Garoogian v. Medlock

• Decision Date: 08 February 1979
• Docket Number: No. 78-1060,78-1060
• Parties: Mike GAROOGIAN d/b/a Atlas Truck & Equipment Company, Appellee, v. Gerald MEDLOCK, J. E. Medlock and J. Medlock Produce, Inc., Intervenor-Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 997

592 F.2d 997

Mike GAROOGIAN d/b/a Atlas Truck & Equipment Company, Appellee, v. Gerald MEDLOCK, J. E. Medlock and J. Medlock Produce, Inc.,

Intervenor-Appellants.

No. 78-1060.

United States Court of Appeals,

Eighth Circuit.

Submitted Feb. 1, 1979.

Decided Feb. 8, 1979.

Frank W. Booth, Fort Smith, Ark., for intervenor-appellants.

H. Ray Hodnett, Fort Smith, Ark., for appellee.

Before HEANEY, STEPHENSON and HENLEY, Circuit Judges.

PER CURIAM.

Mike Garoogian brought this diversity action in the Western District of Arkansas to replevy a 1975 Kenworth truck tractor allegedly wrongfully detained by defendant J. E. Medlock. The case was tried to a jury and the jury awarded possession of the vehicle and $15,200 damages to Garoogian. Medlock appeals. We affirm the judgment in favor of Garoogian upon the condition that he file an appropriate remittitur for the amount of damages we find to be unsubstantiated by the evidence.

The facts of the case are complicated and it is necessary to recite them in some detail. For convenience in understanding the order of events the facts are stated chronologically.

On December 16, 1974, the state of Oklahoma issued to Carroll J. Allen a certificate of title to the 1975 Kenworth truck tractor in question. On October 1, 1976, Allen leased the tractor to J. Medlock Produce, Inc., an Arkansas corporation of which defendant J. E. Medlock is president. The terms of the lease provided that the lessee was to have control and use of the vehicle as though he was the absolute owner. The lease was to be in effect until terminated by "mutual agreement." On February 27, 1977, Allen left the produce company driving the tractor with the company's loaded trailer en route to California. Thereafter Medlock had no knowledge of the whereabouts of the vehicle for several months.

On March 1, 1977, Mike Garoogian, doing business in Fresno, California, as Atlas Truck & Equipment Company (hereinafter Garoogian), was contacted by Juanita and Twain Scow. The Scows wished to purchase the tractor from Allen, but needed assistance in financing. By purchase order dated March 5, 1977, Garoogian sold the tractor to the Scows. Garoogian and Twain Scow entered into a purchase money security agreement which provided that upon Scow's default, Garoogian could, without notice and without demand, declare Scow's rights terminated and immediately take possession of the tractor.

On March 7, 1977, Allen executed a bill of sale of the tractor to Garoogian. Garoogian paid Allen $2,500 and paid off the balance due ($19,803.52) on Allen's account with Paccar Financial Corporation. By the authorization for payoff Allen authorized Paccar to surrender the ownership certificate properly endorsed and released upon payment of this balance. Also on March 7, Garoogian entered into an assignment and repurchase agreement with the Bank of America National Trust and Savings Association. Garoogian assigned his contract rights under the purchase money security agreement to the bank and agreed that upon Scow's default he would repurchase the contract on demand from the bank for the unpaid balance. By the terms of the agreement the vehicle was to be registered in California with the bank as legal owner.

On July 30, 1977, Medlock caught up with Allen, claiming damages under the lease agreement. Allen, in response, executed an assignment of the Oklahoma title, which had been held in the produce company files, leaving open the name of the assignee. In early August 1977 Medlock regained possession of the tractor from the Scows and returned the vehicle to Arkansas.

In the interim, the Scows had defaulted and on August 4 or 5, the bank made an oral demand that Garoogian repurchase the contract. Upon learning that Medlock had the truck and intended to keep it, Garoogian filed this replevin action against Medlock on August 16, 1977.

On August 17, 1977, a hearing was held at which Garoogian submitted an affidavit of ownership, the bill of sale and evidence of his payoff to Paccar Financial Corporation, and posted a $44,000 bond. Over the objections of Medlock's attorney, the court ordered the United States Marshal to seize and hold the vehicle. Since the tractor could not be found, Garoogian applied and secured a writ of Capias ad respondendum against Medlock on August 30, 1977. Shortly after his arrest the tractor was turned over to the marshal and Medlock was released. On September 19, 1977, a second hearing was held. At the conclusion of the hearing, the court determined Garoogian had made out a prima facie case entitling him to temporary possession and use of the tractor pending trial, and ordered release of the tractor to him.

On November 4, 1977, the bank made a written demand that Garoogian repurchase the contract and on November 7, 1977, Garoogian paid the bank the amount owed under the repurchase agreement ($29,232.43).

Prior to trial J. Medlock Produce, Inc. intervened and filed an answer and counterclaim which alleged Garoogian maliciously and recklessly interfered with the lease agreement and maliciously caused Medlock's arrest. ¹ Garoogian counterclaimed alleging that the intervenor was jointly and severally liable with Medlock individually. The case was tried to a jury and the jury returned a verdict finding Garoogian the owner of the tractor and entitled to possession, and assessing damages for wrongful detention of the vehicle against defendant J. E. Medlock individually in the amount of $15,200. On December 2, 1977, judgment was entered in accordance with the jury verdict plus interest and costs.

On appeal Medlock raises numerous issues. The most substantial question is the sufficiency of the evidence to support the verdict. ² Specifically, Medlock contends that Garoogian failed to prove the ownership interest and right to possession required by Arkansas law to maintain an action in replevin, and failed to prove his damages.

Our review of the evidence is governed by certain well-established principles. Under Arkansas law, ³ a "reviewing court is bound to examine the evidence in the light most favorable to the appellee * * * and bound to sustain the jury verdict if there is any substantial evidence to support it * * *." Arkansas Power & Light Co. v. Johnson, 538 S.W.2d 541, 548 (Ark.1976) (citations omitted). The reviewing court is "not concerned with determining where the preponderance of the evidence lies, but only whether there was any substantial evidence to support the verdict * * *." McMillan v. Meuser Material & Equip. Co., 541 S.W.2d 911, 914 (Ark.1976). All doubts must be resolved and all inferences drawn in favor of the appellee. Industrial Park Businessmen's Club, Inc. v. Buck, 252 Ark. 513, 479 S.W.2d 842 (1972).

I. Right to Possession

Under Arkansas law, replevin is an action for the recovery of specific personal property. Ark.Stat.Ann. § 34-2101 (1962). In order to maintain an action in replevin plaintiff must allege and prove that he is the owner of the property, or has a special ownership or interest therein, and that he is entitled to immediate possession of the property. Ark.Stat.Ann. § 34-2102 (1962); Oldham v. Melton, 205 Ark. 240, 168 S.W.2d 387 (1943). Replevin cannot be maintained upon an ownership interest and right to possession acquired after suit has been brought. Witherspoon v. Choctaw Culvert & Mach. Co., 56 F.2d 984, 986 (8th Cir. 1932); Lambert v. Tucker, 83 Ark. 416, 104 S.W. 131 (1907); McKennon v. May, 39 Ark. 442 (1882).

Medlock argues first that by virtue of the assignment to the bank, Garoogian had no interest in the vehicle at the time the action was commenced. As indicated by the facts recited above, at the time Garoogian filed suit on August 16, 1977, the bank had orally demanded that he repurchase the contract, but he did not in fact repurchase the contract until November 7. Thus at the time suit was commenced Garoogian had only a contractual obligation to repurchase the contract from the bank and the permission of the bank to attempt to recover the tractor. ⁴ The question is whether this meets the special ownership interest and immediate right to possession requirements of Arkansas replevin law.

We have carefully reviewed the Arkansas case law and find it to be inconclusive. ⁵ In a diversity case, in the absence of a controlling state decision it is the duty of a federal court to apply the rule it believes the state supreme court would follow. Luster v. Retail Credit Co., 575 F.2d 609, 613 (8th Cir. 1978). Further, this court accords great weight to the conclusions of the local trial judge on questions of state law. Bergstreser v. Mitchell, 577 F.2d 22, 25 (8th Cir. 1978); Luster v. Retail Credit Co., supra, 575 F.2d at 614. By submitting the questions of ownership and right to possession to the jury the trial court in this case implicitly held that Garoogian's evidence was sufficient to meet the minimum requirements of Arkansas replevin law. Since we have discovered no Arkansas law requiring a contrary conclusion, we defer to the trial court's reasonable interpretation of state law and will not set it aside.

Medlock makes two alternative arguments that Garoogian failed to establish his ownership interest and right to possession. Medlock argues that a security interest was never created by the conditional sale contract because, as demonstrated by the dates on the relevant documents, Garoogian sold the tractor before he purchased it from Allen. He cites no legal support for this argument. Assuming the transactions were otherwise valid, the discrepancy in dates alone should not defeat the intentions and expectations of the parties to the transactions.

Medlock also contends that any interest created in Garoogian was subject to the terms of the preexisting lease agreement between the corporation and Allen. The trial judge declared the lease invalid because of an indefinite term and so instructed the jury. Medlock has cited no Arkansas law to indicate that the...