Business Law 11th Edition by Kenneth Clarkson,Roger LeRoy Miller,Gaylord Jentz,Frank Cross

Exercise 15

Hammer v. Thompson
Court of Appeals of Kansas, 2006. 35 Kan.App.2d 165, 129 P.3d 609.
www.kscourts.org/kscases a
• Background and Facts In spring 2002, near Richmond, Kansas, Steve Hammer and Ron Howe placed 150 breeding heifers with Kevin Thompson for grazing. Thompson sold the cattle to Roger Morris, who was doing business as Morris Cattle Company and Auction Service, for $131,750. Morris sold the cattle through Farm Bureau Management Corporation, doing business as BIC Cattle, to Nick Hunt. Hunt, in business as Clan Farms, Inc., sold the cattle to IBP Foods, Inc. (now known as Tyson Fresh Meats). Hammer and Howe filed a suit in a Kansas state court against Morris and the others, alleging conversion (see Chapter 6). Morris admitted that he bought the cattle but argued that the claim against him was barred because he was a "buyer in the ordinary course of business" from Thompson, who was a merchant under Article 2. b Morris filed a motion for summary judgment, which the court granted. Hammer and Howe appealed to a state intermediate appellate court.
a. In the body of the text, in the third line, click on the "Court of Appeals" link. On the page that opens, scroll to the name of the case and click on it to access the opinion. The Kansas courts, the Washburn University School of Law Library, and the University of Kansas School of Law Library maintain this Web site.
b. Under UCC 2-403, entrusting goods to a merchant who deals in goods of the kind gives the merchant the power to transfer all rights to a buyer in the ordinary course of business (a person who, in good faith and without knowledge that the sale violates the rights of a third party, buys in ordinary course from the merchant).
BRAZIL, J. [Judge]
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The parties indicate that Thompson was involved in order buying cattle. Thompson described order buying as acting as the middleman between the purchaser and the seller. "I buy the cattle for the man that's purchasing them and try to help the man that's selling them get rid of them or sell them."[Emphasis added.]
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To support their argument that Thompson was not a merchant, Hammer and Howe argue that Thompson had no intention of being an order buyer of cattle * * *. Hammer and Howe contend there is no evidence that Thompson was running an order buying business in May 2002 when he sold the Hammer/Howe cattle * * *. Hammer and Howe assert that Thompson's documented sales were in the months of October and November 2002, after the May 2002 sale of Hammer and Howe's cattle to Morris.
Morris argues that Thompson was a merchant, pointing to the following facts:Thompson began an order buying business while working at Greeley Farms [in Kansas] and Hammer sold Thompson 300 head of cattle earlier in the summer. Thompson held himself out as a person with specialized knowledge of pasturing cattle, Thompson had documented purchases and sales of cattle as early as March 2001 and had bought or sold cattle as an order buyer in at least 60 different transactions.
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* * * Between March 15, 2001, and December 20, 2001, there were 25 transactions where Thompson was the buyer and 6 where Thompson was the seller. Additionally, Thompson confirmed * * * his cattle sales and purchases for calendar year 2002. Between October 9, 2002, and November 21,2002, Thompson was involved in at least one sale and at least 15 purchases as shown by his name listed on the invoices. There were additional invoices * * * where Thompson purchased cattle from Morris in 19 transactions between May 15, 2002, and August 18, 2002.
In the sale at issue, Thompson sold the cattle to Morris on May 18, 2002. There is a lapse in time between December 2001 and May 2002 where there are no records to support that Thompson was involved in order buying cattle. This is consistent with Thompson's testimony that his initial intention was to [engage in a different business] when he moved to Richmond but that he began order buying because he did not have any income. * * * [T]he undisputed facts in the record support a finding that as a matter of law, Thompson was a merchant * * *.
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The court did not err in finding that Thompson was a merchant.
• Decision and Remedy The state intermediate appellate court upheld the finding of the lower court that Thompson was a merchant. The appellate court ruled, however, that Morris had not shown he was a "buyer in the ordinary course of business," which was an essential element of his defense. The court reversed the summary judgment in Morris's favor and remanded the case to the lower court for a determination on this issue.
• What If the Facts Were Different If neither Thompson nor Morris had any experience in the business of cattle trading, how might the result in this case have been different
• The Global Dimension Suppose that the transactions in which Thompson acted as an order-buyer had occurred in other countries. Would the court have still ruled that Thompson was a merchant Why or why not