Appeal from the Order entered on October 31, 1985, in the Court of Common Pleas of Cumberland County, Civil Division, at No. 3349 Civil 1983.
John F. Pyfer, Jr., Lancaster, for appellants.
William P. Douglas, Carlisle, for appellees.
Wieand, Beck and Watkins, JJ.
[ 362 Pa. Super. Page 319]
The issue is whether a corporation or its officers are liable for conversion when they sell a farmer's cattle and pay the proceeds of the sale to the farmer where the cattle are subject to a third party's security interest.
This is an appeal by Shady Lane Dairy Sales, Inc. ("Shady Lane"), a family-owned corporation engaged in livestock auctioneering, and by its president Glenn D. Fite, from a grant of summary judgment. We affirm summary judgment against both Glenn D. Fite and Shady Lane.
[ 362 Pa. Super. Page 320]
The Bank of Landisburg lent $46,925 for the purchase of 34 head of cattle to Curtis and Carol Burruss, a husband and wife engaged in farming operations in Cumberland County. The Burrusses purchased the cattle from Alfred Albright, who guaranteed the loan. In return, the Burrusses signed three security agreements granting Albright a security interest in the cattle. In these agreements, the Burrusses promised not to sell or otherwise dispose of the cattle without Albright's prior written authorization. Albright perfected his security interest by filing financing statements in the office of the Cumberland County prothonotary.
According to appellants Shady Lane and Fite the following events then occurred. The Burrusses contacted Shady Lane in order to arrange for the sale of their cattle. After visiting the Burrusses' farm, Fite hired a man to transport the cattle from Cumberland County to Shady Lane's place of business in Lancaster County. About four days later, an independent contractor acting for Shady Lane auctioned off the cattle for $24,170. Shady Lane retained $2507 as costs and commission and remitted the balance to the Burrusses, who took the money and promptly disappeared.
In essence, appellants maintain that Fite had no reason to suspect that the Burrusses had violated security agreements and that Fite at all times acted in good faith. However, it is undisputed that neither Fite nor anyone else associated with Shady Lane ever searched the records of the Cumberland County prothonotary's office to determine if a security interest was perfected as to the cattle.
II. LIABILITY OF SHADY LANE CORPORATION
The theory of the Bank of Landisburg and Albright, the appellees, is that Shady Lane's sale of the cattle constitutes a conversion. In order to address this argument, we must consider the scope of the tort of conversion at common law.*fn1
[ 362 Pa. Super. Page 321]
Pennsylvania's appellate courts have not previously considered whether a broker of livestock may be held liable to a secured party for conversion. See United States v. Sommerville, 324 F.2d 712, 722 (3rd Cir.1963) (Steel, J., concurring), cert. denied 376 U.S. 909, 84 S.Ct. 663, 11 L.Ed.2d 608 (1964). Yet, in other jurisdictions, the clear weight of authority supports the view that a broker converts cattle when he sells them without the secured party's permission. See United States v. Matthews, 244 F.2d 626 (9th Cir., 1957); Annotation, Personal Liability of Auctioneer to Owner or Mortgagee for Conversion, 96 A.L.R.2d 208 (1964). This position has been adopted by federal courts applying Pennsylvania law. United States v. Chesley's ...