Cameron Equip. Co. v. Stewart & Stevenson Servs. - 96-554 (La. App. 3 Cir 12/26/96), 685 So. 2d 696

Rule:

Louisiana Civ. Code Ann. art. 518 states: The ownership of a movable is voluntarily transferred by a contract between the owner and the transferee that purports to transfer the ownership of the movable. Unless otherwise provided, the transfer of ownership takes place between the parties by the effect of the agreement and against third persons when the possession of the movable is delivered to the transferee. Hence, when possession is not delivered, a subsequent transferee to whom possession is delivered acquires ownership provided he is in good faith. Creditors of the transferor may seize the movable while it is still in his possession.

Facts:

In June 1987, plaintiff Cameron Equipment Co. Inc. purchased two used diesel engines from the seller, Petroleum Services Inc., along with other used oil field equipment. At the time of this sale, the two diesel engines were located in the equipment yard of another company, Power Rig Drilling Company for two years. The engines were not removed from the yard or marked as property of the plaintiff. The seller sold the engines to another company, Power International, Inc. which immediately resold the engines to American General Transportation Co., Inc. The latter brokered the engines to Stewart & Stevenson Services Inc. which needed the engines for use in a towboat it had contracted to build. In June 1989, American General removed the engines from the Power Rig yard and transported them to Stewart & Stevenson's facility. Coincidentally, the plaintiff arrived to remove the engines from the yard hours after they had been taken by American General. Plaintiff filed suit against Stewart & Stevenson and Travis Ward, the president and sole shareholder of Petroleum Services, Inc. Plaintiff sought the return of the engines and damages for their conversion. Eventually, the subsequent purchasers, Petroleum Services, American General, and Power International were added as defendants. The trial court rendered judgment in favor of plaintiff and against the seller for conversion in the amount of $ 50,000, which the court determined to be the fair market value of the engines at the time of the second sale. However, the trial court denied plaintiff’s claims against the subsequent purchasers, finding that since plaintiff never took possession of the engines, La.Civ. Code art. 518 operated in favor of the subsequent purchasers, whom it determined were in good faith. The trial court refused to pierce the corporate veil and hold the president of the seller company personally liable for the conversion damages awarded against his company. Plaintiff appealed the trial court’s decision.

Issue:

Did the trial court err in its judgment concerning plaintiff’s claims against the subsequent purchasers?

Answer:

No.

Conclusion:

In affirming the trial court’s judgment, the court found that the motors were not delivered, as defined in La. Civ. Code Ann. art. 2477, because they were susceptible of transport, and ownership could not be transferred by the mere consent of the buyer and seller. Also, the court found that plaintiff buyer did not take possession of the motors under La. Civ. Code Ann. art. 518. Additionally, the court found that the company on whose property the motors remained did not know that they were sold and would have demanded their removal if it had known the plaintiff purchased them. Lastly, the court ruled that the subsequent purchasers acted in good faith when they bought the motors, thus, they had superior title to the motors. The court likewise agreed with the trial court’s judgment that the corporate veil could not be pierced to hold the president liable because there was no fraud involved, which was required under La. Rev. Stat. Ann. § 12:95. Judgment of the trial court was affirmed.