Star Bank, NA v. Laker

637 N.E.2d 805 (1994)

STAR BANK, N.A. Southeastern Indiana and Greg King, Appellants, v. Lendo LAKER, Appellee.

No. 69S01-9407-CV-621.

Supreme Court of Indiana.

July 11, 1994.

*806 Douglas R. Denmure, Aurora, for appellants.

John D. Gay, Gay and McCombs, Versailles, for appellee.

GIVAN, Justice.

Laker brought suit against the Bank alleging the cause of various injuries to real and personal property when they undertook to remove certain farm machinery from his premises because of Laker's default on a loan for which the machinery was security. A jury trial resulted in a verdict in Laker's favor of $225 in compensatory damages and $7,000 in punitive damages.

The facts are: Laker obtained a loan from Star Bank and pledged as collateral two tractors, a corn picker, and a disc. When Laker defaulted on the loan, the Bank sent its agents and employees to Laker's home to repossess the machinery. In order to gain access to one of the tractors, it was necessary for the agents of the Bank to roll Laker's truck away from the entrance of a barn. The act of moving the truck caused ruts to be left in Laker's property.

In order to reach the other tractor, it was necessary for the Bank's agents to move two of Laker's horses. Laker alleged that one of the horses was negligently tied near some fresh alfalfa hay where she ate a sufficient quantity to induce colic which in turn caused her to thrash about until she permanently injured one of her hips.

In attempting to repossess the disc, the agents of the Bank mistook a neighbor's disc, which Laker had borrowed, as the disc on which they had a lien. The disc was parked in the barn lot and had been so parked for a period of time, which caused the disc to sink into the ground. When the Bank's agents pulled the disc from the ground, they broke at least one of the discs. (The Bank claims they only broke one, Laker claims they broke *807 seven discs.) Laker testified that it cost $347.03 to repair the disc.

He also testified that he had purchased the horse for $1,750, that he had found a horse to replace the injured horse for $2,500. He further testified that he would not have taken $4,000 for the horse that was injured but that following her injury she could only be sold for dog food.

At the time the Bank repossessed the tractors, one of the tractors had its spark plugs removed. The Bank took possession of the tractor without replacing the spark plugs, stored it in an open lot where it remained for some three months with the sparkplug removed. Laker testified that as a result the engine was filled with water which froze, damaging the engine. He testified that he received an estimate to overhaul the tractor engine for a total of $2,370.88.

The Court of Appeals correctly observes in Star Bank, N.A., v. Laker (1993), Ind. App., 626 N.E.2d 466 that in none of these instances did Laker establish the amount of damages in a proper manner. As observed by the Court of Appeals, the proper measure of damages in an instance of this sort is the fair market value of the tractor, the horse, or the disc immediately before the damage and the fair market value of that object immediately after the damage. It is abundantly clear from the evidence that in each instance, Laker in fact did suffer damage at the hands of the agents of the Bank. However, in each instance the jury was left to guess at what the actual damage was.

The Court of Appeals reversed the award of actual damages because of this lack of proof. However, this Court has stated on several occasions that an award of nominal damages may support an award of punitive damages. Arlington State Bank v. Colvin (1989), Ind. App., 545 N.E.2d 572, citing Hibschman Pontiac, Inc. v. Batchelor (1977), 266 Ind. 310, 362 N.E.2d 845.

When one views the evidence in this record, it because obvious that the jury might well have guessed Laker's damages to be far in excess of the $225 which they allowed. However, being uninformed as to the actual amount of damages, they chose to award Laker a nominal sum of $225 for the actual damage he suffered. Having done so, it was entirely proper for the jury to then consider punitive damages. Their finding in that regard of $7,000 we find in keeping with the evidence in this case from which the jury was justified in finding that the Bank's agents acted in an unreasonable and unnecessarily damaging manner in removing the machinery from Laker's property.

The record further shows that following the taking of the property by the Bank, Laker paid the Bank the entire amount of money owed in order to redeem his machinery. However, the Bank refused to release the machinery unless Laker would execute a release holding them harmless for any damage they did in retrieving the machinery. This Laker refused to do.

The Bank's agents had obtained the machinery on December 30, 1991. It was not until after Laker had brought this cause of action against the Bank and on the day of a prejudgment possession hearing held on February 7, 1992 that the last of Laker's property was returned to him by the Bank. This action alone by the Bank is full justification for the jury's award of punitive damages.

The judgment of the trial court is affirmed.

DICKSON and SULLIVAN, JJ., concur.

DeBRULER, J., concurs and dissents with separate opinion in which SHEPARD, C.J., concurs.

DeBRULER, Justice, concurring and dissenting.

The evidence was insufficient to support the conclusion of a reasonable trier of fact, by a preponderance of the evidence, that the bank committed a tort when repossessing this equipment. The equipment was collateral for a loan, and the bank, as a secured party, was exercising its right to take possession of it, because the loan was in default. Such a repossession of collateral is lawful so long as there is no breach of the peace. I.C. § 26-1-9-503 (West Supp. 1993); Van Bibber v. Norris (1981), 275 Ind. 555, 419 N.E.2d 115. There was no breach of the peace here.

*808 Furthermore, and even assuming arguendo that the evidence was sufficient to support the conclusion of a reasonable trier of fact, by a preponderance of the evidence, that the bank committed a tort in holding onto the repossessed equipment after the borrower paid off the loan while the bank attempted to negotiate a release with borrower and his lawyer, the evidence was nevertheless insufficient to warrant the conclusion of a reasonable trier of fact by clear and convincing evidence that the bank in so doing acted with malice, fraud, gross negligence, or oppressiveness. Erie Insurance Co. v. Hickman (1993), Ind., 622 N.E.2d 515. Punitive damages are therefore unwarranted.

Borrower made repeated complaints of damage to the equipment caused at repossession. The equipment itself was old and in disrepair. Borrower had not made the first three payments due on the obligation and was persistently tardy in paying. Borrower did not respond to repeated requests by the bank to turn over the equipment. Yet borrower was able to pay off the loan within days after receiving notice that the equipment would be sold. When first asked to sign a release, borrower said he did not want to sign until his lawyer read it and advised him. The bank employee then went with borrower to the lawyer's office, where the two awaited the return of the lawyer. Borrower left before the lawyer appeared and did not return. It was the dead of winter.

The conduct of the bank, while perhaps tortious, does not under these circumstances constitute malice or oppressiveness.

The judgment for compensatory damages should be affirmed and the punitive damages set aside.

SHEPARD, C.J., concurs.