Kennedy v. Fournie

• Decision Date: 31 March 1995
• Docket Number: No. 66154,66154
• Citation: Kennedy v. Fournie, 898 S.W.2d 672 (Mo. App. 1995)
• Parties: 26 UCC Rep.Serv.2d 640 Earl J. KENNEDY, Jr. and Continental Boiler Works, Inc., a Missouri Corp., Appellants, v. Robert FOURNIE, Sr., et al., and Boatmen's National Bank of St. Louis, N.A., Respondents.
• Court: Missouri Court of Appeals

Page 672

898 S.W.2d 672

26 UCC Rep.Serv.2d 640

Earl J. KENNEDY, Jr. and Continental Boiler Works, Inc., a Missouri Corp., Appellants, v.Robert FOURNIE, Sr., et al., and Boatmen's National Bank of St. Louis, N.A., Respondents.

No. 66154.

Missouri Court of Appeals,

Eastern District,

Division Five.

March 31, 1995.

Motion for Rehearing and/or Transfer to

Supreme Court Denied May 2, 1995.

Application to Transfer Denied June 20, 1995.

Gregory H. Wolk, St. Louis, for appellants.

Joseph E. Martineau, St. Louis, for respondents.

CARL R. GAERTNER, Judge.

PlaintiffContinental Boiler Works, Inc.(Continental) appeals from the trial court's grant of summary judgment in favor of defendant Boatmen's National Bank of St. Louis (Boatmen's) on a claim for conversion of personal property and from the trial court's judgment, granting judgment notwithstanding the verdict in favor of Boatmen's on Continental's claim for damages due to a commercially unreasonable sale of machinery and inventory and alternatively granting a new trial on Continental's claim for damages due to a commercially unreasonable sale of machinery and inventory after finding that the jury's verdict in favor of Continental on this claim was against the manifest weight of the evidence.We affirm.

Continental is a Missouri corporation engaged in the fabrication of custom steel and alloy plates.In 1987, when the incidents occurred which gave rise to the underlying action, Robert G. Fournie, Sr., was the president and chief executive officer of Continental, and his family owned 50 percent of the Continental's voting stock.Also at this time, Earle J. Kennedy, Jr., was a member of Continental's board of directors, and his family owned the remaining 50 percent of Continental's voting stock.Since 1984, however, Fournie and Kennedy had been feuding.By 1987, they were not on speaking terms and would not sit together in the same room.

Continental operated a manufacturing facility on West Park Avenue in St. Louis.On August 5, 1985, Boatmen's entered into two security agreements with Continental to secure the payment of various notes.¹In the first agreement, a First Deed of Trust and Security Agreement, Continental granted Boatmen's a security interest in the real estate upon which its manufacturing facility was located and "all buildings, improvements, and fixtures now or hereafter existing upon such real estate...."Continental also granted Boatmen's a security interest in "all accessories, parts and assessions (sic) attached to" its manufacturing site.In the second agreement, a Machine and Equipment Security Agreement, Continental granted Boatmen's a security interest in all of its "equipment, machinery, appliances, furnaces, air-conditioning apparatus," inventory and accounts.

At the time that the parties entered into these security agreements, Continental was in default on loan obligations to Boatmen's, owing the bank more than $4 million.By 1987, Continental reduced its indebtedness.However, the debt increased by $350,000.00 in June 1987.

In 1986, the Fournies began expressing to Boatmen's their interest in purchasing Continental's real estate and personal property in a private sale.Boatmen's notified Kennedy of its discussions with the Fournies, and Kennedy expressed no interest in purchasing Continental's assets.By July 1987, negotiations between the Fournies and Boatmen's broke down, and Boatmen's decided to foreclose on Continental's assets due to Continental's default on its loan obligations.Boatmen's scheduled a complete sale of Continental's assets for September 1, 1987.Kennedy objected to this procedure, prompting Boatmen's to cancel the sale.

On September 11, 1987, Boatmen's recommenced foreclosure proceedings, issuing to Continental notice of its scheduled October 2, 1987, foreclosure sale of Continental's real estate and "other personal property situated thereon" pursuant to the parties' First Deed of Trust and Security Agreement.On September 28, 1987, Boatmen's notified Continental of its scheduled October 6, 1987, public auction sale of Continental's inventory, machinery, equipment and appliances pursuant to the parties' Machine and Equipment Security Agreement.

At the October 2, 1987, real estate foreclosure sale, the trustee orally announced that the overhead bridge cranes and the stress-relieving furnace located on Continental's property would be included in the sale.The overhead bridge cranes ranged from 30 to 50 feet in width and rode on rails which were permanently affixed to the structural support beams of Continental's manufacturing plant and were powered by electricity.The stress-relieving furnace was a freestanding steel structure, measuring 17 feet by 17 feet by 50 feet.The furnace was bolted to a concrete foundation and was constructed and installed in panels.It had a railroad car bottom which weighed approximately 100,000 pounds and was attached to railroad tracks.For $601,000.00, Boatmen's sold Continental's real estate, cranes and furnace at the October 2, 1987, sale to Continental Fabricators, a corporation formed by two former Continental officers, Robert and Thomas Fournie.The proceeds of the sale were applied to Continental's debt, leaving a balance due of $688,431.62.

Boatmen's hired A-Tec Liquidations, Inc., to assist in the October 6, 1987, public auction of Continental's remaining personal property.Concerned about gaining access to Continental's plant to enable A-Tec to inspect Continental's property to provide a commercially reasonable sale, Boatmen's obtained an easement and license agreement from Continental which gave Boatmen's and its designees an irrevocable right of access to the premises "for the purpose of preparing and conducting an auction of certain personal property...."Prior to the October 2, 1987, real estate sale, Continental permitted Boatmen's and A-Tec to use the bridge cranes to move inventory in anticipation of the October 6, 1987, sale.However, after the real estate sale and just prior to the public auction, Continental Fabricators informed Boatmen's that it could not use the overhead cranes during the auction unless Boatmen's obtained sufficient insurance and made a rental payment.Instead of meeting these requirements, the auctioneer obtained a portable crane and forklift and provided riggers to assist in removing purchased items.The auctioneer also announced at the start of the auction that the bridge cranes could not be used to remove purchased items, that removal of items would be the buyer's obligation, and he told several people that a portable crane was available to assist in removing purchased items.

Prior to the public auction, A-Tec mailed brochures concerning the auction to approximately 3,500 prospective bidders, and it published advertisements for the auction in the St. Louis Post-Dispatch and the Chicago Tribune.In these notices, A-Tec identified the items to be sold, the date, time and location of the auction, the terms of the inspection period and the terms of the sale.Additionally, A-Tec included the following statement in the brochures and advertisements: "The property is being sold as is, where is, without any warranties either implied or expressed."

Prior to the auction, Boatmen's and A-Tec also requested that Continental produce mill test reports for the sheets of steel in Continental's inventory which Boatmen's planned to sell.²Continental, however, failed to provide these reports, which were located in Continental's office, an area not subject to Boatmen's security agreements.

The October 6, 1987, public auction lasted all day.Four A-Tec employees moved items, and three of its employees auctioned the assets.One hundred and thirty-five bidders attended the auction.No one was prevented from bidding, and items were only sold to the highest bidder.The sale grossed $491,905.47.Boatmen's subsequently collected Continental's accounts receivable, totaling $307,353.00.Continental's indebtedness to Boatmen's was retired in December 1987.

Earle Kennedy and Continental filed an eleven-count petition against Fournie, his family members, Continental Fabricators and Boatmen's.Among its allegations, plaintiffs claimed that Boatmen's converted the overhead bridge cranes and stress-relieving furnace at the October 2 foreclosure sale by selling them as part of Continental's real estate instead of selling them at the October 6 collateral sale.Plaintiffs further alleged that pursuant to § 9-507 of the Uniform Commercial Code(U.C.C.) Boatmen's conducted a commercially unreasonable sale on October 6, 1987, in selling Continental's personalty at public auction because the auctioneer advised purchasers that the overhead cranes could not be used for removal of inventory and equipment purchased and the auctioneer failed to provide steel mill test reports to interested parties at the auction.

On June 29, 1993, Boatmen's moved for partial summary judgment on several of plaintiffs' counts, including their conversion claim.On November 5, 1993, Judge Robert Dierker issued an order granting Boatmen's motion.Despite a later amendment to the order, summary judgment was still granted in favor of Boatmen's on the conversion claim.Trial of the remaining issues, many of which dealt with Continental's claims against Continental Fabricators and its officers and a counterclaim filed by Robert and Thomas Fournie against members of the Kennedy family, commenced on January 24, 1994.On February 11, 1994, the jury returned verdicts in favor of Continental on a number of its counts relating to various members of the Fournie family, Continental Fabricators and some of its officers.On its count alleging that Boatmen's conducted a commercially unreasonable sale on October 6, 1987, the jury returned a verdict for $250,000.00 against Boatmen's.

Both Continental and Boatmen's filed motions for judgment notwithstanding the verdict or in the alternative for a new trial....