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MID-EAST SERVICES, INC. v. ENTERPRISE FORD TRACTOR, INC.



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MID-EAST SERVICES, INC.

v.

ENTERPRISE FORD TRACTOR, INC.


September 15, 2000

Record No. 992543

MID-EAST SERVICES, INC.

v.

ENTERPRISE FORD TRACTOR, INC.

FROM THE CIRCUIT COURT OF YORK COUNTY

Thomas B. Hoover, Judge

Present: All the Justices


OPINION BY JUSTICE DONALD W. LEMONS

In this appeal, we consider whether the trial
court erred in finding that Enterprise Ford Tractor, Inc.
("Enterprise") was not a seller or an agent for a
seller in a transaction involving the sale of lawn servicing
equipment to Mid-East Services, Inc. ("Mid-East").

I

On June 4, 1997, Mid-East, by its agent, Robert
L. Phillips, executed a bill of sale and tendered a check in the
amount of $47,000 to purchase certain lawn servicing equipment
[1] from William T. Hall, the owner
and operator of York River Services, Inc. ("York
River").
[2] The equipment was located in a
compound at Fort Bragg, North Carolina, where York River had been
performing a maintenance contract at the military base.
Apparently, for reasons undisclosed in the record, York River was
not able to complete its contract and Mid-East had been requested
to perform the services. During the period pertinent to this
dispute, Enterprise never took possession of the equipment.

On the day after the check was issued, Mid-East
stopped payment on the check ostensibly because of concerns that
"Mr. Hall was not legitimate." Also on the same day,
Phillips contacted Enterprise and spoke with its representative,
Bruce E. Strack, about the equipment itemized on the bill of sale
from Hall. Strack informed Phillips of an existing lien held by
Ford New Holland Credit ("New Holland") on the
equipment, for which Enterprise was a guarantor. Strack told
Phillips that he would contact New Holland to determine the
pay-off amounts. With Strack acting as intermediary, a facsimile
transmission was sent from Strack to Phillips indicating that a
"check in the amount of ($47,000.00) will pay for"
certain equipment listed. Mid-East had been willing to pay
$47,000 for the equipment listed on the bill of sale with Hall.
However, not all of the equipment listed on the bill of sale was
specified on the facsimile from Strack. Consequently, the price
was negotiated to $38,500 and Mid-East tendered its check in that
amount. Enterprise sent New Holland a check for $30,000 and
applied the balance of $8,500 toward Hall’s past-due account
of $20,000 with Enterprise. The parties agreed that, at the time
of this transaction, Enterprise did not have knowledge of a lien
on the equipment held by United Leasing Corporation. At least for
this transaction, Mid-East alleges that Strack told Phillips that
Enterprise owned the equipment. Strack denies ever making such a
statement.

Approximately three weeks later, Phillips
contacted Strack again regarding the purchase of an additional
tractor subject to New Holland’s liens. Strack confirmed the
conversation with a facsimile stating, "Per our
conversation, you have a signed retail sales agreement with Bill
Hall of York River Services for a 3930 s/n BD75226 in the amount
of $9,000. If you send us the money we will forward it to New
Holland to release the [lien]." According to Strack, this
second facsimile was more specific because United Leasing had
since called to inform him of its lien on the equipment. Strack
also testified that he had informed Phillips about the United
Leasing lien. Nonetheless, Mid-East tendered its check for $9,000
to Strack, who forwarded it to New Holland.

Toward the end of June 1997, a representative
of United Leasing and a deputy sheriff went to the compound at
Fort Bragg with legal documents authorizing the repossession of
the subject equipment. Mid-East needed the equipment to perform
its contract at Fort Bragg and, on July 1, 1997, Mid-East and
United Leasing entered into a lease agreement for the use of some
of the equipment in question for two months at a cost of $2,500
per month. At the end of August, United Leasing took possession
of the equipment.

On January 9, 1998, Mid-East filed a motion for
judgment contending that Enterprise "induce[d]"
Mid-East to enter into the two contracts for the subject
equipment by stating that "it had full ownership and
authority to sell the equipment free of liens." Mid-East
alleged that Enterprise breached an express contract, perpetrated
fraud, and violated various provisions of the Uniform Commercial
Code as adopted in Virginia,
[3] as well as Code
? 18.2-217(a).
[4] Mid-East sought to recover actual
damages of $52,500 and $50,000 in punitive damages, plus interest
and costs.

On July 15, 1999, the circuit court heard
evidence and dismissed the case, stating in its order, "the
[c]ourt is of the opinion that the Plaintiff, MID-EAST SERVICES,
INC. has not proven its case on any count and, therefore, the
Defendant should prevail." Specifically, the trial court
found that Enterprise acted "only as lienholder or agent for
the lienholder. They’re not the seller, they’re not the
dealer, they’re not an agent for the seller."

II

In this appeal, Mid-East alleges that the trial
court erred as a matter of law when it: (1) failed to enforce the
statutory warranty of good title created by Code ? 8.2-312;
(2) failed to find that the goods were entrusted to Enterprise
pursuant to Code ? 8.2-403(2); (3) ruled that a formal bill
of sale was required to transfer ownership of the goods to
Mid-East; (4) "disregarded the complete failure of
consideration where the parties intended to transfer the goods
with good title and Mid-East paid Enterprise but received goods
with defective title and Enterprise refused to return
Mid-East’s consideration"; and (5) found Enterprise was
acting as a lienholder when no action pertaining to secured
transactions under Title 8.9 took place.
[5]

Enterprise argues it was not a
"seller" under Title 8.2 of the Code and that, even if
Code ? 8.2-312 applied in this case, the warranty of good
title was excluded under subsection (2) because the circumstances
gave Phillips reason to know that Enterprise did not claim title
to the equipment. Additionally, Enterprise maintains that the
evidence is sufficient to support the trial court’s
conclusion that Enterprise acted as a "lienholder or agent
of a lienholder" in this transaction. Further, Enterprise
argues that it did not act as a merchant under an entrustment
within the meaning of Code ? 8.2-403(2) and, finally, that
because it did not act as a seller or agent for the seller, it
could not be accountable for any failure of consideration.

III

A review of the record reveals that Mid-East
never alleged that Enterprise acted as a merchant entrusted with
goods pursuant to Code ? 8.2-403(2). Because the matter was
not presented to the trial court, we will not consider the
argument on appeal. See Rule 5:25; Pulliam v. Coastal
Emergency Servs.
, 257 Va. 1, 16, 509 S.E.2d 307, 316 (1999).

IV

The remaining assignments of error are resolved
by the trial court’s factual finding that Enterprise was not
the seller or an agent for the seller in this transaction.

On appeal, we review the facts in the light
most favorable to the prevailing party at trial. Nationwide
Mut. Ins. Co. v. St. John
, 259 Va. 71, 76, 524 S.E.2d 649,
651 (2000). A trial court’s judgment is presumed to be
correct and, on appeal, we will not set it aside unless the
judgment is plainly wrong or not supported by the evidence. Ravenwood
Towers, Inc. v. Woodyard
, 244 Va. 51, 57, 419 S.E.2d 627, 630
(1992).

The trial court found that the only bill of
sale in this transaction was from Hall as seller to Mid-East as
buyer. All of the items referred to in the facsimile dated June
5, 1997 are identified in the bill of sale dated June 4, 1997. A
fourth tractor referred to in the facsimile dated June 17, 1997
was not listed in the bill of sale; however, Strack, on behalf of
Enterprise, clearly indicated in the facsimile that a retail
sales agreement existed between Mid-East and "Bill Hall of
York River Services" for the purchase of this additional
tractor. In both transactions Strack, on behalf of Enterprise,
identified his role as "negotiations middleman" and the
trial court found that he was acting for Enterprise and for New
Holland. The trial court specifically found that Strack, acting
on behalf of Enterprise, was not an agent for Hall or York River.

A.

Mid-East asserts that Title 8.2 of the Uniform
Commercial Code as adopted in Virginia applies to these
transactions. Most assuredly it does. However, Mid-East
mischaracterizes the parties to these transactions. As the trial
court found, the seller was Hall and the buyer was Mid-East.
Enterprise acted on its own behalf and on behalf of New Holland,
a lienholder. Enterprise was not a seller or an agent for a
seller under Title 8.2.

Mid-East’s arguments are dependent upon
characterizing Enterprise as a "seller" under Title 8.2
of the Code. See Code ? 8.2-103(d)
("seller" defined as "a person who sells or
contracts to sell goods"). If Enterprise is a
"seller" under Title 8.2, then Code ? 8.2-312(1)
provides, subject to exclusion or modification under subsection
(2), a warranty from the seller that:

(a) the title conveyed shall be good, and its
transfer rightful; and

(b) the goods shall be delivered free from any
security interest or other lien or encumbrance of which the buyer
at the time of contracting has no knowledge.

Because Hall, not Enterprise, was the seller in
these transactions, Mid-East may not look to Enterprise for a
warranty under Code ? 8.2-312(1). See, e.g., Moore
v. Allied Chem. Corp.
, 480 F. Supp. 364, 375 (E.D. Va.
1979)(breach of warranty within the meaning of Commercial Code of
Virginia requires a sale which "must involve the passing of
title of goods from the seller to the buyer for a price").

B.

Mid-East maintains that the trial court was
plainly wrong in its finding that Enterprise was an agent for the
lienholder because Enterprise never utilized any of the
provisions of Title 8.9 of the Uniform Commercial Code pertaining
to secured transactions. Again Mid-East misunderstands the nature
of the transactions that took place. Enterprise, acting for
itself or as an agent for New Holland, was not seeking to create,
perfect, or enforce a security interest. As the trial court
found, Enterprise was the "negotiations middleman" for
the purpose of the pay-off of New Holland’s lien and
Enterprise’s overdue account with York River.

C.

Mid-East states as an assignment of error that
"[t]he trial court erred in ruling that a formal bill of
sale was required to transfer ownership of the goods to
Mid-East." Nowhere in the record was such a ruling made by
the trial court. Presumably, Mid-East’s quarrel is that the
trial court rejected the characterization of the two facsimiles
as bills of sale. What the trial court did find is that there was
a bill of sale, dated June 4, 1997, between Hall and Mid-East.
The evidence further supports the trial court’s conclusion
that the transfer of the fourth tractor was the subject of a
"signed retail sales agreement" between Hall and
Mid-East.

D.

Finally, Mid-East complains that "[t]he
trial court erred when it disregarded the complete failure of
consideration where the parties intended to transfer the goods
with good title and Mid-East paid Enterprise but received goods
with defective title and Enterprise refused to return
Mid-East’s consideration." There may have been a
failure of consideration in this transaction, but once again
Mid-East mistakes the roles played by the various parties.

The trial court did not make a finding
concerning failure of consideration. With ample support in the
record, the trial court found that Enterprise was neither the
seller nor an agent for the seller. The consideration paid was to
Hall in the form of direct payment of Hall’s or York
River’s indebtedness. If a failure of consideration
occurred, it was between Mid-East and Hall rather than between
Mid-East and Enterprise.

V

For the reasons stated, we conclude that the
trial court was not plainly wrong or without evidence to support
its dismissal of the motion for judgment. See Wright
& Hunt v. Wright
, 205 Va. 454, 460, 137 S.E.2d 902, 907
(1964). Accordingly, we will affirm the judgment of the trial
court.

Affirmed.

FOOTNOTES:

[1] The equipment consisted of three
Ford Tractors, five Alamo Flail Mowers, one swing trim, one
500-gallon fuel tank, one bush hog, two 20-foot storage vans, one
40-foot storage van, one base radio station, and nine hand-held
radios.

[2] Although the bill of sale listed
William T. Hall, individually, as "seller," testimony
revealed that the equipment had been previously sold by
Enterprise to York River, not to William T. Hall.

[3] Specifically, Mid-East
alleges violations of Code ?? 8.2-206, 8.2-301, 8.2-312,
8.2-313, and 8.2-721.

[4] Code ? 18.2-217(a) states,
in pertinent part:

Any person, firm, corporation or
association who in any manner advertises or offers for
sale to the public any merchandise, goods, commodity,
service or thing with intent not to sell, or with intent
not to sell at the price or upon the terms advertised or
offered, shall be guilty of a Class 1 misdemeanor.

[5] The allegations of fraud and violation of Code
? 18.2-217(a) are not the subject of assignments of error.

 

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