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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe Marion Superior Court erred in calculating damages awarded to a vehicle-financing company but correctly determined an auto seller wasn’t guilty of conversion, the Indiana Court of Appeals has ruled.
In 2017, Metro Motors and Herman Jeffrey Baker executed an agreement whereby Automotive Finance Corporation would finance Metro to enable the business to purchase vehicles to sell. In addition, Baker executed a personal guaranty for “all amounts due and owing to AFC” under the terms of the agreement.
The agreement provided that, upon the sale of any vehicle financed by AFC, Metro would “hold the amount received from the disposition of inventory in trust for the benefit of [AFC]” and would “remit the proceeds of [the] sale of any AFC-financed vehicle within forty-eight (48) hours of disposition.”
In early 2018, AFC “received numerous returned checks from Metro.” That April, Michael Flanagan, a branch manager with AFC, conducted an audit at Metro and discovered it had sold eight vehicles “out of trust,” meaning Metro had not remitted the proceeds from the sale of those vehicles to AFC as provided under the agreement.
Additional audits revealed Metro had sold other vehicles out of trust. Metro promised to make the payments to AFC, and AFC gave Metro additional time to pay, but Metro was unable to make the payments.
On May 28, Flanagan returned to the Metro lot “to conduct a lot audit and request vehicle keys, intending to amicably secure possession of AFC’s collateral” under the terms of the agreement. But Metro refused to give Flanagan the keys.
Flanagan also discovered that an additional six vehicles had been sold out of trust, and four vehicles financed by AFC were missing from the lot. Metro owed AFC a total of $78,996.46 for those 10 vehicles.
On May 29, AFC repossessed 15 AFC-financed vehicles from Metro’s lot and later sold them at auction for a total of $64,651.39. AFC applied that amount to the balance Metro owed for each AFC-financed vehicle, leaving a deficiency balance of $123,666.66.
That December, AFC filed a complaint against Metro alleging breach of contract and conversion, seeking, in part, treble damages under the Crime Victim’s Relief Act, Indiana Code § 34-24-3-1.
Following a bench trial, the trial court entered judgment in favor of AFC on its breach of contract claim in the amount of $202,663.12 plus 15% interest and attorney fees, for a total judgment of $322,315.97. The trial court also found Metro did not commit conversion.
Metro filed a motion to correct error, which the trial court denied. An appeal and a cross-appeal ensued.
The Court of Appeals found the trial court double counted when it awarded damages, reversing and sending instructions to the trial court on remand.
“In calculating the damages award, the trial court double-counted the $78,996.46 representing the amount owed for the ten SOT vehicles,” Judge Edward Najam wrote for the court. “Because it is undisputed that the trial court’s award of $202,663.122 includes the same $78,996.46 twice, we reverse and remand with instructions that the trial court enter judgment in favor of AFC in the amount of $123,666.66, plus 15% interest from May 30, 2018, and $32,618.75 in attorney’s fees and expenses.”
On cross-appeal, AFC contended the trial court clearly erred in concluding Metro had not committed conversion. The COA disagreed.
“At trial, AFC bore the burden to prove conversion and, as such, now appeals from a negative judgment,” Najam wrote. “… An assertion that a debtor knowingly failed to pay what he owed, without more, is insufficient as a matter of law to prove conversion.
“… Now, for the first time on appeal, and only in its reply brief, AFC argues that the proceeds from the sale of the SOT vehicles constituted special chattel because, under the agreement, the proceeds were ‘entrusted for a particular purpose,’” the judge continued. “But it is well settled that an argument presented for the first time on appeal is waived for purposes of appellate review.”
The case is CT102 LLC d/b/a Metro Motors and Herman Jeffrey Baker v. Automotive Finance Corporation, 21A-CC-904.
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