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Case Summary: Ford Motor Credit Company v. George Herring and Cecil Geisler

Supreme Court of Arkansas (In Banc), Opinion delivered November 26, 1979 — No. 79-251 — Frank Holt, Justice.

Factual and Procedural Background

Appellees George Herring and Cecil Geisler purchased two pickup trucks financed under retail installment contracts with appellant Ford Motor Credit Company. The contracts authorized repossession of the vehicles upon buyer default. Each appellee became delinquent on monthly payments and appellant repossessed the trucks while various items of personal property and tools belonging to the appellees (used in their concrete business and jointly owned) were stored in the trucks.

The repossessions occurred without apparent confrontation, entry into structures, or damage. Shortly after the repossessions, appellee Herring telephoned the repossessor requesting return of the personal items; the truck and tools were gone before he arrived. Appellees filed suit four days after repossession. A jury awarded appellees $2,000 in actual damages and $17,000 in punitive damages. Appellant appealed. The Supreme Court of Arkansas reviewed the record, evaluated legal issues regarding conversion and punitive damages, and reversed and remanded the case to the Monroe Circuit Court, W. M. Lee, Judge.

Legal Issues Presented

  1. Whether repossession of the trucks, accomplished without force, threats, or a breach of the peace, constituted conversion of the vehicles.
  2. Whether appellant's subsequent retention of personal property found in the repossessed trucks after demand constituted conversion.
  3. What is the proper measure of damages for conversion of the personal property (market value at time and place of conversion or other measures)?
  4. Whether punitive (exemplary) damages were properly submitted to the jury given the evidence.
  5. Whether admission of a colloquy from a discovery deposition in a prior lawsuit was admissible to show agency between appellant and its repossessor contractor.
  6. Whether the AMI Civil 2d 2217 instruction (formulated for negligence cases) correctly stated the law on punitive damages in a conversion action or was inappropriate without modification.

Arguments of the Parties

Appellant's Arguments

  • The trial court erred in submitting the conversion issue to the jury because the repossessions involved no force, threats, or breach of the peace; repossession without a breach of the peace is authorized by contract and statute and is not conversion.
  • There was insufficient evidence to support the jury's $2,000 award for actual damages because the proper measure is market value at the time and place of conversion and the evidence presented was based chiefly on purchase, replacement, or rental costs rather than market value.
  • The court erred in admitting into evidence a colloquy from a discovery deposition in a different lawsuit, offered by appellees to show agency between appellant and the repossessor contractor.
  • The court erred in instructing the jury regarding punitive damages; specifically, AMI Civil 2d 2217 was formulated for negligence cases and was not designed to be used, without modification, in a case of an intentional tort such as conversion.

Appellees' Arguments (as reflected in the opinion)

  • Although repossession of the vehicles was proper, appellant retained personal property found in the trucks and refused to return it after demand, supporting a conversion claim as to that personalty.
  • Appellees argued the colloquy from the prior discovery proceeding was admissible because conversion of the personalty was in issue in the prior lawsuit and the same parties and incidents were involved.
  • Appellees relied on the jury's findings that their business was harmed (they abandoned a project) and that appellant intentionally withheld the personal property following demand, supporting both actual and exemplary damages.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Manhattan Credit Co., Inc. v. Brewer, 232 Ark. 976, 341 S.W.2d 765 (1961) Pre-code Arkansas authority sustaining conversion findings only where force, threats, or breach of the peace accompanied repossession. Used to contrast pre-code standards with statutory UCC authority; court noted prior cases required force/threat for conversion in repossession context.
Kensinger Acceptance Corp. v. Davis, 223 Ark. 942, 269 S.W.2d 792 (1954) Pre-code authority on conversion in repossession cases (force/threat requirement). Referenced as part of historical treatment of conversion where repossession involved force or threats.
Ark. Stat. Ann. 85-9-503 (Supp. 1977) UCC provision: secured party on default has right to take possession; may proceed without judicial process if without breach of the peace. Applied to hold appellant had statutory authority to repossess absent a breach of the peace.
Teeter Motor Co., Inc. v. First National Bank of Hot Springs, 260 Ark. 764, 543 S.W.2d 938 (1976) Upheld right of seller to repossess vehicle upon default under 85-9-503. Applied to support the conclusion that appellant had contractual and statutory authority to repossess the trucks.
Thomas v. Westbrook, 206 Ark. 841, 177 S.W.2d 931 (1944) Definition of conversion as exercise of dominion over property in violation of rights of owner or person entitled to possession. Used to define conversion for analysis of whether appellant's conduct constituted conversion.
Barnett Bros. Merc. Co. v. Jarrett, 133 Ark. 173, 202 S.W. 474 (1918) Conversion defined as wrongful taking/dominion in subversion and denial of rights irrespective of demand. Quoted and used with other cases to explain conversion doctrine.
Plunkett-Jarrell Grocery Co. v. Terry, 222 Ark. 784, 263 S.W.2d 229 (1953) Support for conversion definition cited above. Included among authorities explaining conversion.
Meyers v. Meyers, 214 Ark. 273, 216 S.W.2d 54 (1948) Authority on conversion doctrine. Referenced as part of conversion definitions.
Westark Production Credit Association v. Shouse, 227 Ark. 1141, 305 S.W.2d 127 (1957) Authority on conversion doctrine. Cited among conversion authorities.
Jones v. General Motors Acceptance Corp., 565 P.2d 9 (Okla. 1977) Contractual authorization to hold personalty only as long as necessary to secure possession. Used to support the rule that contractual clause authorizing holding personalty is limited in duration to what is necessary to secure possession.
General Motors Acceptance Corp. v. Vincent, 183 Okla. 547, 83 P.2d 539 (1938) Similar principle about holding personalty incident to repossession. Cited to support limitation on seller's right to retain personalty.
Ford Motor Credit Co. v. Waters, 273 So.2d 96 (Fla. App. 1973) Authority addressing limits on retention of personalty after repossession. Used with other authorities to show the contractual right to hold personalty is not absolute.
U.S. v. Bartholomew, 137 F. Supp. 700 (D.C. Ark. 1956) Measure of damages for conversion is market value at time and place of conversion. Applied to determine correct standard for measuring actual damages for converted personal property.
Hardin v. Marshall, 176 Ark. 977, 5 S.W.2d 325 (1928) Measure of damages for conversion (market value rule). Cited to support the rule that market value is the proper measure of conversion damages.
American Soda Fountain Co. v. Futrall, 73 Ark. 464, 84 S.W. 505 (1905) Measure of damages for conversion. Cited in support of the market value standard.
Parks v. Thomas, 138 Ark. 70, 210 S.W. 141 (1919) Measure of damages for conversion and exemplary damages authority. Used both for the market value damages rule and as precedent that exemplary damages can be appropriate.
Norman v. Roberts, 29 Ark. 365 (1874) Return of property does not bar recovery for conversion but may mitigate damages. Cited to show that eventual return does not eliminate a conversion claim but may reduce damages.
Plummer v. Reeves, 83 Ark. 10, 102 S.W. 376 (1907) Similar principle on mitigation of damages where property eventually returned. Cited to the same effect as Norman v. Roberts.
Sanders v. Malden, 214 Ark. 523, 217 S.W.2d 357 (1949) Parties may modify or amend their pleadings upon remand and raise additional issues. Applied to note that parties can amend pleadings on remand and that issues from a prior suit may be developed further.
Loyd v. Southwest Ark. Utilities Corp., 264 Ark. 818, 580 S.W.2d 935 (1979) Same rule on amendment of pleadings upon remand. Cited to reinforce the point about pleadin​g amendments on remand.
Clark et al v. Bales, 15 Ark. 452 (1854) Jury may consider vexation, inconvenience, and add exemplary "smart money" damages. Used to explain historical support for exemplary damages when rights to property are intentionally violated.
Kelly v. McDonald, 39 Ark. 387 (1882) Exemplary damages are proper where there is an intentional violation of another's property rights. Cited to support permissibility of punitive damages under the facts as a possible remedy.
Ft. Smith I. S. Mills v. So. R.B.P. Co., 139 Ark. 101, 213 S.W. 21 (1919) Authority on exemplary damages in property-related torts. Cited in support of exemplary damages doctrine.
AMI Civil 2d 2217; Committee Comment AMI Civil 2d XXIX Standard jury instruction language on punitive damages (not a case). Court held the instruction was formulated for negligence cases and was not suitable, without modification, for intentional torts like conversion.

Court's Reasoning and Analysis

The Court proceeded in a series of analytic steps grounded in statutory text, contract terms, and precedent:

  1. Statutory and Contractual Authority for Repossession:

    The Court cited Ark. Stat. Ann. 85-9-503 and the retail installment contracts containing a clause granting the creditor the right to repossess "wherever the same may be found with free right of entry." Because repossession was accomplished without a breach of the peace, force, or threats, and occurred in open access without damage or confrontation, the Court concluded appellant had contractual and statutory authority to repossess the trucks. The Court relied on Teeter Motor Co. v. First National Bank as supporting this conclusion.

  2. Distinction Between Repossession and Conversion:

    Applying conversion definitions from Thomas v. Westbrook and other authorities, the Court held that proper repossession, done without breach of the peace, did not itself constitute conversion of the vehicles. Thus, the initial act of taking the trucks was lawful and not conversion under the circumstances.

  3. Conversion Claim as to Personal Property Retained After Repossession:

    The Court analyzed whether appellant's retention of personalty found in the trucks could constitute conversion. Although the contract provided that "any personalty in or attached to the property when repossessed may be held by the seller without liability," the Court explained (with supporting authority from other jurisdictions) such a clause authorizes holding the personalty only for so long as is necessary to secure possession of the vehicles. Given the facts — an immediate telephone demand by Herring to retrieve his tools, appellant's employee initially denying knowledge, a report two days later advising appellant of the existence of the personalty, a lawsuit filed four days after repossession, and release of the property only about two months later after attorney intervention — the Court concluded that it could reasonably be inferred that appellant intentionally withheld the property after demand. Viewing the evidence in the light most favorable to appellees (as required on appeal), the Court held that the question of conversion as to the personalty was properly submitted to the jury.

  4. Measure of Actual Damages:

    The Court reviewed authorities establishing that the proper measure of damages for conversion is the market value of the property at the time and place of conversion. The Court found the trial evidence deficient because it primarily consisted of purchase, replacement, or rental price rather than market-value evidence for the items missing or returned. Consequently, the $2,000 actual-damages award was unsupported by the record.

  5. Admissibility of Deposition Colloquy from Prior Lawsuit:

    The Court noted the trial court admitted a colloquy from a discovery deposition in a different lawsuit to prove agency between appellant and the repossessor contractor. The Supreme Court observed that from the record it was impossible to determine the precise issues in the prior lawsuit and that, on remand, parties could modify or amend pleadings and raise additional issues. The opinion also noted the agency issue was not raised on appeal. The Court did not definitively decide whether admission was erroneous but emphasized remediation by pleadings on remand.

  6. Punitive Damages — Submissibility and Jury Instruction:

    The Court discussed exemplary damages authorities and concluded that exemplary damages are appropriate where there is an intentional violation of another's property rights. Given the permissibly inferable intentional withholding of personalty after demand, the retention of the items created a submissible factual question on punitive damages. However, the Court held the specific punitive-damages instruction given (AMI Civil 2d 2217) was formulated for negligence cases and was not designed to be used without modification in intentional-tort cases like conversion; thus its use was improper here.

Holding and Implications

Final Disposition: The judgment of the trial court is REVERSED AND REMANDED.

Holding (Core Rulings)

  • The repossession of the trucks, carried out without a breach of the peace, did not constitute conversion of the vehicles.
  • The question whether appellant's retention of personal property found in the repossessed trucks after demand for return constituted conversion was properly submissible to the jury based on the evidence viewed in the light most favorable to appellees.
  • The jury's award of $2,000 in actual damages was unsupported because plaintiffs failed to present market-value evidence for the converted items, which is the proper measure of damages for conversion.
  • Punitive damages were a submissible issue because intentional withholding after demand could be inferred, but the punitive damages instruction (AMI Civil 2d 2217) was inappropriate without modification, as it was formulated for negligence cases rather than intentional torts.

Practical Consequences and Directions on Remand

  • The case must be remanded for further proceedings consistent with the Court's rulings: conversion may proceed only as to the personal property retained, not the repossessed vehicles themselves.
  • On remand, the parties may amend or modify pleadings and raise additional issues as permitted by precedent cited by the Court (Sanders v. Malden; Loyd v. Southwest Ark. Utilities Corp.).
  • Any new trial or further proceedings must apply the correct legal standards: market value is the correct measure for actual damages for conversion, and punitive-damages instructions must be appropriate to intentional-tort contexts rather than using negligence-formulated language without modification.

Note: This summary is based solely on the text of the provided opinion and does not add facts or inferences beyond those expressly stated in that opinion.

FORD MOTOR CREDIT COMPANY v. George HERRING and Cecil GEISLER

1. SECURED TRANSACTIONS — REPOSSESSION OF COLLATERAL — PERMISSIBLE WHERE NO BREACH OF PEACE. — A secured party has, on default, the right to take possession of the collateral if such can be done without a breach of the peace. 2. TORTS — CONVERSION, ELEMENTS OF. — Conversion is the exercise of dominion over property in violation of the rights of the owner or person entitled to possession," or the wrongful taking or dominion over one's property in subversion and denial of his rights irrespective of whether there was a demand and refusal for its return. 3. TORTS — CONVERSION — EFFECT OF CONTRACTUAL PROVISIONS. — Where a contract for financing the sale of two trucks specifically provided that "any personalty in or attached to the property when repossessed may be held by the seller without liability," the appellant credit company was authorized to hold the personalty, but only for so long as was necessary to secure possession of the trucks. 4. APPEAL ERROR — REVIEW OF EVIDENCE. — On appeal, the evidence must be viewed in the light most favorable to the appellee. 5. TORTS — CONVERSION — WRONGFUL RETENTION OF PERSONALTY. — Although the contract authorized appellant to seize any personalty in the trucks at the time of repossession, he is not absolutely shielded from liability by the terms of the contract when it can reasonably be inferred that appellant intentionally withheld the property after demand had been made for its return. 6. TORTS — CONVERSION — MEASURE OF DAMAGES. — The proper measure of damages for the conversion of personalty is its market value at the time and place of the conversion, not its purchase, rental, or replacement cost, and the fact that it was eventually returned to its owners does not bar recovery of damages for its conversion, but may mitigate those damages. 7. PLEADING — MODIFICATION OR AMENDMENT UPON REMAND. — Where, on appeal, a cause is remanded for a new trial, the parties may modify or amend their pleadings and raise additional issues upon remand. 8. DAMAGES — EXEMPLARY DAMAGES — WHERE PROPER. — Exemplary damages are proper where there is an intentional violation of another's right to his property. 9. TORTS — CONVERSION PUNITIVE DAMAGES FOR WRONGFUL RETENTION. — Where appellant obtained possession of the personal items in trucks it repossessed under authority of its contract with the appellees (the purchasers of the trucks), but refused to return the items after demand by appellees, held, the retention of the personalty after demand for its return constituted a submissible fact question on the issue of punitive damages. 10. JURY INSTRUCTIONS — IMPROPER USE. — Jury instructions formulated for use in negligence cases were not designed to be used, without modification, in a case of intentional tort.

FRANK HOLT, Justice.

The appellees were purchasers of two pickup trucks which were financed under retail installment contracts with the appellant. The contracts authorized repossession of the vehicles upon the buyer's default. When each appellee became delinquent on his monthly payments, appellant repossessed the trucks in which various items of personal property were stored. Appellant brings this appeal from a judgment awarding appellees $2,000 in actual damages and $17,000 in punitive damages.

Appellant first contends that the trial court erred in submitting the issue of conversion to the jury since no element of force, threats of force, or breach of the peace accompanied repossession. In pre-code cases, we have sustained a finding of conversion only where force, or threats of force, or risk of invoking violence, accompanied the repossession. Manhattan Credit Co., Inc. v. Brewer, 232 Ark. 976, 341 S.W.2d 765 (1961); Kensinger Acceptance Corp. v. Davis, 223 Ark. 942, 269 S.W.2d 792 (1954).

Ark. Stat. Ann. 85-9-503 (Supp. 1977) provides in pertinent part of the code:

Unless otherwise agreed, a secured party has on default the right to take possession of the collateral. In taking possession, a secured party may proceed without judicial process if this can be done without breach of the peace or may proceed by action.

Here the contract recited that upon default by the appellee debtors, appellant creditor could invoke the remedies of the U.C.C. "including the right to repossess the property wherever the same may be found with free right of entry." Clearly the appellant had the contractual and statutory authority to repossess the vehicles. Teeter Motor Co., Inc. v. First National Bank of Hot Springs, 260 Ark. 764, 543 S.W.2d 938 (1976). In the case at bar there was no personal confrontation or contract between the repossession contractor and either of the appellees when the vehicles were repossessed. There was open access to the vehicles parked in a private driveway or adjacent to the houses. Both were removed during the evening hours without entry into, or damages ages to, any structure. Within a few minutes following repossession of Herring's truck, he, in a telephone conversation with the repossessor, admittedly demanded only the right to retrieve his personal items, stating "they [Ford] can have the truck." The next day he telephoned appellant Ford asking permission to "pick up" his payments which was refused. Appellee Geisler's only contact with the appellant was in this same telephone conversation the next day following the repossession. In Teeter, supra, we upheld the right of the seller to repossess- the vehicle upon default if it could be done without a breach of the peace as provided in 85-9-503. Here the evidence is clearly insufficient to establish a fact question that the repossession of the trucks constituted a conversion.

Even though the repossession of the vehicles was proper, the question of whether appellant's subsequent retention of certain personal property stored in the trucks constituted conversion was properly submitted to the jury. Conversion is the "exercise of dominion over the property in violation of the rights of the owner or person entitled to possession." Thomas v. Westbrook, 206 Ark. 841, 177 S.W.2d 931 (1944). We have also defined conversion as the wrongful taking or dominion over one's property in subversion and denial of his rights irrespective of whether there was a demand and refusal for its return. Barnett Bros. Merc. Co. v. Jarrett, 133 Ark. 173, 202 S.W. 474 (1918); Plunkett-Jarrell Grocery Co., et al v. Terry, 222 Ark. 784, 263 S.W.2d 229 (1953); Meyers v. Meyers, 214 Ark. 273, 216 S.W.2d 54 (1948); and Westark Production Credit Association v. Shouse, 227 Ark. 1141, 305 S.W.2d 127 (1957). Here, however, the contract specifically provided that "any personalty in or attached to the property when repossessed may be held by the seller without liability

The property consisted mostly of various pieces of concrete equipment and tools jointly owned and stored in the trucks at the time of the repossession. The appellees were partners in the concrete business. The trucks and equipment were used in their means of livelihood. Although the appellant was authorized under the contract to hold the personal property, it could do so only as long as it was necessary to secure possession of the trucks. Jones v. General Motors Acceptance Corp. 565 P.2d 9 (Okla. 1977); General Motors Acceptance Corp. v. Vincent, 183 Okla. 547, 83 P.2d 539 (1938); and Ford Motor Credit Co. v. Waters, 273 So.2d 96 (Fla.App. 1973).

As previously indicated, appellee Herring telephoned the repossession contractor shortly following the repossession and advised him that he "needed my [his] personal effects and tools out of my [his] trucks." Herring requested that the contractor remain a few minutes at the local restaurant where the truck was parked until he, Herring, could arrive to discuss the return of the tools and equipment to him. Herring arrived approximately a minute later, and the truck and tools were gone. The morning after the repossession appellant's employee, in a telephone conversation, denied any knowledge of the tools. A written report by the repossession contractor, dated two days after the repossession, advised appellant about the existence of the personalty in the repossessed trucks. Appellees filed a lawsuit four days after repossession. Appellant released possession of the property to appellees about two months later through arrangements by their attorney. Appellee Herring testified that he and Geisler had to abandon a project due to appellant's retention of their jointly owned concrete equipment and tools. There is no evidence that the retention of the personal property, following a demand for its return, was necessary to the repossession of the trucks. In viewing the evidence most favorable to the appellees, as we must do on appeal, we hold that appellant is not absolutely shielded from liability by the contract terms when it can reasonably be inferred, as here, that it intentionally withheld the property after a demand had been made for it.

Appellant next asserts that there was insufficient evidence to support the jury's award of $2,000 actual damages for the conversion of the trucks and personal property. We agree. As previously indicated, there was a submissible issue only as to conversion of the personalty. Appellant correctly states that the proper measure of damages for the conversion of the personal items was their market value at the time and place of the conversion. U.S. v. Bartholomew, 137 F. Supp. 700 (D.C. Ark. 1956); Hardin v. Marshall, 176 Ark. 977, 5 S.W.2d 325 (1928); American Soda Fountain Co. v. Futrall, 73 Ark. 464, 84 S.W. 505 (1905); and Parks v. Thomas, 138 Ark. 70, 210 S.W. 141 (1919). The fact that the majority of the items were eventually returned to the appellees does not bar recovery of damages for their conversion but may mitigate the damages. Norman v. Roberts, 29 Ark. 365 (1874); and Plummer v. Reeves, 83 Ark. 10, 102 S.W. 376 (1907). Here there was no evidence as to the value of various missing items. As to the items retrieved by appellees, the evidence, as to most items, was primarily based upon the purchase, replacement and rental price. Obviously, the evidence was deficient and did not comport with the recited standard.

Appellant next contends that the court erred in allowing the appellees to read to the jury a colloquy between counsel which took place during a discovery deposition in a different lawsuit between the parties to this action. The court admitted this verbal exchange between counsel as evidence of agency between appellant and its repossessor contractor. From the record before us, it is impossible to determine the precise issues in the prior lawsuit even though the same parties, lawfirms and incidents were involved. It is argued, however, by the appellees that the conversion of the personalty was in issue there and the same issue is presented here plus conversion of the trucks. Therefore, say appellees, the exchange between the parties' counsel in the discovery proceeding is admissible. Even so, the parties, however, may modify or amend their pleadings resulting in additional issues upon a remand. Sanders v. Malden, 214 Ark. 523, 217 S.W.2d 357 (1949); and Loyd v. Southwest Ark. Utilities Corp., 264 Ark. 818, 580 S.W.2d 935 (1979). Furthermore, the issue of agency was not raised on this appeal.

Appellant next asserts that the court erred in instructing the jury regarding punitive damages since there was no evidence of force, oppression, or intimidation in connection with the repossession. In Clark et al v. Bales, 15 Ark. 452 (1854), we said the jury "had the right to take into consideration . . . . the vexation to [plaintiffs] feeling[s], the inconvenience to him arising from the deprivation of his property [hogs], as well as its value, and then to add something by way of `smart money,' or exemplary damages." Exemplary damages are proper where there is an intentional violation of another's right to his property. Kelly v. McDonald, 39 Ark. 387 (1882); Ft. Smith I. S. Mills v. So. R.B.P. Co., 139 Ark. 101, 213 S.W. 21 (1919); and Parks v. Thomas, supra. In view of the evidence previously recited, we hold that, although the taking was proper, the retention of the personalty after demand for its return constituted a submissible fact question on the issue of punitive damages.

Appellant's last assertion for reversal is that AMI Civil 2d 2217 does not accurately state the law on punitive damages in a conversion action and, therefore, the court erred in reciting this instruction to the jury. That instruction provides in pertinent part:

Punitive damages may be imposed to punish a wrongdoer and to deter others from similar conduct. Before you can impose punitive damages you must find that . . . knew or ought to have known, in the light of the surrounding circumstances, that his conduct would naturally or probably result in injury and that he continued such conduct [with malice or] in reckless disregard of the consequences from which malice may be inferred.

We agree with the appellant that this instruction was formulated for use in negligence cases. See Committee Comment AMI Civil 2d XXIX. It was not designed, as here, without modification to apply in a case of an intentional tort; i.e., conversion.

Reversed and remanded.

HARRIS, C.J., not participating.

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FORD MOTOR CREDIT CO. v. HERRING
(Nov 26, 1979)