No. 91-542
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
MARLAN ENTRIKEN,
Plaintiff and Respondent,
v.
MOTOR COACH FEDERAL CREDIT UNION,
Defendant and Appellant.
APPEAL FROM: District Court of the Second Judicial District,
In and for the County of Silver Bow,
The Honorable James E. Purcell, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James M R ow, Murr.ay & Kaufman,
.
Kalispell, Montana
For Respondent:
David J. Wing, Attorney at Law,
Butte, Montana
EEC23 1992
Filed:
D Submitted on Briefs:
Decided:
March 12, 1992
December 23, 1992
7 c
C L E R K OF S U ; ~ ~ L P &
STATE OF I;SDit'I'ANA
CQUpq
'%.<..+-i*
#7\
/ $:bb
/
+J
Justice William E Hunt, Sr., delivered the opinion of the Court.
.
Plaintiff Marlan Entriken brought suit against defendant Motor
Coach Federal Credit Union in the District Court for the Second
Judicial District Court, Silver Bow County, alleging defendant
converted his truck. The District Court, sitting without a jury,
found that defendant's repossession of plaintiff's truck
constituted the tort of conversion. The District Court awarded
actual damages of $18,711.20, treble damages under the Montana
Unfair Trade Practices and Consumer Protection Act of 1973 [Montana
Consumer Protection Act] in the amount of $56,133.60, and attorney
fees of $9,540.00 for a total judgment of $84,384.80. From this
judgment, defendant appeals. We affirm in part and reverse in
part.
Appellant presented eight issues for review by this Court. We
phrase the issues before this Court as follows:
1. Did appellant's repossession of respondent's vehicle
constitute conversion?
2. Did the District Court err in determining respondent's
damages?
3. Did the District Court err in awarding respondent
attorney fees in the action below?
Respondent purchased a new 1989 GMC pickup truck in November
1988. At the time of the purchase, respondent was employed by
Greyhound Lines, Inc. (Greyhound) and lived in Oregon. Respondent
was a member of appellant Motor Coach Federal Credit Union in
Portland, Oregon, a credit union for Greyhound employees.
Respondent financed the purchase of the vehicle through appellant,
which paid to the automobile dealer the full purchase price of
$11,589.15. Respondent entered into a financing agreement with
appellant entitled a One-way Loan Disclosure and Agreement which
also incorporated a payoff of a prior loan in the amount of
$2,038.35. Additionally, respondent purchased credit disability
insurance with a premium of $1,057.80 from Life Assurance Company
of Pennsylvania (LACOP). The cost of the credit disability
insurance was added to the loan, making the total loan $14,685.30.
Appellant received ten percent of the insurance premium as a
commission, a fact not disclosed to respondent at the time of the
transaction. Appellant also obtained a security interest in the
vehicle. Respondent authorized his employer to deduct the sum of
$182 from each paycheck and apply this amount directly to his loan
with appellant.
Loan payments were deducted from respondent's paychecks until
February 13, 1989. On March 16, 1989, respondent suffered a
work-related injury. At this time, he was approximately two weeks
behind in his loan payments. The record does not indicate why the
agreed upon payroll deductions did not occur from February 13,
1989, until the date of injury. Respondent notified appellant that
he was no longer working and requested that the appropriate papers
be sent to him so that the disability insurance company could begin
making his required monthly payments during the period of his
disability.
Respondent received the necessary forms from appellant on
March 27, 1989, and promptly completed and returned them. Three
weeks later, on April 17, 1989, respondent received a notice from
appellant indicating that he was delinquent in payments and that
the credit disability insurer had not yet made any payments.
Respondent then contacted appellant and was told that the
delinquency notice was just a standard letter and that he should
not worry because the credit disability insurance payments would be
arriving shortly.
Respondent and his family then moved from Oregon to Columbia
Falls, Montana. Appellant was aware of this move. On May 24,
1989, appellant caused respondent's vehicle to be repossessed.
Respondent obtained legal counsel who sent a letter to appellant
demanding the return of the truck which was being held in Missoula
and informing appellant that the credit disability payments would
be arriving shortly and respondent was going to return to work in
June or July. Appellant refused to return the truck, demanded
payment in full on the loan, and had the truck transported to
Portland, Oregon. The costs of the repossession, storage, and
transportation of the truck were added to the outstanding balance
on the loan, as were certain legal fees later incurred in this
matter.
Shortly after repossession, LACOP, the credit disability
insurer, straightened out the problems with the claim and made the
first in a series of payments on respondent's behalf. Appellant
subsequently acknowledged receipt of $760.01 from LACOP, which was
applied to the outstanding balance of the loan. The District Court
found that the delay in the credit disability payments was
attributable to persons outside the control of respondent. At
about this same time, respondent returned to work, and despite the
fact that he no longer possessed the truck, three more payroll
deductions were applied to the loan, the last deduction occurring
on August 21, 1989. Without giving proper notice to respondent,
appellant sold respondent's truck for $8000 on August 28, 1989.
Appellant did not file an action for a deficiency judgment.
Following the sale of the vehicle, appellant continued to receive
loan payments which were being deducted from respondent's pay.
Appellant applied the last of these payments to the loan on
October 30, 1989. Respondent was again forced to leave work
because of the previously sustained injury. Someone then informed
LACOP that respondent was again not able to work and requested that
LACOP start making payments on behalf of respondent. The record
does not indicate that LACOP was advised that respondent no longer
had the truck. Over the next year, LACOP made payments totaling
$4,174.68 to appellant. In October 1990, LACOP was suspended from
doing business. However, on April 19, 1991, the Pennsylvania Life
and Health Guaranty Association sent appellant a payment on behalf
of respondent in the amount of $863.39 which was applied to the
loan.
Respondent brought suit alleging that appellant converted his
truck and that he had suffered damages as a result of the
conversion. The District Court awarded actual damages against
appellant in the amount of $18,711.20 based upon its finding that
the truck's fair market value at the time of conversion was $11,000
and that the rental value of the truck from the date of conversion
was $7,711.20. The District Court then added an additional award
of treble damages under the Montana Consumer Protection Act
amounting to $56,133.60 for a total damage award of $74,844.80.
The court also awarded respondent attorney fees in the amount of
$9,540. The final judgment entered against appellant was
$84,384.80. This appeal followed in which appellant contests both
the District Court's determination regarding conversion and the
appropriateness of the damage award.
I
Did appellant's repossession of respondent's vehicle
constitute conversion?
On appeal, this Court will not set aside the findings of fact
found by a district court sitting without a jury unless they are
clearly erroneous. Rule 52(a), M.R.Civ.P. Concerning our review
of conclusions of law, this Court will simply determine whether the
lower court's interpretation of the law was correct. We are not
bound by the trial court's conclusions and remain free to reach our
own. Schaub v. Vita Rich Dairy (1989), 236 Mont. 389, 770 P.2d
522.
The District Court applied Oregon law almost exclusively in
reaching its decision in this case. The only exception was the
application of the Montana Consumer Protection Act. The factual
situation in this case could potentially have given rise to a
6
conflict of laws question. However, since neither party has
objected, either at trial or on appeal, to the District Court's
selection of the law to be applied in this case, this Court will
not now address the issue sua sponte.
The District Court determined that appellant had no legal
right under the security agreement to repossess the truck and that
by repossessing the truck appellant committed the tort of
conversion. Appellant argues that pursuant to the terms of the
security agreement signed by both parties repossession was proper
for any one of several reasons. Appellant relies on several
arguments on appeal that were not properly placed before the
District Court for consideration and they will not be considered
for the first time on appeal. Weaver v. Law Firm of Graybill
(1990), 246 Mont. 175, 803 P.2d 1089. Appellant argued before the
District Court that repossession was proper because respondent
failed to maintain proper insurance on the truck as provided in the
agreement. Additionally, appellant argues that respondent's
delinquency in payments, both prior to and after respondent's work
related injury, justified the repossession.
INSURANCE: The security agreement provided that respondent
was to maintain proper insurance on the truck. Respondent failed
to do so. The Oregon Uniform Commercial Code at § 79.5030, in a
provision identical to § 30-9-503, MCA, provides that "[ulnless
otherwise agreed a secured party has on default the right to take
possession of the collateral." The District Court found that the
security agreement provided that appellant's remedy for failure to
insure the collateral was to purchase insurance for the truck and
add the cost of the insurance to the outstanding loan. While the
agreement might be subject to different interpretations, the
District Court's interpretation was not clearly erroneous. The
District Court also found that based on subsequent actions taken by
appellant, the right to rely on the failure of respondent to obtain
insurance as justification for repossession had been waived. In
light of our holding on this issue, this Court need not consider
these additional matters.
DELINOUENT PAYMENTS: The District Court determined that
respondent's delinquency in making payments on the loan did not
justify appellant's repossession of the truck. The court relied on
two Oregon cases which discussed a secured creditor's right to
repossess an automobile in situations in which the debtor had
purchased a credit life and disability policy as a part of the
sales transaction, as respondent had in this case. In Owens v.
Walt Johnson Lincoln Mercury, Inc. (Or. 1978), 574 P.2d 642, the
Oregon Supreme Court held that the right of repossession is
subordinated to collection of the payments due from the insurer if
the debtor is disabled within the terms of the policy.
Additionally, repossession may not occur prior to allowing the
debtor a fair opportunity to establish eligibility under the
coverage. Subsequently, in the case of Carter v United States
.
Nat'l Bank of Oregon (Or. App. 1989), 768 P.2d 930, the principle
in Owens was extended to cover situations in which the applicable
disability insurance would not fully cover the loan payments that
8
the debtor would otherwise be required to make. The District Court
properly concluded that pursuant to these two cases any post-injury
delinquency in payments could not serve as the basis for
repossession of the truck.
Appellant argues that Owens and Carter are not dispositive in
that respondent was several weeks delinquent prior to sustaining
the injury. However, the District Court specifically found that an
agent of appellant had communicated to respondent that this short
period of delinquency was not a concern and that the disability
payments would be arriving soon. This act, combined with others as
found by the District Court, is sufficient to waive any right
appellant may have had to immediately repossess the truck, prior to
respondent's work-related injury.
The findings of fact of the District Court relative to the
issue of conversion are not clearly erroneous and its conclusions
of law were not incorrect. We affirm the District Court's
determination that appellant converted respondent's truck.
Did the District Court err in determining respondent's
damages?
The District Court awarded actual damages in the amount of
$18,711.20 based on its finding that the truck's fair market value
at the time of conversion was $11,000 and the rental value of the
truck from the date of conversion was $7,711.20. The District
Court then awarded an additional $56,133.60 as treble damages under
the Montana Consumer Protection Act for a total damage award of
$74,844.80. Appellant alleges the District Court erred in
determining the value of the truck, in awarding damages for loss of
use of the truck, and in awarding treble damages in this situation.
VALUE OF THE TRUCK: The District Court determined that the
fair market value of the truck at the time of conversion was
$11,000 and awarded that amount to respondent. Appellant agrees
that the general rule is that the measure of damages for conversion
is the market value of the personal property. However, appellant
points out that in Hall v. Work (Or. 1960), 354 P.2d 837, 842-43,
the Oregon Supreme Court stated that:
The general rule for the measure of damages in an
action by a mortgagor against a mortgagee for a
conversion of the mortgaged property is the difference
between the market value of the property at the time of
the conversion and the amount of the mortgage debt.
This rule governing damages for the conversion of mortgaged
property provides that a mortgagor should only receive damages
equal to their interest in the converted property. This is only
equitable in that awarding a mortgagor damages in excess of their
interest in the mortgaged property would result in a windfall for
the mortgagor. However, this case differs from most conversion of
mortgaged property cases in that respondent's interest in the truck
continued to grow even after the conversion. The District Court
refused to reduce the $11,000 fair market value of the truck by the
amount outstanding on the loan. The court found that because
appellant had not sought a deficiency judgment and had continued to
receive payments on the truck it was not necessary to reduce the
value by the amount owed. We cannot say that this finding is
clearly erroneous.
LOSS OF USE DAMAGES: The District Court awarded loss of use
damages in the amount of $7,711.20. Appellant argues that absent
rare and unusual circumstances, loss of use damages are not
available in conversion actions under Oregon law. In m, the
Oregon Supreme Court stated that generally the appropriate measure
of damages to compensate for loss of use is the fair market value
of the property with interest. m, 354 P.2d at 842-43. However,
the Oregon Supreme Court has recognized that in some special
circumstances loss of use damages might be appropriate. In Singer
v. Pearson (Or. 1911), 115 P. 158, the Oregon Supreme Court stated:
"The measure of damages, therefore, in an action of
trover, unless plaintiff, by reason of the unlawful act
of the defendant, has suffered some special loss or
injury, which must be alleged, is the value of the
property at the time of the conversion, with interest
thereon .... II
Sinser, 115 P. at 158 (quoting Eldridge v. Hoefer, 77 P. 874).
This is consistent with the general measure of damages for
conversion, which is that:
In the ordinary case, the value of the use of
property converted is not regarded as a recoverable item
in an action for conversion. This rule generally applies
where the property is not returned to the plaintiff, who
instead recovers the value of the property .... Where
interest on the value of the property is awarded, the
value of the use of the property . . .may not be
recovered in addition thereto, since damages for the use
of the property are generally regarded as in lieu of
interest.
18 Am Jur 2d, Conversion § 118.
The Alaska Supreme Court, relying on the Oregon Supreme Court
decision in w, has explained the rationale for this rule,
stating that:
[Defendant] argues that [plaintiff], in electing to
pursue conversion, effectively abandoned the property to
the converter and proceeded to sue for its value.
Therefore, he argues since the conversion judgment has
been entered and satisfied ... the title is transferred
to her as of the date of conversion, and [plaintiff] can
obtain no damages for loss of use after that time. We
find this argument to be an accurate representation of
the law of conversion.
Rollins v. Leibold (Alaska 1973), 512 P.2d 937, 944-45 (citing Hall
v. Work (Or. 1960), 354 P.2d 837).
The District Court did not explain the basis for its award of
loss of use damages. On appeal respondent has not cited to any
legal authority in support of his contention that he is entitled to
loss of use damages in this situation. In this case, respondent
will receive the value of the truck plus interest from the date of
judgment . The circumstances of this case do not indicate
respondent is entitled to damages for loss of use in addition to
the value of the truck plus interest. The District Court's award
of damages for loss of use is reversed.
TREBLE DAMAGE AWARD: Appellant argues that the treble damage
award under the Montana Consumer Protection Act was inappropriate.
In the alternative, appellant argues that the District Court erred
in its computation of the treble damages. The treble damages
should have been three times the actual damages, not three times
the actual damages plus the actual damages. Respondent concedes
that appellant's contention concerning the computation of the
treble damages is correct, but argues that an award of treble
damages was appropriate.
Section 30-14-133, MCA, provides that in actions brought under
the Consumer Protection Act "[tlhe court may, in its discretion,
award up to three times the actual damages sustained . . . ." This
Court has recently held that the Montana Consumer Protection Act
applies to the lending and collecting of money in relation to
consumer loans. Baird v. Norwest Bank (Mont. 1992), Cause No.
91-224, decided December 4, 1992. The decision of the District
Court in this case to award treble damages was not an abuse of
discretion and is affirmed. Respondent's actual damages were
$11,000. Under the treble damage provision of 5 30-14-133, MCA,
the total damage award is $33,000, plus interest from the date of
judgment .
I11
Did the District Court err in awarding respondent attorney
fees in the action below?
The District Court awarded respondent attorney fees in the
amount of $9540. Pursuant to the Montana Consumer Protection Act,
9 30-14-133, MCA, respondent, as the prevailing party, is entitled
to attorney fees incurred at trial and in defending this appeal.
Additionally, the issue of attorney fees was raised and fully
discussed by the parties below. Appellant failed to object to the
award of attorney fees at that time. In fact, when respondent
called a witness to testify to the reasonableness of the attorney
fees appellant made such testimony unnecessary by stipulating to
the reasonableness of the fees. Appellant now argues for the first
time on appeal that respondent was not entitled to attorney fees.
Appellant's failure to make a timely objection when given the
opportunity waives the right to now object for the first time on
appeal and present an entirely different theory on the issue of
attorney fees. Clemans v. Martin (1986), 221 Mont. 483, 719 P.2d
787.
This matter is affirmed in part and reversed in part, and is
remanded to the District Court for entry of an order consistent
with this opinion.
We concur:
Chief Justice
Justices
14
~usticeFred J. Weber specially concurs as follows:
I concur in the majority opinion with the exception of the
reasoning set forth in the following paragraphs:
Part TI of the majority opinion determines that the decision
of the District court to award treble damages was not an abuse of
discretion and is affirmed. In the course of that discussion, the
majority makes the fallowing statement:
This Court has recently held that the Montana Consumer
Protection Act applies to the lending and collecting of
money in relation to consumer loans. ~ a i r dv. Norwest
Bank (Mont. 1992), Cause No. 91-224, decided December 4,
1992.
Apparently the reference to Baird is the establishment of a
rationale for the application of the Montana Consumer Protection
Act to the present case. I do not agree that reference is
appropriate as a basis for the opinion.
That was not the legal theory adopted by the District Court in
this case. In substance the District Court held that the purchase
of credit disability insurance by the plaintiff constituted a
purchase of services under the Act, and that the breach was a
violation of the Act. Following is a pertinent portion of the
District Court opinion:
.. - The weight of authority when considered in light of
the evidence presented supports the finding of fact and
conclusion of law that Credit Union in fact committed an
unfair and deceptive act in its safe of credit disability
insurance to plaintiff and subsequent repossession of the
security and continued acceptance of payments deducted
from plaintifffs check and the disability carrier after
repossession.
I would affirm the District Court's conclusion that there was a
breach of the Act in connection with the purchase of t h e c r e d i t
disability insurance which constituted a purchase of services as
defined under the Act.
I would limit my reference to the Montana Consumer Protection
Act to the affirming of the action of the District Court. I do not
believe Baird is authority pertinent to the conduct in this case.
Chief Justice J. A. Turnage, specially concurring:
I concur in the special concurring opinion of Justice Weber.
.-
/
chief Justice
December 23, 1992
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
James M. Ramlow
MURRAY & KAUFMAN, P.C.
P.O. Box 728
Kalispell, MT 59903-0728
DAVID J. WING
Attorney at Law
100 East Broadway
P.O. Box 504
Butte, MT 59703
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA