Lake Philgas Service v. Valley Bank & Trust Co.
| Decision Date | 12 January 1993 |
| Docket Number | No. 910128-CA,910128-CA |
| Citation | 845 P.2d 951 |
| Parties | 20 UCC Rep.Serv.2d 417 LAKE PHILGAS SERVICE, a Utah corporation, Plaintiff and Appellee, v. VALLEY BANK & TRUST COMPANY, a Utah corporation; and Carl D. Bennett, Defendants and Appellants. |
| Court | Utah Court of Appeals |
John T. Anderson (argued), Parsons, Behle & Latimer, Salt Lake City, for defendants and appellants.
Arthur H. Nielsen, Richard M. Hymas (argued), Nielsen & Senior, P.C., Salt Lake City, for plaintiff and appellee.
Before GARFF, GREENWOOD and RUSSON, JJ.
Valley Bank & Trust Company (Valley Bank) appeals the bench trial judgment in favor of Lake Philgas Service (Lake Philgas), a Utah corporation, awarding compensatory damages, interest and punitive damages for conversion of a trailer. We affirm.
We state the facts as found by or consistent with the trial court's findings. 1 In April 1988, Lake Philgas, a vehicle dealer in Millard County, agreed to sell a 1987 Aljo Alliance fifth wheel trailer to Carl Dee Bennett (Bennett) for $15,000, subject to Bennett obtaining financing. Lake Philgas and Bennett executed an Installment Sale and Security Agreement (the Agreement) for presentation to First Security Bank, from whom Bennett expected to obtain financing. The Agreement contained standard provisions, including provisions that (1) Lake Philgas was selling the trailer and retaining a security interest in the trailer, (2) Lake Philgas would have remedies as a secured creditor, and (3) the Agreement constituted the entire agreement between the parties and could not be modified except in writing. Lake Philgas had previously requested sales financing from First Security for other customers, and all requests had been approved. Anticipating First Security's financing approval, Bennett and Lake Philgas also submitted an application for title and registration to the Motor Vehicle Division (MVD) of the State Tax Commission, and Bennett obtained automobile insurance. Bennett took possession of the trailer.
Subsequently, First Security notified Lake Philgas and Bennett that it would not provide financing. As a result, the parties never consummated the sale to Bennett, but instead agreed that Bennett would lease the trailer for $15 per day. Consistent with that agreement, Bennett retained possession of the trailer.
In the meantime, MVD issued a certificate of title to the trailer, showing Bennett as the owner and First Security as the first lien holder. MVD mailed the certificate to First Security. An officer of First Security thereafter endorsed the "first lien release" provision on the certificate and delivered it to Lake Philgas. Bennett, or someone acting with Bennett's ratification, endorsed the certificate prior to June 24, 1988. Lake Philgas retained possession of the certificate but never submitted it to MVD for issuance of a new title certificate in its name.
Earlier, in July 1987, Valley Bank obtained a deficiency judgment against Bennett and his former wife in the amount of $23,615.44. At that time, Valley Bank had no knowledge of any assets or property owned by Bennett. However, in July 1988, Valley Bank learned that Bennett was living in a trailer in Delta, Utah. Based on this information, Valley Bank began an investigation to determine if Bennett owned the trailer.
First, Valley Bank contacted Millard County and was informed that Bennett was the registered owner of the trailer. Valley Bank next contacted MVD, which informed Valley Bank that the title to the trailer listed Bennett as the owner and First Security as the first lienholder of the trailer. Valley Bank then contacted First Security to determine the nature of its interest in the trailer. Nikki Hirschi, assistant manager of the Delta branch of First Security, informed Russell Wilson, Valley Bank's Delta branch manager, that Bennett had applied for financing with First Security, but that his request had been denied. Hirschi also told Wilson that the MVD had sent a certificate of title for the trailer to First Security, but since it had declined Bennett's request for financing, First Security had endorsed the first lien release provision on the certificate and delivered the title to Alfred Lake, president of Lake Philgas, from whom Bennett had attempted to purchase the trailer. Hirschi further informed Wilson that she was not aware of any interest Bennett had in the trailer and that Lake Philgas was the owner, but said that she would contact Lake Philgas to confirm her understanding. Hirschi contacted Alfred Lake, who told her that her understanding was correct. Hirschi then contacted Wilson, told him of her conversation with Alfred Lake, relating that Lake had confirmed that Lake Philgas owned the trailer and that Bennett had no ownership interest in the trailer.
Other than checking on the trailer's insurance, Valley Bank conducted no further investigations. On August 4, 1988 Valley Bank's attorney obtained a writ of execution and praecipe from the district court, directing the Millard County Sheriff's Office to levy upon and seize the trailer. The writ was executed later that day.
The next day, Bennett filed a response to the execution and praecipe, stating that he had no ownership interest in the trailer, but that Alfred Lake was the owner, and that Bennett remained in possession of the trailer pursuant to an oral agreement with Alfred Lake to rent the trailer for $15 per day. In addition, Alfred Lake contacted Wilson and told him that Lake Philgas owned the trailer, that Bennett had no interest in it, that Lake Philgas possessed the endorsed title certificate, and explained the circumstances of the failed sale. Wilson told Alfred Lake that Valley Bank intended to go ahead with the sheriff's sale of the trailer. Lake Philgas, Bennett, and others acting on their behalf, then notified Valley Bank approximately nine separate times that Lake Philgas owned the trailer and that Bennett had no ownership interest in it.
On August 17, 1988, Alfred Lake filed a notice with the court, declaring that on August 9, he had served his affidavit and notice on Valley Bank and its attorney, advising them that he claimed full and exclusive ownership of the trailer. The affidavit stated that he, Alfred Lake, was the sole owner of the trailer and that he had advised Valley Bank on August 5 "of his total and exclusive ownership." Alfred Lake's verified complaint, filed August 17, 1988, again asserted that he was the owner. 2 The complaint also asserted that both Alfred Lake and Bennett considered the Agreement to have been cancelled when Bennett was unable to obtain financing, and that Bennett was merely renting the trailer from Lake with an option to buy the trailer if other financing arrangements could be made.
On August 17, 1988, the Millard County Sheriff conducted an execution sale to sell whatever interest Bennett had in the vehicle. Prior to the sale, Lake Philgas's attorney informed Valley Bank that the intended purchase of the trailer had not been consummated, that Bennett had paid nothing to Lake Philgas for the trailer, that Bennett had no ownership interest in the trailer, and that Lake Philgas was the sole and actual owner of the trailer. Counsel demanded that Valley Bank cancel the sale. Lake Philgas's attorney also held up the title to the trailer, stating that Bennett had endorsed the owner transfer provision on the title, transferring title back to Lake Philgas. 3 No Valley Bank representatives present at the sale made any attempt to examine the certificate. Wilson testified at trial that even if he had examined the certificate, he would not have canceled the sheriff's sale. Valley Bank credit bid a portion of its judgment against Bennett and obtained a sheriff's certificate to the trailer.
Lake Philgas subsequently brought suit against Valley Bank for wrongful conversion of the trailer. The trial court ruled in favor of Lake Philgas and awarded $16,300 in compensatory damages for the loss of the trailer, plus $25,000 punitive damages. Valley Bank appeals, alleging that the trial court erred in awarding judgment to Lake Philgas. Specifically, Valley Bank argues: (1) Lake Philgas merely held a security interest in the trailer under the sales agreement with Bennett, and therefore the trial court erred in determining that Valley Bank was liable to Lake Philgas for conversion; (2) Lake Philgas should be estopped from asserting that it was the owner of the trailer because it allowed Bennett to retain all indicia of ownership; and (3) punitive damages were inappropriate because Valley Bank's conduct at worst constituted negligence.
We will not set aside the trial court's findings of fact unless they are clearly erroneous. Utah R.Civ.P. 52(a). "A finding is clearly erroneous if it is against the great weight of evidence or if the court is otherwise definitely and firmly convinced that a mistake has been made." Bountiful v. Riley, 784 P.2d 1174, 1175 (Utah 1989). We review a trial court's conclusions of law under a correction of error standard, granting no deference to the trial court. Marchant v. Park City, 771 P.2d 677, 680 (Utah App.1989), aff'd, 788 P.2d 520 (Utah 1990).
To sustain an action for conversion, a party must prove that the act in question constituted " 'an act of wilful interference with a chattel, done without lawful justification by which the person entitled thereto is deprived of its use and possession.' " Phillips v. Utah State Credit Union, 811 P.2d 174, 179 (Utah 1991) (quoting Allred v. Hinkley, 8 Utah 2d 73, 328 P.2d 726, 728 (1958)). " 'Although conversion results only from intentional conduct it does not however require a conscious wrongdoing, but only an intent to exercise dominion or control over the goods inconsistent with the owner's right.' " Id. (emphasis added). We must determine, therefore, if Valley Bank was legally justified in seizing the trailer or if Lake Philgas as owner of the...
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