## Facts

- Perez-Medina bought a tractor at an auction for $66,500.
- At that auction, Perez-Medina met Julio Lara, who had been bidding on the same tractor.
- Later the same day, Perez-Medina again met Lara at a second auction where Perez-Medina purchased equipment intended for the tractor.
- Perez-Medina and Lara agreed that Lara would install the newly purchased equipment on the tractor.
- With Perez-Medina’s knowledge and consent, Lara took possession of the tractor and transported it to Lara’s place of business to perform the installation work.
- About four months later, Perez-Medina visited Lara’s place of business and paid Lara $10,000 for the installation work.
- Perez-Medina testified that Lara’s business looked to him like a repair shop, not a business that sold heavy equipment.
- Other undisputed evidence showed Lara operated a business in which he regularly bought and sold heavy equipment like the tractor, including at auctions conducted by First Team Auction, Inc. (First Team), and through other sales.
- Without Perez-Medina’s knowledge or consent, Lara consigned the tractor for sale through an auction conducted by First Team and represented that he owned the tractor free and clear of liens.
- When the auction did not produce an acceptable bid, Lara sold the tractor directly to First Team for about $54,000.
- First Team later sold the tractor to a dealer, who sold it to a consumer; at the time of those purchases, First Team and the later purchasers lacked knowledge of Perez-Medina’s ownership claim.
- After Lara’s misconduct was discovered, the later sales were unwound and First Team ended up with the tractor again after returning the purchase price to its buyer.
- Perez-Medina filed a trover action against First Team, claiming ownership and seeking recovery of the tractor (or its value).
- The trial court granted summary judgment to First Team and denied Perez-Medina’s motion for summary judgment, relying on Georgia’s UCC entrustment statute, O.C.G.A. § 11-2-403.
- Perez-Medina appealed, arguing that Lara was not a “merchant” for purposes of the entrustment statute.

## Issues

1. Whether Perez-Medina’s delivery of the tractor to Lara (and acquiescence in Lara’s continued possession) constituted an “entrusting” under O.C.G.A. § 11-2-403(2)–(3).
2. Whether the undisputed evidence established that Lara was a “merchant who deals in goods of that kind” within O.C.G.A. § 11-2-403(2) and O.C.G.A. § 11-2-104(1).
3. Whether First Team purchased the tractor as a buyer in ordinary course of business, so that Lara had power under O.C.G.A. § 11-2-403(2) to transfer Perez-Medina’s rights to First Team, defeating Perez-Medina’s trover claim.

## Decision

- The Court of Appeals of Georgia affirmed the grant of summary judgment to First Team and the denial of Perez-Medina’s summary judgment motion.
- The court held that the record showed entrustment because Perez-Medina voluntarily allowed Lara to take and keep possession of the tractor for installation work.
- The court held the evidence was undisputed that Lara regularly bought and sold heavy equipment like the tractor, making him a merchant dealing in goods of that kind, even if Perez-Medina believed Lara appeared to run only a repair shop.
- The court held First Team qualified as a buyer in ordinary course because it purchased for value and without knowledge of Perez-Medina’s claim.
- Because the entrustment statute gave Lara power to transfer Perez-Medina’s rights to First Team, Perez-Medina lacked a superior right to possession and could not prevail in trover.

## Legal Principles

- Under O.C.G.A. § 11-2-403(2), entrusting goods to a merchant who deals in goods of that kind gives the merchant power to transfer all rights of the entruster to a buyer in ordinary course of business.
- Under O.C.G.A. § 11-2-403(3), “entrusting” includes delivery and acquiescence in retention of possession, regardless of any conditions between the parties and even if the possessor’s later disposition would be wrongful.
- A “merchant” under O.C.G.A. § 11-2-104(1) includes a person who deals in goods of the kind involved in the transaction.
- A buyer in ordinary course of business takes in good faith, for value, and without knowledge that the sale violates another person’s ownership rights. See O.C.G.A. § 11-1-201(9) (as applied by the court).
- In trover, the plaintiff must show title or a superior right of possession; the entrustment rule can cut off the original owner’s right to reclaim the goods from a protected buyer.

## Conclusion

Because Perez-Medina consented to Lara’s possession of the tractor and the undisputed evidence showed Lara was a merchant who regularly dealt in heavy equipment, O.C.G.A. § 11-2-403 allowed Lara to transfer Perez-Medina’s rights to First Team as a buyer in ordinary course, so Perez-Medina could not establish a superior right to possession in trover and summary judgment for First Team was properly affirmed.


Perez-Medina v. First Team Auction, Inc., 426 S.E. 2d 397 (1992)