National Music Museum: America's Shrine to Music v. Johnson et al

Filing 43

ORDER denying 26 Motion for Summary Judgment; denying 34 Motion for Summary Judgment. Signed by U.S. District Judge Karen E. Schreier on 3/11/16. (SLW)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
NATIONAL MUSIC MUSEUM:
AMERICA'S SHRINE TO MUSIC,

4:14-CV-04113-KES

Plaintiff,
ORDER DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT
AND DENYING DEFENDANTS’
MOTION FOR SUMMARY JUDGMENT

vs.
ROBERT JOHNSON and
LARRY MOSS,
Defendants.

Plaintiff, National Music Museum (NMM): America’s Shrine to Music,
brings a declaratory judgment action against defendants, Robert Johnson and
Larry Moss. NMM seeks a declaration that it is the valid, legal owner of a
Martin D-35 guitar that was once owned by Elvis Presley. Both NMM and Moss
move for summary judgment. The court denies both motions.
BACKGROUND
The undisputed facts are as follows:
This litigation revolves around a Martin D-35 guitar that was formerly
owned by Elvis Presley. In February 1977, Presley dropped and broke the
guitar during a concert in St. Petersburg, Florida. Presley gave the guitar to a
female fan at the show. The guitar eventually made its way into the hands of
Johnson, a collector of musical instruments and memorabilia. Both NMM and

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Moss claim ownership of the guitar based on their respective agreements with
Johnson.
In 2007, Moss and Johnson started negotiating about the purchase of
the Elvis guitar. In February 2008, the parties reached an agreement. Moss
would pay Johnson $120,000 for four guitars, one being the Elvis guitar. The
parties agreed to two separate exchanges. Moss would take immediate
possession of two guitars and pay Johnson $70,000. And by April 12, 2009,
Johnson would later deliver to Moss the Elvis guitar and the remaining guitar.
Upon delivery Moss would pay Johnson the remaining $50,000.
At the time of contracting, the Elvis guitar was on display at the Rock ‘n’
Soul Museum in Memphis. During discovery, Moss testified that he agreed to
the continued display through January 2009 of the Elvis Guitar at the Rock ‘n’
Soul Museum. On November 21, 2008, however, Johnson removed the guitar
from the Rock ‘n’ Soul Museum. Johnson listed the guitar on Alexander’s, an
auction website, in the summer of 2009. Moss testified in his deposition that
he saw the guitar on Alexander’s, but Moss did not take any legal action
against Johnson at that time. Docket 41 at 5.
In 2012, Johnson contacted NMM about the sale and donation of a
number of musical instruments, including the Elvis guitar. NMM and Johnson
came to an agreement. NMM would pay Johnson $250,000 for a John
Entwistle Gibson Korina Explorer, and Johnson would donate to NMM various
instruments, including the Elvis guitar. The deal was conditioned on NMM’s
authentication of all of the instruments. During discovery NMM employees
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testified that they confirmed the authenticity of the instruments by contacting
various professionals in the field and comparing the instruments to
photographs of the original. After NMM authenticated the instruments, NMM
entered into a one page written agreement with Johnson. Johnson delivered
the Elvis guitar to NMM on February 4, 2013. Later, on December 10, 2013,
Moss contacted NMM regarding his claim over the Elvis guitar.
On July 7, 2014, NMM filed its complaint in state court seeking a
declaratory judgment that NMM is the legal owner of the Elvis guitar. On
July 22, 2014, Moss removed the action to this court on diversity grounds.
Both parties now move for summary judgment.
DISCUSSION
I.

Full Faith and Credit, Res Judicata, and Collateral Estoppel
Before discussing the parties’ motions for summary judgment, the court

must address a threshold issue. Moss argues this court is bound by a
judgment of the Chancery Court of Tennessee for the Thirtieth Judicial District
of Memphis, which found that “Moss holds legal and equitable title to the
[Elvis] guitar . . . [on] the date of contracting, February 12, 2008.” Docket 29-5.
Moss bases his argument on the doctrines of full faith and credit, claim
preclusion, and issue preclusion. Docket 41 at 12-14. For the following
reasons, the court disagrees.
The Full Faith and Credit Clause of the United States Constitution
compels federal courts to recognize valid state court judgments. See Baker by
Thomas v. General Motors Corp., 522 U.S. 222, 233 (1998). The text of the
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clause reads, “Full Faith and Credit shall be given in each State to the public
Acts, Records, and judicial Proceedings of every other State.” U.S. CONST. art.
IV, § 1. This means that a valid state court judgment receives the same
recognition in federal court as the judgment would receive in the issuing state.
28 U.S.C. § 1738. Thus, the court must determine what effect the Tennessee
judgment would have in Tennessee, and the court must consider Tennessee’s
law on res judicata and collateral estoppel.
A.

Res judicata

Tennessee’s law on res judicata bars parties and their privies from
litigating “the same cause of action with respect to all issues which were or
could have been litigated in the former suit.” Hooker v. Haslam, 393 S.W.3d
156, 165 n.6 (Tenn. 2012) (emphasis removed from original). To determine
whether a suit stems from the “same cause of action,” Tennessee applies the
“transactional test” from the Restatement (Second) of Judgments. Id. at 166
n.6. Although the transactional test “is not capable of a mathematically precise
definition,” “the expression connotes a natural grouping or common nucleus of
operative facts.” Restatement (Second) of Judgments § 24 cmt. b. (1982). The
transactional test balances “the interests of the defendant and of the courts in
bringing litigation to a close” against “the interest of the plaintiff in the
vindication of a just claim.” Id.
Under the transactional test, NMM’s suit would not be barred by the
doctrine of res judicata. NMM and Moss claim title to the Elvis guitar based on
two different factual circumstances. NMM derives its claim to the Elvis guitar
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from the February 6, 2013 Sales-Donation Agreement it signed with Johnson.
The prior Tennessee litigation concerned the February 12, 2008 sales
agreement between Johnson and Moss. There is no common nucleus of
operative fact. Thus, NMM’s claim is not barred by Tennessee’s law on res
judicata.
B.

Collateral estoppel

Tennessee recognizes the doctrine of collateral estoppel. Mullins v. State,
294 S.W.3d 529, 534-35 (Tenn. 2009). The Tennessee Supreme Court has
explained, “Collateral estoppel is a judicially created issue preclusion doctrine.”
Id. at 534 (citations omitted). The doctrine “bars the same parties or their
privies from relitigating in a later proceeding legal or factual issues that were
actually raised and necessarily determined in an earlier proceeding.” Id.
(citations omitted). For collateral estoppel to apply, the following five elements
must be met:
[T]he party asserting [collateral estoppel] must demonstrate (1) that
the issue to be precluded is identical to an issue decided in an
earlier proceeding, (2) that the issue to be precluded was actually
raised, litigated, and decided on the merits in the earlier
proceeding, (3) that the judgment in the earlier proceeding has
become final, (4) that the party against whom collateral estoppel is
asserted was a party or is in privity with a party to the earlier
proceeding, and (5) that the party against whom collateral estoppel
is asserted had a full and fair opportunity in the earlier proceeding
to contest the issue now sought to be precluded.
Id. at 535 (citing Gibson v. Trant, 58 S.W.3d 103, 118 (Tenn. 2001) (Birch J.,
concurring and dissenting)). The determination of “whether collateral estoppel
applies is a question of law.” Id. (citations omitted).

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Moss argues NMM is collaterally estopped from asserting that Moss never
acquired title to the Elvis guitar. Moss argues that the issue was before the
Tennessee court and that the court’s ruling is binding. This court disagrees
and finds that collateral estoppel does not apply to NMM for two reasons: (1)
NMM was not in privity with Johnson; and (2) NMM did not have a “full and
fair opportunity” to litigate its claim.
1.

Privity

The Supreme Court of Tennessee has indicated that parties are not in
privity for the purposes of collateral estoppel if one party is denied the
opportunity to meaningfully participate in the underlying litigation. Shelley v.
Gipson, 400 S.W.2d 709, 712-16 (Tenn. 1966). In Shelley, James Shelley
brought suit against Richard and Jon Gipson for damages arising from a car
accident. Id. at 710. In earlier litigation, the Gipsons brought suit against
Shelley’s employer. Id. at 710-11. In the earlier suit, the court found that “Mr.
Shelley was guilty of negligence which was a proximate cause of the accident
and resulting injuries . . . .” Id. at 711. Based on the earlier judgment, the
Gipsons argued that Shelley was collaterally estopped from relitigating the
negligence issue. See id. The Supreme Court of Tennessee disagreed and held
that collateral estoppel did not apply to Shelley’s case. The court wrote:
It is one of the proud boasts of the Anglo-American legal tradition
that every man is entitled to his day in court, that is, a trial court,
and Shelley has not had that day to assert his claim for damages.
He was certainly not a party to the litigation in the federal court;
he had no right to cross-examine witnesses; no control over the
litigation; he had no right to appeal the finding of his negligence,

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because the judgment was not adverse to him, and since, also, he
was not a party.
Id. at 715. Because Shelley did not have an opportunity to meaningfully
participate in the underlying litigation, he was free to assert his claim anew
during the subsequent suit. See id.
NMM finds itself in a similar position. During the Tennessee litigation,
NMM was unable to assert its claim of ownership, present evidence, cross
examine witnesses, or appeal the Tennessee judgment. NMM was unable to
shape the Tennessee litigation in any meaningful way. If NMM is collaterally
estopped from making its argument that Moss never acquired title to the
guitar, NMM would be deprived of its day in court. Thus, the court finds that
NMM is not in privity with Johnson, and NMM is not collaterally estopped from
arguing that Moss never acquired title to the guitar.
2.

Full and fair opportunity to litigate

The Supreme Court of Tennessee has held that collateral estoppel does
not apply if a party has not received a “full and fair opportunity to litigate.” Id.
at 538. In Mullins, the plaintiff brought a federal action against multiple
doctors. Id. at 533. The plaintiff voluntarily dismissed one of the doctors,
Dr. Mejia, once she learned that Dr. Mejia was immune from suit in federal
court. Id. Plaintiff then started separate proceedings with the Tennessee Claims
Commission—suing Dr. Mejia. Id. Although Dr. Mejia was not a party to the
federal suit, the federal jury assigned “0% of the fault to Dr. Mejia.” Id. at 534.
The State of Tennessee, while representing Dr. Mejia, argued that the federal

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verdict collaterally estopped plaintiff from litigating Dr. Mejia’s negligence in
the Tennessee Claims Commission action. Id. The Supreme Court of Tennessee
disagreed. Id. at 540. The court held that collateral estoppel did not apply
because plaintiff did not have a “full and fair opportunity to litigate” Dr. Mejia’s
negligence in the federal proceeding. Id. at 538-40. The court noted that the
plaintiff had little incentive to prove Dr. Mejia’s negligence when Dr. Mejia was
not a party to the suit. Id. Dr. Mejia also did not have an opportunity to rebut
the plaintiff’s allegations. Id. at 539. Because neither party had an opportunity
to fully prosecute or defend the claim, collateral estoppel did not apply.
Applying the holding of Mullins to this case, the court finds that NMM did not
have a full and fair opportunity to litigate in Tennessee. NMM was not a party
to the Tennessee action, and the record contains no evidence indicating that
Johnson would have adequately represented NMM’s interests. For example,
NMM did not get to argue that its Sales-Donation Agreement with Johnson
stopped Moss from acquiring title to the guitar. This is supported by the fact
that the Tennessee judgment contains no reference to NMM or any legal
citation. One plausible reading of the Tennessee judgment is that Moss was
entitled to specific performance under the contract and that Moss acquired title
to the guitar because of the Tennessee action. This conclusion could change if
NMM’s interests in the guitar were considered. Because there is no evidence
that the Tennessee litigation considered how NMM’s interest in the guitar
affected title between Johnson and Moss, NMM is not collaterally estopped
from making its arguments.
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For these reasons, the Full Faith and Credit Clause of the United States
Constitution and the doctrines of res judicata and collateral estoppel do not
require that this court be bound by the Tennessee judgment with respect to
NMM.
II.

Motions for summary judgment
Both parties move for summary judgment and make arguments that are

different sides to the same coin. The two issues before the court are whether (1)
NMM acquired title to the guitar before Johnson and (2) whether NMM is a
buyer in the ordinary course of business. Because there are unresolved issues
of material fact on each issue, summary judgment is denied.
A.

Legal standard

Summary judgment is granted if the movant “shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). The moving party can meet this
burden by presenting evidence that there is no dispute of material fact or by
showing that the nonmoving party has not presented evidence to support an
element of its case on which it bears the ultimate burden of proof. Celotex Corp.
v. Catrett, 477 U.S. 317, 322-23 (1986). To avoid summary judgment, “[t]he
nonmoving party may not ‘rest on mere allegations or denials, but must
demonstrate on the record the existence of specific facts which create a
genuine issue for trial.’ ” Mosley v. City of Northwoods, Mo., 415 F.3d 908, 910
(8th Cir. 2005) (quoting Krenik v. Cty of Le Sueur, 47 F.3d 953, 957 (8th Cir.
1995)).
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Summary judgment is precluded if there is a factual dispute that could
affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). For purposes of a summary judgment motion, the court views the
facts and the inferences drawn from such facts “in the light most favorable to
the party opposing the motion.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 588 (1986).
B.

Parol evidence

Plaintiff raises a threshold issue: whether parol evidence is permitted to
interpret the Johnson-Moss contract. South Dakota and Tennessee law are
identical on this issue. While parol evidence may not be used to change the
plain meaning of a contract, it may be used to explain an ambiguity within the
contract. Roseth v. Roseth, 829 N.W.2d 136, 142 (S.D. 2013); Jones v. Brooks,
696 S.W.2d 885, 886 (Tenn. 1985). If the court finds a term is ambiguous, it
may consider parol evidence to determine the intention of the parties. See id.
The court finds that the term “deliver” within the Johnson-Moss contract
is ambiguous. The contract states, “Johnson guarantees that he will deliver to
Moss both [the Elvis guitar] & [another guitar] on or before April 12, 2009 . . . .”
Docket 29-3. The ambiguity arises because South Dakota and Tennessee law
both recognize two different types of delivery. SDCL 57A-2-401 and T.C.A.
§ 47-2-401. Delivery can be completed by “physical delivery,” SDCL
57A-2-401(2); T.C.A. § 472-2-401(2), or delivery “made without moving the
goods.” SDCL 57A-2-401(3)(b); T.C.A. § 47-2-401. The distinction determines
when—if ever—the guitar’s title passed from Johnson to Moss. Because the
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word “delivery” is ambiguous, the court will consider the circumstances
surrounding the contract.
C.

Johnson’s title

Both parties argue summary judgment can be granted based on when
Johnson acquired title to the Elvis guitar. NMM argues Moss did not acquire
title to the guitar because Moss never took possession of it. Moss argues he
acquired title to the guitar when he and Johnson signed their agreement.
South Dakota and Tennessee law are the same on this issue. If the goods are to
be physically delivered, title passes at the time of delivery. SDCL 57A-2-401(2);
T.C.A. § 472-2-401(2). If the goods will not be physically moved and the parties
do not exchange a document of title, title passes at the time and place of
contracting. SDCL 57A-2-401(3)(b); T.C.A. § 47-2-401.
The key factual issue in this case is whether Johnson was going to
physically deliver the Elvis guitar or whether Moss was going to retrieve the
guitar from the Rock ‘n’ Soul Museum. NMM argues Johnson was contractually
obligated to physically deliver the guitar. NMM argues this inference is
supported by the language of the Johnson-Moss contract and the fact that
Moss never notified the Rock ‘n’ Soul Museum that he was the owner of the
Elvis guitar. Moss, in contrast, claims the parties agreed that delivery would be
made without moving the guitar. Moss supports his argument with his
deposition testimony that he agreed to let the guitar stay on display at the Rock
‘n’ Soul Museum. Moss argues he held title to the guitar but allowed the Rock
‘n’ Soul Museum to keep the guitar on display until January 2009. Based on
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each party’s arguments and factual support, a reasonable fact finder could rule
for either side. Because evidence supports both parties’ arguments, a factual
dispute exists, and summary judgment is denied for both parties.
D.

Buyer in the ordinary course of business

Under SDCL 57A-2-403(2), “[a]ny entrusting of possession of goods to a
merchant who deals in goods of that kind gives him power to transfer all rights
of the entruster to a buyer in ordinary course of business.” SDCL 57A-2-403(2).
NMM argues it is a buyer in the ordinary course of business, and Moss
disagrees for three independent reasons. Moss argues that (1) NMM is not a
“buyer,” (2) Moss never “entrusted” Johnson with the Elvis guitar, and (3) NMM
did not act in good faith during its transaction with Johnson.
1.

Buyer

To be a “buyer,” a person may take the property by “cash, by exchange of
other property, or on secured or unsecured credit . . . .” SDCL 57A-1-201(b)(9).
Moss argues NMM is not a “buyer” because Johnson donated the guitar to
NMM. Moss supports his argument by pointing to the agreement NMM had
with Johnson. The Sales-Donation Agreement states Johnson “agrees to
donate” the Elvis guitar to NMM. Docket 29-13. Because the agreement says
“donate,” Moss argues NMM cannot by definition be a “buyer.” In response,
NMM argues that its agreement with Johnson represents one packaged
transaction. NMM argues that it paid $250,000 to take title to all the
instruments listed in the agreement, not just the John Entwistle guitar.

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The parties’ dispute illustrates the unresolved factual issue about
whether NMM is a “buyer.” A reasonable fact finder could conclude that
Johnson gave the guitar to NMM as a gift and that NMM is not a buyer. On the
other hand, a reasonable fact finder could also decide that the Sales-Donation
Agreement represents one packaged transaction. For example, a fact finder
could conclude that the donation section of the agreement is inseparable from
the sales section of the agreement. This is supported by the fact that NMM
authenticated all of the instruments before signing the agreement. Thus, a
reasonable fact finder could infer that neither section of the agreement was
independent of the other. Because this element is factually disputed, neither
party is entitled to summary judgment on the issue of whether NMM is a buyer
in the ordinary course of business.
2.

Entrustment

To qualify as a buyer in the ordinary course of business, buyers must
purchase their goods from a merchant who was “entrusted” with the goods.
Under SDCL 57A-2-403(3), entrustment is “any delivery and any acquiescence
in retention of possession regardless of any condition expressed between the
parties to the delivery or acquiescence and regardless of whether the
procurement of the entrusting or the possessor’s disposition of the goods have
been such as to be theft under the criminal law.” SDCL 57A-2-403(3).
Moss argues he never entrusted Johnson with the Elvis guitar. Moss
asserts that Johnson converted the guitar when he retrieved it from the Rock
‘n’ Soul Museum. NMM argues Johnson had title to the guitar when he
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removed it and that Johnson merely exercised his ownership rights by taking
the guitar. Once again, the parties’ dispute shows the unresolved factual issues
that remain. A reasonable fact finder could believe that Johnson—in essence—
stole the guitar when he removed it from the Rock ‘n’ Soul Museum because he
no longer had title to the guitar. On the other hand, a reasonable fact finder
could find that because Moss had not paid the remaining $50,000 owed to
Johnson, Johnson still had title to the guitar and was merely exercising his
ownership rights. Or a reasonable fact finder could conclude that Moss
acquiesced to Johnson’s possession of the guitar because Moss did not take
legal action for several years after he learned that Johnson had removed the
guitar from the Rock ‘n’ Soul Museum. Because of the factual dispute, neither
party is entitled to summary judgment on the buyer in ordinary course theory.
3.

Good faith

A buyer in the ordinary course of business must act in “good faith.”
SDCL 57A-1-201(b)(9). Good faith is defined as “honesty in fact and the
observance of reasonable commercial standards of fair dealing.” SDCL
57A-1-201(b)(20). A buyer must not have “knowledge that the sale violates the
rights of another person in the goods . . . .” SDCL 57A-1-201(b)(9). Moss argues
NMM did not observe “reasonable commercial standards in the trade” because
NMM failed to investigate Johnson’s claim to title. Docket 28 at 4. NMM, in
contrast, argues it followed reasonable commercial standards of fair dealing
when it authenticated the instruments.

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The determination of whether NMM followed reasonable commercial
standards is inherently fact intensive. The fact finder must determine what is
commercially reasonable and then find whether NMM adhered to that
standard. Both parties provide credible evidence that the standard was or was
not met. Because a reasonable fact finder could decide for either party,
summary judgment on this theory is denied.
CONCLUSION
Summary judgment will not be granted for either party because genuine
questions of material fact remain. A factual dispute exists as to whether Moss
acquired title to the guitar and whether NMM is a buyer in the ordinary course
of business. Accordingly, it is
ORDERED that plaintiff’s motion for summary judgment (Docket 34) is
denied.
IT IS FURTHER ORDERED that defendants’ motion for summary
judgment (Docket 26) is denied.
DATED this 11th day of March 2016.
BY THE COURT:

/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE

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