Porter v. Wertz, 53 N.Y.2d 696 (1981)

The “entrustment provision” of UCC § 2-403(2) protects only those who purchase from the merchant to whom the property was entrusted, in the ordinary course of the merchant’s business; it does not protect a buyer who purchases from someone other than the entrusting merchant, even if that person is connected to the merchant.

Summary

Porter entrusted a painting to Von Maker, an art merchant. Von Maker, using the alias Peter Wertz, sold the painting to Feigen Gallery through Wertz, a delicatessen employee. When Porter sought to recover the painting, Feigen Gallery argued that UCC § 2-403(2) protected their title because Porter entrusted the painting to an art merchant. The court held that the entrustment provision was inapplicable because Feigen did not purchase the painting from the entrusting merchant (Von Maker), but from Wertz, a non-merchant, and the sale wasn’t in the ordinary course of business. The court affirmed the lower court’s decision in favor of Porter.

Facts

Porter owned an Utrillo painting and entrusted it to Harold Von Maker, an art merchant. Von Maker used the name Peter Wertz in his dealings with Porter. Von Maker then gave the painting to the actual Peter Wertz, a delicatessen employee, and asked him to find a buyer. Wertz approached the Feigen Gallery, and Richard Feigen purchased the painting from Wertz, believing him to be an art dealer. Feigen had been told by Henry Sloan that a person named Peter Wertz, who was an art dealer, was interested in selling a Utrillo. Porter sued to recover the painting after discovering it at the Feigen Gallery.

Procedural History

The trial court ruled in favor of Porter. The Appellate Division affirmed, concluding that UCC § 2-403(2) did not protect Feigen Gallery’s claim to the painting. The New York Court of Appeals granted leave to appeal and affirmed the Appellate Division’s decision.

Issue(s)

1. Whether UCC § 2-403(2) protects a buyer who purchases goods from someone other than the merchant to whom the goods were entrusted, but who claims to be acting on behalf of that merchant, or is mistaken by the buyer to be the merchant?
2. Whether the doctrine of equitable estoppel applies where the original owner entrusted the goods to a merchant who then used an alias, but did not directly interact with the ultimate purchaser through that alias?

Holding

1. No, because the protection of UCC § 2-403(2) extends only to purchases made directly from the merchant to whom the goods were entrusted in the ordinary course of that merchant’s business.
2. No, because the original owner must have taken some action to clothe the eventual seller with apparent ownership or authority, and the purchaser must have relied on that appearance.

Court’s Reasoning

The court reasoned that the “entruster provision” of UCC § 2-403(2) aims to enhance the reliability of commercial sales by merchants. It shifts the risk of fraudulent transfer to the owner who selects the merchant. However, this protection is limited to purchases made directly from the entrusted merchant in the ordinary course of their business. The court emphasized that Feigen purchased the painting from Wertz, a delicatessen employee, not from Von Maker, the art merchant to whom the painting was entrusted. The court rejected the argument that Wertz was acting on Von Maker’s behalf because there was no evidence that Wertz disclosed this to Feigen, thus Feigen could not have relied on Von Maker’s status as an art merchant. The court highlighted the Appellate Division’s finding that Feigen failed to establish that Wertz was introduced as an art dealer. Regarding equitable estoppel, the court found that Porter did nothing to create apparent ownership in Wertz, as Porter delivered the painting to Von Maker, not Wertz. “An estoppel might arise if Porter had clothed Peter Wertz, with ownership of or authority to sell the Utrillo painting and the Feigen Gallery had relied upon Wertz’ apparent ownership or right to transfer it. But Porter never even delivered the painting to Peter Wertz, much less create apparent ownership in him”. Therefore, Feigen Gallery could not rely on an estoppel defense. The court explicitly declined to address the issue of Feigen’s good faith, given its other holdings.