McQuillan v. Mercedes-Benz Credit Corp., MERCEDES-BENZ

• Decision Date: 29 January 1998
• Docket Number: MERCEDES-BENZ,No. 97-209,97-209
• Citation: 331 Ark. 242,961 S.W.2d 729
• Parties: , 36 UCC Rep.Serv.2d 844 Gary D. McQUILLAN and America's Truckaway Systems, Inc., Appellants, v.CREDIT CORPORATION, Appellee.
• Court: Arkansas Supreme Court

Page 729

961 S.W.2d 729

331 Ark. 242, 36 UCC Rep.Serv.2d 844

Gary D. McQUILLAN and America's Truckaway Systems, Inc., Appellants, v. MERCEDES-BENZ CREDIT CORPORATION, Appellee.

No. 97-209.

Supreme Court of Arkansas.

Jan. 29, 1998.

Brian L. Spaulding, Springdale, for Appellants.

John R. Eldridge, III, Fayetteville, for Appellee.

CORBIN, Justice.

Appellants Gary D. McQuillan and America's Truckaway Systems, Inc., (ATS) appeal the judgment of the Carroll County Circuit Court, Western District, awarding damages in the amount of $17,509.52 and $1,000.00 in attorney's fees to Appellee Mercedes-Benz Credit Corporation (MBCC) for its claims of replevin and conversion against Appellants. On appeal, Appellants assert that the trial court erred in finding that a conversion had occurred and in calculating the damages and fees awarded to MBCC. This case is certified to us from the court of appeals, as the issues present questions involving the law of torts; hence, our jurisdiction is pursuant to Ark. Sup.Ct. R. 1-2(d). We affirm.

The matter was tried before the court in a bench trial. The judgment reflects that the trial court made the following findings of fact. MBCC had a perfected security interest in two 1991 Freightliner trucks arising from a retail installment contract in which MBCC had financed the purchase of the trucks by Penguin Truck Leasing, Inc., from New Dallas Freightliner. The parties stipulated as to the existence of MBCC's perfected security interest. Penguin subsequently defaulted on its payments under the agreement.

In late 1993, ATS hauled seventeen trucks for St. Lawrence Freightway from Dallas, Texas, to various locations. Two of those seventeen trucks were the same trucks in which MBCC had a perfected security interest. ATS issued three invoices, one dated November 22, 1993, and two dated December 9, 1993, to St. Lawrence Freightway for transporting fourteen of the seventeen vehicles, including the two MBCC trucks. Those two trucks were transported by ATS under separate invoice dated December 9, 1993, from Dallas to McKee's Rock, Pennsylvania. All three of the invoices issued from ATS to St. Lawrence Freightway were unpaid. ¹ The record reflects that the first invoice, number 3296, was for transporting six trucks, with a total amount of $4,123.50 payable to ATS. The second invoice, number 3305, was also for transporting six trucks, with a total amount of $3,712.94 payable to ATS. The third invoice, number 3310, was for transporting the two MBCC trucks, with an amount of $1,682.80 payable to ATS.

The court found further that when the two MBCC trucks were delivered at McKee's Rock, on December 7, 1993, the driver demanded payment for all three invoices issued by ATS, but did not receive any payment. ATS then stored the two MBCC trucks at Cerni Truck Center in Hubbard, Ohio. No later than May 27, 1994, and subsequent to Penguin's default under the installment agreement with MBCC, McQuillan, individually and as president of ATS, received notice that MBCC had a perfected security interest in the two trucks. On or about June 15, 1994, McQuillan was served with process issued out of Cass County, Missouri, in an action commenced by MBCC for possession of the two trucks that were being stored, unbeknownst to MBCC, at Cerni Truck Center in Ohio. McQuillan hired an attorney to defend against the action filed in Missouri, who made an offer to MBCC in which Appellants would return the two trucks if MBCC would pay all of the unpaid invoices, together with the unpaid storage charges for the trucks. In other words, Appellants were attempting to secure payment from MBCC for the entire debt owed by St. Lawrence Freightway to ATS for transporting the fourteen trucks, notwithstanding the fact that MBCC only had an interest in two of those trucks.

MBCC filed the instant action for replevin in Carroll County on July 14, 1994. Alternatively, MBCC prayed for relief under a theory of conversion. Through his attorney in the Arkansas action, McQuillan offered to return the two trucks to MBCC for the sum of $8,000.00, if MBCC agreed to pay the storage charges. The invoice pertaining to the two MBCC trucks was for the sum of $1,682.80. MBCC discovered the location of the two trucks in October 1994, and obtained possession of them on October 6, 1994, after paying Cerni Truck Center the sum of $4,000.00 in storage fees. In addition to the storage fees, MBCC also paid $400.00 for the transportation of the two trucks and expended $13,109.52 in legal fees in its attempts to recover the trucks through the legal processes of various states.

The trial court specifically rejected Appellants' claim that ATS had a carrier's lien on the two trucks. Instead, the court found that Appellants' actions in refusing to surrender possession of the two trucks to MBCC, in placing them in "secret storage," and insisting upon payment of charges over and above those to which they would have been entitled under a properly established carrier's lien, constituted the tort of conversion.

I. Conversion

For their first point for reversal, Appellants argue that the trial court erred in finding that a conversion had occurred, as they contend that they had a valid carrier's lien on the two trucks that was superior to MBCC's perfected security interest. We disagree.

Conversion is a common-law tort action for the wrongful possession or disposition of another's property. France v. Nelson, 292 Ark. 219, 729 S.W.2d 161 (1987); Gardner v. Robinson, 42 Ark.App. 90, 854 S.W.2d 356 (1993). To establish liability for the tort of conversion, a plaintiff must prove that the defendant wrongfully committed a distinct act of dominion over the property of another, which is a denial of or is inconsistent with the owners' rights. South v. Smith, 326 Ark. 774, 934 S.W.2d 503 (1996) (citing Dent v. Wright, 322 Ark. 256, 909 S.W.2d 302 (1995)); Reed v. Hamilton, 315 Ark. 56, 864 S.W.2d 845 (1993). Where the defendant exercises control over the goods in exclusion or defiance of the owner's rights, it is a conversion, whether it is for defendant's own use or another's use. Id.

In Car Transp. v. Garden Spot Distrib., 305 Ark. 82, 805 S.W.2d 632 (1991), relied upon by MBCC, this court observed that conscious wrongdoing is not the requisite intent for conversion; rather, what is required is that there be intent to exercise control or dominion over the goods. In that case, the appellant was attempting to assert a carrier's lien and was demanding payment of current charges as well as past debts before it would deliver the goods to the owner. This court held that "[i]f a lien defense is available to the motor carrier, it can only be asserted against currently transported goods for current freight charges that remain unpaid." Id. at 87, 805 S.W.2d at 634. This court held further that its conclusion was supported by Prosser:

An unqualified refusal to surrender, stating no reason, or one stating the wrong reason, is still a conversion, even where there are unstated justifications. And if the defendant insists upon charges, or other conditions of delivery, which he has no right to impose, there is conversion.

Id. (emphasis added) (quoting Prosser and Keaton on Torts, § 15, at 100 (5th ed.1984)).

Arkansas Code Annotated § 4-7-307 (Repl.1991) provides for the establishment of a carrier's lien:

(1) A carrier has a lien on the goods covered by a bill of lading for charges subsequent to the date of its receipt of the goods for storage or transportation (including demurrage and terminal charges) and for expenses necessary for preservation of the goods incident to their transportation or reasonably incurred in their sale pursuant to law. But against a purchaser for value of a negotiable bill of lading a carrier's lien is limited to charges stated in the bill or the applicable tariffs, or if no charges are stated then to a reasonable charge.

(2) A lien for charges and expenses under subsection (1) on goods which the carrier was required by law to receive for transportation is effective against the consignor or any person entitled to the goods unless the carrier had notice that the consignor lacked authority to subject the goods to such charges and expenses. Any other lien under subsection (1) is effective against the consignor and any person who permitted the bailor to have control or possession of the goods unless the carrier had notice that the bailor lacked such authority.

(3) A carrier loses his lien on any goods which he voluntarily delivers or which he unjustifiably refuses to deliver. [Emphasis added.]

McQuillan testified below that he had instructed his contracted driver not to release the two MBCC trucks until he had received payment for all of the invoices. In response to MBCC's attorney's question whether he, through his Missouri attorney, had offered to return the trucks if MBCC would pay all the invoices plus storage fees, McQuillan stated "[w]e was [sic] trying to get all our money." Additionally, McQuillan admitted that he had never extended an offer to return the trucks to MBCC in exchange for the transportation fees for the two trucks, $1,682.80, plus storage fees. In addition to such testimony, the trial court also received into evidence various letters between the attorneys for the parties in which offers for the trucks' release were discussed. One such letter, dated September 19, 1994, from McQuillan's then attorney to MBCC's attorney indicated that McQuillan would be pleased to inform MBCC of the storage location of the trucks upon receipt of $7,000.00, which MBCC had previously offered as a complete settlement of the transportation fees and storage costs.

The trial court specifically found that Appellants had not established that they had acquired a valid carrier's lien because they had refused to surrender possession of the two trucks to MBCC, had placed the trucks in "secret storage," and had insisted upon payment of charges over and above...