Chrysler Credit Corp. v. Perry Chrysler Plymouth, Inc.
| Decision Date | 18 February 1986 |
| Docket Number | No. 85-4477,85-4477 |
| Citation | 783 F.2d 480 |
| Parties | CHRYSLER CREDIT CORPORATION, Plaintiff-Appellee, v. PERRY CHRYSLER PLYMOUTH, INC., and Julian I. Perry, Defendants-Appellants. Summary Calendar. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Bernard Kramer, Alexandria, La., for defendants-appellants.
G. Thomas Arbour, Baton Rouge, La., for plaintiff-appellee.
Appeal from the United States District Court for the Western District of Louisiana.
Before RUBIN, JOHNSON, and JONES, Circuit Judges.
Julian Perry, the President of Perry Chrysler Plymouth, Inc., took over $100,000 in cash that the corporation was holding for Chrysler Credit Corporation with him to Las Vegas in the hope of winning enough to succor his failing automobile dealership. He knew he was taking money that did not belong either to him or to his corporation. We consider the price he must pay for his losses at the gaming tables.
Perry Chrysler Plymouth, Inc., a Louisiana corporation, was the franchise dealer for Chrysler automobiles in Rapides Parish, Louisiana. Julian Perry was its president and sole shareholder. Chrysler Credit Corporation financed the dealer's purchase of automobiles, taking as security a chattel mortgage on his total stock, known in the trade as a floor plan mortgage. Ordinarily, a chattel mortgage follows the mortgaged property into the hands of a buyer. However, under Louisiana law, a good faith buyer of an automobile is protected against such a floor plan mortgage, and the lender's mortgage does not afford it security against sales of the mortgaged property in the normal course of business. 1
For this reason, Chrysler Credit's agreement with Perry Chrysler Plymouth provided that the mortgagor might sell the mortgaged automobiles in the regular course of its retail trade. If it did so, however, "the proceeds of each such sale, and the evidence thereof in whatever form the same may be, shall be the property of the Mortgagee [Chrysler Credit] and shall be held in trust by the Mortgagor for the use and benefit of the Mortgagee and the Mortgagor agrees as such trustee to deliver such proceeds and such evidence of sale immediately upon his or its receipt thereof to the Mortgagee...." The promissory notes secured by the floor plan mortgage and the mortgage itself were signed by Perry Chrysler Plymouth. In addition, Julian Perry and his wife, Jerre, personally signed a continuing guaranty agreement with Chrysler Credit. This agreement provided that Julian and Jerre Perry were each to be a "primary obligor, jointly and severally, and unconditionally [bound] ... for all of [Perry Chrysler Plymouth's] present and future obligations owing to" Chrysler Credit. When, from time to time, vehicles were delivered to Perry Chrysler Plymouth, Perry, as its president, executed a separate promissory note and a trust receipt for the purchase price of each vehicle. These documents required Perry Chrysler Plymouth to "keep the proceeds of any sale separate from all other funds and on the day of the receipt of such proceeds to transmit them to" Chrysler Credit.
Perry Chrysler Plymouth complied with the terms of its agreement until May 1981. By that time, the dealership was in serious financial difficulty. Perry took from the dealership in cash the proceeds from the sale of a number of vehicles and did not remit them to Chrysler Credit. Instead, he went to Las Vegas where, in three days, instead of achieving his hopes, he lost virtually all of the money. Between May 22 and July 1, 1981, Perry Chrysler Plymouth issued nineteen checks to Chrysler Credit totalling $110,000. These checks represented, in whole or in part, the proceeds from the sales of individual vehicles, which were to have been held in trust. The checks were dishonored because of the losses Perry had incurred in Las Vegas.
Chrysler Credit sued Perry Chrysler Plymouth in June 1981 for the full sum due it, and utilizing Louisiana's executory process, foreclosed on the chattel mortgage. At that time, the chattel mortgage covered 86 vehicles, securing an obligation of $585,000. Of these, only 51 were still held by Perry Chrysler Plymouth. Chrysler Credit seized these cars and sold them in globo at auction for $244,000 to the highest bidder, who was, not surprisingly, Chrysler Credit.
To recover the balance owed it, $344,000, Chrysler Credit brought suit in state court for a deficiency judgment against Perry Chrysler Plymouth. The state court dismissed the suit because Chrysler Credit's judicial sale of the 51 vehicles was defective, inter alia, for want of an appraisal, thus aborting its right to a deficiency judgment, 2 and extinguishing the remaining debt owed by Perry Chrysler Plymouth to Chrysler Credit.
Chrysler Credit then filed this action against Perry Chrysler Plymouth, Julian Perry, and Jerre Perry seeking to recover the same $344,000 balance, but offering three alternative theories for the defendant's liability. It argued that: (1) the Perrys were liable in their personal capacity on the continuing guarantees they had executed; (2) the Perrys and Perry Chrysler Plymouth were liable for tortious conversion of the sales proceeds held by Perry Chrysler Plymouth for Chrysler Credit but taken and gambled away by Julian Perry in Las Vegas; and (3) the corporation and the Perrys were liable for the nineteen checks made payable to Chrysler Credit but dishonored.
During the pendency of the suit, the Perrys filed a petition in bankruptcy and were discharged. The district court rendered summary judgment holding that the Perrys were not liable on their continuing guarantees because of the forfeiture of the right to a deficiency judgment against the corporation, but that Julian Perry was liable for tortious conversion of $220,000--the unremitted amount of money owing to Chrysler Credit from the sale of the 35 vehicles covered by the floor plan mortgage that had been sold by Perry Chrysler Plymouth. The court held, moreover, that this debt was not discharged in bankruptcy. Julian Perry brings this appeal.
The legal questions presented are: whether, under Louisiana law, Perry became personally liable to Chrysler Credit either for the whole debt due it or for the amount taken for his own use from funds realized on the sale of mortgaged vehicles and required, pursuant to the floor plan mortgage, to be remitted promptly to Chrysler Credit; and, if Perry is so liable, whether the debt was discharged either by later foreclosure of the chattel mortgage without compliance with the Louisiana Deficiency Judgment Act or by his bankruptcy. We affirm the district court judgment holding Perry liable, but only for the amounts taken by him for his Las Vegas gambit or otherwise for his personal use, and we remand for a determination of that sum.
In Louisiana, delictual actions based on unlawful interference with the ownership or possession of movables are frequently termed actions for "conversion." 3 The Louisiana Court of Appeals has said, "[t]he common law tort of conversion--a distinct act of dominion wrongfully exerted over another's property in denial of or inconsistent with the owner's right therein--has been recognized by Louisiana courts for over a century as an offense or quasi offense under LSA-C.C. Art. 2315." 4 Despite the similarity in labels, the Louisiana action is only rarely completely identifiable with actions based on the common-law tort. 5 In this area, therefore, as Professor A.N. Yiannopoulos has written, the law of Louisiana appears to be a hybrid, with characteristics borrowed from both the common law and the civil law. 6 The Louisiana Supreme Court held in Importsales, Inc. v. Lindeman 7 that Louisiana does, however, recognize a cause of action for the wrongful act of repudiation of the owner's right to property, or some exercise of dominion over it inconsistent with the owner's right. Explaining the basis for this cause of action, Louisiana courts have cited with approval Dean Prosser's analysis:
The intent required is not necessarily a matter of conscious wrongdoing. It is rather an intent to exercise a dominion or control over the goods which is in fact inconsistent with the plaintiff's rights.... Persons ... exercise acts of ownership over them at their peril, and must take the risk that there is no lawful justification for their acts. 8
Thus, the focus is on the act committed in order to determine whether it constitutes a tort; whether the act was done intentionally or negligently is of no moment. 9
We, therefore, agree, albeit with slight modification, with the district court's characterization of the plaintiff's burden in proving this claim. For Chrysler Credit to prevail against Perry, it must prove that (1) it owned funds misused by him; (2) the misuse was inconsistent with its rights of ownership; and (3) the misuse constituted a wrongful taking of the funds.
The documents signed by Perry Chrysler Plymouth provided categorically that any proceeds from the sale of the vehicles covered by the floor plan mortgage must be kept separate from Perry Chrysler Plymouth's funds, held in trust for Chrysler Credit, and transferred immediately to it. 10 This was sufficient to create a fiduciary duty on the corporation's part. 11 Its failure to segregate and remit the funds and its diversion of them to its own uses constituted a conversion for which it is liable.
Traditionally, the measure of damages for a tortious conversion is the value of the property wrongly appropriated plus interest. 12 Perry Chrysler Plymouth sold 35 vehicles covered by the floor plan mortgage without properly remitting the proceeds, the sum of $220,000. This is the amount that was converted by Perry Chrysler Plymouth, and the total sum for which it is liable.
As an officer of the corporation, Perry is not personally liable for the tortious acts of the corporation in the absence of his own fraud, malfeasance, or other wrongdoing. 13 To hold...
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