Sperry v. ITT Commercial Finance Corp., WD

• Decision Date: 16 October 1990
• Docket Number: No. WD,WD
• Citation: 799 S.W.2d 871
• Parties: 14 UCC Rep.Serv.2d 319 Robert M. SPERRY and Melinda J. Lubis as statutory trustees for Computer Merchants, Inc., and Robert M. Sperry and Melinda J. Lubis, individually, Appellants, v. ITT COMMERCIAL FINANCE CORPORATION and Dominic Gerard Pilla, Respondents. 42391.
• Court: Missouri Court of Appeals

Page 871

799 S.W.2d 871

14 UCC Rep.Serv.2d 319

Robert M. SPERRY and Melinda J. Lubis as statutory trustees for Computer Merchants, Inc., and Robert M. Sperry and Melinda J. Lubis, individually, Appellants, v. ITT COMMERCIAL FINANCE CORPORATION and Dominic Gerard Pilla Respondents.

No. WD 42391.

Missouri Court of Appeals Western District.

Oct. 16, 1990.

Motion for Rehearing and/or Transfer to Supreme Court

Denied Dec. 4, 1990.

Application to Transfer Denied Jan. 9, 1991.

Gordon N. Myerson, Kansas City, for appellants.

Daniel M. Dibble, Kansas City, for respondents.

Before KENNEDY, P.J., and SHANGLER and GAITAN, JJ.

GAITAN, Judge.

This is a tort action where plaintiffs and appellants, Robert M. Sperry and Melinda J. Lubis, statutory trustees for Computer Merchants, Inc. seek to reinstate a jury verdict in their favor and against defendants-respondents, ITT Commercial Finance Corporation and Dominic G. Pilla. The trial court granted a judgment notwithstanding the verdict. We affirm.

Pretrial Procedural Matters

In 1986, the now-defunct Computer Merchants, Inc., was a retail computer vendor with locations in Overland Park, Kansas, and Jefferson City and Osage Beach, Missouri. Computer Merchants and its corporate predecessors, Bob Sperry's Computers, Inc., and Century Next Computers, Inc., obtained inventory financing from ITT Commercial Finance Corp. ("ITT"), under an agreement for wholesale financing dated December 17, 1984, and an identical agreement dated February 13, 1985 (hereinafter collectively referred to as "the security agreement").

In paragraph 3 of the security agreement, Computer Merchants granted ITT a security interest in all inventory, machinery, equipment, and fixtures "wherever located and whether or not financed under this agreement." In paragraphs 7 and 9 of the security agreement, Computer Merchants agreed to pay all assessments and charges when due, and to pay "the full amount of the principal balance immediately when each of the goods is sold, lost, stolen, destroyed, or damaged or when payment is required under the terms of [ITT's] financing program, whichever occurs first." ITT monitored Computer Merchants' performance of this payment obligation by conducting periodic "floor checks" to determine what inventory had been sold, lost, stolen, destroyed, or was otherwise unaccounted for.

ITT performed such a floor check on March 6, 1986, and determined that approximately $12,771 worth of merchandise was sold or otherwise unaccounted for. ITT demanded immediate payment from Melinda J. Lubis (Lubis), then president of Computer Merchants. Lubis refused, claiming that Computer Merchants did not have the money. On March 10, 1986, Computer Merchants again refused to pay. Pursuant to paragraphs 13(c) and 17 of the security agreement, ITT declared a default and demanded that Computer Merchants surrender collateral for the indebtedness. Throughout this proceeding the parties disagreed whether ITT demanded all, or only part, of the collateral. Plaintiffs contended that ITT demanded "floorplan inventory only" and that plaintiffs agreed to surrender only that inventory. Defendants insisted that they demanded, and plaintiffs agreed to surrender, all collateral.

In paragraph 13 of the security agreement, Computer Merchants agreed to the following conditions with respect to default:

13. If we do not comply with any of the terms of this agreement, ... or whenever you in good faith deem the debt or the goods insecure:

(a) You may call all or any part of the amount ... due and payable immediately, ...

(b) We shall hold and keep the goods in good order for your benefit and shall not exhibit or sell them;

(c) Upon your demand, we shall deliver the goods to you in good order at a place you choose that is reasonably convenient to both of us ...

On March 11, 1986, ITT repossessed inventory, machinery, equipment and fixtures from the three Computer Merchants stores. On May 7, 1986, Computer Merchants filed suit against ITT and its branch manager, Dominic Pilla, demanding $1,800,000 actual damages and $4,000,000 punitive damages on each count of a five-count petition for wrongful repossession (Count I), conversion (Count II), trespass (Count III), outrageous conduct (Count IV), and prima facie tort (Count V). ¹ All such counts were premised on Computer Merchants' claim that it offered to let ITT pick up property which ITT had floor-planned, but that ITT had wrongfully taken additional property as well.

Defendants denied liability and asserted numerous defenses to plaintiffs' claims. ITT also advanced three counterclaims: Count I sought a deficiency judgment of approximately $200,000 plus collection costs and attorneys' fees, on the indebtedness due ITT from Computer Merchants; Count II sought to recover on Sperry's personal guaranty of said indebtedness; and Count III sought actual and punitive damages from Sperry and Lubis, individually and as trustees for Computer Merchants, for conversion and conspiracy to defraud.

On July 7, 1988, defendants filed a motion for partial summary judgment. After extensive briefing by the parties, consideration of affidavit and depositions, and oral argument, the trial court on April 12, 1989, sustained defendants' motion as to four key issues. Specifically, it held that the following points were undisputed or established as a matter of law, and required no proof at trial.

1. Pursuant to the security agreement, ITT had a valid and enforceable security interest in all inventory, machinery, equipment and fixtures of Computer Merchants;

2. On March 11, 1986, Computer Merchants was in default under the security agreement because it had failed to timely pay all current debts owed to ITT for principal and charges;

3. Except to the extent that said inventory, machinery, equipment, and fixtures were owned by persons or entities other than Computer Merchants, ITT had a valid and enforceable right to possession of said inventory, machinery, equipment, and fixtures; and

4. In conducting the repossession, ITT did not breach the peace.

The court scheduled all remaining issues for trial on May 15, 1989. On April 21, 1989, defendants filed further motions for summary judgment on each specific count of plaintiffs' third amended petition. Again the parties briefed all issues and presented extensive argument. Immediately before trial, on the morning of May 15, 1989, the trial court sustained defendants' motions for summary judgment on plaintiffs' claims for wrongful repossession (Count I), outrageous conduct (Count IV), and prima facie tort (Count V).

The case proceeded to trial on plaintiffs' claims for conversion (Count II) and trespass (Count III), and on defendants' counterclaims for a deficiency judgment (Count I), for recovery on Sperry's personal guaranty (Count II), and for actual and punitive damages for conversion and conspiracy to defraud (Count III).

At the time the trial court entered partial summary judgment for defendants, it ordered the parties to file motions in limine by May 5, 1989. Pursuant to this order, defendants filed a motion asking that the trial court prohibit plaintiffs from mentioning to the jury the following items of alleged damage to Computer Merchants:

a. total destruction of the fair market value of the company, in the amount of $1,200,000;

b. loss of a $600,000 tax loss carry-forward;

c. loss of the IBM and Apple dealerships;

d. loss of credit standing and inability to repay loans totalling $800,000; and

e. loss of leaseholds and leasehold deposits.

Defendants argued, inter alia, that such items were not proper items of damage for conversion or trespass, and that evidence of such losses would be highly prejudicial to defendants. The trial court agreed, and so restricted the appellants.

Events Culminating in Litigation

The repossession occurred on Tuesday, March 11, 1986. Early that morning, Schifferdecker and Weir, agents for defendants, went to Jefferson City. Mike Day, who managed that store, had spoken directly with Sperry and Lubis about ITT's scheduled visit. Sperry had told him that ITT was "coming down to Jeff City," but had not told him that some inventory should stay or that other inventory should go. ITT did not bring a list of the floorplan inventory and the Jefferson City employees did not have or ask for one. Schifferdecker and Weir asked if it was okay to pick up their merchandise. The employees said "fine," sat back, and let ITT take what it wanted. If Day told Schifferdecker and Weir not to take something, however, they did not take it. For example, at one point, Day discovered that personal computers belonging to the Missouri Farm Bureau had been removed from the service area. Day returned them to the service area without reported incident.

The repossession took perhaps an hour, and was uneventful. One Computer Merchants employee testified that it was not hostile or argumentative, and described it as "low-key" and "real quiet." During the repossession, no one objected, asked ITT to leave, or even called Sperry or Lubis to report what was happening. The store employees were helpful and courteous and made no protest.

After Jefferson City, Schifferdecker and Weir went to Osage Beach. Sales clerk Kim Leutzinger was alone in the store. She was helpful and courteous, and did not object to any part of the repossession or ask ITT to take only certain property. The repossession was orderly and "very routine."

Before repossession, The School of the Osage took an Apple II-e computer to the Osage Beach store for repair. Store manager Art Langston testified that the Apple II-e was gone after the repossession. Langston was not present during the repossession and, therefore, had no actual knowledge whether ITT had removed it, but opined that no one besides ITT could have removed it. The computer was never repaired or returned to the school, but shortly after the repossession, the manufacturer replaced it free of charge. The...