Dean Machinery Co. v. Union Bank
| Decision Date | 15 April 2003 |
| Docket Number | No. WD 61205.,No. WD 61217.,WD 61205.,WD 61217. |
| Citation | 106 S.W.3d 510 |
| Parties | DEAN MACHINERY COMPANY, Respondent, v. UNION BANK f/k/a Bannister Bank, Appellant. |
| Court | Missouri Court of Appeals |
Irvin V. Belzer, Kansas City, MO, for Appellant, Union Bank.
Frank Wendt, Kansas City, MO, for Appellant, Paula Wray and Defendant, PC Contractors, Inc.
Kurt S. Brack, Merriam, KS, for Defendant, Brotherhood Bank.
Michael H. Berman, Overland Park, KS, for Respondent, Dean Machinery.
Before: THOMAS H. NEWTON, P.J., ROBERT G. ULRICH and EDWIN H. SMITH, JJ.
Union Bank and Paula Wray ("Ms. Wray") appeal from judgment entered for Dean Machinery Company ("Dean Machinery") on Dean's claim and Ms. Wray's counterclaim following a judge-tried case. The judgment of the trial court is reversed.
Dean Machinery is a Caterpillar equipment dealer with a location in Kansas City, Missouri. For over forty years, Dean has rented, sold, serviced, and sold parts for heavy construction equipment. In 1994, Dean Machinery began renting equipment to PC Contractors, Inc. ("PC Contractors"), an excavating business. Ms. Wray was the president, chief executive officer, and sole shareholder of PC Contractors. Dean Machinery's practice is to verbally conduct business with select customers by having them sign a continuing purchase order to avoid the need for having a salesperson obtain a signature on every rental agreement. PC Contractors executed a continuing purchase order with Dean Machinery around November 10, 1997.
At issue in this case are three pieces of equipment that PC Contractors began renting from Dean Machinery in late 1997 and early 1998. PC Contractors executed three separate documents, each entitled Memorandum of Agreement to Lease Equipment (collectively, the "Lease Agreement"), to rent a 963B Track Loader, a 416C Backhoe Loader, and a BRV32 Hydraulic Hammer (collectively, the "Equipment") from Dean Machinery.1 The Lease Agreements provided that PC Contractors lease the Equipment from Dean Machinery for a minimum of six months. After that time, PC Contractors could continue using the Equipment as long as it paid rent to Dean Machinery. Dean Machinery issued monthly rental invoices to PC Contractors. PC Contractors was often delinquent or failed to make payments to Dean Machinery. In mid 1999, Dean Machinery contacted PC Contractors and demanded that it either return the Equipment and pay the past due rent or purchase the Equipment. Dean Machinery refused to finance the Equipment sale to PC Contractors.
PC Contractors did not have the cash or financing to purchase the Equipment. It contacted several financial institutions to obtain financing. None of these institutions would extend financing to PC Contractors. PC Contractors began working with SDI Capital Resources, Inc. ("SDI") to obtain financing for the Equipment. SDI is a high risk lender specializing in providing financing to businesses that are unable to qualify for financing from more conventional sources. PC Contractors submitted a "lease application" to SDI on October 25, 1999. SDI approved financing for PC Contractors on November 11, 1999, subject to SDI's inspection of the Equipment and PC Contractor's completion of all documentation. SDI sent a letter to PC Contractors on November 12, 1999, requesting several things, among which was "proof of rental payments." PC Contractors was behind in its rental payments to Dean Machinery and could not establish a rental payment history.
Ms. Wray contacted Dean Machinery regarding SDI's request for additional documentation. At that time, PC Contractors issued a check to Dean Machinery for $41,104.15. The purpose of the check was a disputed issue at trial. Dean Machinery contended that the check represented three rental payments on the Equipment. It claimed that it cooperated with Ms. Wray to calculate the amount of past due rent and help her establish a rental payment history. On the same day that PC Contractors gave its check to Dean Machinery for the Equipment, however, Dean Machinery issued sales invoices for the Equipment to PC Contractors. The purpose of the sales invoices was also disputed at trial. Dean Machinery claimed that it issued the "sales invoices" as a favor to PC Contractors to help it obtain financing. It asserted that it never intended to transfer ownership of the Equipment to PC Contractors. Union Bank argued otherwise, claiming that PC Contractors' check to Dean Machinery was a down payment for the purchase of the Equipment. Union Bank claimed interest in the Equipment as a secured creditor of PC Contractors.
After December 30, 1999, Dean Machinery stopped sending PC Contractors rental invoices and began sending it sales invoices. Dean Machinery's internal records were changed to reflect that PC Contractors had purchased the Equipment. Prior to December 30, 1999, Dean Machinery's balance sheet had carried the Equipment as an asset. After December 30, 1999, the balance sheet carried the Equipment as a machine receivable. None of PC Contractor's records or financial statements was changed to reflect the purchase of the Equipment. Between March and April 2000, SDI informed PC Contractors that it would not finance the purchase of the Equipment.
Union Bank made three loans to PC Contractors and took a security interest in its inventory, chattel paper, accounts, equipment, and general intangibles, including any after-acquired property. Additionally, Ms. Wray provided further security for the three loans by executing a personal guaranty of PC Contractors' debt to Union Bank. Union Bank's security interest is most senior and would take priority over PC Contractors' other creditors. In March or April 2001, PC Contractors went out of business. PC Contractors delivered all of its assets including the subject Equipment to Union Bank. Dean Machinery sent a letter to Union Bank on April 16, 2001, stating that it owned the Equipment. Union Bank did not give the Equipment to Dean Machinery. It set up an auction on August 30, 2001, to sell the Equipment. Dean Machinery sought and was granted a temporary restraining order to stop Union Bank's sale of the Equipment.
Dean Machinery filed an action in the Circuit Court of Jackson County, Missouri, seeking to recover the Equipment and the past due amounts owed to it by PC Contractors under the Lease Agreement. The case was tried without a jury on December 11, 2001. The trial court's judgment found that the Equipment belonged to Dean Machinery and that Union Bank had no "ownership interest or possessory rights" in the Equipment. The trial court also awarded damages to Dean Machinery for conversion and against PC Contractors, Union Bank, and Ms. Wray in the amount of $57,782. This appeal by Union Bank, and Ms. Wray (the "Appellants") followed.
Appellants raise four issues on appeal. In their first point, Appellants claim that the trial court erred in determining that PC Contractors had breached the Lease Agreement with Dean Machinery, that a sale of the Equipment to PC Contractors had not occurred, and granting judgment to Dean Machinery because the conditions for a sale of the Equipment had occurred under section 400.2-401, RSMo 1994, in that PC Contractors had possession of the Equipment when Dean Machinery issued sales invoices to PC Contractors. The Appellants claim in their second point that the trial court erred in granting judgment to Dean Machinery because the trial court's conclusion that the purpose of the second agreement between Dean Machinery and PC Contractors and attendant conduct of the two entities did not constitute a sale was against the weight of the evidence which reflected the unequivocal, plain, clear, and expressed intent of the two parties to transform the lease to a sale of the Equipment after December 30, 1999. In their third point, Appellants claim that the trial court erred in holding that PC Contractors and Union Bank unlawfully converted the Equipment because they did not exercise unauthorized assumption of the right of ownership over the Equipment in that PC Contractors had acquired ownership of the Equipment pursuant to section 400.2-401, RSMo 1994, and Union Bank's security interest attached to the Equipment which was after-acquired property of PC Contractors. Ms. Wray asserts as a fourth point on appeal that the trial court erred in entering judgment against her for unlawfully converting Dean Machinery's Equipment because the elements of conversion were not satisfied in that no evidence was presented that Ms. Wray had possession of the Equipment when Dean Machinery made its demand for surrender and the undisputed evidence established that Dean Machinery had consented to Ms. Wray's possession of the Equipment, which was a complete affirmative defense to the conversion claim.
Before addressing the merits of the case, it is noted that this case presents some of the most convoluted business transactions to come before this court. Dean Machinery, PC Contractors, and SDI disregarded recognized and traditional business practices when they entered into the transactions that caused the dispute in this case. The sequence of events occurring during the second transaction between Dean Machinery and PC Contractors defy explanation. Dean Machinery claims that it never intended to sell the Equipment to PC Contractors. Rather, Dean Machinery contends that it intended to sell the Equipment to SDI. Yet, Dean Machinery issued sales invoices for the Equipment to PC Contractors. Why a company in business for as long as Dean Machinery would issue sales invoices to PC Contractors when it intended to sell the Equipment to SDI is bewildering. Dean Machinery also claims that it does not provide purchase money financing to its customers. The sales invoices issued to PC...
To continue reading
Request your trial
-
Pearson v. Koster
...P.J., Breckenridge and Spinden, JJ.); Hockman v. Dir. of Revenue, 103 S.W.3d 382, 383 (Mo.App. W.D.2003); Dean Machinery Co. v. Union Bank, 106 S.W.3d 510, 523 (Mo.App. W.D.2003); Kauffman v. Kauffman, 101 S.W.3d 35, 44 (Mo.App. W.D.2003) (Breckenridge, P.J.); In re Coffel, 117 S.W.3d 116, ......
-
Pearson v. Koster
...P.J., Breckenridge and Spinden, JJ.); Hockman v. Dir. of Revenue, 103 S.W.3d 382, 383 (Mo. App. W.D. 2003); Dean Machinery Co. v. Union Bank, 106 S.W.3d 510, 523 (Mo. App. W.D. 2003); Kauffman v. Kauffman, 101 S.W.3d 35, 44 (Mo. App. W.D. 2003) (Breckenridge, P.J.); In re Coffel, 117 S.W.3d......
-
Burnett v. United States, 16-995L
...intention effect." Hinshaw v. M-C-M Props., LLC, 450Page 8 S.W.3d 823, 827 (Mo. Ct. App. 2014) (quoting Dean Machinery Co. v. Union Bank, 106 S.W.3d 510, 520 (Mo. Ct. App. 2003)). In interpreting a deed, it is necessary to determine the intention of the grantor and to give effect to that in......
-
GP&W, Inc. v. OceanConnect, LLC
...the law governing commercial transactions" and "to make uniform law among the various jurisdictions." Dean Mach. Co. v. Union Bank, 106 S.W.3d 510, 517 (Mo. App. W.D. 2003) (internal citations omitted). "[W]here there is a paucity of Missouri case law interpreting a provision of the UCC, co......