IOS Capital, Inc. v. Phoenix Printing, Inc.
| Decision Date | 22 April 2004 |
| Docket Number | No. 4-03-0879.,4-03-0879. |
| Citation | 808 N.E.2d 606,348 Ill. App.3d 366,283 Ill.Dec. 640 |
| Parties | IOS CAPITAL, INC., Plaintiff-Appellee and Cross-Appellant, v. PHOENIX PRINTING, INC., d/b/a Colortech Printing; and Joseph B. Legener, Defendants and Third-Party Plaintiffs (Robert C. Russell, Defendant and Third-Party Plaintiff-Appellant and Cross-Appellee, v. Canon U.S.A., Inc., and Ikon Office Solutions, Inc., Third-Party Defendants). |
| Court | United States Appellate Court of Illinois |
R. Stephen Scott (argued), Daniel J. Davlantis, Mark D. Thielen, Scott & Scott, P.C., Springfield, for Phoenix Printing, Inc.
David O. Edwards, Giffin, Winning, Cohen & Bodewes, P.C., Springfield, Thomas G. Berndsen (argued), Thomas G. Berndsen, P.C., St. Louis, Mo, for IOS Capital, Inc.
In January 1998, plaintiff, IOS Capital, Inc., formerly known as IKON Capital Resources (IOS), and defendant, Phoenix Printing, d/b/a Colortech Printing (Colortech), entered into a five-year written agreement for the lease of two black-and-white photocopy machines (copiers). After May 2000, Colortech stopped making payments, which IOS deemed a default under the agreement. Plaintiff sued defendants, Colortech, Joseph Legener, and Robert Russell, on various counts, including conversion. The parties proceeded to trial on the conversion count only against Russell. Following a June 2002 bench trial, the trial court found for IOS and against Russell on the conversion count for $139,457.
On appeal, Russell argues the trial court erred because (1) IOS failed to prove he was guilty of conversion, (2) the award of damages and the elements making up the award were inappropriate, and (3) it admitted certain hearsay statements not subject to any exception into evidence. IOS cross-appeals, arguing the court erred in calculating damages. We reverse.
In January 1998, IOS and Colortech executed a written five-year agreement (Agreement) for the lease of the copiers by IOS to Colortech. The Agreement required Colortech to make monthly payments of $6,450. Pursuant to the Agreement, if Colortech defaulted, it would pay IOS, inter alia, attorney fees, all amounts due under the Agreement, and a 5% penalty on the overdue amount, and would return the system to IOS at Colortech's expense.
Russell was majority owner of Colortech and held a position on the three-member board of directors. He was not active in the daily business of Colortech or operating the copiers. He did authorize Legener, company president, to enter into the Agreement with IOS on behalf of Colortech.
Legener was a corporate officer and director of Colortech until March 2001, when Russell fired him as an employee, officer, and director. While president of Colortech, he managed daily business and oversaw operations at both corporate locations.
Legener testified for IOS that he signed the Agreement on behalf of Colortech and also as a personal guarantor. Colortech made only 26 of 60 payments on the Agreement, the last one on May 1, 2000. On cross-examination, Legener acknowledged whenever he needed IOS copiers moved or picked up, IOS had always been the party to do so. He asked IOS prior to the onset of litigation to pick up the copiers on three separate occasions, but IOS did not do so. He stated the copiers were not performing and maintenance and service were not adequate, such that "[i]t was costing me more to own the copier than I could possibly get out of the sales and production of the jobs they were designed to produce."
IOS presented evidence Colortech retained the copiers after May 1 and continued to use them for 23 months, made 706,408 photocopies on the copiers during that time, and collected $49,007.88 of revenue from the sale of those photocopies. Almost all of the copies and revenue occurred before November 2000. IOS stated it had demanded Colortech return the copiers to IOS but Colortech refused to do so.
Stephen Young, IOS's recovery analyst, testified he phoned Colortech in October 2000 and "asked to speak to someone in authority." He was transferred to "Diane." Young believed she was someone in authority who could make a decision and resolve the dispute over the copiers. When Young asked about getting the copiers back, "Diane" told him "she was not going to release the equipment and did not want to discuss it any further."
Colortech was served with summons on December 5, 2000. After that date, but before or during March 2001, Russell met with his attorneys, Scott and Scott, who advised him not to return the copiers to IOS. Russell took the advice and ordered Legener not to return the copiers to IOS. At trial, Russell admitted he did not have to take the advice and the decision was his to make.
IOS retrieved the copiers on April 30, 2002. After bench trial, the trial court found for IOS and against Russell on the conversion count and awarded total damages of $139,457, categorized as follows:
This appeal followed.
The issue is whether a corporate director and shareholder can be held liable for conversion of copiers subject to a contract by the corporation where his participation was limited to retaining the chattel months after the item was initially converted by the corporation and he relied on the advice of counsel in authorizing the conversion.
Russell argues IOS failed to prove (1) all elements of conversion and (2) he actively participated therein. We agree with his second contention.
Conversion is the unauthorized deprivation of property from a person entitled to its possession. Sandy Creek Condominium Ass'n v. Stolt & Egner, Inc., 267 Ill.App.3d 291, 294, 204 Ill.Dec. 709, 642 N.E.2d 171, 174 (1994). To prove conversion, the plaintiff must establish (1) a right in the property, (2) a right to immediate possession, (3) wrongful control by the defendant, and (4) a demand for possession. Cirrincione v. Johnson, 184 Ill.2d 109, 114, 234 Ill.Dec. 455, 703 N.E.2d 67, 70 (1998). When the trial court determines a plaintiff has proved the elements of conversion, we will reverse only when the decision is against the manifest weight of the evidence. See Ruiz v. Wolf, 250 Ill.App.3d 121, 123-24, 190 Ill.Dec. 198, 621 N.E.2d 67, 69, (1993).
IOS presented evidence at trial it had a right in the copiers. The Agreement indicated Colortech was leasing the copiers from IOS. Legener identified the Agreement as a lease between Colortech and IOS for two black-and-white copiers. Further, in its initial answer, Colortech admitted IOS was the "sole and lawful owner" of the copiers.
IOS also showed it had a right to immediate control. Legener acknowledged the copiers were subject to the Agreement. The Agreement stated a failure to make payments constituted a default, which allowed IOS to either repossess the copiers or demand return of the copiers to IOS at Colortech's expense. Legener acknowledged Colortech was consistently late in making payments. IOS introduced evidence showing Colortech defaulted on the Agreement and had not made a payment since May 1, 2000. In addition, Legener identified a letter received from IOS indicating notice of default.
IOS also presented sufficient evidence of wrongful control. Colortech made no payments on the Agreement after May 1, 2000, yet retained the copiers. IOS attempted to enforce its rights under the Agreement's default provisions to retake the copiers but claims Legener and Colortech ignored the demands. In October 2000, Russell discovered Colortech had stopped paying on the IOS Agreement. Russell told Legener he should work out a deal with IOS, but no deal ever transpired. Colortech was served with summons on December 5, 2000, and Russell was aware of this fact. He later met with his attorneys, who advised him not to return the copiers. Russell admitted he was not obligated to take their advice and he was the ultimate decision maker. Russell instructed Legener not to return the copiers, even though he knew Colortech had stopped making payments under the Agreement. Legener did not return the copiers. Russell admitted keeping the copiers without paying for them was wrong. Under these facts, the trial court could reasonably determine Colortech exercised unauthorized control over the copiers.
IOS also showed it made a demand for the copiers. IOS made several payment demands on Colortech. Further, IOS made multiple demands for the copiers themselves, including one on November 22, 2000. In addition, Colortech admitted in its initial answer IOS demanded surrender and delivery of the copiers to IOS and Colortech failed and refused to do so. The trial court's finding IOS proved all elements of conversion is not against the manifest weight of the evidence.
Russell argues because demand was not made on him personally he cannot be guilty of conversion. However, the question is not whether each element is satisfied as to him but whether he actively participated in the tort.
Corporate officers are generally not liable for corporate obligations. Mannion v. Stallings & Co., 204 Ill.App.3d 179, 191, 149 Ill.Dec. 438, 561 N.E.2d 1134, 1141 (1990). However, they "are liable for any tort of the corporation in which they participate." Landfield Finance Co. v. Regal Paper Box Co., 345 Ill.App. 611, 104 N.E.2d 359 (1952) (conversion).
In National Acceptance Co. of America v. Pintura Corp., 94 Ill.App.3d 703, 706, 50 Ill.Dec. 120, 418 N.E.2d 1114, 1116-17 (1981), the court recognized the need to protect corporate officers from individual contractual liability. However, it distinguished situations involving breach of contract from those involving torts. National Acceptance Co., 94...
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