COMMUNITY BANK, ELLISVILLE, MS v. Courtney

• Decision Date: 21 October 2004
• Docket Number: No. 2001-CA-01657-SCT.,2001-CA-01657-SCT.
• Parties: COMMUNITY BANK, ELLISVILLE, MISSISSIPPI f/k/a Merchants and Manufacturers Bank v. Archie Wayne COURTNEY.
• Court: Mississippi Supreme Court

884 So.2d 767

COMMUNITY BANK, ELLISVILLE, MISSISSIPPI f/k/a Merchants and Manufacturers Bank v. Archie Wayne COURTNEY.

No. 2001-CA-01657-SCT.

Supreme Court of Mississippi.

October 21, 2004.

John C. Henegan, Donna Brown Jacobs, J. Stevenson Ray, Mary Jacqueline Watson Easley, Jackson, Amy D. Whitten, attorneys for appellant.

Thomas J. Lowe, Jr., Brandon, Lawrence E. Abernathy, III, John T. Kersh, Laurel, attorneys for appellee.

EN BANC.

ON MOTION FOR REHEARING

SMITH, Chief Justice, for the Court.

¶ 1. The motions for rehearing are denied. The original opinions of this Court are withdrawn, and these opinions are substituted therefor.

¶ 2. This case involves the alleged conversion of certain pieces of equipment by Community Bank of Ellisville formerly known as Merchants & Manufacturers Bank ("the Bank"). Archie Wayne Courtney (Courtney) had some loans with the Bank for equipment used in his plumbing business. In 1991, Courtney defaulted on a consolidated loan payment and the Bank eventually sought an order of possession from the trial court to retrieve and sell the collateral. Courtney alleged that the Bank and Holifield and Sons Wrecker Services erroneously picked up some equipment and converted this collateral.

¶ 3. In Courtney v. Merchs. & Mfrs. Bank, 680 So.2d 866, 866 (Miss.1996) (Courtney I), this Court held that the Bank did not have "a valid security interest in the backhoe, even though the parties may have originally intended for the backhoe to serve as security." On remand from this Court's ruling in Courtney I, the case was tried in the Circuit Court of Jones County. The jury awarded Courtney $345,000 in actual damages and $5,000,000 in punitive damages.

¶ 4. The Bank filed a motion for new trial and a j.n.o.v. and in the alternative for a remittitur. The trial court granted the Bank a setoff or recoupment of $38,803.12, which was the amount of the deficiency in this matter. However, the court refused to grant a remittitur on actual damages. Moreover, concluding that the award of punitive damages was excessive, the court remitted that award to $1,500,000. Courtney subsequently accepted this remittitur, and the Bank appealed.

FACTS

¶ 5. The Bank regularly provided loans to Archie Courtney, owner of Courtney Plumbing, Inc., in connection with Courtney's plumbing and septic tank business. These loans typically took the form of promissory notes, which were secured by both purchase money and non-purchase money security interests in Courtney's heavy equipment used in his business. Over a period of time, these separate promissory notes would typically be consolidated into one.

¶ 6. Courtney experienced severe financial problems, and he filed for Chapter 13 Bankruptcy on February 18, 1992. On April 14, 1992, the Bank filed suit against Courtney, alleging that he was in default on two of the promissory notes. The Bank requested that Courtney, who was serving as his own attorney, be required to pay the balance on the notes and to surrender possession of various collateral which he had pledged as security on the notes.

¶ 7. At the hearing on the Bank's complaint on May 7, 1992, the primary dispute centered around a 1986 Case 580E Super E backhoe, which was listed as security on the Bank's copy of one of the promissory notes, but not on Courtney's copy thereof. When asked about this discrepancy, Tommy Stroud, vice-president of the Bank, testified that his secretary had originally forgotten to type the backhoe on the note and, realizing her mistake at a later date, had added the backhoe to the instrument. The Bank did not seek Courtney's ratification of the addition of the backhoe, however, nor did it inform him that the note had been altered. Following a hearing, the trial judge entered an order of possession in favor of the Bank for the equipment listed as security on the promissory note, including the backhoe. Courtney subsequently filed a complaint against the Bank for allegedly seizing property in addition to that which it was entitled to pursuant to the order of possession, to which the Bank responded with a motion for summary judgment. The trial court granted the summary judgment motion, and Courtney timely filed an appeal from said ruling as well as from the order of possession entered in favor of the Bank with regard to the backhoe.

¶ 8. In Courtney I, this Court reversed "the order granting possession of the backhoe to the Bank and render[ed] judgment that the Bank holds no proper security interest in the backhoe." 680 So.2d at 869. As to the summary judgment issue, this Court held that the case should be remanded for a determination of whether the Bank had actually returned the wrongfully seized property. Id. The Court concluded that if Courtney represented in writing that the Bank had returned the property, then no further proceedings would be required. Id. After this Court's ruling in Courtney I, the trial court granted Courtney's motion to restore the case to the active docket for a jury trial. Courtney filed a motion for an amended counterclaim, which the trial court granted. At trial, Courtney claimed that the bank converted nine pieces of property:

1. Case 580 Super E Backhoe;

2. An auto mixer concrete truck ("concrete truck");

3. A ditcher;

4. A backhoe;

5. Mack truck;

6. FastBack trailer;

7. Two (2) sets of chains with binder;

8. Transit; and

9. Water system and rep. clamps

DISCUSSION

I. Conversion and J.N.O.V.

¶ 9. Denials of peremptory instructions, motions for directed verdict, and motions for judgment notwithstanding the verdict each challenge the legal sufficiency of the evidence presented at trial. Moore v. State, 859 So.2d 379, 383 (Miss.2003). They are, therefore, reviewed under the same standard. Id. This Court has held:

Under this standard, this Court will consider the evidence in the light most favorable to the appellee, giving that party the benefit of all favorable inference that may be reasonably drawn from the evidence. If the facts so considered point so overwhelmingly in favor of the appellant that reasonable men could not have arrived at a contrary verdict, we are required to reverse and render. On the other hand if there is substantial evidence in support of the verdict, that is, evidence of such quality and weight that reasonable and fair minded jurors in the exercise of impartial judgement might have reached different conclusions, affirmance is required.

Id.

¶ 10. It is elementary that ownership is an essential element of conversion. This Court has held that "[t]o make out a conversion, there must be proof of a wrongful possession, or the exercise of a dominion in exclusion or defiance of the owner's right, or of an unauthorized and injurious use, or of a wrongful detention after demand." Smith v. Franklin Custodian Funds, Inc., 726 So.2d 144, 149 (Miss.1998) (emphasis added). "[T]here is no conversion until the title of the lawful owner is made known and resisted or the purchaser exercises dominion over the property by use, sale, or otherwise." Miss. Motor Fin., Inc. v. Thomas, 246 Miss. 14, 149 So.2d 20, 20 (1963) (emphasis added).

¶ 11. Courtney alleges that the Bank converted nine pieces of equipment, but the record indicates that Courtney did not own all these items. The evidence clearly establishes that Courtney owned the chain and binders, as well as the ditcher, concrete truck, and backhoe attachment. Courtney also owned the transit and water system repair clamps.

¶ 12. Courtney testified that his father owned the fastback trailer. Courtney also indicated that the Mack truck was "strictly" his father's. He stated that his father was the owner of the "big items" at issue in this case. Initially, Courtney testified that the Super E backhoe actually belonged to his father. When asked if his father owned five specific pieces of the equipment,¹ Courtney testified that his father "wasn't the owner of the chain and binders. He would have been on the backhoe and stuff." He later recanted this testimony, stating that he and his father owned the Super E backhoe jointly.

¶ 13. The Bank moved for a directed verdict at the close of Courtney's case-in-chief with respect to the ownership of the ditcher, concrete truck, and backhoe attachment. The court took this motion under advisement. However, it denied the Bank's general motion for directed verdict. The clear evidence that Courtney's father owned some of the property in question was elicited during the Bank's case-in-chief. The trial court denied the Bank's j.n.o.v. on conversion.

¶ 14. The evidence is overwhelming that Courtney did not own all the property at issue in this case. Based on his own admissions, it is clear that Courtney was not the owner of the Mack truck or the fastback trailer. Because Courtney did not own these items, and ownership is an essential element of conversion, the trial court erred in denying the Bank's j.n.o.v. as to those items.

II. Conversion and security interests.

¶ 15. The elements of conversion are established in Mississippi. We have stated:

It is well settled that the acts alleged to constitute a conversion must be positive and tortious. In McJunkin v. Hancock[, 71 Okla. 257, 176 P. 740 (1918)], the Court said: "To make out a conversion, there must be proof of a wrongful possession, or the exercise of a dominion in exclusion or defiance of the owner's right, or of an unauthorized and injurious use, or of a wrongful detention after demand." In Spooner v. Holmes[, 102 Mass. 503, 3 Am.Rep. 491, 1869 WL 5777 (1869)], ... the Court said: "Action of tort ... cannot be maintained without proof that the defendant either did some positive wrongful act with the intention to appropriate the property to himself, or to deprive the rightful owner of it, or destroyed the property." In Lee Tung v. Burkhart[, 59 Or. 194, 116 P. 1066 (1911)], the Court held that in order to maintain an action for conversion, there must have been, on the part of the defendant, some unlawful

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