Section 6 Farmers, Bailees, and Buyers in Ordinary Course

• Library: Farm Law 2006

Farmers must be careful when entrusting their goods (crops, livestock, etc.) to a bailee (grain elevator, livestock hauler, etc.). This is because, under § 400.2-403(2), RSMo 2000, “Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him the power to transfer all rights of the entruster to a buyer in ordinary course of

business.” Section 400.1-201(9), RSMo Supp. 2005, defines “Buyer in ordinary course of business” as:

a person that buys goods in good faith and without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller’s own usual or customary practices. . . . Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under article 2 may be a buyer in ordinary course of business. A person that acquires goods in a transfer in bulk or as security for, or in total or partial satisfaction of, a money debt is not a buyer in ordinary course of business.

This means that the burden is on the person entrusting the goods to a bailee to exercise sound discretion in the choice of a bailee because, “Where one of two innocent parties must suffer a loss occasioned by a third person, the person who enabled the acts of the wrongdoer must suffer the loss.” Standard Leasing Corp. v. Mo. Rock Co., 693 S.W.2d 232, 237 (Mo. App. W.D. 1985).

Further, when a farmer ships goods by way of a trucker who is also a part-time merchant and that bailee wrongfully sells the goods to a buyer in ordinary course of business, the farmer will be unable to recover anything from the purchaser. See Simonds-Shields-Theis Grain Co. v. Far-Mar-Co., Inc., 575 F. Supp. 290 (W.D. Mo. 1983). But when the transferee receives the property or goods by fraud, such as forging a buyer’s name on documents or theft, that transferee is incapable of transferring any title, even to a buyer in the ordinary course of business. Moore Equip. Co. v. Halferty, 980 S.W.2d 578 (Mo. App. W.D. 1998); Paulino v. Computer Renaissance, 62 S.W.3d 648 (Mo. App. E.D. 2001); § 400.2-403.

(§1.7) Destruction of Crops and Impracticability

The Missouri UCC has made provisions to excuse performance under a contract, either when the goods suffer casualty...