Hoffman Management Corp. v. S.L.C. of North America, Inc.

• Court: Missouri Court of Appeals
• Writing for the Court: MANFORD; Fraze's
• Citation: Hoffman Management Corp. v. S.L.C. of North America, Inc., 800 S.W.2d 755 (Mo. App. 1990)
• Decision Date: 13 November 1990
• Docket Number: No. WD,WD
• Parties: HOFFMAN MANAGEMENT CORPORATION, Lewis A. Dysart, Frank W. Taylor, Roger W. Penner, Howard D. Lay, Alex M. Lewandowski, Robert W. Cotter, Patrick K. McMonigle, and Charles F. Marvine, Jr., Respondents-Appellants, v. S.L.C. OF NORTH AMERICA, INC., Appellant-Respondent. 42324.

Page 755

800 S.W.2d 755

HOFFMAN MANAGEMENT CORPORATION, Lewis A. Dysart, Frank W Taylor, Roger W. Penner, Howard D. Lay, Alex M. Lewandowski Robert W. Cotter, Patrick K. McMonigle, and Charles F Marvine, Jr., Respondents-Appellants, v. S.L.C. OF NORTH AMERICA, INC., Appellant-Respondent.

No. WD 42324.

Missouri Court of Appeals Western District.

Nov. 13, 1990.

Motion for Rehearing and/or Transfer to Supreme Court

Denied Jan. 2, 1991.

James C. Morrow, Daniel T. DeFeo, James P. Barton, Jr., Kansas City, for S.L.C of North America, Inc.

Larry W. Joye of Morrison, Hecker, Curtis, Kuder & Parrish, Howard D. Lay and Janet I. Blauvelt of Dysart Taylor, Kansas

City, Penner Lay & Lewandowski, for Hoffman Mgmt., et al.

Before LOWENSTEIN, P.J., and SHANGLER and MANFORD, JJ.

MANFORD, Judge.

This is a consolidated appeal. Hoffman Management Corporation, et al. (hereinafter HMC) cross-appeals from the trial court's declaratory judgment finding that a telephone system was owned by S.L.C. of North America, Inc. (hereinafter S.L.C.) and appeals from the trial court's verdict in favor of S.L.C. for conversion of that telephone system. S.L.C. appeals from the trial court's order, remitting the amount of the award from $45,000.00 to $19,763.88. The trial court's declaratory judgment ruling is affirmed. This court also affirms the jury's verdict and remands this cause with directions to set aside the order of remittitur and enter judgment for S.L.C. for the verdict sum of $45,000.00, plus prejudgment interest.

Cross-appellants, HMC, et al., present five points on appeal which, in summary, charge that the trial court erred: (1) in its findings of fact and conclusions of law for declaratory judgment in concluding that S.L.C. was the owner of the telephone system because the telephone system was a fixture and not, as the court concluded, personalty, and, therefore, ownership passed to HMC as part of the foreclosure sale because HMC was a bona fide purchaser for value without notice of S.L.C.'s unperfected security interest; (2) in finding the telephone system to be personalty but, even if the telephone system was personalty, the trial court erred in making the conclusion of law that S.L.C. was the owner of the telephone system because it improperly concluded that the foreclosure sale included only real property and, therefore, that HMC did not acquire any interest in personalty as part of the foreclosure sale, in that the deed of trust foreclosed upon granted a security interest in personalty which was foreclosed and to which ownership passed to HMC as part of the foreclosure sale pursuant to § 400.9-501(4), RSMo 1986; (3) in finding the telephone system to be personalty, but, even if the phone system is personalty, the trial court erred in making the conclusion of law that S.L.C. was the owner of the telephone and that S.L.C. had not abandoned the telephone system; (4) in giving Instruction No. 7, because it instructed the jury as to an improper measure of damages in that it allowed the jury to compensate S.L.C. for loss of use in addition to depreciation in fair market value which, under the circumstances of this case, resulted in a verdict far in excess of recoverable damages and, further, in that it did not define the point in time at which to determine the value of the telephone system for purposes of determining depreciation in value; and (5) in entering judgment against "the partners" because it improperly ruled that they were parties to the proceedings at trial on S.L.C.'s counterclaim for conversion in that S.L.C.'s amended counterclaim did not assert claims against "the partners" and was not served on them.

Appellant S.L.C. presents one point on appeal, which charges the trial court erred in entering a remittitur order because remittitur was not available in Missouri when S.L.C.'s cause of action accrued against HMC.

The central issue involved in this appeal deals with the status of a certain Horizon telephone system. S.L.C. claimed ownership of the telephone system, and HMC filed a Declaratory Judgment action as a result of the ownership dispute. S.L.C. counterclaimed for conversion.

In May, 1986, HMC purchased the 4420 Madison Building in Kansas City, Missouri, through a foreclosure sale. Shortly thereafter, the ownership of the building was transferred to an entity known as the 4420 Madison Avenue Building. The owners of the 4420 Madison Avenue Building, in addition to HMC, were Mr. Lewis A. Dysart, Mr. Frank W. Taylor, Jr., Mr. Roger W. Penner, Mr. Howard D. Lay, Mr. Alex M. Lewandowski, Mr. Robert W. Cotter, Mr. Patrick K. McMonigle and Mr. Charles F. Marvine, Jr. At the time that HMC purchased the 4420 Madison Building, Mr. Charles Hoffman, Jr., the president of HMC, understood that he was purchasing the interests of an entity known as First United Partners 9. The description of the property purchased as contained in the Deed of Trust was a typical, standard description of real property.

Prior to the foreclosure sale in May, 1986, First United Partners 9 filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. At that time, World Savings held the First Deed of Trust on the 4420 Madison Building. In mid-April, 1986, the Bankruptcy Court approved World Savings foreclosure on its Deed of Trust, and an irrevocable trust known as the Sexton Family Trust purchased World Savings' Deed of Trust on the 4420 Madison Building. Mr. Ronald Sexton is an individual who is affiliated with the Sexton Family Trust and acted in this matter on behalf of the trust. As a result of the purchase by the Sexton Family Trust of World Savings' Deed of Trust, the Sexton Family Trust conducted the foreclosure sale at which HMC purchased the interest of First United Partners 9.

In regards to the telephone system in question, on December 30, 1983, Faddis Leasing Corporation leased a Horizon Telephone System to Charter Properties, Ltd., located in the 4420 Madison Building, Suite 106, Kansas City, Missouri. The lease provides that it is for a four-year term, at a rental rate of $991.00 per month, and that the telephone system was always to remain the personal property of Faddis Leasing Corporation. Charter Properties defaulted on the lease for the phone system. Faddis Leasing Corporation then terminated the lease with Charter Properties, sending notice dated April 25, 1986 to Sam Daily, the personal guarantor.

When First United Partners 9 filed bankruptcy, Faddis Leasing Company filed a Proof of Claim. Faddis Leasing Company had some concern in terminating the telephone lease or in recovering the telephone system in that it was located in a building affected by bankruptcy.

By its order of April 21, 1986, the Bankruptcy Court allowed Faddis Leasing Company to remove the telephone system from the building. Faddis Leasing, having terminated its lease with Charter Properties, Ltd., sold the system to S.L.C. on April 25, 1986. Mr. Sexton, acting now in the capacity of president of S.L.C., paid $5,500.00 for the phone system on behalf of S.L.C. on April 29, 1986. Due to the fact that fewer headsets came with the phone system than what Mr. Sexton paid for, Faddis Leasing Co. refunded S.L.C. $500.00, bringing the total purchase price of the Horizon system of $5,000.00.

After purchasing the system, S.L.C. did not remove it from the 4420 Madison Building as Mr. Sexton was hoping to purchase the building at the foreclosure sale. He was unsuccessful at this attempt.

S.L.C. is in the business of leasing equipment. At the time Mr. Sexton of S.L.C. purchased the phone system in April of 1986, he testified it had a value of $20,000.00 and a lease value of $1,000.00 per month. When originally purchased in 1984, the telephone system sold for $31,000.00, a fair and reasonable purchase price. At the time Mr. Sexton purchased the system, only ten of the original 18 headsets could be found, thereby decreasing the original price in 1984 to approximately $28,500.00.

In May, 1986, the foreclosure sale occurred. Prior to this sale, Mr. Sexton of S.L.C. had made no attempts to remove the phone system from the premises. HMC was the successful bidder at the foreclosure sale. Shortly after the sale, Mr. Sexton had a conversation with Charles Hoffman of HMC concerning the system, stating that S.L.C. owned the telephone system. Subsequent to the foreclosure sale, HMC and "the partners" of the 4420 Madison Building would not turn over the system to S.L.C., asserting that the system was a fixture under the Uniform Commercial Code, and that ownership of the system passed to them as a result of the foreclosure sale.

Cross-appellants (at the time in the posture of plaintiffs) filed their Petition for Declaratory Judgment to Quiet Title. S.L.C. then counterclaimed against HMC, seeking damages and return of the telephone system. A trial on the issue of declaratory judgment ensued on November 8, 1988. At that time, plaintiff HMC's counsel amended their petition to include the names of "the partners" in the 4420 Madison Avenue Building partnership. Defense counsel then orally amended their counterclaim to include "the partners". The trial was bifurcated. The first trial was on the declaratory judgment issue and the second, on defendants' counterclaim for conversion.

At the trial for declaratory judgment, evidence was heard regarding the phone system. The system was installed and utilized in the "Executive Suite" area located on the first floor of the 4420 Madison Avenue Building. It consisted of the central processing unit of the telephone system, which was on wheels; included the board containing the wiring configuration, which was screwed and bolted into the wall; the wiring running to the individual offices, which was dropped through the ceiling; and headsets. It could easily be removed from the Executive Suite with minimal damage to the building.

As a result of the initial non-jury trial, the trial court issued its Findings...