Sheridan Suzuki, Inc. v. Caruso Auto Sales, Inc. - 110 Misc. 2d 823, 442 N.Y.S.2d 957 (Sup. Ct. 1981)

Rule:

At common law, a thief could pass no title whatsoever to stolen goods. However, N.Y. U.C.C. § 2-403(1)(b), (d) supplants the common-law rule as to goods received in exchange for a check that is later dishonored or delivery is procured through fraud punishable as larcenous under the criminal law. If a good is transferred as part of a transaction involving a bad check, rather than as a result of a direct larceny or burglary, it cannot be asserted that any title received by a bona fide purchaser for value would be void. The law is clear that a person receiving goods incident to a transaction involving a dishonored check and a fraud receives only voidable title, at best. A bona fide purchaser for value can receive good title from a person with voidable title under the Uniform Commercial Code, N.Y. U.C.C. § 1-101 et seq.

Facts:

In May 1981, plaintiff Sheridan Suzuki Inc. sold a motorcycle to one Ronald Bouton. Incident to this sale they gave him possession of the motorcycle, a signed bill of sale marked paid in full and registration of the vehicle in said Bouton's name. They also filed an application for an original certificate of title, however, said certificate was never received by Bouton. Plaintiff was given Bouton's check in satisfaction of the purchase price, but said check was dishonored and Bouton has disappeared from the area. A day after the initial sale, Bouton sold the vehicle to defendant Caruso Auto Sales, Inc. Bouton gave defendant the possession of the same, signed over the registration and assured defendant that he would transfer the certificate of title upon receipt of the title documents. Before accepting the transaction, defendant called plaintiff and the latter had confirmed Bouton's assertion of prior purchase, this happened when the check was not yet dishonored. Plaintiff filed the action against defendant after the motorcycle was bought with a dishonored check and then sold it to the defendant. The court granted a preliminary order placing the motorcycle with plaintiff pending a determination of the legal issues and both parties filed for summary judgment. Defendant alleged that plaintiff was equitably estopped from denying it's buyer's title because of plaintiff’s representation that the third party had properly received ownership of the vehicle in question. Plaintiff alleged that it relied upon those representations to his detriment.

Issue:

Should plaintiff’s motion for summary judgment be granted?

Answer:

Yes.

Conclusion:

The court held that because the motorcycle was transferred as part of a transaction involving a bad check, defendant had only voidable title, at best. Also, since the voidable title received by the third party was never perfected as required by N.Y. Veh. & Traf. Law § 2113(c), it could not be successfully passed to a bona fide purchaser for value. The court further held that equitable estoppel did not operate to create rights which were nonexistent, but only operate to preclude the denial of a right claimed otherwise to have arisen. Accordingly, the court granted the plaintiff’s motion for summary judgment and denied defendant’s motion for summary judgment.