DeWeldon, Ltd. v. McKean

Procedural entryThis page is a short order in DeWeldon, Ltd. v. McKean. Read the opinion of the Court — 125 F.3d 24 →

Court of Appeals for the First Circuit·Decided September 25, 1997·No. 97-1175·Published

Opinion

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

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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-

DeWeldon, Ltd. v. McKean, (1st Cir. 1997).

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