Zendman v. Harry Winston, Inc.
305 N.Y. 180, 111 N.E.2d 871 (1953)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An owner of goods is precluded by their conduct from denying a seller's authority to sell when the owner entrusts the goods to a merchant who deals in such goods, and the owner's conduct, such as acquiescing to public display and a prior course of dealing inconsistent with private restrictions, creates an apparent authority to sell in the merchant upon which a bona fide purchaser relies.
Facts:
- Harry Winston, Inc. (Winston), a diamond merchant, and Brand, Inc. (Brand), an auction gallery, had a long-standing business relationship.
- In October 1947, Brand obtained a diamond ring from Winston, purportedly to show to a customer.
- Winston sent the ring to Brand with a memorandum stating that no title would pass until Winston approved a sale and sent a bill of sale.
- With Winston's knowledge and acquiescence, Brand placed the ring in a public show window at its auction gallery for over a month.
- The parties had a regular course of dealing where Winston allowed Brand to sell items received on similar memoranda and would later collect payment, without strictly enforcing the memorandum's terms.
- On November 28, 1947, Brand sold the ring at a public auction to Jane Zendman for $12,500.
- Zendman was a good faith purchaser who was unaware of the memorandum between Winston and Brand and received a bill of sale from Brand.
Procedural Posture:
- The case was initiated in the New York court at Special Term (trial court), where defendant Winston filed a counterclaim against plaintiff Zendman for replevin to recover the ring.
- The Special Term rendered judgment in favor of plaintiff Zendman on the counterclaim, holding that Winston was precluded from denying Brand's authority to sell.
- Winston, as the appellant, appealed to the Appellate Division of the New York Supreme Court (intermediate appellate court).
- The Appellate Division reversed the judgment of the Special Term, finding no basis for estoppel, and directed judgment for defendant Winston.
- Zendman, as the appellant, appealed to the Court of Appeals of New York, the state's highest court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an owner of a diamond ring who entrusts it to an auctioneer under a memorandum explicitly denying the auctioneer authority to sell, but then acquiesces to its public display and has a prior course of dealing that disregards such restrictions, become precluded by their conduct from denying the auctioneer's authority to sell to a bona fide purchaser for value?
Opinions:
Majority - Fuld, J.
Yes. An owner is precluded by their conduct from denying a seller's authority to sell under these circumstances. The governing principle, found in the New Jersey sales act and based on estoppel, states that while a seller generally cannot transfer better title than they have, an exception exists where the true owner's conduct precludes them from denying the seller's authority. Here, more than mere entrustment occurred. Winston's acquiescence to the ring's prolonged public display in an auction gallery—a place where goods are expected to be for sale—combined with a prior course of dealing where Winston regularly disregarded the limitations in its memoranda with Brand, created an apparent authority for Brand to sell the ring. This conduct made the fraud possible, and as between two innocent parties, the one who enabled the fraud (Winston) must bear the loss. Zendman, as an innocent purchaser who reasonably relied on this apparent authority, acquired good title to the ring.
Analysis:
This case is a classic application of the doctrine of estoppel by entrustment, which protects bona fide purchasers in the marketplace. It clarifies that an owner's protections are not absolute and can be forfeited by conduct that misleads innocent third parties. The decision establishes that a combination of entrusting goods to a merchant, allowing public display, and a course of dealing that ignores private restrictions is sufficient to create 'apparent authority' to sell. This principle laid important groundwork for the more expansive entrusting rule later codified in the Uniform Commercial Code (§ 2-403), which further strengthens the rights of buyers in the ordinary course of business.
