia of ownership to another who had the apparent right to sell and that the buyer exercised good faith in the purchase.
The entrustment rule is designed to enhance the reliability of commercial sales by merchants (who deal with the kind of goods sold on a regular basis) while shifting the risk of loss through fraudulent transfer to the owner of the goods, who can select the merchant to whom he entrusts his property.View Full Point of Law
Issue. Does the defense of equitable estoppel or the defense of statutory estoppel raised by Defendant Feigen bar recovery by the Plaintiff?
Held. No. The judgment of the trial court on law and facts is reversed and vacated and judgment is entered for Plaintiff- Appellant. The matter is remanded for a determination of damages.
The defense of statutory estoppel is not available to Defendant Feigen because Defendant was not acting as a “buyer in the ordinary course of business.” This is true for two reasons: (1) Wertz, from whom Defendant Feigen purchased the Utrillo was not “a person in the business of selling goods of that kind.” Wertz was a deli worker, which Defendant Feigen could have discovered through minimal effort. (2) Defendant Feigen did not act in good faith in making the purchase from Wertz. Good faith is defined as “honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.” [U.C.C. Section:2-203]. Defendant Feigen deviated from the standard of good faith by taking no effort to determine if Wertz was authorized by the rightful owner to sell the painting.
The defense of equitable estoppel is likewise not available to Defendant Feigen. Equitable estoppel does not require the buyer to be acting as a buyer in the ordinary course of business, but extends protection to “good faith purchasers for value.” The Court noted that if Plaintiff- Appellant had provideed another (such as Von Maker) with the usual evidence of title or with the apparent authority to dispose of the Utrillo, then Plaintiff- Appellant would be estopped from recovery. However, in this case all the Plaintiff- Appellant allowed was for Von Maker to possess the Utrillo, and conveyed no other indicia of ownership. The mere fact of possession is not sufficient to create a defense of estoppel. Also, Feigen was not a purchaser in good faith because (1) he made no effort to determine who owned the painting sold by Wertz at the direction of Von Maker, (2) Wertz had no right to possess the Utrillo, and (3) Von Maker only possessed a limited right of possession to display the paint
The Court notes that this case deals with rare objects of art and as such should be decided on a policy which protects against dishonest practice in the buying and selling of art.
Discussion. This case is useful as a discussion of the estoppel doctrine. The estoppel defense is generally similar whether it arises under common law or statute.