KRAMER, CHIEF JUDGE:
Baciomiculo, LLC, appeals an order of the Jefferson Circuit Court summarily dismissing its claim of conversion against Nick Bohanon, LLC, and Nick Bohanon (collectively "the Bohanon Defendants"). Following careful review, we reverse and remand.
Much of the history of this case was summarized by the circuit court's aforementioned order and judgment. We quote the relevant part of that history as follows:
Ultimately, the circuit court granted summary judgment in favor of the Bohanon Defendants.
Stated differently, the circuit court presumed Lakeland had no title to the personal property at issue in this matter (i.e., the equipment). Nevertheless, the circuit court reasoned because Lakeland held title to the land where the equipment had been placed, and because Lakeland did not tell the Bohanon Defendants that it was not the owner of the equipment, the Bohanan Defendants were able to purchase and acquire valid title to the equipment from Lakeland and were entitled to be treated as a good faith purchaser for value.
This appeal followed.
Summary judgment serves to terminate litigation where "the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Kentucky Rules of Civil Procedure (CR) 56.03. Summary judgment should be granted only if it appears impossible that the nonmoving party will be able to produce evidence at trial warranting a judgment in his favor. Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky.1991). Summary judgment "is proper where the movant shows that the adverse party could not prevail under any circumstances." Id. at 480 (citing Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255 (Ky.1985)).
On appeal, we must consider whether the circuit court correctly determined that there were no genuine issues of material fact and that the moving party was entitled to judgment as a matter of law. Scifres v. Kraft, 916 S.W.2d 779 (Ky.App. 1996). Because summary judgment involves only questions of law and not the resolution of disputed material facts, an appellate court does not defer to the circuit court's decision. Goldsmith v. Allied Building Components, Inc., 833 S.W.2d 378 (Ky.1992). Likewise, we review the circuit court's interpretations of law de novo. Cumberland Valley Contrs., Inc. v. Bell County Coal Corp., 238 S.W.3d 644, 647 (Ky.2007).
On appeal, Baciomiculo argues the circuit court's judgment, which stands for the proposition that a seller's lack of title is irrelevant if the buyer acted in good faith, was a backward application of the law; and that the general rule, which is applicable under the circumstances of this case, is that a buyer's good faith is irrelevant if the seller lacks title. We agree.
Additionally, in their brief the Bohanon Defendants hypothesize Lakeland might have acquired voidable or good title to the equipment, but they stop short of offering any kind of argument supporting those propositions. To the extent that they have attempted to raise those points as alternative bases for affirming the circuit court's judgment, we reject them as unsupported by the record.
Generally speaking, the concept of purchasing in "good faith" in the context of sales transactions regarding personal property or goods is relevant when the purchaser claims the protection of the voidable title or entrustment provisions of the Uniform Commercial Code. Those provisions, as adopted in KRS 355.2-403, state in relevant part:
With the above in mind, the goods at issue in this matter (the equipment) were never "delivered" to Lakeland "under a transaction of purchase,"
There is also nothing of record indicating Lakeland ever acquired any species of "voidable title" to the equipment. According to its own pleadings, Lakeland's only claim to the equipment was through its commissioner's deed to the real property the equipment had been placed upon, or its alternative theory that the equipment had been "abandoned." But, Lakeland's commissioner's deed did not encompass personal property; it only encompassed the real property "together with the appurtenance thereon" and there is no evidence of record, much less any argument, to the effect that the equipment qualified as any kind of "appurtenance" (i.e., fixture). Furthermore, any good faith on the part of the Bohanon Defendants in purchasing the equipment from Lakeland would have been irrelevant if Lakeland had acquired it as abandoned property
Moreover, the dispositive assumption of the circuit court's judgment was that Lakeland had no title to the equipment — in which case no measure of protection is usually afforded to a good faith purchaser. This point is underscored in 67 Am.Jur.2d Sales § 385 (2016), in the context of its discussion of Uniform Commercial Code (U.C.C.) 2-403 (the basis of KRS 355.2-403):
(Internal citations and footnotes omitted; emphasis added); see also 67 Am.Jur.2d Sales §§ 386 and 387 (2016) (explaining purchaser of goods from either a thief or a non-merchant bailee, even if acting in good faith, does not vest title on the purchaser as against the owner); State Auto. Mut. Ins. Co. v. Chrysler Credit Corp., 792 S.W.2d 626, 627 (Ky.App.1990) (explaining good faith is immaterial to an action for conversion).
Despite the above, the Bohanon Defendants successfully argued to the circuit court that even if Lakeland had no title, Lakeland was still capable of transferring good title to them based upon a common law principle of estoppel discussed in United Road Machinery Co. v. Jasper, 568 S.W.2d 242 (Ky.App.1978). On appeal, the Bohanon Defendants offer the same argument.
Before discussing the particulars of Jasper, we note that KRS 355.2-403 was never designed to impair any "rights acquired under the law of agency or of apparent agency or ownership or other estoppel, whether based on statutory provisions or on case law principles." See KRS 355.2-403, Official Comment 1. In other words, there are instances under Kentucky law where a person with no title to property may effectively convey good title. The common law principle of estoppel discussed in Jasper appears to be one such instance.
However, the principle discussed in Jasper has no application because it was based upon a narrow set of circumstances that are not present here.
In Jasper, United Road Machinery Company (United), a dealer in heavy road equipment, entered into a "lease-purchase" agreement with Consolidated Coal Company (Consolidated) for a set of truck scales. The agreement provided for monthly payments over a 24-month period with an option to purchase for one dollar consideration exercisable at the termination of the lease. Id. at 243. Subsequently, United allowed Consolidated to take possession of the scales without signing any written contract or paying any consideration. Id. Approximately two months later, Consolidated sold the scales to a third party, Kentucky Mobile Homes (Mobile). Before this latter sale was consummated, Mobile's president searched the Laurel and Pulaski County records for any possible lien, mortgage or other encumbrance relating to the scales; found nothing; and otherwise had no knowledge of any dispute between United and Consolidated. Two days later, Mobile sold the scales to Clyde Jasper, who also conducted a search of the Laurel and Pulaski County records;
The circuit court in Jasper ultimately dismissed United's suit. Its reasoning, as later adopted and affirmed by the Court of Appeals, was that under the circumstances Jasper was entitled to keep the scales if Consolidated had acquired all of United's title by virtue of the lease-purchase agreement. It was entitled to keep the scales if Consolidated had acquired voidable title within the ambit of KRS 355.2-403 by virtue of the lease-purchase agreement (i.e., through fraud for example) because Jasper had no notice of United's claims and otherwise qualified as a good faith purchaser. And, it was entitled to keep the scales even if Consolidated had acquired "no title" from the lease-purchase agreement. Id. at 244-45.
As noted, in the case at bar the Jefferson Circuit Court concluded that because Lakeland found the equipment on its land, and because Lakeland did not tell the Bohanon Defendants that it was not the owner of the equipment, Lakeland was able to sell and transfer valid title to that property to the Bohanon Defendants. To justify its conclusion, the circuit court seized upon the following passage from Jasper:
Id. at 245 (emphasis added).
What should be obvious from this passage and what we have italicized of it is that the common law rule described in Jasper, allowing an individual with "no title" in personal property to effectively convey valid title irrespective of KRS 355.2-403, only applied when the owner of the property in question voluntarily — whether by reason of free choice or fraudulent inducement — "puts it in the power of another to cause the loss" and cloaks that individual with indicia of ownership. Id. In Jasper, for example, United allowed Consolidated to take possession of the scales; required no payment for the scales; and made no record of any interest it may have retained in the scales, even though it was apparently the custom to record such an interest. Id. at 243-44.
Moreover, the Jasper Court only applied this common law rule in a circumstance where (1) a voluntary transaction regarding the personal property had taken place between the owner and the individual who wrongfully sold it; and (2) due to a gray area in the law which existed when Jasper was rendered in 1978, it was a relatively close call whether the transaction qualified as a sale — which would have transferred title and left United with merely a security interest — as opposed to a lease — which would not have transferred United's title at all.
Here, the exception described in Jasper simply does not apply. No voluntary transaction ever took place between Baciomiculo and either Lakeland or the Bohanon Defendants. To the contrary, Lakeland instead cast itself in its pleadings as either a finder of "abandoned property," or an "innocent
In short, the circuit court did not identify, and the Bohanon Defendants did not raise, any viable basis for dismissing Baciomiculo's conversion suit. Accordingly, the circuit court's judgment in favor of the Bohanon Defendants was erroneous and we REVERSE and we REMAND this matter for further proceedings not inconsistent with this opinion.
See Kentucky Ass'n of Counties All Lines Fund Trust v. McClendon, 157 S.W.3d 626, 632 n. 12 (Ky.2005) (quoting 90 C.J.S. Trover and Conversion § 4 (2004)).
Gilmore, Security Interests in Personal Property Section 3.6, at 76 (1965). That the Jasper Court navigated this gray area is apparent from the context of that case and more so by its citation of KRS 355.1-207(37) (the troublesome statute discussed above) in its analysis of how common law estoppel applied under the circumstances. Id. at 245. The Jasper Court navigated this gray area by: (1) equivocally stating that it felt like the lease-purchase agreement between United and Consolidated qualified as a "transaction of purchase" under KRS 355.2-403, and that if this was the case Consolidated had acquired voidable title; or alternatively, (2) if its understanding of the law on that point was incorrect, then United, by its voluntary negligence or mistake in trusting Consolidated and clothing it with indicia of ownership, was still culpable enough for purposes of estoppel. Id.