Sheridan Suzuki, Inc. v. Caruso Auto Sales

Brief Fact Summary. Plaintiff Sheridan Suzuki sold a motorcycle to Ronald Bouton, who paid with a bad check and then sold the vehicle to Defendant Caruso Auto Sales the following day.

Synopsis of Rule of Law. The common law rule that a thief could never pass good title has been supplanted by the statutory rule that a person receiving goods incident to a transaction involving a dishonored check receives only voidable title. A bona fide purchaser for value can receive good title from a person with voidable title so long as other statutory requirements are met.

Facts. Bouton purchased a motorcycle from Plaintiff for a sum of $3,559.44, which was paid for with a check later dishonored. Bouton received a bill of sale and registration in his name. Also, a Certificate of Title was applied for from the state agency pursuant to the state requirements. The process of granting a Certificate of Title was later interrupted by Plaintiff upon discovery that Bouton’s check was bad. One day later Bouton endeavored to sell the motorcycle to Defendant. During this time Defendant called Plaintiff and was told of the circumstances of the prior day’s transaction, although at that time the Plaintiff was unaware that Bouton’s check was no good. Bouton was paid $2,000 for the motorcycle by Defendant and promised to deliver the Certificate of Title to Defendant when it was received from the state. Bouton left the area and when the check was found to be bad, Plaintiff sued for return of the motorcycle and prevailed in a preliminary order to have the motorcycle pla
ced with Plaintiff until a determination of the rights of the parties could be made.

Issue. Did Bouton possess any title that could be passed on to Defendant in a manner which creates legal protection for Defendant as a bona fide purchaser?

Held. No. Plaintiff’s motion for summary judgment is granted and Defendant’s motion for summary judgment is denied.
At common law a thief could pass no title whatsoever to stolen goods. However, that rule has been supplanted by the Uniform Commercial Code with respect to goods received “in exchange for a check that was later dishonored.” [U.C.C. Section:2-403]. The common law rule is that the buyer of stolen goods from a thief has void title. Under the U.C.C., the buyer of goods that were obtained by a bad check has a “voidable” title, at best. A bona fide purchaser for value can obtain good title from a person with “voidable” title under the U.C.C.
In order to determine what form of title Bouton had in the motorcycle the Court considers not only the U.C.C. definitions, but also those of the statutory scheme which deals specifically with the titling of motor vehicles. The Court finds that, insofar as different results occur between the two portions of code, the particularized statute of the motor vehicle title scheme will be applied over the general statute of the U.C.C.
In the New York statute regarding the titling of motor vehicles, the procedures are more than mere record keeping and amount to a “quasi- judicial” determination of one’s ownership of a motor vehicle. The mere act of applying for a Certificate of Title is not sufficient to create good or complete title. The final determination of the department must be made upon the application documents submitted. Here the process was interrupted prior to completion, and thus Bouton never possessed the Certificate of Title. Therefore, the lack of perfected title in Bouton prevents Defendant from claiming to be a bona fide purchaser for value.
Defendant also alleges that Plaintiff’s assurance by telephone call that Bouton had in fact purchased the motorcycle from Plaintiff creates an equitable estoppel defense against the Plaintiff. The Court rejects this argument because the Defendant never had any right to the property in question, and thus, has not been denied any right.
The Court noted the public policy of preventing fraud in the purchases of motor vehicles. The Court found that Defendant had taken a risk which could not be afforded legal protection.

Discussion. This case contrasts the common law rule that a thief’s title in stolen property is void with the U.C.C. rule that title is voidable when property is obtained with a bad