First Tennessee Bank, Nat. Ass'n v. Graphic Arts Centre, Inc., No. 62049
| Citation | 859 S.W.2d 858 |
| Decision Date | 20 July 1993 |
| Docket Number | No. 62049 |
| Parties | 23 UCC Rep.Serv.2d 269 FIRST TENNESSEE BANK, NATIONAL ASSOCIATION, Plaintiff/Appellant, v. GRAPHIC ARTS CENTRE, INC., Keeler/Morris Printing Company, Inc., Lithocraft Studios, Inc., J. Lewin Bookbinding Company, Inc., Fordyce Promotional Services, Inc., Minuteman Press Printing, Inc., Defendants/Respondents. |
| Court | Court of Appeal of Missouri (US) |
Charlene N. Kass, St. Louis, Richard Gossett, John Speer, Monique Nassar, Chattanooga, TN, for plaintiff/appellant.
John F. Cowling, James E. Mello, Kenneth J. Mallin, James Michael Cox, St. Louis, for defendants/respondents.
This replevin action arises out of a dispute as to who was entitled to possession of 264,848 games. Plaintiff bank claimed the games pursuant to a security agreement given by its debtor, the distributor of the games.
Defendants, as suppliers or manufacturers of the games, claimed they were entitled to the games. They alleged they had an artisan's lien, a warehouseman's lien, and an equitable lien.
Pursuant to Rule 99 governing replevin, and following a hearing, the Hon. Robert G. Dowd, Jr. entered an Order of Delivery in Replevin. Bank took possession and sold the games.
Following trial on the merits, the Hon. Richard J. Mehan found Bank had not met its burden of proof that it was entitled to the games. Judge Mehan therefore entered judgment for defendants. 1 Bank appeals; we affirm.
In this court-tried case, we set forth the facts in a light most favorable to the judgment. We defer to the trial court's resolution of conflicting evidence. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).
This case basically involves five different organizations. Three of these organizations were involved a year or longer before the other two. The first three organizations were headed by Mark Walbridge, Bill Struthers, and Jack Bobo.
In 1983, Mr. Walbridge of Vancouver, Washington, began developing an idea for a VCR videotape game called Video Trivalities. In producing and marketing this game, he used various organizations including the services of a printer, Mr. Struthers of Clackamas, Oregon.
In the summer of 1985, Mr. Walbridge met Mr. Bobo of Clarksdale, Mississippi, a potential distributor for his game. Mr. Bobo, an attorney, had experience in raising equity for projects. Several organizations, including one formed by Mr. Bobo, entered into various written distribution agreements with Mr. Walbridge.
In late 1984, Mr. Walbridge developed the concept for a VCR sports game called The VCR Quarterback Game. The game was a combination videotape and board game. Because of its potential, he formed Interactive VCR Games, Inc. (Originator). National Football League Films and Properties permitted Originator to use NFL highlights and licensed the game to Originator. By 1986, a prototype had been developed.
Originator produced the videotape for the game. Ultimately, Originator orally contracted with Mr. Struthers of Minuteman Press Printing, Inc. (Producer) to produce or procure the other component parts and assemble the finished games.
Mr. Bobo formed VCR Enterprises, Inc. (Distributor) to market the original game. In the early stages of their relationship, Distributor paid Originator for the completed games in different ways. At times it prepaid and at times the games were shipped COD. Either way, the games were shipped to Distributor in Mississippi for warehousing and shipping to retailers.
Before going further, we point out that neither Originator nor Distributor are parties to this action. However, it is necessary to refer to them in order to fully understand the relationship of all the participants.
When the Quarterback Game was developed, Originator and Distributor entered into different arrangements. By this time, Distributor was basically the sole marketer and distributor of Originator's products. The written agreement set forth their financial relationship. It provided, among other things, that (1) Originator was the seller and Distributor was the purchaser; (2) the sales price for each game was "FOB Manufacturer;" 2 (3) Distributor would pay a portion of the game's cost immediately after it was manufactured; and (4) after certain advertising expenses were paid, Distributor would pay the balance due Originator once a year.
The fourth organization, a bank, now enters the picture. To enable Distributor to furnish this financing, Distributor contacted First Tennessee Bank of Memphis (Bank). In October, 1986, Bank furnished Distributor with a seven million dollar line of credit. Distributor executed a security agreement in Bank's favor, pledging, among other things, all of its inventory.
In addition to The VCR Quarterback Game, Originator developed and obtained licenses for other sports games which were produced by Producer and marketed by Distributor in a similar fashion. All these games, including the Quarterback game, are referred to collectively as "sports games."
In addition to sports games, the parties were involved in a detective-style mystery game, 221 B Baker Street. However, the relationship of the parties was not the same. A New Zealand company contacted Distributor about this game and Distributor entered into a licensing agreement with that company. Distributor had Originator make the videotapes for the game and had Producer produce the other component parts and assemble the game. Distributor told Producer how many games to produce.
With the aid of numerous local suppliers, Producer originally performed its part of the work in Oregon. In June, 1987, the fifth organization became involved. At that time, Producer contracted out various production responsibilities to several corporations in St. Louis, known collectively as the Graphic Arts Centre.
Graphic Arts Centre is a "corporate holding company." Its subsidiaries are Keeler/Morris Printing, Lithocraft Studios, J. Lewin Bookbinding, Co., and Fordyce Promotional Services. Each of the five is a Missouri corporation; they are all located in one building at 5800 Fee Fee Road in St. Louis.
Keeler/Morris did printing work and leased the first warehouse for the project, known as the Park Steed warehouse in Earth City. The games were manufactured and stored there pending shipment. Lithocraft Studios developed and proofed film. J. Lewin Bookbinding Co. cut, trimmed, and assembled games. Fordyce Promotional Services assembled games and shipped them.
A few months into the project, Graphic Arts Centre leased a second warehouse; it was located on Shoreline in Earth City. Raw materials and component parts were stored there.
In May, 1988, Graphic Arts Centre leased a third warehouse, located on Goodfellow in St. Louis. All of the finished games were moved to this warehouse. The games were in this warehouse at the time of this replevin action.
Shipping instructions were given exclusively by Distributor. Distributor would send the shipping instructions for drop shipping to retailers by overnight delivery to the Park Steed warehouse. The instructions included packing slips, freight bills, labels, and designations of freight lines. The shipping and handling were performed by one of the Graphic Arts companies, Keeler/Morris. Keeler/Morris billed Producer for this service, who in turn billed Distributor.
The games were paid for under a procedure 3 apparently agreed upon by Originator, Producer, Distributor, and Bank. Producer would count the number of completed games manufactured at the end of each day. Periodically, an independent company, SLT Warehouse Company, would verify the inventory count. It would then issue an inventory certificate indicating the number of games on hand.
On approximately a weekly basis, Producer, on behalf of Originator, would invoice Distributor and Bank for the week's completed games. Each sports game was priced separately, ranging from $15.90 to $17.20. For example, Originator and Distributor agreed that Distributor would pay $15.90 for each Quarterback game. Of that sum, however, Bank would advance only $9.75 per game. Bank would send the $9.75 to Producer, Producer would retain $3.65 for its production charge, and Producer would forward the remaining sum to Originator.
The money advanced Originator through Producer would be credited against the total amount Distributor owed Originator. At the end of the year, Distributor was to pay Originator the balance of the amount due on the completed games produced, minus one-half of the advertising charges.
On the Baker Street games, Producer would invoice Distributor and Bank weekly $6.83 for each completed game. Bank would pay the full invoice price to Producer. Producer would retain $2.93 for its production charge and send $3.90 to Originator for its production charge for the videotape.
In the summer of 1987, Producer claims Originator orally contracted with it to buy 500,000 sports games to be produced in St. Louis. In early July, the order was increased to 845,000 sports games. At about the same time, Producer claims Distributor ordered 100,000 Baker Street games.
Producer ordered raw materials to make the 500,000 sports games. Producer then issued purchase orders to Graphic Arts for 450,000 sports games and 100,000 Baker Street games.
Several adverse situations arose in late summer and the fall of 1987. In August, Bank notified Distributor that its line of credit expired at year-end; Bank wanted Distributor to obtain another source of funding. The players in the National Football League went on strike and the stock market crashed in October. The National Football League licensed a competing VCR football game. As a result, the market for the sports games deteriorated.
In late October or in November, 1987, Distributor...
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