Opinion Number: 1998-NMCA-046
Filing Date: February 4, 1998
Docket No. 17,688
SECURITY PACIFIC FINANCIAL SERVICES,
a division of Bank of America, FSB,
Plaintiff-Appellee,
v.
SIGNFILLED CORP.,
Defendant-Appellant.
APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
Burt Cosgrove, District Judge
ROBERT J. MUEHLEN
Kelly, Rammelkamp,
Muehlenweg & Lucero, P.A.
Albuquerque, NM
for Appellee
PAUL S. WAINWRIGHT,
Paul S. Wainwright, P.A.
Albuquerque, NM
for Appellant
ALARID, Judge.
{1}
Security Pacific Financial Services (Security Pacific)
filed a complaint against George Turner, Robert Eden, and
Signfilled Corporation for collection under an installment
sales contract and for replevin and declaratory relief in
connection with a mobile home. The trial court ruled in favor
of Security Pacific on its complaint. Signfilled Corporation
appeals this ruling; George Turner and Robert Eden do not.
Therefore, our holding is confined to the portion of the
judgment concerning Signfilled Corporation. As discussed in
the opinion, we affirm the judgment in part and we reverse in
part. Finally, we deny the request for oral argument as
unnecessary. See County of Bernalillo v. Morris, 117 N.M.
398, 403, 872 P.2d 371, 376 (Ct. App. 1994).
BACKGROUND
{2}
George Turner (Turner) entered into a retail installment
sales contract (the contract) and security agreement with
Value Mobile Homes (Value) to purchase a mobile home. The
contract granted to Value, the Seller, a security interest in
the mobile home. Value assigned its rights, title, and
interest in the contract to General Electric Credit
Corporation (GECC). GECC was listed on the Certificate of
Title for the mobile home as the first lienholder. Security
Pacific then purchased the contract from GECC. The contract
required Turner to pay for insurance on the mobile home, but
he failed to make the required payments. When Turner was
contacted by Security Pacific regarding the delinquent
payments, he stated that Security Pacific should ask for
payment from Robert Eden (Eden), his stepson, who was living
in the mobile home. It is not clear whether Security Pacific
asked Eden for the insurance payments, but no payments were
made. As a result of the late insurance payments, Security
Pacific issued a demand letter to Turner. In response to the
demand letter, Eden told Security Pacific that he would not
make the required payments unless his name was added to the
contract. Security Pacific agreed to accept a credit
application from Eden so that Eden's name might be added to
the contract. Eden's application was approved but never
consummated because Eden did not pay the required down
payment. In addition, Turner was unwilling to provide his
signature, which was required to allow Eden to assume the loan
under the contract.
{3}
Signfilled Corporation (Signfilled) consists of Loretta
Quintana (Quintana), the president of Signfilled, and Gerry
Ferrara, an officer of Signfilled and Eden's sister. Quintana
had been a close friend of Eden for twenty years. In July
1993, Quintana purchased all of the shares of the corporation
from Eden. On July 1, 1993, Signfilled entered into a lease
agreement with Eden allowing Eden to lease space on land
belonging to Signfilled for placement of the mobile home.
Quintana testified that Eden never paid any rent under the
lease agreement and that no legal action was taken to collect
the rent.See footnote 1
{4}
In August 1994, Signfilled gave notice to Security
Pacific that it was asserting a landlord's lien against the
mobile home for unpaid rent under its lease with Eden.
Signfilled held an auction of the mobile home, which no one
attended. Signfilled then submitted its own bid for the
mobile home for the amount of the claimed landlord's lien.
After Signfilled purchased the mobile home for the lien
amount, Signfilled submitted documents to the Motor Vehicle
Department pursuant to the claim of landlord's lien. In
return, Signfilled received a Certificate of Title listing Signfilled as owner of the mobile home and removing GECC as
lienholder. When Signfilled filed its landlord's lien, it
knew that Turner was the owner of the mobile home, and that
Security Pacific had a security interest in the mobile home.
{5}
Security Pacific received notice of Signfilled's claim of
landlord's lien. Security Pacific did not receive any notice
of the sale of the mobile home. In November 1994, Security
Pacific received notice that title to the mobile home had been
transferred from Turner to Signfilled. Security Pacific
called Eden and asked him to return the mobile home, and a
notice of default was sent to Turner. The contract provided
that, in the event of default, the holder may pursue any
rights and remedies available to the holder under the law as
well as repossession and/or acceleration of Turner's
indebtedness. On December 6, 1994, on the basis that Turner
was in default under the terms of the contract, Security
Pacific elected to accelerate the contract as allowed by its
terms.
{6}
Security Pacific filed its complaint against Turner,
Eden, and Signfilled. With respect to Signfilled, some
Conclusions of Law entered by the trial court are as follows:
8. The landlord's lien claimed by
Signfilled is invalid and void.
. . . .
15. Security Pacific is entitled to
immediate possession of the Redman
mobile home.
. . . .
18. Security Pacific is entitled to
recovery from Signfilled of its
damages resulting from the loss of
its collateral, the Redman mobile
home.
. . . .
20. Security Pacific suffered damages in
the amount of the value of the
Redman mobile home as of the date of
Signfilled's conversion of the
mobile home.
21. Security Pacific is entitled to
recover from Signfilled its costs
and attorney's fees in this action.
The trial court also entered a Judgment and Order of Replevin
which stated:
2. Security Pacific is awarded judgment
against Signfilled as follows: (I)
the greater of the sum of (a)
$16,298.00, plus interest from
October 11, 1994 at the judgment
rate of interest, and/or (b) the
outstanding amount of the Judgment
awarded Security Pacific against
Turner set out [in the order], and
(ii) Security Pacific's attorney's
fees, expenses and tax in an amount
to be determined by this Court[.]
In sum, the trial court found that Security Pacific was
entitled to possession of the mobile home; that Signfilled had
no interest in the mobile home; that Signfilled's actions
constituted wrongful conversion of the mobile home; and that
Security Pacific was entitled to recovery of interest, costs,
and attorney fees. Following judgment in this case, a writ of
replevin was issued for return of the mobile home to Security
Pacific.
{7}
On appeal, Signfilled argues that its interest in the
mobile home was superior to Security Pacific's interest and
that the trial court erred in awarding judgment to Security
Pacific and against Signfilled. Signfilled also argues that
the trial court erred in awarding interest and attorney fees
to Security Pacific, and that the rate of interest applied to
the judgment was incorrect. We discuss the issues below.
DISCUSSION
Security Interest in the Mobile Home
{8}
Signfilled makes various arguments pertaining to the
validity of Security Pacific's interest in the mobile home.
In particular, Signfilled argues that Security Pacific's
interest was never perfected and the Certificate of Title was
never changed to reflect Security Pacific's interest in the
mobile home. As noted above, GECC held the mobile home's
sales contract prior to its assignment to Security Pacific.
The contract provided that the Buyer (Turner) granted to the
Seller (or holder of the contract) a security interest in the
mobile home and all the proceeds of the property. The
security interest ensured payment and performance of Turner's
obligations under the contract. Thus, the security interest
was a "purchase money security interest" in that it was "taken
or retained by the seller of the collateral to secure all or
part of its price." See NMSA 1978, § 55-9-107(a) (1961).
{9}
Signfilled does not dispute GECC's status as holder of a
perfected security interest. Furthermore, the fact that GECC
was listed on the Certificate of Title as lienholder indicates
that GECC had a perfected security interest. See NMSA 1978,
§ 55-9-302(3)(b) (1996) (filing of a financing statement not required to perfect security interest in property, such as
mobile homes, covered by Sections 66-3-201-204); NMSA 1978, §
66-3-201 (1995) (procedures to be followed so that the holder
of the security interest will be included on the Certificate
of Title as a lienholder).
{10}
The contract also provided that it could be assigned by
Seller to any person or entity and that all rights granted to
the Seller under the contract would apply to the assignee.
GECC sold its interest in the contract to Security Pacific.
See NMSA 1978, § 56-1-6(A) (1965) (an assignee may purchase
any retail installment contract from a seller). The
assignment of a retail installment is valid as against those
making a claim against the seller regardless of whether the
assignment is filed or whether the buyer is provided notice.
See NMSA 1978, § 56-1-6(B). As in this case, when a secured
party assigns a perfected security interest there is no
requirement that the assignment be filed "in order to continue
the perfected status of the security interest against
creditors of and transferees from the original debtor." See
§ 55-9-302(2). Therefore, Security Pacific was assigned the
perfected security interest in the mobile home by GECC and the
perfected status of the security interest was not altered
despite the fact that Security Pacific never changed the
Certificate of Title to reflect the change in lienholders.
See Michel v. J's Foods, Inc., 99 N.M. 574, 577, 661 P.2d 474,
477 (1983) (assignee stands in shoes of assignor). In other
words, the security interest continued to be perfected after
GECC transferred the contract to Security Pacific.
{11}
Signfilled claims that its interest in the mobile home
was superior to Security Pacific's interest, particularly
because it perfected its lien by foreclosing on the landlord's
lien and obtaining a title to the mobile home. Under NMSA
1978, § 48-3-5 (1923) (prior to the 1995 and 1997 amendments):
A landlord shall have a lien on the property of
their tenants which remains in the house rented,
for the rent due, or to become due by the terms of
any lease or other agreement in writing, and said
property may not be removed from said house without
the consent of the landlord, until the rent is paid
or secured.
A landlord may assert a landlord's lien on the property of the
landlord's tenants. The evidence in this case is that Eden,
who was the lessee that signed the lease agreement with
Signfilled, never owned the mobile home. Section 48-3-5
provides that a landlord's lien may only be claimed on
property owned by a tenant. Accordingly, Signfilled could not
assert a landlord's lien over the mobile home and Signfilled's
title is invalid. Cf. Hesselden v. Karman, 67 N.M. 434, 437,
356 P.2d 451, 453 (1960) (citing proposition that when title
to property has not passed to a tenant, a landlord's lien
would not extend to such property).
{12}
Even if Signfilled had a valid landlord's lien, the
perfected purchase money security interest was superior to
that landlord's lien. The security interest possessed by
Security Pacific was perfected before any interest claimed by
Signfilled under a landlord's lien. See NMSA 1978, § 55-9-312(5)(a) (1996) ("[C]onflicting security interests rank
according to priority in time of filing or perfection.");
National Inv.Trust v. First Nat'l Bank, 88 N.M. 514, 516, 543
P.2d 482, 484 (1975) (perfected security interest has priority
over subsequent landlord's lien).
Replevin/Conversion
{13}
The trial court found that Signfilled had wrongfully
converted the mobile home to its own use and that Security
Pacific was entitled to issuance of a writ of replevin and
return of the mobile home. Any person who has the right to
the immediate possession of property that has been wrongfully
taken or detained may bring an action of replevin for recovery
of the property. See NMSA 1978, § 42-8-1 (1907). In addition
to recovery of the property, a person bringing an action of
replevin may recover "damages sustained by reason of the
unjust caption or detention thereof." Id.
{14}
Security Pacific was entitled to bring its action of
replevin for the recovery of the mobile home and for damages
sustained by the unjust detention of the mobile home. See §
42-8-1. Security Pacific's security interest in the mobile
home had priority over any other claimant. Signfilled used an
invalid claim of lien to obtain a Certificate of Title listing
it as owner of the mobile home. At the time that Signfilled
obtained the altered Certificate of Title, it knew that Turner
was the owner of the mobile home. Security Pacific was
entitled to possession of the mobile home due to default by
Turner and to the fact that Signfilled had wrongfully taken
the mobile home.
{15}
The trial court found that "Signfilled's conduct causing
the transfer of title in the [] mobile home from Turner to
Signfilled and removing Security Pacific as registered
lienholder, without the knowledge or consent of Security
Pacific, constitutes the wrongful conversion of the [] mobile
home[.]" Conversion is the unlawful exercise of dominion and
control over property belonging to another in defiance of the
owner's rights, or acts constituting an unauthorized and
injurious use of another's property, or a wrongful detention
after demand has been made. See AAA Auto Sales & Rental, Inc.
v. Security Fed. Sav. & Loan Ass'n., 114 N.M. 761, 763, 845
P.2d 855, 857 (Ct. App. 1992). Security Pacific, a secured
creditor, was entitled to bring an action for conversion. Id.
The measure of damages for conversion is the value of the
property at the time of conversion plus interest. See Woods
v. Collins, 87 N.M. 370, 371, 533 P.2d 759, 760 (Ct. App.
1975). As indicated by the facts, Signfilled asserted an
invalid landlord's lien against the mobile home knowing that Eden was not the owner of the property. Signfilled took steps
to gain title to the mobile home without providing notice of
the sale to Security Pacific despite the fact that Signfilled
knew that Security Pacific had a security interest in the
mobile home. The facts in this case support the trial court's
findings and conclusions that Signfilled wrongfully converted
the mobile home to its own use.
{16}
As discussed above, Security Pacific was entitled to
relief under the replevin statute. In addition, the evidence
supported the trial court's finding that Signfilled had
wrongfully converted the mobile home to its own use. Security
Pacific, however, would not be entitled to both the return of
the mobile home under the theory of replevin and damages under
the theory of conversion in the amount of the value of the
mobile home at the time of conversion. See NIKA Corp. v. City
of Kansas City, Mo., 582 F. Supp. 343, 365 (W.D. Mo. 1983) (on
conversion theory, plaintiff not entitled to both value of
property and return of property); Ducote v. City of
Alexandria, 677 So. 2d 1118, 1122 (La. Ct. App. 1996) (damages
for conversion include return of property or, if property
cannot be returned, value of property at time of conversion);
Hoffman Mgmt. Corp. v. S.L.C. of North America, Inc., 800
S.W.2d 755, 762 (Mo. Ct. App. 1990) (ordinarily conversion
damages consist of value of property at time of conversion,
but when property returned to owner, damages consist of the
difference in value at conversion and value at return plus
reasonable value for the loss of use). In addition, because
Security Pacific has already replevied the mobile home, the
statute which would allow Security Pacific an election between
return of the property and the value of the property is
inapplicable. See NMSA 1978, § 42-8-7 (1953) (if the
plaintiff demands return of the property and waives seizure
and delivery of the property, a writ need not be issued and
the plaintiff shall have judgment for damages and will be able
to elect to receive the return of the property or the value of
the property). Therefore, as to the judgment finding in favor
of Security Pacific under both a replevin theory and a
conversion theory, Security Pacific is entitled only to relief
in replevin--the return of the property plus damages for
wrongful detention of that property. See § 42-8-1.
{17}
With respect to recovery in replevin, because the mobile
home has been replevied by Security Pacific, the only damages
left to be awarded to Security Pacific are damages for
wrongful detention of the mobile home. Based on the requested
findings of Security Pacific, the trial court found that the
value of the mobile home on August 2, 1994, was $16,298.00.
The only other evidence of value presented to the trial court
was the value of the mobile home at the time of trial.
Security Pacific's agent testified at trial that he believed
the value of the mobile home at that time to be approximately
$11,000.00. See Kipp v. Lipp, 495 N.W.2d 56, 58-59 (N.D.
1993) (determination of diminished value of property can be
based solely on owner's testimony). Accepting these values as the only evidence of the value of the mobile home at the time
of conversion and at the time of trial, the diminution in
value in the mobile home amounted to $5,298.00. We are of the
opinion that our replevin statute includes depreciation or
diminution in value of property as an item of "damages
sustained by reason of the unjust caption or detention" of
property. See Hyde v. Elmer, 14 N.M. 39, 44, 88 P. 1132, 1133
(1907) (if property has been delivered on a writ of replevin,
person entitled to possession of property is also entitled to
damages for money that will compensate for the injury
sustained by reason of the wrongful taking including any
depreciation in value that was sustained while the property
was wrongfully detained). Other jurisdictions agree. See,
e.g., United Jersey Bank Southwest v. Keystone Collision,
Inc., 482 F. Supp. 71, 72 (E.D. Pa. 1979) (corporation
entitled to replevin of vehicle if it is shown that value of
vehicle had decreased during wrongful possession, and
therefore entitled to return of vehicle and damages equal to
diminution in value of vehicle); White Motor Credit Corp. v.
Sapp Bros. Truck Plaza, Inc., 249 N.W.2d 489, 493-94 (Neb.
1977) (statute language broad enough to allow recovery for
depreciation or deterioration of property when returned;
damages equal to difference in value at time of taking and
value at time of trial), overruled on other grounds by United
States Nat'l Bank v. Atlas Auto Body, Inc., 335 N.W.2d 288-290
(Neb. 1983); Brook v. James A. Cullimore & Co., 436 P.2d 32,
35 (Okla. 1967) (in replevin action, if property has
deteriorated on return, defendant is liable for difference in
value when property taken and when property returned); Taylor
v. Graver Tank & Mfg. Co. Inc., 344 P.2d 1045, 1048-49 (Okla.
1959) (if value at time of return is different than value at
time of taking, plaintiff entitled to damages for the
difference where damages based on competent evidence and
damages do not exceed purchase price plus interest less
payments made by vendee). Therefore, Security Pacific is
entitled to collect $5,298.00 in damages from Signfilled.
{18}
We base our holding, in part, on the trial court's
finding that the value of the mobile home on August 2, 1994,
was $16,298.00. Signfilled argues that it "believes that the
evidence does not support a finding that the value of the
mobile home purchased over ten years ago was worth more at
trial than it was when purchased[.]" While Signfilled
includes in its brief a comment pertaining to the trial
court's finding, the comment is included only in the statement
of facts and there is no argument or authority accompanying
it. At the trial level, Signfilled did not submit specific
findings on the value of the mobile home and there is no
indication that Signfilled presented any evidence of value.
Therefore, Signfilled has waived any findings on that issue
and cannot obtain review in this Court of the evidence
pertaining to those findings. See Pedigo v. Valley Mobile
Homes, Inc., 97 N.M. 795, 798, 643 P.2d 1247, 1250 (Ct. App.
1982) (defendant who did not request specific finding on
calculation of mileage expenses cannot obtain review of the issue on appeal); Smith v. Galio, 95 N.M. 4, 8, 617 P.2d 1325,
1329 (Ct. App. 1980) (shareholder did not request finding
regarding value of shares so appellate court cannot consider
claimed error by trial court). Moreover, Signfilled did not
sufficiently argue the issue on appeal by merely including the
comment in the statement of facts in the brief in chief. See
State v. Clifford, 117 N.M. 508, 513, 873 P.2d 254, 259 (1994)
(mere reference to claimed error in a conclusory statement was
insufficient to raise issue on appeal); Perez v. Gallegos, 87
N.M. 161, 162, 530 P.2d 1155, 1156 (1974) (mere challenge to
finding by parenthetical note in statement of proceedings
resulting in failure to clearly point out error by trial court
is insufficient to raise issue on appeal).
Interest
{19}
Awarding the return of the mobile home and diminution in
its value makes Security Pacific whole. Granting interest as
well would result in duplicate recovery.
Attorney Fees/Costs
{20}
Signfilled claims that the trial court erred in awarding
a judgment against Signfilled which included attorney fees.
The general rule is that absent statutory authority or rule of
court, attorney fees are not recoverable as an item of damage.
See Jemez Properties, Inc. v. Lucero, 94 N.M. 181, 186, 608
P.2d 157, 162 (Ct. App. 1979). Exceptions to the general rule
include instances where the other party engages in bad faith,
or frivolous litigation practices before the trial court in
direct defiance of its authority. See State ex rel. New
Mexico State Highway and Transp. Dep't v. Baca, 120 N.M. 1, 5,
896 P.2d 1148, 1152 (1995). Trial courts may impose sanctions
for misconduct by an award of attorney fees where the conduct
occurred before the trial court and does not include
prelitigation conduct. Id. at 8, 896 P.2d at 1155.
{21}
Against Signfilled, Security Pacific filed a claim for
replevin, a claim for wrongful conversion, and a claim for
declaratory judgment. Under any of these theories, attorney
fees are not recoverable by rule of law or by statute. There
is no agreement between Security Pacific and Signfilled which
would require Signfilled to be responsible for attorney fees.
Furthermore, there is nothing to indicate that the award of
attorney fees would be justified under one of the exceptions
to the general rule concerning attorney fees.
{22}
Security Pacific argues that the attorney fees are
recoverable as expenses incurred in "pursuit" of the mobile
home. Attorney fees have sometimes been included as damages
when they are expended to locate converted property. See
State v. Whitaker, 110 N.M. 486, 495, 797 P.2d 275, 284 (Ct.
App. 1990). However, when the attorney fees are incurred in
the litigation that follows the location of the property, they
are not included as damages. See Security-First Nat'l Bank v. Lutz, 322 F.2d 348, 352 (9th Cir. 1963) (in conversion action,
expenses incurred in preparation for litigation and not in
pursuit of property cannot be allowed as damages). With
respect to costs, they are "allowed as a matter of course to
the prevailing party[.]" See Rule 1-054(E) NMRA 1998.
CONCLUSION
{23}
Based on the foregoing, we hold that Security Pacific is
entitled to recover from Signfilled $5,298.00 in damages;
return of the mobile home, and costs as awarded by the trial
court. The award of attorney fees is reversed.
{24}
IT IS SO ORDERED.
______________________________
A. JOSEPH ALARID, Judge
WE CONCUR:
________________________________
JAMES J. WECHSLER, Judge
________________________________
MICHAEL D. BUSTAMANTE, Judge