McQuillan v. Mercedes-Benz Credit Corp.

Annotate this Case
Gary D. McQUILLAN and America's Truckaway
Systems, Inc. v. MERCEDES-BENZ CREDIT
CORPORATION

97-209                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered January 29, 1998


1.   Conversion -- term defined. -- Conversion is a common-law tort
     action for the wrongful possession or disposition of another's
     property.

2.   Conversion -- proof needed to establish liability for. -- 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; 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.

3.   Conversion -- requisite intent. -- 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. 

4.   Conversion -- unqualified refusal to surrender -- insistence upon charges.
     -- An unqualified refusal to surrender, stating no reason, or
     one stating the wrong reason, is a conversion, even where
     there are unstated justifications; a party's insistence upon
     charges or other conditions of delivery that he has no right
     to impose is conversion.

5.   Trial -- bench trial -- standard of review. -- In bench trials, the
     standard of review on appeal is whether the trial judge's
     findings were clearly erroneous or clearly against the
     preponderance of the evidence; the appellate court views the
     evidence in a light most favorable to the appellee, resolving
     all inferences in favor of the appellee; disputed facts and
     determinations of the credibility of witnesses are within the
     province of the factfinder.

6.   Conversion -- trial court's findings that conversion had occurred not
     clearly erroneous. -- Where the evidence showed and the trial
     court found that appellants had not established that they had
     acquired a valid carrier's lien because they had refused to
     surrender possession of two trucks to appellee, had placed the
     trucks in "secret storage," and had insisted upon payment of
     charges over and above those to which they would have been
     entitled, and where the testimony of appellant showed that he
     had instructed his contracted driver not to release appellee's
     two trucks until he had received payment for all of the
     invoices and that he had never extended an offer to return the
     trucks in exchange for transportation and storage fees, the
     supreme court could not say that the trial court's findings on
     the conversion issue were clearly erroneous.

7.   Conversion -- measure of damages -- circumstances may require different
     standard. -- Ordinarily, the proper measure of damages for
     conversion of property is the market value of the property at
     the time and place of its conversion; the market value of the
     property is not, however, the only measure of the damages
     recoverable in an action for conversion; the circumstances of
     the case may require a different standard, including a measure
     of the expenses incurred as a result of the conversion.

8.   Conversion -- mitigation of damages -- evidence of return of property. --
     The fact that converted items were eventually returned to the
     owners does not necessarily bar recovery of damages for their
     conversion, but may mitigate the damages; generally, the law
     permits evidence of the return of the property to its owner in
     mitigation of damages only when certain circumstances are
     present: (1) the owner must have accepted the return of the
     goods; (2) the original conversion occurred by mistake; and
     (3) the return of the goods occurred promptly after the
     discovery of the mistake and before the commencement of the
     action for conversion.

9.   Damages -- compensatory damages for costs incurred in recovery of converted
     property -- trial court did not err in awarding. -- Where appellee
     eventually received possession of the converted property, and
     the trial court then awarded damages to appellee in the exact
     amount of the costs that a witness stated were expended by
     appellee in its attempts to recover possession of the two
     trucks, the supreme court could not say that the trial court
     erred in awarding such compensatory damages; the supreme court
     has acknowledged the permissibility of awarding damages in an
     action for conversion based upon the expenses incurred as a
     result of the conversion. 

10.  Damages -- award for legal fees incurred in recovery of converted property
     -- trail court did not err in awarding. -- Where the action was one
     for replevin and, alternatively, for conversion of two trucks,
     the legal fees incurred by appellee in its attempts to recover
     possession of the converted property were proper as damages
     under the circumstances of the case; the award of such damages
     is supported by Ark. Code Ann.  18-60-820(a)(1987), which
     provides that "[i]n an action to recover the possession of
     personal property, judgment for the plaintiff may be for the
     delivery of the property, ... and damages for the detention";
     the supreme court affirmed that portion of the damages awarded
     to appellee.   

11.  Damages -- separate award for attorney's fees for expenses incurred in
     prosecution of suit reversed -- no statutory provision for attorney's fees
     in tort actions. -- The supreme court reversed the trial court's
     separate award of attorney's fees where it was apparent that
     the amount was awarded for the expenses incurred in the
     prosecution of appellee's suit; the general rule in Arkansas
     is that attorney's fees incurred in the pursuit of civil
     actions are not awarded unless expressly provided for by
     statute or rule; Ark. Code Ann.  16-22-308 (Repl. 1994),
     which provides for attorney's fees in specific civil actions,
     does not allow attorney's fees in tort actions.

12.  Damages -- award affirmed as modified. -- Where the trial court
     awarded damages to appellee separately as attorney's fees for
     action taken in pursuit of the civil claims rather than as
     part of the costs incurred by appellee in the recovery of the
     converted trucks, the trial court erred because attorney's
     fees incurred generally in the prosecution of replevin and
     conversion actions are not expressly provided for by statute;
     accordingly, the supreme court affirmed the trial court's
     award of damages but modified the judgment to reflect that
     appellants are not required to pay the portion of attorney's
     fees resulting from the prosecution of the litigation.


     Appeal from Carroll Circuit Court, Western District; David S.
Clinger, Judge; affirmed as modified.
     Zurborg & Spaulding, P.A., by: Brian L. Spaulding, for
appellants.
     Burke & Eldridge, P.A., by: John R. Eldridge, III, for
appellee.

     Donald L. 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.  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 those to which they would have
been entitled, by demanding payment of all three invoices, despite
the fact that only one of the invoices pertained to the
transportation fees for the two trucks at issue. 
     In bench trials, the standard of review on appeal is whether
the trial judge's findings were clearly erroneous or clearly
against the preponderance of the evidence.  Schueck v. Burris, 330
Ark. 780, ___ S.W.2d ___ (1997); ARCP Rule 52(a).  We view the
evidence in a light most favorable to the appellee, resolving all
inferences in favor of the appellee.  France, 292 Ark. 219, 729 S.W.2d 161.  Disputed facts and determinations of the credibility
of witnesses are within the province of the factfinder.  Id.  Based
upon the evidence presented below and the testimony of McQuillan,
we cannot say that the trial court's findings on this issue were
clearly erroneous.
                          II.  Damages
     For their second point for reversal, Appellants argue that the
trial court erred in its award and assessment of damages to MBCC. 
Specifically, they contend that there was an absence of proof as to
the market value of the two trucks, and that the trial court erred
in awarding attorney's fees, as they contend there is no authority
for awarding such fees in a conversion case.  
     MBCC contends that it was entitled to compensatory damages
caused by Appellants' wrongful refusal to surrender the trucks, and
that it was due to such wrongful refusal that MBCC incurred
attorney's fees in the amount of $13,109.52.  MBCC contends further
that the testimony of Andrew Kanel established that MBCC had paid
$4,000.00 in storage charges, $400.00 for hauling the trucks from
Cerni Truck Center, and $13,109.52 for attorney's fees incurred in
the attempt to recover possession of the trucks.  MBCC asserts that
the attorney's fees claimed were only those incurred as a direct
result of its attempts to secure possession of the trucks, and that
no such fees were claimed subsequent to the time that possession of
the trucks was obtained. 
     Ordinarily, the proper measure of damages for conversion of
property is the market value of the property at the time and place
of its conversion.  Elliott v. Hurst, 307 Ark. 134, 817 S.W.2d 877
(1991); Ford Motor Credit Co. v. Herring, 267 Ark. 201, 589 S.W.2d 584 (1979).  The market value of the property is not, however, the
only measure of the damages recoverable in an action for
conversion; the circumstances of the case may require a different
standard, including a measure of the expenses incurred as a result
of the conversion.  First Nat'l Bank of Brinkley, Ark. v. Frey, 282
Ark. 339, 668 S.W.2d 533 (1984).  Moreover, the fact that the items
were eventually returned to the owners does not necessarily bar
recovery of damages for their conversion, but may mitigate the
damages.  Ford Motor Credit Co., 267 Ark. 201, 589 S.W.2d 584. 
Generally, the law permits evidence of the return of the property
to its owner in mitigation of damages only when certain
circumstances are present:  (1) that the owner must have accepted
the return of the goods; (2) that the original conversion occurred
by mistake; and (3) that the return of the goods occurred promptly
after the discovery of the mistake and before the commencement of
the action for conversion.  McKenzie v. Tom Gibson Ford, Inc., 295
Ark. 326, 749 S.W.2d 653 (1988). 
     In the case at hand, MBCC did eventually receive possession of
the converted property.  The trial court then awarded damages to
MBCC in the amount of $17,509.52, the exact amount of the costs
that Kanel stated were expended by MBCC in its attempts to recover
possession of the two trucks.  As such, we cannot say that the
trial court erred in awarding such compensatory damages, as this
court has acknowledged the permissibility of awarding damages in an
action for conversion based upon the expenses incurred as a result
of the conversion.  First Nat'l Bank of Brinkley, 282 Ark. 339, 668 S.W.2d 533.  
     Furthermore, we cannot say that the award of damages for legal
fees incurred by MBCC in its attempts to recover the two trucks was
erroneous.  This conclusion is supported by the decisions of other
jurisdictions.  In Fulks v. Fulks, 121 N.E.2d 180 (Ohio Ct. App.
1953), the Ohio Court of Appeals held that although attorney's fees
incurred in the prosecution of a conversion action were not
recoverable, those attorney's fees spent in recovering possession
of the converted property were properly awarded as special damages
by the trial court.  Subsequently, that same court explained the
decision in Fulks, holding that there was a distinction between
those attorney's fees expended in an effort to recover the
converted property and those expended generally in the prosecution
of the conversion action.  Cincinnati Ins. Co. v. Diebold, Inc.,
581 N.E.2d 566 (Ohio Ct. App. 1989).  That court went on to hold
that where the action is one to recover money damages for the
wrongful conversion of the property, as opposed to an action to
recover the possession of the property, attorney's fees are not
proper damages.  Id.  Similarly, the Texas Court of Civil Appeals
has held that the measure of damages for the conversion of personal
property may include special damages "resulting from the
withholding of the property or properly incurred by the owner in
the pursuit of it."  Reed v. White, Weld & Co., Inc., 571 S.W.2d 395, 397 (Tex. Civ. App. 1978).  We find these holdings persuasive
of the issue involved in this case.
     Here, the action was one for replevin and, alternatively, for
conversion of the two trucks.  As such, the expenses incurred by
MBCC in its attempts to recover possession of the trucks are proper
as damages under the circumstances of this case.  We see no reason
to distinguish the award of such expenses based upon whether the
actions taken to secure the return of the property were performed
by attorneys or persons of other occupations, such as repossession
agents.  Additionally, the award of such damages is supported by
Ark. Code Ann.  18-60-820(a) (1987), which provides that "[i]n an
action to recover the possession of personal property, judgment for
the plaintiff may be for the delivery of the property, . . . and
damages for the detention."  (Emphasis added.)  See also France,
292 Ark. 219, 729 S.W.2d 161.  We thus affirm as to that portion of
the damages awarded to MBCC.   
     As for the issue of the separate award of $1,000.00 attorney's
fees, we must reverse the trial court's ruling, as it is apparent
that this amount was awarded for the expenses incurred in the
prosecution of MBCC's suit.  The judgment entered below reflects
that MBCC was awarded $17,509.52 as costs expended and an
additional award of $1,000.00 in attorney's fees.  As such, the
separate award of $1,000.00 cannot stand.  The general rule in
Arkansas is that attorney's fees incurred in the pursuit of civil
actions are not awarded unless expressly provided for by statute or
rule.  Security Pac. Housing Servs., Inc. v. Friddle, 315 Ark. 178,
866 S.W.2d 375 (1993); Chrisco v. Sun Indus., Inc., 304 Ark. 227,
800 S.W.2d 717 (1990).  Arkansas Code Annotated  16-22-308 (Repl.
1994), which provides for attorney's fees in specific civil
actions, does not allow attorney's fees in tort actions.  Friddle,
315 Ark. 178, 866 S.W.2d 375; Stein v. Lukas, 308 Ark. 74, 823 S.W.2d 832 (1992).
     Here, the trial court awarded $1,000.00 to MBCC separately as
attorney's fees for action taken in pursuit of the civil claims,
rather than as part of the costs incurred by MBCC in the recovery
of the trucks.  Thus, the trial court erred in awarding that sum to
MBCC, as attorney's fees incurred generally in the prosecution of
replevin and conversion actions are not expressly provided for by
statute.  Accordingly, we affirm the trial court's award of damages
in the amount of $17,509.52, but we modify the judgment to reflect
that Appellants are not required to pay the $1,000.00 in attorney's
fees resulting from the prosecution of the current litigation.
     Affirmed as modified.