This case arose after Felix DeWeldon, a well-known sculptor and art collector, sold three paintings to Robert McKean in 1994.
Felix DeWeldon declared bankruptcy in 1991. In 1992, DeWeldon, Ltd., purchased all Felix DeWeldon’s personal property from the bankruptcy trustee. After this purchase, the director of DeWeldon, Ltd., entrusted the paintings to Felix DeWeldon as custodian. DeWeldon, Ltd., did nothing to make it clear Felix DeWeldon did not own the paintings. For example, DeWeldon, Ltd., did not put a sign on the premises of Beacon Rock, Felix DeWeldon’s home in Newport, Rhode Island, nor did DeWeldon, Ltd., tag or label the paintings themselves.
In 1993, Nancy Wardell, the sole shareholder of DeWeldon, Ltd., sold all of her DeWeldon, Ltd., stock to the Byron Preservation Trust. This trust 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.
In 1993, DeWeldon, Ltd., sued Felix DeWeldon, seeking possession of the paintings, but was unsuccessful because of the option to repurchase and right of possession. The court enjoined Felix DeWeldon from transferring or removing the paintings from Beacon Rock. The paintings that became the subject of this lawsuit never left Beacon Rock until McKean bought them in 1994.
The question in this case is whether DeWeldon, Ltd., can recover the three paintings it had entrusted to Felix DeWeldon, or, alternatively, whether the district court correctly ruled in favor of McKean, the buyer.
SENIOR CIRCUIT JUDGE HILL As a general rule, a seller [in this case Felix DeWeldon] cannot pass better title than he has himself. Nevertheless, the Uniform Commercial Cole (UCC) as adopted by Rhode Island provides that an owner [in this case DeWeldon, Ltd.] who entrusts items to a merchant who deals in goods of that kind gives him or her the power to transfer all rights of the entruster to a buyer in the ordinary course of business….
In order for McKean to be protected … , 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 Sec. 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 himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction….” … [The court then resolves the preceding factual issues in McKean’s favor before looking at the merchant issue.]
… Felix DeWeldon acted as a merchant within the meaning of the Rhode Island Commercial Code. Under the Code, “merchant” is given an expansive definition…. 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 Sec. 6A-2-104. Comment 2 to this section notes that Page 492 “almost every person in the business world would, therefore, be deemed to be a ‘merchant.’” …
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…. It shifts the risk of resale to the one who leaves his property with the merchant…. 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 DeWeldson’s home. He had recently sold paintings to a European buyer. By his occupation he held himself out as having knowledge and skill 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 apparently good title. The entrustor in this case, DeWeldon, Ltd., took that risk and bears the consequences.
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….
CRITICAL THINKING:
In this case, the goods in question were artworks as opposed to generic or ordinary goods. Does that make any difference in the application of the entrustment rule? Should there be a distinction between general goods and highly personal goods?
ETHICAL DECISION MAKING:
Think about this case closely. You take your great-great grandfather’s Civil War era pocket watch in to a watch repair shop for cleaning. The repairman inadvertently puts your pocket watch out for sale, and a good-faith purchaser buys it. You can clearly sue and prevail over the repair shop, but you want the watch back. Under the rules of entrustment, you will not. Fair?