McKenzie v. Tom Gibson Ford, Inc., 87-363

• Decision Date: 02 May 1988
• Docket Number: No. 87-363,87-363
• Citation: 749 S.W.2d 653,295 Ark. 326
• Parties: Barbara McKENZIE, Appellant, v. TOM GIBSON FORD, INC., Appellee.
• Court: Arkansas Supreme Court

Page 653

749 S.W.2d 653

295 Ark. 326

Barbara McKENZIE, Appellant, v. TOM GIBSON FORD, INC., Appellee.

No. 87-363.

Supreme Court of Arkansas.

May 2, 1988.

Jimmie G. Dunlap, Marked Tree, for appellant.

Rieves & Mayton, West Memphis, for appellee.

HAYS, Justice.

Barbara McKenzie filed this action for conversion against Tom Gibson Ford, Inc., claiming compensatory and punitive damages for the alleged conversion of a check for $500 intended as a down payment on the purchase of a truck. At the close of Ms. McKenzie's case, Gibson asked for a directed verdict on the grounds that Ms. McKenzie had failed to make a prima facie showing of conversion, had failed to prove conduct by Gibson which would entitle her to punitive damages and had failed to show that she suffered compensatory damages. The motion was denied, but at the close of the case, Gibson renewed its motion, and a directed verdict for the defendant was granted.

Ms. McKenzie has appealed, alleging three points of error: 1) The trial court erred in directing a verdict in favor of Gibson on the issue of damages; 2) the trial court erred in directing a verdict on the issue of punitive damages; and 3) the trial court erred in denying a motion in limine. We agree with the first two points.

Stating the facts most favorably to Ms. McKenzie, against whom the verdict was directed, in January, 1986, she visited Tom Gibson Ford as a prospective purchaser. The truck she liked had been sold but a salesman, Mr. Graham, offered to find one to her liking and he took a credit application and a check for $500 as "earnest money" to serve as a down payment. The understanding was that Ms. McKenzie's check would be returned to her "if the deal fell through."

A few days later Mr. Graham called Ms. McKenzie to tell her she would need $1,500 rather than $500 as a down payment and after thinking it over a day or two she decided to look elsewhere. She asked that her check be returned and Mr. Graham promised to mail it that day.

When the check was not forthcoming Ms. McKenzie inquired at her bank and discovered that the check had been presented and paid to Ford Motor Credit Company and applied to an account of her son, whose note she had co-signed. One of the installments was some fourteen days delinquent at that point in time.

Ms. McKenzie testified she contacted Mr. Graham and Mr. Murray, the credit manager. She said she was treated rudely and her requests for assistance in recovering her $500 were rejected. She was told, she said, to get herself a lawyer and Mr. Murray suggested to her that her son had intercepted the check and delivered it to Ford Motor Credit. This testimony was disputed by Messrs. Graham and Murray. Mr. Graham insisted he mailed the check to Ms. McKenzie. Neither witness had any explanation for how the check came into the hands of Ford Motor Credit. When Gibson refused to refund her deposit, Ms. McKenzie filed suit for conversion seeking compensatory and punitive damages.

I The Directed Verdict on Compensatory Damages

Before dealing with the merits of Point I, we must dispense with a contention by Gibson that Ms. McKenzie has failed to assign error to the directed verdict on the issue of conversion. The problem exists, we believe, because it is not at all clear whether the trial court in the end was ruling that the plaintiff had failed to prove conversion or, having proved conversion, failed to prove that she was legally damaged as a result. At the close of the plaintiff's case the trial court properly denied a motion for a directed verdict on the issue of conversion and at the close of the defendant's case the motion was renewed. During a lengthly discussion the trial court clearly recognized that a factual issue existed as to conversion. He ruled unequivocally on the matter of punitive damages, but never clearly on conversion, and we resolve that doubt in favor of the party against whom the verdict was directed. There is no indication the appellee has been misled by the appellant's points of error and we are unwilling to rule on an ambiguous record that Ms. McKenzie has abandoned the issue of conversion, which would render the appeal meaningless.

The motion for a directed verdict was grounded on an absence of proof that Gibson converted Ms. McKenzie's funds to its own use. It is not essential to conversion that it be for the use of the alleged converter. Conversion is any distinct act of dominion wrongfully exerted over property in denial of, or inconsistent with, the owner's right. First National Bank of Brinkley v. Frey, 282 Ark. 339, 668 S.W.2d 533 (1984); Thomas v. Westbrook, 206 Ark. 841, 177 S.W.2d 931 (1949). "The conversion need not be a manual taking or for the defendant's use: if the defendant exercises control over the goods in exclusion, or defiance, of the plaintiff's right, it is a conversion, whether it is for his own use or another's use." (Our italics). Big A Warehouse Distributors, Inc. v. Rye Auto Supply, Inc., 19 Ark.App. 286, 719 S.W.2d 716 (1986). "Perhaps the most common way in which conversion is committed is by an unauthorized transfer or disposal of possession of the goods to one who is not entitled to them." Prosser and Keeton on the Law of Torts, 5th Edition § 15 p. 92.

Gibson Ford maintains that because the $500 check was applied to the reduction of an indebtedness for which Ms. McKenzie was liable, she sustained no damage as a matter of law. We reject the proposition. Certainly, as the trial court observed, there was a factual dispute as to whether Gibson returned Ms. McKenzie's check to her or delivered it to Ford Motor Credit and that issue was for the jury to settle. We need not decide whether Ms. McKenzie's liability to Ford Motor Credit Company was as a borrower or a guarantor, as in either event, Gibson had no right to deliver her check to Ford Credit in direct violation of the understanding that the check would be returned to her. Gibson has produced no authority supporting the premise that a tortfeasor can escape liability as a converter because the proceeds of his conversion are disposed of in a manner that may ultimately benefit the owner.

We believe the weight of authority is to the contrary and is in accord with our holding in Roach v. Rector, 93 Ark. 521, 123 S.W. 399 (1909). There, Roach, a creditor of Rector, converted goods belonging to Rector, sold them and applied the proceeds to Rector's indebtedness. On appeal we affirmed a judgment for Rector for conversion, holding that the creditor's action was impermissible, her recourse being by legal process rather than the commission of a tort.

The exclusive right of an owner of property to decide how he will allocate his funds among obligees was expressed cogently in the early case of Northrup v. McGill, 27 Mich. 234 (1873), cited by Roach v. Rector, supra, and more recently by a California appellate court, Dakota Gardens Apt. Investors v. Pudwill, 142 Cal.Reptr. 126, 75 Cal.App.3d 346 (1977):

In general, when there is no fraud, and when the law does not forbid, a man may dispose of his own property according to his own ideas of propriety. If he is indebted by note to different parties, he may apply his property to the payment of one, and refuse to apply it to the payment of...