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Wood v. Corner Stone Bank
Citations: 315 Ark. 200; 866 S.W.2d 385; 24 U.C.C. Rep. Serv. 2d (West) 1125; 1993 Ark. LEXIS 663Docket: 93-444
Court: Supreme Court of Arkansas; December 6, 1993; Arkansas; State Supreme Court
The trial court affirmed its finding of sufficient evidence for a conversion claim against Ron and Ed Wood, and Buck Graham, regarding property owned by The Corner Stone Bank. James P. Chamberlain, who had taken a loan from the bank secured by a 1980 Great Dane trailer and a 1984 Ford truck, had the trailer stolen. Following the theft, the bank allowed Chamberlain to substitute a 1977 TIMP trailer as collateral. The TIMP trailer was owned by the Woods, but an endorsement indicated that Ron Wood had transferred ownership to Chamberlain. Chamberlain eventually defaulted on his loan, prompting the bank to repossess the trailer. Ed Wood sent Graham to locate it, leading to Graham taking the trailer without bank notice and subsequently selling it for salvage. The bank sued for conversion and was awarded $4,000 in compensatory and $2,000 in punitive damages. The court referenced the "Derivative Title Principle" from the Uniform Commercial Code, which typically protects original owners like the Woods. However, it acknowledged the "Preclusion Exception," which can override this principle if the original owner's actions do not justify contesting the property holder's title. The Woods' failure to inform the bank of the alleged forgery on the title and Ron Wood's claim that he had merely loaned the trailer to Chamberlain were insufficient to dispute the bank's security interest. Thus, the trial court's findings were upheld as not clearly erroneous. Wood asserted that he had not signed the front of the title certificate for the trailer nor was he present when the back was notarized by Mr. Hueston Brown, who could not recall whether Wood signed in his presence. Despite knowing the bank had possession and a potential security interest in the trailer, the Woods did not inform the bank of their dispute regarding Chamberlain's title. The bank was unaware of any issues, as Chamberlain provided a certificate of title that appeared valid. The appellants referenced Pachter, Gold, Shaffer v. Yantis, but this case was deemed irrelevant since the original owner in Pachter had not contributed to the loss, unlike the Woods, who had provided Chamberlain with both the title and the trailer. The principle established in Snuffy Smith Motors v. Universal C.I.T. indicated that the party whose actions induced the loss should bear the burden. Consequently, the court found the bank to be less at fault than the Woods, confirming the trial court's ruling that the Woods were precluded from contesting the bank's proprietary interest in the trailer. The decision was affirmed.