The owner of a vehicle delivered his car to a repairman for service, thereby creating a bailment through the transfer of possession. Under this arrangement, the bailee assumed possession of the vehicle but did not acquire ownership or title. After a dispute over payment for the repairs, the bailee obtained a certificate of title via unknown channels and then sold the vehicle to a dealer. The dealer purchased in good faith in reliance on the facial validity of the title document and used the document to assert rightful ownership. The owner, when the dealer requested proof, could not produce sufficient evidence of ownership. After this, the owner sued the dealer and the bailee. The trial court permitted the dealer to retain ownership because it had purchased the vehicle in good faith. The trial court further held that the bailee obtained a voidable title and, thus, could convey ownership under Tennessee’s adoption of the UCC. The owner appealed the grant of summary judgment for the dealer.
In Relliford v. Burks, No. W2022-00997-COA-R3-CV, 2025 WL 26106, 2025 Tenn. App. LEXIS 3 (Tenn. Ct. App. Jan. 3, 2025) (opinion not yet released for publication), the court reversed and remanded the decision of the district court. First, it identified the initial transaction between the owner and repairman as a bailment, not a purchase. The Tennessee UCC defined a purchase as the “taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest, issue or reissue, gift, or any other voluntary transaction creating an interest in the property.” Tenn. Code. Ann. § 41-1-201(b)(29). From that definition, the court found that the transfer from the owner to the bailee did not amount to a “purchase” due to a lack of intent to permanently relinquish title and based on UCC § 2-403, Official Comment 2, which classified bailments as entrustment of goods rather than a broad type of purchase. Thus, the bailee held rightful possession for a limited purpose only, not ownership. Second, under the Tenn. Code. Ann. § 47-2-403(1), the court held that only a purchaser with a voidable title can pass a good title to another good-faith purchaser. Because the bailee never acquired ownership, his title was void, and he could not legally convey it to the dealer. The dealer argued that the bailee acquired title through a garage-keeper’s lien, rendering him a purchaser. The court found that the facts did not establish how the bailee acquired title, so it dismissed the § 47-2-403(1) claim as speculation not entitled to judgment as a matter of law. Third, the court declined to apply an entrustment provision, § 47-2-403(2), because the delivery had been for repair, and without facts showing the regular sale or lease of cars, did not establish the bailee as a “merchant who deals in goods of that kind.” Thus, the dealer did not show entitlement to summary judgment. Accordingly, the court reversed the grant of summary judgment and remanded the case for reconsideration of the owner’s leave to amend motion, vacating its denial on the grounds of mootness.
By Landon Womack [email protected]
Edited By Taylor O’Brien [email protected]
Edited By Callighan Ard [email protected]
Edited By Hayden Mariott [email protected]