Chapter IV　ORIGINAL OWNER’S RIGHTS

Bailments ＆ Good Faith Purchase

A.Bailments

The Principles

1.Broadly speaking，a bailment is a rightful possession of goods by one who is not the true owner.

2.Generally，a bailment occurs when there is delivery of personal property by a prior possessor to a subsequent possessor for a particular purpose with an express or implied understanding that when the purpose is completed the property will be returned to the prior possessor.

3.A bailment is frequently said to be based on a contract，express or implied，but the obligations may be imposed by law irrespective of the “bailee’s” intent； thus any contract in such situations is implied by law and not in fact.

4.The bailee must be in possession of the goods.

5.In order to have possession，there must be physical control over the property and intention to exercise that control.

a） Control，for example，is an issue when goods are deposited in a safe deposit box where both the customer and the bank have keys.Courts frequently hold this a bailment although the bailee has neither complete control nor any way to know what is in the box.The bailee does intend，however，to control the contents whatever they are.

b） There also must be an intent to exercise control.This issue is critical in bailments of parcels or other chattels containing items of which the “bailee” is unaware，and in situations where the depository attempts to prevent herself from becoming a bailee of the particular item.

Bailments Distinguished from Other Legal Relationships

A bailment is distinguished from other legal relationship as follows：

1.Custody：When the owner of goods places them in the actual physical control of another with no intent to relinquish the right，as distinct from the power of dominion over them，there is no bailment or possession but only custody.For example，if a clerk hands goods to a customer to examine，the customer has only custody.Similarly，an employee has only custody of his employer’s chattels.

2.Sale：In a sale，title passes to the purchaser； in a bailment the title remains in the bailor.

3.Conditional Sale：A purchaser under a conditional sales contract acquires not only possession but also beneficial interest in the goods for which he is under an obligation to pay.The conditional seller retains legal title for security only.

4.Trust：A trustee acquires legal title for purposes of performing her duties as trustee； a bailee has only possession.

5.Lease：A landlord-tenant relationship and not a bailment results if there is a lease of space for use by the tenant.The automobile parking lot situation results in a landlord-tenant or licensor-licensee relationship in the case of a park-and-lock operation.In this situation the owner of the car keeps the keys，along with control and constructive possession of the automobile.On the other hand，if the keys are surrendered to the attendant who assumes control of the car，there is a bailment.In a lease of personal property where the lessee acquires possession of the goods with an obligation to return them，the lessee is a bailee of the chattels.

Liability for Failure to Return Goods

1.The bailee has a duty to redeliver the goods to the bailor on demand，or if a fixed term has been set for the bailment by contract，at the expiration of that term.

2.The bailee is liable for conversion，regardless of negligence，if the bailee wrongfully refuses to return the goods or if the bailee delivers the goods to the wrong person.

3.Liability of the bailee is based on negligence if the goods are lost，destroyed or damaged during the bailment.The burden of proof is normally on the bailor but if the bailor proves delivery of the goods and failure to return them，or redelivery in a damaged condition，the bailor establishes a prima facie case.At this point，the burden of going forward with the evidence ordinarily shifts to the bailee.

Rights of Bailee Against Third Parties

A bailee is entitled to possession of the bailed property or damages against third parties who wrongfully take or damage the property.The wrongdoer cannot defeat the bailee’s claim by showing title in another with whom the wrongdoer has no connection.

Rights of Bailors Against Bona Fide Purchasers

Ordinarily a person cannot transfer a greater title to property to a third person than the transferor has.Thus，a bailee ordinarily cannot defeat the rights of the bailor by transferring the bailed property to a third party.

Under certain circumstances a bailee can transfer a good title to a purchaser even though the transfer is wrongful as against the bailor.This can occur if the bailee is a dealer of the kind of goods bailed and the transferee is a bona fide purchaser for value.

PROBLEMS

Problem 1–Classi fication of Bailments and Standard of Care

A drove her car into B’s enclosed parking lot and paid the parking fee.A left the car keys in the ignition at the request of the attendant and in return was given a receipt.Printed on the ticket was the following：

Liability.Management assumes no responsibility of any kind.Charges are for rental of space.From 8 AM to 11 PM.Not responsible for articles left in or on the car.Agree to within terms.

A read and understood these words but did not read a sign which provided：

Charges are for use of parking space until 11 PM.Not responsible for cars left open after 11 PM.You may lock your car.

When A returned，A discovered the car had been stolen.A sues B.May A recover？7

Applicable Law

A parking lot operation results in a lease of space relationship when the motorist parks and locks the car but results in a bailment when the attendant takes possession and control of the car.The conduct of the parties，not the printed words on the ticket，determines the relationship.The parties by a voluntary agreement may limit the liability of the bailee but considerable authority will not permit the bailee to exempt itself from all liability for negligence.

Answer and Analysis

Yes.Depositing an automobile in a parking lot may constitute either a lease of space or a bailment of the automobile.The difference is whether the owner of the car surrenders possession and control of the automobile and the owner of the lot assumes it.Where the attendant collects a fee，designates the area in which to park，and the owner parks and locks the automobile，there is no transfer of possession.Consequently，there is a lease[2] and no bailment and generally no liability on the parking lot for theft.[3]

On the other hand，when the attendant takes possession of the car，parks it，retains the key and issues a receipt，possession passes to the lot owner and a bailment is created regardless of what the ticket says.Once the bailment relationship has been created a duty arises to exercise reasonable care to prevent theft.The provisions on the receipt are of no effect because a bailee cannot by contract relieve itself from all liability for losses resulting from its own negligence.

Problem 2–Rights of Bailors Against Bona Fide Purchasers

O owned a diamond ring which needed cleaning.O left the ring with B，a local retail jeweler to be cleaned.B cleaned the ring，put it in a case in the front of the store and subsequently sold it to P，an unsuspecting customer who paid B the full value of the ring.B refused to pay O the value of the ring.O then sued P to recover the ring.What result？[4]

Applicable Law

At common law a bailor who entrusted goods to a bailee under such circumstances that a reasonable person could believe that the bailee was the owner of the goods was estopped from claiming the goods from a bona fide purchaser for value.A similar rule applies under Section 2-403 of the Uniform Commercial Code，the socalled entruster provision.

Answer and Analysis

While as a general rule a person cannot convey a better title than he or she has to a third person，under certain circumstances it would be inequitable to hold an innocent purchaser for value liable to another for goods purchased from a wrongdoer when the purchaser had no reason to suspect any wrongdoing and paid full value for the goods.This is particularly true in the case of commercial transactions where the purchaser is dealing with a wrongdoer who deals regularly in the goods that are purchased.The rule prohibiting the owner from recovering from the bona fide purchaser for value thus responds to the tension between the desire to protect titles and the desire to foster the movement of goods in commerce in favor of the commercial interests.

If an owner entrusts goods to a person who from all outward appearances would appear to be authorized to sell the goods to others，it is inequitable to permit the owner to recover the goods from the bona fide purchaser.It is inequitable because it is the act of entrusting (an act initiated by the bailor and which the bailor could have avoided）that created the situation which permits the wrong to occur.This position is bolstered by the fact that there is little or nothing the purchaser can generally do to protect him or herself since commercial transactions in goods rely on the fact of possession as the best evidence of title.

The rule is expressed as a rule of estoppel.Thus，an owner is estopped from claiming a superior title as against the bona fide purchaser for value because the owner’s acts were largely responsible for the loss and the innocent purchaser was not in a position to protect him or her self.

This theme underlying the common law rule of estoppel is also reflected in Section 2-403 of the Uniform Commercial Code providing that “any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in the ordinary course of business”.This buyer is defined as a “person who in good faith and without knowledge that the sale to him is in violation of the ownership rights … of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind”.

In the problem，B appears to be a retail jewelry merchant whom P would rightly assume had title to goods in the jewelry case being offered to sale to the public.O was aware that B was a retail jewelry merchant and by entrusting the ring to B should have appreciated there was always a risk that B would commingle the ring with other stock in trade and offer it to sale to the public.Under either the common law or the UCC，P should win.[5]

B.Good Faith Purchase

Good Faith Purchase

Excerpted from Barlow Burke，Personal Property in a Nutshell

West Publishing Gr.，1993，2d Ed.

The purchaser of a chattel who gives a valuable consideration (1） paid in the belief that the vendor had a right to sell and (2） parted with in circumstances which would make him inquire into the vendor’s title and right to sell，is said to be a good faith or bona fide purchaser.Another name for such a person is an “innocent purchaser for value.

The initial common law position was not favorable to the good faith purchaser，but the latter has increasingly sought and won the protection of the law，not because his innocence was to be rewarded，but because in some situations he served a commercial function that was growing in importance.He represented the needs of increasingly regional and national markets for sales made without an elaborate investigation of the chattel’s title and made in reliance on the putative vendor’s possession of the goods.

The Problem

The rise in the legal fortunes of the good faith purchaser has been rapid of the last century.He is part of a legal triad including a chattel’s true owner，a rogue，and himself.In skeletal form，the facts producing the litigation in which he has had engage can be reduced to the following：the rogue acquires a chattel from the true owner and transfers it to a good faith purchaser.The rogue either is judgment-proof or disappears.Later the true owner discovers that the good faith purchaser has the goods and seeks to replevy them or recover their value in trover from the purchaser.

With the rogue gone，a legal problem of some difficulty remains：which of the two innocent parties left is going to suffer the loss occasioned by the rogue’s crookedness？

… If it is impractical to expect a vendor to inquire into the honesty of the purchasers with whom he deals，is it any more impractical than expecting a good faith purchaser to investigate the title of a vendor？ Investigating honesty is an inquiry everyone can undertake，but an investigation of title is a more specialized undertaking.And even if these tasks are conceded to be of equal difficulty，perhaps the law is correct in choosing to favor the party representing the societal interests of trade and commerce.Individual equities being relative equal，a judge is free to choose an expedient solution.And finally，where both the true owner and the purchaser have been equally diligent in protecting themselves against theft and acquisition of a defective title，the law will need to resolve conflicts among its doctrines in such a way as to give it the discretion to decide sometimes for the true owner and sometimes for the purchaser as the facts of the case tip the equities in the balance now to one side and then to the other….

The primary justification for protecting a purchaser involves an inquiry into his good faith.With this good faith present，the law needs to carve out an exception to the general rule to the effect that，if a true owner does not intend to transfer title to a chattel to another who nonetheless obtains possession of it，that person acquires no title to it and cannot pass good title to it to yet another transferee to whom its later transfer is made.This is called the “void title rule”.If a title was void in the hands of a transferor，its quality does not improve in the hands of the next transferee.

The idea that “one can’t give what one doesn’t have”，in Latin，nemo dat quod non habet，underlies the general rule and has a metaphysical ring to it.It implies the commonly-held notion that along with the transfer of the chattel comes a transfer of title.Title here is intended to refer to a basic unit of ownership.

A requirement that possession and title be transferred together is evident in the common law attitude toward the requirement of a delivery in the law of gifts.Moreover，it made sense in local markets in which vendors and purchasers of goods met face to face and transferred the goods in exchange for cash.Besides，in some situations，it is impractical to have the title to personalty pass independently of possession.The rule that no title is passed by a person without title cannot control in the case of money，negotiable commercial paper，promissory notes or bank checks.Even a thief can pass good title to money or negotiable instruments.The needs of capital markets and trade overwhelm the void-title rule here.

In England，certain marketplaces on certain days and all of London’s shops every business day were designated by charter to be “markets overt，” wherein a good faith purchaser could take good title to chattels to which his vendor had no title.The doctrine of a market overt has never been accepted or applied in the United States….

The void title rule is intended to instill an attitude of wariness in purchasers：caveat emptor–let the buyer beware.It worked well in local face to face markets but became increasingly questioned in markets which were broader in scope.Indeed，in regional or national markets，the good faith necessary to protect the purchaser tended to be proven，not by a showing of his subjective good faith but by the fact that he entered into the transaction using accepted commercial practices.His business practices conforming to the norm，the court looks less into the matter of his individual good faith.

The void title rule has never been overruled.Courts have rather looked at the type of title transferred and have added a new issue，phrased to protect the good faith purchaser.Under common law (and now under the Uniform Commercial Code §2-403），the law asked itself two questions：(1） did the true owner of the chattel intend to transfer it to the rogue； and (2） if the rogue received a “voidable” title，did the rogue transfer the title to a good faith purchaser in whose hands the voidable title becomes absolute？

A.Void and Voidable Title

To protect a purchaser，then，the law first had to inquire into the concept of title.Its unitary nature had to be made，through a type of legal nuclear fission，divisible.The unit-splitting method of legal analysis，it turned out，was the concept of the true owner’s intent to transfer title to a person who，under the general rule，would not be able to pass on any title.

The judge’s motivation in litigation over a chattel between a true owner and a good faith purchaser is easily enough seen.Both of the litigants are to some degree innocent parties，but the judge may regard this innocence as a relative matter and think one more innocent than the other for，after all，the owner’s innocence can be seen as naïveté and as the cause of the good faith purchaser’s troubles.

Moreover，the judge is caught between conflicting principles of law.On the one hand，he probably believes，along with his common law brethren，that no owner should be deprived of his property without his consent (e.g.，by a thief）.This belief will be strongest in cases where the chattel concerned are his possessions–items taken out of the stream of commerce and devoted to his personal use.On the other hand，the judge also probably believes that purchasers need a secure title to the goods they purchase，particularly if the transaction takes place in a commercial setting where the purchaser may want to resell the goods rather than use them himself.As Grant Gilmore has argued，he needs a way of maintaining the void title rule in non-commercial settings while relaxing it in commercial cases in which there is some deviation from normal commercial practice in the true owner’s parting with the goods，but no such deviation in the acquisition of the same goods by a subsequent purchaser.

The concept of “voidable title” is an intermediate position for the judge.It allows him to maintain both of his beliefs.It works [this way…]：

Once a transfer of title depends on more than a delivery of a chattel but takes place when the parties to the contract intend it to take effect，the courts are given discretion to distinguish between various types of transactions in which the true owner surrenders possession of the goods.If，for examples，the chattel is stolen from the true owner，he can have no intention to transfer it to the thief，and the void title rule applies even where the thief later sells the chattel to a good faith purchaser.The same is true when the parties make a mutual mistake when contracting with each other.The title in the hands of the transferee is void.

Likewise，a transfer by a bailee confers a void title on the bailee’s transferee.Why？ Because the bailor did not intend，when the bailment was created，that there be a delivery by the bailee to any person other than himself； this definitionally is what a bailment involves and unless there has been an entrustment a void title results.

However，when the true owner is induced to part with the goods through some fraud or misrepresentation by the transferee，one can say that the owner did intend to part with title.The true owner intended to transfer the chattel，even though fraud was used to induce that intent.In such situations，the true owner of the chattel can replevy them upon finding out that the original transaction was fraudulent.In this sense the title of the subsequent purchaser is voidable–liable to being revoked by the true owner or an assignee of his rights.However，this ability to void the title ends when the chattel comes into the hands of a good faith purchaser.At that point，the voidable title becomes absolute.

Thus there are two classifications of title which can be passed on to subsequent purchasers–void and voidable.Which type of title was transferred is a matter of ascertaining the intent of the transferor.The vocabulary of estates can assist in this classification.Where there is no title to give，the court might regard the transfer document as neither a contract for nor a conveyance of the chattel.It is void ab initio.When the title is voidable，the title might be regarded as having been conveyed subject to a condition subsequent； here the transferee acquires an absolute title，subject to the right of the true owner to rescind and replevy the chattel while it remains in the hands of the fraudulent transferee.

A voidable title is a defective title，but it is not wholly defective.It is a title which has been transferred by a deed or contract which one party to the document (generally the true owner） has the power to rescind.The title is then voidable by the person with the right of rescission，but it is not voidable by the other party.The right to rescind is often called the equity of rescission.

Asking a court to exercise this equity is like asking a court to compel the surrender of some right，title or advantage by the defendant.Equity will compel such a surrender only when it is unconscionable for the defendant to retain it.If the defendant acquired title with notice of the equity of the plaintiff，or if he did not pay value (but was without notice），he should surrender it.

All this was first a matter of equity pleading before such rules became incorporated into the substantive law of personal property.This highlights another interesting feature of this definition of voidable title.It has a procedural origin and aspect.Defining any substantive concept in terms of its procedural origins is to leave a good deal of imprecision in the concept.Grant Gilmore has called the concept of voidable title the courts’ “happiest discovery” and “a vague idea，never defined and perhaps incapable of definition.” G.Gilmore，The Commercial Doctrine of Good Faith Purchase，63 Yale L.J.1057，1059 (1954）.Its greatest virtue was its capacity for growth.

B.The Good Faith Purchaser

When a court reaches the question of whether a transferee qualifies as a good faith purchaser the answer depends on whether (1） he gave a fair or reasonable value for a chattel，(2） in an honestly held belief that he was acquiring title，or whatever rights he bargained for，to it，and (3） under circumstances which would not lead him to question his vendor’s right or title.

So a donee would not qualify.A good faith purchaser must advance some new consideration，surrender some security，or do some act which will cause him to be in a worse position if the transfer is rescinded.All these things must be done in advance of any notice to him of the true owner’s adverse claim.Likewise，a person who acquires a chattel with either actual or constructive notice that his vendor used any fraud or deceit to acquire possession of it，does not qualify.So someone in collusion with a rogue can never become a good faith purchaser.

Many aspects of the definition of a good faith purchaser are today found in cases controlled by the provisions of the Uniform Commercial Code.

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D. Extinguishing The True Owner’s Title in Favor of A Good Faith Purchaser

If a legislature is going to cut off the right and title of a true owner in favor of a good faith purchaser，it must do so clearly.If，for example，statutes on sheriff’s sales for payment and satisfaction of a debt are intended to cut off the true owner’s rights，they must clearly state that this is the effect of the statute.Most state statutes on the subject do not so state，and their effect is to provide that the purchaser at the sheriff’s sale acquires no more title than the execution debtor had going into the sale.Grif fith v.Fowler (1846）.

In the field of international law，if a foreign government，in a declaration of war or expropriation，cuts off a true owner’s rights，such an action normally would be recognized by our courts or would place the owner’s right beyond their jurisdiction.Thereafter，Congress must be clear that it intends to reverse this action in our courts；otherwise any declaration or resolution condemning the action will not have this specific legal consequence.Williams v.Armroyd (1813）.

The first clear legislative reversal of the void title rule in the United States came with the so-called Factors Acts.A factor is an agent employed to sell goods consigned to him in his own name for a commission.Never uniform among the states，the Acts were none-the-less similar in approach.They shifted the loss caused by the fraudulent factor from the good faith purchaser to the true owner who，after all selected the broker，transferred the goods to him and enabled him to accomplish the fraud.

Later legislation，first the Uniform Sales Act，§ 25，and now in all states except Louisiana，the Uniform Commercial Code，codified both the void title rule and the void/voidable distinction.The UCC also added one further qualification to the void title rule–the so-called entrustment doctrine….

The Uniform Commercial Code (UCC）

The UCC has now codified the general rule and the doctrine of good faith purchaser of personalty in its § 2-403(1），using the following language，first to restate the void title rule：

A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the inter est purchased.

Under this language，a transferor with a void title confers nothing on his transferee.However，once a transferor has acquired title through this section (or by later portions of § 2-403 as well），his subsequent transferees take his rights under the Code.This is the “shelter” principle of this section.(It is also found in later portions of §2-403）.A second aspect of this general rule is found in the language “or had power to transfer”.This means that the law of agency，apparent agency and estoppel，apply to implement the general rule to the effect that what title the vendor appears to have the purchaser gets.The pre-UCC common law was moving in this direction.See e.g.，O’Connor’s Administratrix v.Clark，(1895） (replevin of a horse-drawn wagon）.

This section then goes on to state the exception to the general rule：

….A person with voidable title has power to transfer a good tile to a good faith purchaser for value.When goods have been delivered under a transaction of purchase the purchaser has such power even though

(a） the transferor was deceived as to the identity of the purchaser，or

(b） the delivery was in exchange for a check which is later dishonored，or

(c） it was agreed that the transaction was to be a “cash sale，” or

(d） the delivery was procured through fraud punishable as larcenous under the criminal law.

The italicized words are discussed below.

The second sentence provides in (a） through (d） some examples of situations which have often been litigated.Under these subparagraphs，a true owner’s transferring of a chattel to a rogue in an “all cash” sale，in exchange for a check that bounces or in circumstances punishable as a violation of the criminal code–a forged check –does not deny a subsequent purchaser the status of a good faith purchaser.

Transfer

The drafters of the Code do not use the word “delivery.” Therefore a question arises as to whether or not a person must first take delivery of the chattel before claiming to be a good faith purchaser of it.The examples which follow in subparagraphs(a） through (d） make plain that delivery will usually be present，but paying value for a document of title is sufficient to “transfer a good title” too.Examples of a document of title are a deed，a warehouse receipt or a bill of lading which a purchaser can thereafter present to a bailee.

Good Faith

The common law and the Code protect only subsequent purchasers whose transferor has a voidable title to a chattel and who take title in good faith.A transaction is undertaken in good faith when it is in fact done honestly，whether or not the transaction is performed negligently.If the transferee is a merchant，however，a higher standard applies.A merchant must observe reasonable commercial practices for the same or similar transactions.If reasonable commercial practice demanded more care than the merchant observed，he will be denied good faith purchaser status by the courts.For example，when a person purchases a car with a rubber check and resells it to a dealer in another city，that second dealer should require a certificate or other customary proof of title to the vehicle and failing to do so will deny that dealer good faith purchaser status.Similarly，a transaction between two dealers is judged by higher standards than would prevail in a sale by a dealer to a consumer； unless required by statute，no certificate of title would be required when a consumer claims good faith purchaser status.Moreover，a purchaser is offered a chattel at well below its fair market value is not enough to put him on notice that his transferor’s title is defective or impose on him any duty to inquire into the state of its title.Again，however，more leeway in this regard may be given the non-commercial purchaser than is given his commercial counterpart.

Value

A purchaser for value needs not have a suitcase full of cash to exchange for a chattel.To use the example in the preceding paragraph，when the thief who buys a car with a rubber check resells it for one half of its fair market value，a purchasing dealer may be denied the protection of § 2-403(1） because he has not given value.A non-dealer purchaser can，however，pay far less than the fair market value and not be denied the status of a protected purchaser.The reason for this is that courts are reluctant to undo a bargain struck by agreement.Inadequacy of price alone will not deny a person a protected status，unless the price is so inadequate as to “shock the conscience of the court.” Moreover，not only can a contract itself be given in consideration of a preexisting debt of the transferor.Generally under the Code value is any consideration sufficient to support a simple，executory contract or a purchaser’s pre-existing claim– that is，any contractual consideration，present or past，is sufficient to support the claim that a purchaser paid “value” under the Code.§ 1-201(44） (b），(d）.Donees are excluded from protection by the phrase.

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Entrusting Chattel

If you leave your watch for repair，should you look around the jeweler’s shop to find out if he also sells watches，particularly second-hand ones？ The answer today is yes，but at common law，you need not have been so careful.At common law，leaving the watch created a bailment.The true owner intended to pass no title to it to the repairman but instead only wanted to give him its possession for the (limited） purpose of fixing it.If the bailee resells it，his title being void，he transfers nothing to a purchaser，even one with good faith.Baehr v.Clark (1891）.

Indeed，the purchaser in many jurisdictions committed a conversion of the watch by the very act of purchasing it as his own.Some jurisdictions mitigate the harshness of this doctrine by requiring that the conversion is complete only when the true owner makes a demand for the watch’s return and the demand is refused，but this only delays the liability of the purchaser for the conversion.

The true owner’s cause of action for conversion by bailee of the watch survives today； the UCC does not affect it.What the UCC does affect is the true owner’s cause of action against the purchaser of the watch–no such action survives the passage of the UCC.Why？ Because even though purchasers from bailees are denied the protection of § 2-403(1），§ 2-403(2） creates an additional class of purchasers entitled to special protection.They are those who buy “in the ordinary course of business” from one to whom a chattel has been entrusted.In the somewhat cryptic language of the UCC，

Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.The next sub-paragraph (3） of this section defines entrusting as including “any delivery and any acquiescence in retention of possession”，regardless of any condition placed on the transfer between the parties and no matter what the possessor’s disposition of the chattel constituted the crime of larceny.

Delivery is a precondition of an entrustment.So delivery of your watch for repair to the jeweler who also sells second-hand watches may be a statutory entrusting，no matter that you only intended a common law bailment.The particular purpose of the entrustment is irrelevant，so long as it is made to “a merchant who deals in goods of that kind”.§ 2-402(2）.Similarly irrelevant is whether the entrustor was acting in the course of his own business，or just dealing occasionally and for his own purposes：all commercial and quasi-commercial entrustments are treated alike.Likewise，the delivery of a chattel on consignment by a wholesaler to a retailer of such chattel means that a purchaser in the ordinary course of business with the retailer will take free of the wholesaler’s rights，even if the wholesaler and retailer agreed that the former would retain title to them.Finally，the entrusting is sufficient to entitle a purchaser to Code protection：the latter need not take delivery of the chattel； a transfer of title to him is enough to cut off the entruster rights.

In Zendman v.Harry Winston，Inc. (1953），the plaintiff went into an auction house on the Atlantic City，N.J.boardwalk and purchased a diamond ring at auction.The defendant had actually left the ring with the operator of the auction，as he often did，with a memorandum in which the defendant retained title.When the defendant learned of the sale，he demanded the ring back.

In its common law form，estoppel requires proof that the appearances at the auction reasonably induced the purchaser to rely on the title of the auctioneer.Reliance is shown by a subjective belief.The concept of a “buyer in the ordinary course” has the effect of permitting appearances，rather than the state of mind of the purchaser，to control the showing of reliance.It may now be shown by objective facts：if the public could reasonably have expected，from all the circumstances surrounding the auction，that the auctioneer had authority to transfer title to the chattel sold，then the entruster is estopped.

Common law estoppel is usually a shield，not a sword； it does not give rise to a cause of action，but the positive wording of the entrustment rule in the Code indicates that this is no longer true.Thus the true owner of goods who without protest allows another to treat them as his own so that a third person is induced to purchase them in good faith，cannot replevy them from the person，and the latter has an action to quiet title to the chattel which he was induced to purchase.

In deciding the Zendman case，for example，the court concluded that Harry Winston had created an implied authority in the auctioneer to deal with the ring as his own.It also cited the fact that Harry Winston had previously and severally times approved sales unauthorized by the title-retention memo which Winston left with the auctioneer.This past practice between the entrustor and the possessor should have no significance to the purchaser unless he knew about it； and of course if he knew of this practice，the purchaser could not have acted in good faith at the auction.The past practice does，however，go to show that the goods were entrusted to “a merchant who deals in goods of that kind”.To negate this effect，the defendant would have had to make some effort to notify the public at the auction that the ring entrusted to the auctioneer did not belong to the latter.

The entrustment sections of the UCC favor and expand the role of some purchasers and commerce at the expense of true owners，so remember that entrustment doctrine does not exclude the possibility of a larcenous merchant conveying a voidable title to a purchaser.Although the choice between two perhaps equally innocent parties is basic and seldom tension-free，probably the true owner deserves more protection than that!Notes：

1.What is “good faith”，and how is it determined under various circumstances？The current trend under UCC is that “good faith” is presumed objectively if the purchaser pays valuable consideration.In what circumstances，if any，can “good faith” be ruled out or at least can a prima facie bad faith be established？ In other words，can you fashion some rules to better protect the true owner’s interests？

2.The intent，by nature，is subjective.So what is the intent of the true owner，and how do we judge it？ Are there any objective standards of determining the intent？ For example，if one bets with his head (or a pound of flesh，as in Merchant of Venice），can it be enforced； or，imagine，if the United States says it intends (be it so） to sell the names of the founding fathers like George Washington and Thomas Jefferson to，say，Cuba，can the latter quiet title of whatever nature to these names？

3.These questions in some way may lead to the problems of national treasures now in possession of museums and libraries throughout the world.Many countries，especially those that were defenseless in the past (e.g.，Egypt，Greece，Turkey and China），now are trying to figure out a way to replevy those treasures.Retaking by force or by theft is probably not recommendable，but suppose an item shows up in the true owner’s country，how do we justify the right to retain，in a similar way western powers justified their position for the “good faith” purchasers，or in a totally different way？

Georgia O’Keeffe v.Barry Snyder

Supreme Court of New Jersey，(1980）

83 N.J.478； 416 A.2d 862； LEXIS 1385

[Plaintiff artist sought to recover three paintings from defendant’s gallery that she allegedly owned and which were stolen from another gallery.Defendant asserted he was a purchaser for value，had taken title of the paintings by adverse possession，and that the action for replevin was barred by the statute of limitations period.The court held that the lower court erred in granting summary judgment to plaintiff by concluding that the paintings were stolen and that defendant had not proven the elements of adverse possession.The court noted that defendant contested the theft and had conceded it only for purposes of having his adverse possession claim decided.The court decided that the factual disputes warranted a remand.The court indicated that it could not determine who had title on the limited record before it，but proceeded to resolve questions of law that would become relevant on remand.The court held that the discovery rule applied in determining when the statute of limitations began to run in the action for replevin.]

POLLOCK，J.delivered the opinion.

O’Keeffe contended the paintings were stolen in 1946 from a gallery，An American Place.The gallery was operated by her late husband，the famous photographer Alfred Stieglitz.

An American Place was a cooperative undertaking of O’Keeffe and some other American artists identified by her as Marin，Hardin，Dove，Andema，and Stevens.In 1946，Stieglitz arranged an exhibit which included an O’Keeffe painting，identified as Cliffs.According to O’Keeffe，one day in March，1946，she and Stieglitz discovered Cliffs was missing from the wall of the exhibit.O’Keeffe estimates the value of the painting at the time of the alleged theft to have been about $ 150.

About two weeks later，O’Keeffe noticed that two other paintings，Seaweed and Fragments，were missing from a storage room at An American Place.She did not tell anyone，even Stieglitz，about the missing paintings，since she did not want to upset him.

Before the date when O’Keeffe discovered the disappearance of Seaweed，she had already sold it (apparently for a string of amber beads） to a Mrs.Weiner，now deceased.Following the grant of the motion for summary judgment by the trial court in favor of Snyder，O’Keeffe submitted a release from the legatees of Mrs.Weiner purportedly assigning to O’Keeffe their interest in the sale.

O’Keeffe testified on depositions that at about the same time as the disappearance of her paintings，12 or 13 miniature paintings by Marin also were stolen from An American Place.According to O’Keeffe，a man named Estrick took the Marin paintings and “maybe a few other things”.Estrick distributed the Marin paintings to members of the theater world who，when confronted by Stieglitz，returned them.However，neither Stieglitz nor O’Keeffe confronted Estrick with the loss of any of the O’Keeffe paintings.

There was no evidence of a break and entry at An American Place on the dates when O’Keeffe discovered the disappearance of her paintings.Neither Stieglitz nor O’Keeffe reported them missing to the New York Police Department or any other law enforcement agency.Apparently the paintings were uninsured，and O’Keeffe did not seek reimbursement from an insurance company.Similarly，neither O’Keeffe nor Stieglitz advertised the loss of the paintings in Art News or any other publication.Nonetheless，they discussed it with associates in the art world and later O’Keeffe mentioned the loss to the director of the Art Institute of Chicago，but she did not ask him to do anything because “it wouldn’t have been my way”.O’Keeffe does not contend that Frank or Snyder had actual knowledge of the alleged theft.

Stieglitz died in the summer of 1946，and O’Keeffe explains she did not pursue her efforts to locate the paintings because she was settling his estate.In 1947，she retained the services of Doris Bry to help settle the estate.Bry urged O’Keeffe to report the loss of the paintings，but O’Keeffe declined because “they never got anything back by reporting it.” Finally，in 1972，O’Keeffe authorized Bry to report the theft to the Art Dealers Association of America，Inc.，which maintains for its members a registry of stolen paintings.The record does not indicate whether such a registry existed at the time the paintings disappeared.

In September，1975，O’Keeffe learned that the paintings were in the Andrew Crispo Gallery in New York on consignment from Bernard Danenberg Galleries.On February 11，1976，O’Keeffe discovered that Ulrich A.Frank had sold the paintings to Barry Snyder，d/b/a Princeton Gallery of Fine Art.She demanded their return and，following Snyder’s refusal，instituted this action for replevin.

Frank traces his possession of the paintings to his father，Dr.Frank，who died in 1968.He claims there is a family relationship by marriage between his family and the Stieglitz family，a contention that O’Keeffe disputes.Frank does not know how his father acquired the paintings，but he recalls seeing them in his father’s apartment in New Hampshire as early as 1941-1943，a period that precedes the alleged theft.Consequently，Frank’s factual contentions are inconsistent with O’Keeffe’s allegation of theft.Until 1965，Dr.Frank occasionally lent the paintings to Ulrich Frank.In 1965，Dr.and Mrs.Frank formally gave the paintings to Ulrich Frank，who kept them in his residences in Yardley，Pennsylvania and Princeton，New Jersey.In 1968，he exhibited anonymously Cliffs and Fragments in a one day art show in the Jewish Community Center in Trenton.All of these events precede O’Keeffe’s listing of the paintings as stolen with the Art Dealers Association of America，Inc.in 1972.

Frank claims continuous possession of the paintings through his father for over thirty years and admits selling the paintings to Snyder.Snyder and Frank do not trace their provenance，or history of possession of the paintings，back to O’Keeffe.

As indicated，Snyder moved for summary judgment on the theory that O’Keeffe’s action was barred by the statute of limitations and title had vested in Frank by adverse possession.For purposes of his motion，Snyder conceded that the paintings had been stolen.On her cross motion，O’Keeffe urged that the paintings were stolen，the statute of limitations had not run，and title to the paintings remained in her.

II

The Appellate Division accepted O’Keeffe’s contention that the paintings had been stolen.However，in his deposition，Ulrich Frank traces possession of the paintings to his father in the early 1940’s，a date that precedes the alleged theft by several years.The factual dispute about the loss of the paintings by O’Keeffe and their acquisition by Frank，as well as the other subsequently described factual issues，warrant a remand for a plenary hearing.

Without purporting to limit the scope of the trial，other factual issues include whether (1） O’Keeffe acquired title to Seaweed by obtaining releases from the legatees of Mrs.Weiner； (2） the paintings were not stolen but sold，lent，consigned，or given by Stieglitz to Dr.Frank or someone else without O’Keeffe’s knowledge before he died； and (3） there was any business or family relationship between Stieglitz and Dr.Frank so that the original possession of the paintings by the Frank family may have been under claim of right.

III

On the limited record before us，we cannot determine now who has title to the paintings.That determination will depend on the evidence adduced at trial.Nonetheless，we believe it may aid the trial court and the parties to resolve questions of law that may become relevant at trial.

Our decision begins with the principle that，generally speaking，if the paintings were stolen，the thief acquired no title and could not transfer good title to others regardless of their good faith and ignorance of the theft.Proof of theft would advance O’Keeffe’s right to possession of the paintings absent other considerations such as expiration of the statute of limitations.

Another issue that may become relevant at trial is whether Frank or his father acquired a “voidable title” to the paintings under N.J.S.A.12A：2-403(1）.That section，part of the Uniform Commercial Code (U.C.C.），does not change the basic principle that a mere possessor cannot transfer good title.Nonetheless，the U.C.C.permits a person with voidable title to transfer good title to a good faith purchaser for value in certain circumstances.If the facts developed at trial merit application of that section，then Frank may have transferred good title to Snyder，thereby providing a defense to O’Keeffe’s action.No party on this appeal has urged factual or legal contentions concerning the applicability of the U.C.C.Consequently，a more complete discussion of the U.C.C.would be premature，particularly in light of our decision to remand the matter for trial.

V

A purchaser from a private party would be well-advised to inquire whether a work of art has been reported as lost or stolen.However，a bona fide purchaser who purchases in the ordinary course of business a painting entrusted to an art dealer should be able to acquire good title against the true owner.Under the U.C.C.entrusting possession of goods to a merchant who deals in that kind of goods gives the merchant the power to transfer all the rights of the entruster to a buyer in the ordinary course of business.In a transaction under that statute，a merchant may vest good title in the buyer as against the original owner.The interplay between the statute of limitations as modified by the discovery rule and the U.C.C.should encourage good faith purchases from legitimate art dealers and discourage trafficking in stolen art without frustrating an artist’s ability to recover stolen art works.

The discovery rule will fulfill the purposes of a statute of limitations and accord greater protection to the innocent owner of personal property whose goods are lost or stolen.Accordingly，we overrule Redmond v.New Jersey Historical Society，and Joseph v.Lesnevich，to the extent that they hold that the doctrine of adverse possession applies to chattels.

By diligently pursuing their goods，owners may prevent the statute of limitations from running.The meaning of due diligence will vary with the facts of each case，including the nature and value of the personal property.For example，with respect to jewelry of moderate value，it may be sufficient if the owner reports the theft to the police.With respect to art work of greater value，it may be reasonable to expect an owner to do more.In practice，our ruling should contribute to more careful practices concerning the purchase of art.

VI

Read literally，the effect of the expiration of the statute of limitations under N.J.S.A.2A：14-1 is to bar an action such as replevin.The statute does not speak of divesting the original owner of title.By its terms the statute cuts off the remedy，but not the right of title.Nonetheless，the effect of the expiration of the statute of limitations，albeit on the theory of adverse possession，has been not only to bar an action for possession，but also to vest title in the possessor.There is no reason to change that result although the discovery rule has replaced adverse possession.History，reason，and common sense support the conclusion that the expiration of the statute of limitations bars the remedy to recover possession and also vests title in the possessor.

VII

For the purpose of evaluating the due diligence of an owner，the dispossession of his chattel is a continuum not susceptible to separation into distinct acts.Nonetheless，subsequent transfers of the chattel may affect the degree of difficulty encountered by a diligent owner seeking to recover his goods.To that extent，subsequent transfers and their potential for frustrating diligence are relevant in applying the discovery rule.An owner who diligently seeks his chattel should be entitled to the benefit of the discovery rule although it may have passed through many hands.Conversely an owner who sleeps on his rights may be denied the benefit of the discovery rule although the chattel may have been possessed by only one person.

We reject the alternative of treating subsequent transfers of a chattel as separate acts of conversion that would start the statute of limitations running anew.At common law，apart from the statute of limitations，a subsequent transfer of a converted chattel was considered to be a separate act of conversion.In his dissent，Justice Handler seeks to extend the rule so that it would apply even if the period of limitations had expired before the subsequent transfer.Nonetheless，the dissent does not cite any authority that supports the position that the statute of limitations should run anew on an act of conversion already barred by the statute of limitations.Adoption of that alternative would tend to undermine the purpose of the statute in quieting titles and protecting against stale claims.

Treating subsequent transfers as separate acts of conversion could lead to absurd results.As explained by Dean Ames：

The decisions in the case of chattels are few.As a matter of principle，it is submitted this rule of tacking is as applicable to chattels as to land.A denial of the right to tack would，furthermore，lead to this result.If a converter were to sell the chattel，five years after its conversion，to one ignorant of the seller’s tort，the disposed owner’s right to recover the chattel from the purchaser would continue five years longer than his right to recover from the converter would have lasted if there had been no sale.In other words，an innocent pur chaser from a wrong-doer would be in a worse position than the wrong-doer himself，a conclusion as shocking in point of justice as it would be anomalous in law.

It is more sensible to recognize that on expiration of the period of limitations，title passes from the former owner by operation of the statute.Needless uncertainty would result from starting the statute running anew merely because of a subsequent transfer.It is not necessary to strain equitable principles，as suggested by the dissent，to arrive at a just and reasonable determination of the rights of the parties.The discovery rule permits an equitable accommodation of the rights of the parties without establishing a rule of law fraught with uncertainty.

VIII

We recognize the possible relevancy of claims of common law and statutory copyright and related questions of infringement.The parties have not raised any copyright issue in the pleadings，on the motion for summary judgment，or on this appeal.On the limited record before us，we cannot evaluate the existence or merit of copyright claims.Depending on the evidence adduced at trial，copyright claims may arise under federal statutes or the common law.For present purposes，it is sufficient to note that there are valuable rights in a work of art，apart from the right to title and possession；such as，the rights of reproduction，distribution，and display.Those rights，assembled under the rubric of a copyright，are not involved in this appeal.

O’Keeffe is a distinguished American artist，now 92 years old and living in New Mexico.In this proceeding，she has been deposed in her attorney’s office in New York City.At oral argument，we were informed that she had visited New York recently for reasons unrelated to the litigation.Nonetheless，if，because of her age，O’Keeffe is unable to travel to New Jersey for trial，an appropriate application may be made to the trial court to perpetuate her testimony.Furthermore，we direct the trial court to expedite both discovery proceedings and the trial.

We reverse the judgment of the Appellate Division in favor of O’Keeffe and remand the matter for trial in accordance with this opinion.

Handler，J.，dissenting.

The Court today rules that if a work of art has been stolen from an artist，the artist’s right to recover his or her work from a subsequent possessor would be barred by the statute of limitations if the action were not brought within six years after the original theft.This can happen even though the artist may have been totally innocent and wholly ignorant of the identity of the thief or of any intervening receivers or possessors of the stolen art.The Court would grudgingly grant some measure of relief from this horrendous result and allow the artist to bring suit provided he or she can sustain the burden of proving “due diligence” in earlier attempting to retrieve the stolen artwork.No similar duty of diligence or vigilance，however，is placed upon the subsequent receiver or possessor，who，innocently or not，has actually trafficked in the stolen art.Despite ritualistic disavowals，the Court’s holding does little to discourage art thievery.Rather，by making it relatively more easy for the receiver or possessor of an artwork with a “checkered background” to gain security and title than for the artist or true owner to reacquire it，it seems as though the Court surely will stimulate and legitimatize art thievery.

I believe that there is a much sounder approach in this sort of case than one that requires the parties to become enmeshed in duplicate or cumulative hearings that focus on the essentially collateral issues of the statute of limitations and its possible tolling by an extended application of the discovery doctrine.The better approach，I would suggest，is one that enables the parties to get to the merits of the controversy.It would recognize an artist’s or owner’s right to assert a claim against a newly-revealed receiver or possessor of stolen art as well as the correlative right of such a possessor to assert all equitable and legal defenses.This would enable the parties to concentrate directly upon entitlement to the artwork rather than entitlement to bring a lawsuit.By dealing with the merits of the claims instead of the right to sue，such an approach would be more conducive to reconciling the demands for individual justice with societal needs to discourage art thievery.In addition，such a rule would comport more closely with traditional common law values emphasizing the paramountcy of the rights of a true owner of chattels as against others whose possession is derived from theft.Simultaneously，it would acknowledge that the claims of the true owner as against subsequent converters may in appropriate circumstances be counterbalanced by equitable considerations.

I therefore dissent.

Notes

A motivated painter，Georgia O’Keefe became an artist mainly because she took art lessons at a young age and showed a lot of talent，taking 5 years of private art by age 16，which was unprecedented for a female artists at the time in Wisconsin where she grew up.She mainly focused on flowers，large ones that usually take up the entire canvas.Many people were involved with Georgia’s art schooling and career，but the most significant would most likely be Alfred Stieglitz.He was a photographer and exhibited Georgia’s charcoal artwork before he even met her.Although he was 23 years older than her，they ended up marrying in 1929 and lived together in New York and New Mexico，two places where much of Georgia’s inspiration originated.

Some of Georgia O’Keeffe’s Works

Porter v.Wertz

41[6] N.Y.S.2d 254，(Sup.Ct.1979）

BIRNS，J.

Plaintiffs-appellants，Samuel Porter and Express Packaging，Inc.(Porter’s corporation），owners of a Maurice Utrillo painting entitled “Chateau de Lion-sur-Mer，”seek in this action to recover possession of the painting or the value thereof from defendants，participants in a series of transactions which resulted in the shipment of the painting out of the country.The painting is now in Venezuela.

Defendants-respondents Richard Feigen Gallery，Inc.，Richard L.Feigen ＆ Co.，Inc.，and Richard L.Feigen，hereinafter collectively referred to as Feigen，were in the business of buying and selling paintings，drawings and sculpture.

The amended answer to the complaint asserted，inter alia，affirmative defenses of statutory estoppel (Uniform Commercial Code，§ 2-403） and equitable estoppel.[8] The trial court，after a bench trial，found statutory estoppel inapplicable but sustained the defense of equitable estoppel and dismissed the complaint.

On this appeal，we will consider whether those defenses，or either of them，bar recovery against Feigen.We hold neither prevents recovery.[9]

Porter，the owner of a collection of art works，bought the Utrillo [painting：“Chateau de Lion- sur-Mer”] in 1969.During 1972 and 1973 he had a number of art transactions with one Harold Von Maker who used，among other names，that of Peter Wertz.[10] One of the transactions was the sale by Porter to Von Maker in the spring of 1973 of a painting by Childe Hassam for $150，000，financed with a $50，000 deposit and 10 notes for $10，000 each.At about that time，Von Maker expressed an interest in the Utrillo.Porter permitted him to have it temporarily with the understanding that Von Maker would hang it in his (Von Maker’s） home，[11] pending Von Maker’s decision whether to buy the painting.On a visit to Von Maker’s home in Westchester in May，1973，Porter saw the painting hanging there.In June，1973，lacking a decision from Von Maker，Porter sought its return，but was unable to reach Von Maker.

The first note in connection with Von Maker’s purchase of the Childe Hassam，due early July，1973，was returned dishonored，as was the balance of the notes.Porter commenced an investigation and found that he had not been dealing with Peter Wertz– but with another man named Von Maker.Bishop Reports，dated July [12] and July 17，1973，disclosed that Von Maker was subject to judgments，that he had been sued many times，that he had an arrest record for possession of obscene literature，and for“false pretenses”，as well as for “theft of checks”，and had been convicted，among other crimes，of transmitting a forged cable in connection with a scheme to defraud the Chase Manhattan Bank and had been placed on probation for three years.Porter notified the FBI about his business transactions concerning the notes.He did not report that Von Maker had defrauded him of any painting，for，as will be shown，Porter did not know at this time that Von Maker had disposed of the Utrillo.

Porter did，however，have his attorney communicate with Von Maker’s attorney.As a result，on August 13，1973，a detailed agreement，drawn by the attorneys for Porter and Von Maker，the latter still using the name Peter Wertz，was executed.Under this agreement the obligations of Von Maker to Porter concerning several paintings delivered by Porter to Von Maker (one of which was the Utrillo） were covered.In paragraph 11，Von Maker acknowledged that he had received the Utrillo from Porter together with a certain book[13] on Utrillo，that both “belong to [Porter]”，that the painting was on consignment with a client of Von Maker’s，that within 90 days Von Maker would either return the painting and book or pay $30，000 therefor，and that other than the option to purchase within said 90-day period，Von Maker had “no claim whatsoever to the Utrillo painting or Book”.

Paragraph 13 provided that in the event Von Maker failed to meet the obligations under paragraph 11，i.e.，return the Utrillo and book within 90 days or pay for them，Porter would immediately be entitled to obtain possession of a painting by Cranach held in escrow by Von Maker’s attorney，and have the right to sell that painting，apply the proceeds to the amount owing by Von Maker under paragraph 11，and Von Maker would pay any deficiency.Paragraph 13 provided further that “[t]he above is in addition to all [Porter’s] other rights and remedies，which [Porter] expressly reserved to enforce the performance of [Von Maker’s] obligations under this Agreement.”

We note that the agreement did not state that receipt of the Cranach by Porter would be in full satisfaction of Porter’s claim to the Utrillo and book.Title to the Utrillo and book remained in Porter，absent any payment by Von Maker of the agreed purchase price of $30，000.Indeed，no payment for the Utrillo was ever made by Von Maker.

At the very time that Von Maker was deceitfully assuring Porter he would return the Utrillo and book or pay $30，000，Von Maker had already disposed of this painting by using the real Peter Wertz name to effect its sale for $20，000 to Feigen.Von Maker，utilizing Sloan and Lipinsky，persons in the art world，had made the availability of the Utrillo known to Feigen.When Wertz，at Von Maker’s direction，appeared at the Feigen gallery with the Utrillo，he was met by Feigen’s employee，Mrs.Drew-Bear.She found a buyer for the Utrillo in defendant Brenner.In effecting its transfer to him，Feigen made a commission.Through a sale by Brenner the painting is now in Venezuela，South America.

We agree with the conclusion of the trial court that statutory estoppel does not bar recovery.

The provisions of statutory estoppel are found in section 2-403 of the Uniform Commercial Code.Subdivision (2） thereof provides that “[a]ny entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in the ordinary course of business.” Subdivision (9） of Section 1-201 of the Uniform Commercial Code defines a “buyer in the ordinary course of business” as “a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind.”

In order to determine whether the defense of statutory estoppel is available to Feigen，we must begin by ascertaining whether Feigen fits the definition of “a buyer in the ordinary course of business”.(Uniform Commercial Code，§ 1-201，subd [9].）Feigen does not fit that definition，for two reasons.First，Wertz，from whom Feigen bought the Utrillo，was not an art dealer–he was not “a person in the business of selling goods of that kind”.(Uniform Commercial Code，§ 1-201，subd [9].） If anything，he was a delicatessen employee.[14] Wertz never held himself out as a dealer.Although Feigen testified at trial that before he (Feigen） purchased the Utrillo from Wertz，Sloan，who introduced Wertz to Feigen told him (Feigen） that Wertz was an art dealer，this testimony was questionable.It conflicted with Feigen’s testimony at his examination before trial where he stated he did not recall whether Sloan said that to him.[15] Second，Feigen was not “a person ...in good faith” (Uniform Commercial Code，§ 1-201，subd [9]） in the transaction with Wertz.Section 2-103 (subd [1]，par [b]） of the Uniform Commercial Code defines “good faith” in the case of a merchant as “honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.” Although this definition by its terms embraces the “reasonable commercial standards of fair dealing in the trade”，it should not–and cannot–be interpreted to permit，countenance or condone commercial standards of sharp trade practice or indifference as to the “provenance”，i.e.，history of ownership or the right to possess or sell an object d’art，such as is present in the case before us.

We note that neither Ms.Drew-Bear nor her employer Feigen made any investigation to determine the status of Wertz，i.e.，whether he was an art merchant，“a person in the business of selling goods of that kind.” (Uniform Commercial Code，§ 1-201，subd [9].） Had Ms.Drew-Bear done so much as call either of the telephone numbers Wertz had left，she would have learned that Wertz was employed by a delicatessen and was not an art dealer.Nor did Ms.Drew-Bear or Feigen make an effort to verify whether Wertz was the owner or authorized by the owner to sell the painting he was offering.Ms.Drew-Bear had available to her the Petrides volume on Utrillo which included “Chateau de Lion-sur-Mer” in its catalogue of the master’s work.[16] Although this knowledge alone might not have been enough to put Feigen on notice that Wertz was not the true owner at the time of the transaction，it could have raised a doubt as to Wertz’ right of possession，calling for further verification before the purchase by Feigen was consummated.Thus，it appears that statutory estoppel provided by subdivision (2） of Section 2-403 of the Uniform Commercial Code was not，as Trial Term correctly concluded，available as a defense to Feigen.

We disagree with the conclusion of the trial court that the defense of equitable estoppel (see Zendman v Harry Winston，Inc.） raised by Feigen bars recovery.

We pause to observe that although one may not be a buyer in the ordinary course of business as defined in the Uniform Commercial Code，he may be a good-faith purchaser for value and enjoy the protection of precode estoppel (see Tumber v Automation Design ＆ Mfg.Corp.； Uniform Commercial Code，§ 1-103）.We now reach the question whether the defense of equitable estoppel has been established here.

In general terms：“Equitable estoppel or estoppel in pais is the principle by which a party is absolutely precluded，both at law and in equity，from denying，or asserting the contrary of，any material fact which，by his words or conduct，affirmative or negative，intentionally or through culpable negligence，he has induced another，who was excusably ignorant of the true facts and who had a right to rely upon such words or conduct，to believe and act upon them thereby，as a consequence reasonably to be anticipated，changing his position in such a way that he would suffer injury if such denial or contrary assertion were allowed.An estoppel in pais can arise only when a person，either by his declarations or conduct，has induced another person to act in a particular manner.The doctrine prohibits a person，upon principles of honesty and fair and open dealing，from asserting rights the enforcement of which would，through his omissions or commissions，work fraud and injustice.” (21 NY Jur，Estoppel，§ 15[citing cases].）

As the Court of Appeals reiterated in Zendman v Harry Winston，Inc.，an “owner may be estopped from setting up his own title and the lack of title in the vendor as against a bona fide purchaser for value where the owner has clothed the vendor with possession and other indicia of title，46 Am.Jur.，Sales，§ 463.” Indeed “[t]he rightful owner may be estopped by his own acts from asserting his title.If he has invested another with the usual evidence of title，or an apparent authority to dispose of it，he will not be allowed to make claim against an innocent purchaser dealing on the faith of such apparent ownership” (Smith v Clews）.

In Zendman v Harry Winston，Inc.，a diamond merchant in New York City sent a ring to Brand，Inc.，a corporation which conducted auctions on the boardwalk in Atlantic City，New Jersey，with a memorandum reciting that the ring was for examination only and that title was not to pass until the auctioneer had made his selection，and had notified the sender of his agreement to pay the indicated price and the sender had indicated acceptance thereof by issuing a bill of sale.The ring was placed in a public show window at the auctioneer’s place of business，remaining there for more than a month，before being sold to the plaintiff at a public auction.Under circumstances where it was demonstrated that the defendant had permitted other pieces of jewelry it owned to be exhibited and sold by the auctioneer，it was held that the defendant by his conduct was estopped from recovering the ring from the plaintiff.

In the case at bar，Porter’s conduct was not blameworthy.When the first promissory note was dishonored，he retained Bishop’s investigative service and informed the FBI of the financial transactions concerning the series of notes.His attorney obtained a comprehensive agreement covering several paintings，within which was the assurance (now proven false） by Von Maker that he still controlled the Utrillo.Although Porter had permitted Von Maker to possess the painting，he conferred upon Von Maker no other indicia of ownership.Possession without more is insufficient to create an estoppel (Zendman v Harry Winston，Inc.）.

We find that the prior art transactions between Porter and Von Maker justified the conclusion of the trial court that Porter knew that Von Maker was a dealer in art.Nevertheless，the testimony remains uncontradicted，that the Utrillo was not consigned to Von Maker for business purposes，but rather for display only in Von Maker’s home.In these circumstances，it cannot be said that Porter’s conduct in any way contributed to the deception practiced on Feigen by Von Maker and Wertz.

Finally，we must examine again the position of Feigen to determine whether Feigen was a purchaser in good faith.

In purchasing the Utrillo，Feigen did not rely on any indicia of ownership in Von Maker.Feigen dealt with Wertz，who did not have the legal right to possession of the painting.Even were we to consider Wertz as the agent of Von Maker or merge the identities of Von Maker and Wertz insofar as Feigen was concerned，Feigen was not a purchaser in good faith.As we have commented，neither Ms.Drew-Bear nor Feigen made，or attempted to make，the inquiry which the circumstances demanded.

The Feigen claim that the failure to look into Wertz’ authority to sell the painting was consistent with the practice of the trade does not excuse such conduct.This claim merely confirms the observation of the trial court that “in an industry whose transactions cry out for verification of ...title ...it is deemed poor practice to probe.”Indeed，commercial indifference to ownership or the right to sell facilitates traffic in stolen works of art.Commercial indifference diminishes the integrity and increases the culpability of the apathetic merchant.In such posture，Feigen cannot be heard to complain.

In the circumstances outlined，the complaint should not have been dismissed.Moreover，we find that plaintiffs-appellants are the true owners of the Utrillo painting and are entitled to possession thereof，that defendants-respondents wrongfully detained that painting and are obligated to return it or pay for its value at the time of trial.

In view of the inconclusive nature of the evidence at trial as to damages (the painting apparently being irretrievable），that sole issue remains to be determined.Further，plaintiffs-appellants may have obtained the proceeds from a sale of the Cranach(as to which we have no information） and that could be a credit against those damages.

Accordingly，the judgment of the Supreme Court，New York County (Shorter，J.），entered June 22，1978，should be reversed and vacated，on the law and the facts，the complaint reinstated，judgment entered in favor of plaintiffs-appellants on liability，and the matter remanded for an assessment of damages，with costs and disbursements to plaintiffs-appellants.

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[2]In Wall v.Airport Parking Co.of Chicago，41 Ill.2d 506 (1969） the court held that a bailor-bailee relationship had not been created between an automobile owner and the owner of a self-serve parking lot where the automobile owner parked his own vehicle，locked it，and retained the key，but the owner of the parking lot had not actually or constructively accepted the automobile.

[3]But see，Parking Management，Inc.v.Gilder，343 A.2d 51 (D.C.App.1975） (owner of self-service parking lot，where auto owner parks and locks car，can be liable even though no bailment created，if the lot owner fails to “take reasonable care to avoid malicious mischief to，or theft of，vehicles.”）

[4]Zendman v.Harry Winston， Inc.，305 N.Y.180，111 N.E.2d 871 (1953）.

[5]Compare，Porter v.Wertz，68 A.D.2d 141，416 N.Y.S.2d 254 (1st Dept.1979），affirmed 53 N.Y.2d 696，439 N.Y.S.2d 105，421 N.E.2d 500 (1981） (buyer acted in bad faith in purchase of goods from person who was not a merchant）.

[6]The defense of equitable estoppel was not contained in the original answer.At the close of the trial，Feigen moved to amend the answer to include that defense.We are not at all certain that amendment of the pleading should have been allowed at that point.In any event，as the defense was raised we will consider it.

[8]The defense of equitable estoppel was not contained in the original answer.At the close of the trial，Feigen moved to amend the answer to include that defense.We are not at all certain that amendment of the pleading should have been allowed at that point.In any event，as the defense was raised we will consider it.

[9]We note that the appeal is from the trial court’s determination that equitable estoppel constitutes a bar to the action.However，because the enactment of statutory estoppel (Uniform Commercial Code，§ 2-403）was intended to embrace prior uniform statutory provisions and case law thereunder (so as “to continue unimpaired all rights acquired under the law of agency or of apparent agency or ownership or other estoppel”），and to state a unified and simplified policy on good faith purchase of goods (see Official Comment，McKinney’s Cons Laws of N.Y.，Book 62 1/2，Uniform Commercial Code，§ 2-403，p 395），we find it necessary to enter into some discussion of section 2-403 of the Uniform Commercial Code.

[10]As will be seen，Peter Wertz was a real person，at least an acquaintance of Von Maker； who permitted Von Maker to use his name.Von Maker’s true name was Harold Maker，presumably he was born in New Jersey.Apparently Maker added the prefix “Von” to his name to indicate nobility of birth.

[11]It is questioned as to where Porter believed Von Maker was living at the time.Respondents claim Porter knew only that Von Maker had a townhouse in Manhattan，whereas Porter testified he was aware Von Maker had two residences，one of them being in Westchester County.There is no support in the record for the trial court’s finding that the painting was to be hung only in the Manhattan townhouse.

[12]The book，entitled “Petrides on Utrillo，” was purchased by Porter in 1971 in Paris for the sum of $200.

[13]The book，entitled “Petrides on Utrillo，” was purchased by Porter in 1971 in Paris for the sum of $200.

[14]Wertz is described as a seller of caviar and other luxury food items (because of his association with a Madison Avenue gourmet grocery） and over whom the Trial Term observed，Von Maker “cast his hypnotic spell … and usurped his name，his signature and his sacred honor.”

[15]Feigan’s explanation for his changed version was that after his examination before trial and before the trial，his memory was “jogged” by Lipinsky，who had introduced Sloan to Feigen.In connection with Feigen’s claim that Wertz was a dealer，it is observed that on a previous appeal (Porter v.Wertz），this court unanimously affirmed an order of Special Term denying appellants’ motion for summary judgment in that there was an issue of fact as to whether Wertz was a dealer or a collector.If a dealer，appellants claimed，as they do now，the applicability of subdivision (2） of section 2-403 of the Uniform Commercial Code.

[16]Page 32 of that book clearly contained a reference to the fact that that painting，at least at the time of publication of the book in 1969，was in the collection of Mrs.Donald D.King of New York，supposedly the party from whom Porter obtained it.