Case Name: COMMUNITY BANK, ELLISVILLE, MISSISSIPPI f/k/a Merchants and Manufacturers Bank v. Archie Wayne COURTNEY
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 2004-10-21
Citations: 884 So. 2d 767
Docket Number: No. 2001-CA-01657-SCT
Parties: COMMUNITY BANK, ELLISVILLE, MISSISSIPPI f/k/a Merchants and Manufacturers Bank v. Archie Wayne COURTNEY.
Judges: WALLER, P.J., AND CARLSON, J., CONCUR. COBB, P.J., CONCURS IN RESULT ONLY. EASLEY, J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY GRAVES, J. DIAZ, DICKINSON AND RANDOLPH, JJ., NOT PARTICIPATING.
Reporter: Southern Reporter, Second Series
Volume: 884
Pages: 767–787

Head Matter:
COMMUNITY BANK, ELLISVILLE, MISSISSIPPI f/k/a Merchants and Manufacturers Bank v. Archie Wayne COURTNEY.
No. 2001-CA-01657-SCT.
Supreme Court of Mississippi.
Oct. 21, 2004.
John C. Henegan, Donna Brown Jacobs, J. Stevenson Ray, Mary Jacqueline Watson Easley, Jackson, Amy D. Whitten, attorneys for appellant.
Thomas J. Lowe, Jr., Brandon, Lawrence E. Abernathy, III, John T. Kersh, Laurel, attorneys for appellee.

Opinion:
ON MOTION FOR REHEARING
SMITH, Chief Justice,
for the Court.
¶ 1. The motions for rehearing are denied. The original opinions of this Court are withdrawn, and these opinions are substituted therefor.
¶ 2. This case involves the alleged conversion of certain pieces of equipment by Community Bank of Ellisville formerly known as Merchants & Manufacturers Bank ("the Bank"). Archie Wayne Courtney (Courtney) had some loans with the Bank for equipment used in his plumbing business. In 1991, Courtney defaulted on a consolidated loan payment and the Bank eventually sought an order of possession from the trial court to retrieve and sell the collateral. Courtney alleged that the Bank and Holifield and Sons Wrecker Services erroneously picked up some equipment and converted this collateral.
¶ 3. In Courtney v. Merchs. & Mfrs. Bank, 680 So.2d 866, 866 (Miss.1996) (Courtney I), this Court held that the Bank did not have "a valid security interest in the backhoe, even though the parties may have originally intended for the backhoe to serve as security." On remand from this Court's ruling in Courtney I, the case was tried in the Circuit Court of Jones County. The jury awarded Courtney $345,000 in actual damages and $5,000,000 in punitive damages.
¶ 4. The Bank filed a motion for new trial and a j.mo.v. and in the alternative for a remittitur. The trial court granted the Bank a setoff or recoupment of $38,803.12, which was the amount of the deficiency in this matter. However, the court refused to grant a remittitur on actual damages. Moreover, concluding that the award of punitive damages was excessive, the court remitted that award to $1,500,000. Courtney subsequently accepted this remittitur, and the Bank appealed.
FACTS
¶ 5. The Bank regularly provided loans to Archie Courtney, owner of Courtney Plumbing, Inc., in connection with Courtney's plumbing and septic tank business. These loans typically took the form of promissory notes, which were secured by both purchase money and non-purchase money security interests in Courtney's heavy equipment used in his business. Over a period of time, these separate promissory notes would typically be consolidated into one.
¶ 6. Courtney experienced severe financial problems, and he filed for Chapter 13 Bankruptcy on February 18, 1992. On April 14, 1992, the Bank filed suit against Courtney, alleging that he was in default on.two of the promissory notes. The Bank requested that Courtney, who was serving as his own attorney, be required to pay the balance on the notes and to surrender possession of various collateral which he had pledged as security on the notes.
¶ 7. At the hearing on the Bank's complaint on May 7, 1992, the primary dispute centered around a 1986 Case 580E Super E backhoe, which was listed as security on the Bank's copy of one of the promissory notes, but not on Courtney's copy thereof. When asked about this discrepancy, Tommy Stroud, vice-president of the Bank, testified that his secretary had originally forgotten to type the backhoe on the note and, realizing her mistake at a later date, had added the backhoe to the instrument. The Bank did not seek Courtney's ratification of the addition of the backhoe, however, nor did it inform him that the note had been altered. Following a hearing, the trial judge entered an order of possession in favor of the Bank for the equipment listed as security on the promissory note, including the backhoe. Courtney subsequently filed a complaint against the Bank for allegedly seizing property in addition to that which it was entitled to pursuant to the order of possession, to which the Bank responded with a motion for summary judgment. The trial court granted the summary judgment motion, and Courtney timely filed an appeal from said ruling as well as from the order of possession entered in favor of the Bank with regard to the backhoe.
¶ 8. In Courtney /, this Court reversed "the order granting possession of the backhoe to the Bank and rendered] judgment that the Bank holds no proper security interest in the backhoe." 680 So.2d at 869. As to the summary judgment issue, this Court held that the case should be remanded for a determination of whether the Bank had actually returned the wrongfully seized property. Id. The Court concluded that if Courtney represented in writing that the Bank had returned the property, then no further proceedings would be required. Id. After this Court's ruling in Courtney I, the trial court granted Courtney's motion to restore the case to the active docket for a jury trial. Courtney filed a motion for an amended counterclaim, which the trial court granted. At trial, Courtney claimed that the bank converted nine pieces of property:
1. Case 580 Super E Backhoe;
2. An auto mixer concrete truck ("concrete truck");
A ditcher; 03
A backhoe; 1^
Mack truck; Ü1
FastBack trailer; O)
Two (2) sets of chains with binder;
Transit; and 00
Water system and rep. clamps ÍO
DISCUSSION
I. Conversion and J.N.O.V.
¶ 9. Denials of peremptory instructions, motions for directed verdict, and motions for judgment notwithstanding the verdict each challenge the legal sufficiency of the evidence presented at trial. Moore v. State, 859 So.2d 379, 383 (Miss.2003). They are, therefore, reviewed under the same standard. Id. This Court has held:
Under this standard, this Court will consider the evidence in the light most favorable to the appellee, giving that party the benefit of all favorable inference that may be reasonably drawn from the evidence. If the facts so considered point so overwhelmingly in favor of the appellant that reasonable men could not have arrived at a contrary verdict, we are required to reverse and render. On the other hand if there is substantial evidence in support of the verdict, that is, evidence of such quality and weight that reasonable and fair minded jurors in the exercise of impartial judgement might have reached different conclusions, affir-mance is required.
Id.
¶ 10. It is elementary that ownership is an essential element of conversion. This Court has held that "[t]o make out a conversion, there must be proof of a wrongful possession, or the exercise of a dominion in exclusion or defiance of the owner's right, or of an unauthorized and injurious use, or of a wrongful detention after demand." Smith v. Franklin Custodian Funds, Inc., 726 So.2d 144, 149 (Miss.1998) (emphasis added). "[T]here is no conversion until the title of the lawful owner is made known and resisted or the purchaser exercises dominion over the property by use, sale, or otherwise." Miss. Motor Fin., Inc. v. Thomas, 246 Miss. 14, 149 So.2d 20, 20 (1963) (emphasis added).
¶ 11. Courtney alleges that the Bank converted nine pieces of equipment, but the record indicates that Courtney did not own all these items. The evidence clearly establishes that Courtney owned the chain and binders, as well as the ditch-er, concrete truck, and backhoe attachment. Courtney also owned the transit and water system repair clamps.
¶ 12. Courtney testified that his father owned the fastback trailer. Courtney also indicated that the Mack truck was "strictly" his father's. He stated that his father was the owner of the "big items" at issue in this case. Initially, Courtney testified that the Super E backhoe actually belonged to his father. When asked if his father owned five specific pieces of the equipment, Courtney testified that his father "wasn't the owner of the chain and binders. He would have been on the backhoe and stuff." He later recanted this testimony, stating that he and his father owned the Super E backhoe jointly.
¶ 13. The Bank moved for a directed verdict at the close of Courtney's case-in-chief with respect to the ownership of the ditcher, concrete truck, and backhoe attachment. The court took this motion under advisement. However, it denied the Bank's general motion for directed verdict. The clear evidence that Courtney's father owned some of the property in question was elicited during the Bank's case-in-chief. The trial court denied the Bank's j.n.o.v. on conversion.
¶ 14. The evidence is overwhelming that Courtney did not own all the property at issue in this case. Based on his own admissions, it is clear that Courtney was not the owner of the Mack truck or the fastback trailer. Because Courtney did not own these items, and ownership is an essential element of conversion, the trial court erred in denying the Bank's j.n.o.v. as to those items.
II. Conversion and security interests.
¶ 15. The elements of conversion are established in Mississippi. We have stated:
It is well settled that the acts alleged to constitute a conversion must be positive and tortious. In McJunkin v. Hancock[, 71 Okla. 257, 176 P. 740 (1918)], the Court said: "To make out a conversion, there must be proof of a wrongful possession, or the exercise of a dominion in exclusion or defiance of the owner's right, or of an unauthorized and injurious use, or of a wrongful detention after demand." In Spooner v. Holmes[, 102 Mass. 503, 3 Am.Rep. 491, 1869 WL 5777 (1869)], . the Court said: "Action of tort . cannot be maintained without proof that the defendant either did some positive wrongful act with the intention to appropriate the property to himself, or to deprive the rightful owner of it, or destroyed the property." In Lee Tung v. Burkhart[, 59 Or. 194, 116 P. 1066 (1911)], the Court held that in order to maintain an action for conversion, there must have been, on the part of the defendant, some unlawful assumption of dominion over the personal property involved, in defiance or exclusion of the plaintiffs rights, or else a withholding of the possession under a claim of right or title inconsistent with that of plaintiff.
First Investors Corp. v. Rayner, 738 So.2d 228, 234-35 (Miss.1999) (quoting Thomas, 246 Miss. at 20-21, 149 So.2d at 23 (internal citations omitted)). Thus, there is a conversion only when there is an "intent to exercise dominion or control over goods which is inconsistent with the true owner's right." Rayner, 738 So.2d at 234. While intent is necessary, it need not be the intent to be a wrongdoer. Id.
¶ 16. In Courtney I, this Court held that the Bank holds no proper security interest in the Super E backhoe. The record indicates that the Bank collected this piece of equipment and held it in a manner adverse to Courtney's rights. Thus, we find that the Bank converted the Super E backhoe.
¶ 17. The record reveals that Courtney paid off the concrete truck before the Bank repossessed it. In fact, the Bank released the lien on that piece of equipment and gave Courtney the title. Therefore, we find that the Bank did not have a valid security interest in the concrete truck at the time of the repossession and the Bank, therefore, converted that piece of property.
¶ 18. Moreover, the record indicates that Courtney owned a set of chains and binder. The Bank never had a security interest in those items but nevertheless collected them. We hold that the Bank converted the chains and binder.
¶ 19. The transit and the water system repair clamps, do not appear in Courtney's amended counterclaim. However, the counterclaim does state that Courtney had personal property contained in the equipment listed. The record establishes that the Bank never had a security interest in these chattels but nevertheless collected these items.
¶ 20. Finally, Courtney owned a "Ditch Witch," and the Bank had a security interest in that piece of equipment. At the time the Bank repossessed the Ditch Witch, there were two implements attached to it, a backhoe and a trencher. Citing PACCAR Fin. Corp. v. Howard, 615 So.2d 583, 590 (Miss.1993), the Bank argues that it obtained a security interest in these two implements because they were attached to the Ditch Witch, a piece of secured collateral.
¶ 21. At the time of this trial, the Mississippi Uniform Commercial Code provided that "a security agreement is effective according to its terms between the parties, against purchasers of the collateral and against creditors." Miss.Code Ann. § 75-9-201 (repealed by Laws 2001, Ch. 495). The security agreement that covered the Ditch Witch defined the term "property" as "all property as that is now or later becomes attached to, a part of, or results from the described property." (emphasis added). We find that the security agreement covered the Ditch Witch implements and the Bank, therefore, had a valid security interest in those items.
¶ 22. We find that Courtney was entitled to damages resulting from the Bank's conversion of the Super E backhoe, chains and binder, concrete truck, transit, and water system repair clamps.
III. Compensatory Damages.
¶23. We have held that a party may testify as to the value of his or her own property. Regency Nissan, Inc. v. Jenkins, 678 So.2d 95, 101 (Miss.1996). "We have not indicated whether this estimate of value must be rationally based. Nor have we required any predicate other than that of ownership." Id.
¶ 24. The testimony and documentary evidence in this case establish that Courtney clearly owned seven pieces of the property at issue here. As discussed above, the Bank converted five of those pieces of equipment. At trial, Courtney testified that those five items have a value of $45,040. Pursuant to established jurisprudence at the time of this trial, we find that it was appropriate for Courtney to testify regarding the value of this equipment.
¶ 25. In a conversion action, the measure of damages is the value of the property at the time and place of the conversion. West v. Combs, 642 So.2d 917, 921 (Miss.1994). Moreover, this Court has stated that damages resulting from a conversion that "are not ordinary, usual, or commonly to be expected, are recoverable" so long as the parties in question have those effects in contemplation at the time of the wrong as the probable result. Pride Oil Co. v. Tommy Brooks Oil Co., 761 So.2d 187, 191-92 (Miss.2000). These unusual consequences may not, however, be uncertain, unnatural, remote as to cause, nor speculative and conjectural in effect. Id. at 191. In general, lost profits may be recovered in a conversion action "where the loss is a proximate result of the defendant's act, and where the loss can be shown with reasonable certainty." Id. at 192 (emphasis added). In addition, we have held that damages beyond the property's fair market value are recoverable even if the conversion occurs in good faith. Id. at 191.
¶ 26. At trial, Courtney's attorney asked him what the rental value on the equipment would have been during the time he did not have the equipment. He testified that over nine years, "[y]ou are looking at probably $800,000 considering what it would rent and what the equipment would have made back then." This is the only evidence regarding Courtney's lost profits. In fact, the trial court noted,
I want the record to clearly reflect the only evidence that was put on by the Plaintiff about that was a figure of $800,000 as what he places as a rental value or whatever on this. And I find as a matter of finding that there was no credible evidence that would meet any type of standard under law as to substantiate the loss of use of those items.
¶ 27. We find that Courtney's statement regarding the "rental value" of his equipment is insufficient to support a finding of lost profits in this case. Under our case law, lost profits are allowable in a conversion action, but only if those damages can be shown with reasonable certainty. Moreover, those damages may not be unnatural, remote as to cause, nor speculative and conjectural in effect. We hold that Courtney's evidence of lost profits fails to meet these standards.
¶ 28. As the Bank correctly notes, where mental distress damages are alleged in connection with intentional tor-tious conduct, "the standard is whether the defendant's behavior is malicious, intentional, willful, wanton, grossly careless, indifferent or reckless." Morrison v. Means, 680 So.2d 803, 805 (Miss.1996) (quoting Leaf River Forest Prods., Inc. v. Ferguson, 662 So.2d 648, 659 (Miss.1995)). Where the tort complained of is "one of ordinary garden variety negligence, the plaintiffs . have to prove some sort of injury, whether it be physical or mental. If the conduct was not malicious, intentional or outrageous, there must be some sort of demonstrative harm." Ill. Cent. R.R. v. Hawkins, 830 So.2d 1162, 1174 (Miss.2002) (quoting Summers ex rel. Dawson v. St. Andrew's Episcopal Sch., Inc., 759 So.2d 1203, 1211 (Miss.2000)).
¶ 29. The only evidence concerning Courtney's alleged emotional distress damages consists of Courtney's own testimony about stomach problems he purportedly developed as a result of losing his equipment and business. We find that this evidence is insufficient to support a finding that the Bank's behavior was malicious, intentional, willful, wanton, grossly careless, indifferent or reckless. Nor did this testimony prove any type of demonstrable harm. Therefore, Courtney's evidence of mental anguish is insufficient as a matter of law under either standard.
¶ 30. Pursuant to Miss.Code Ann. § 11-1-55 (Rev.2002), this Court is empowered to affirm judgments for money damages on the condition of remittitur. In order to do so, we must find that damages awarded "are excessive for the reason that the jury or trier of the facts was influenced by bias, prejudice, or passion, or that the damages awarded were contrary to the overwhelming weight of credible evidence." If the remittitur is not accepted, then we may direct a new trial on the issue of damages only. Id. Where a remittitur is accepted and the other party files an appeal, the accepting party may cross-appeal the trial court's action regarding the remittitur. Id.
¶ 31. We review the denial of a remittitur for abuse of discretion. Entergy Miss., Inc. v. Bolden, 854 So.2d 1051, 1058 (Miss.2003). There are no standards governing when a remittitur is proper; thus, we proceed on a case-by-case basis in determining whether a particular jury award is excessive. Id. We will not interfere with a jury's award of damages unless the size of the award, in comparison with the actual amount of damage, shocks the conscience of the Court. Id. If there is insufficient proof to support the award of damages, a remittitur is appropriate. Id. It is elementary that the plaintiff has the burden of proving her damages by a preponderance of the evidence. Id.
¶ 32. As demonstrated above, the compensatory damage award was against the overwhelming weight of credible evidence. According to Courtney's own testimony, the property that he actually owned only had a value of $45,040. The meager evidence Courtney offered on the issue of lost profits fails to meet this Court's standards. Likewise, he offered only conclusory statements regarding mental distress damages, and we find that his assertions on this point fail to satisfy this Court's standards. As such, we hold that the size of the compensatory damages award, in relation to the actual amount of damage, "shocks the conscience" of this Court, and the trial court abused its discretion in refusing to grant a remittitur on compensatory damages. That award should be remitted to $45,040.
IV. Setoff
¶ 33. The trial court properly adjusted the award of compensatory damages to include a setoff in the amount of the loan delinquency of $38,803.12. Section 553 of the bankruptcy code preserves the right to setoff notwithstanding a discharge of the debt. In re Morgan, 77 B.R. 81, 84 (Bankr.S.D.Miss.1987). Section 553 of the bankruptcy code provides that the creditor has the right to "offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case." 11 U.S.C. § 553(a). In order to establish this right under the bankruptcy code "a creditor must prove: 1) a debt owed by the creditor against the debtor which arose prior to the commencement of the bank ruptcy case; 2) a claim of the creditor against the debtor which arose prior to the commencement of the bankruptcy case; and 3) the debt and claim must be mutual obligations." In re Morgan, 77 B.R. at 83. For debts and claims to be mutual they must be "owing between the same parties, in the same right or capacity, and must be of the same kind or quality." In re Braniff Airways, Inc., 42 B.R. 443, 449 (Bankr.N.D.Tex.1984).
¶ 34. All three of the prerequisites exist in this case. Courtney's claim for conversion arose before his filing of bankruptcy and Courtney's obligation to the bank also arose before the commencement of the bankruptcy proceedings. The debt and claim involved are also mutual in that they arose from the same notes and financing statements and they are owing between the same parties. Since all three are clearly meet, Community Bank is entitled to setoff the deficiency of $38,803.12. Therefore, the amount of compensatory damages will be reduced to $6,236.88.
V. Punitive damages and J.N.O.V.
¶ 35. "Mississippi law does not favor punitive damages; they are considered an extraordinary remedy and are allowed with caution and within narrow limits." Life & Cas. Ins. Co. of Tenn. v. Bristow, 529 So.2d 620, 622 (Miss.1988). The Legislature has determined that punitive damages are allowable under certain circumstances only, namely:
(1) In any action in which punitive damages are sought:
(a) Punitive damages may not be awarded if the claimant does not prove by clear and convincing evidence that the defendant against whom punitive damages are sought acted with actual malice, gross negligence which evidences a willful, wanton or reckless disregard for the safety of others, or committed actual fraud.
(d) The court shall determine whether the issue of punitive damages may be submitted to the trier of fact; and, if so, the trier of fact shall determine whether to award punitive damages and in what amount.
Miss.Code Ann. § 11-1-65 (Rev.2002). Trial judges have the "authority to initially determine whether the particular facts of a case merit the submission of the issue of punitive damages to the jury." Alpha Gulf Coast, Inc. v. Jackson, 801 So.2d 709, 733 (Miss.2001).
¶ 36. At trial, Courtney testified that one of the Bank's employees intended to put him out of business. Courtney contacted Wayne Davis at the Bank to inform him that the consolidated note had been altered. Courtney then stated that Davis's "exact words was to me T got [it] on my note. I am going to get it. I'm going to put you out of business. You didn't help me when I needed it, and I ain't doing it in return.' " According to Courtney, Davis told him he "could carry it to court, but [he] would never live long enough to get a dime." Davis specifically denied Courtney's allegations, stating "[w]e have no knowledge of that. We did our sincere effort [to] work with Mr. Courtney." Davis stated that he did not have any kind of ill will against Courtney. Courtney did not provide any corroborating testimony regarding Davis's alleged statements. Interestingly, the trial judge concluded that
[t]here was one little item of evidence about one of the officers . making a statement to the defendant that he was going to put him out of business. But other than that, there is really not a lot of evidence of any wrong or morally reprehensible motivation on the part of the bank in this matter.
In addition, the trial judge stated that the Bank's conduct in this case "was not that reprehensible."
¶ 37. We find that there is insufficient evidence in this case to support a jury charge on the issue of punitive damages. The only evidence that remotely approaches one of the statutory requirements is Davis's alleged out-of-court statement regarding his intention to put Courtney out of business. We find that this self-serving hearsay statement is in no way clear and convincing evidence of actual malice, gross negligence, or the commission of actual fraud. Accordingly, we find that the trial court erred when it denied the Bank's motion for j.n.o.v. on the issue of punitive damages. Pursuant to the controlling standard of review, we reverse and render that verdict.
VI. The Bank's remaining assignments of error and Courtney's cross-appeal.
¶ 38. We have carefully reviewed the Bank's remaining assignments of error and find that they are without merit. In light of our findings, supra, Courtney's contentions on cross-appeal are moot and will not be discussed.
CONCLUSION
¶ 39. For the foregoing reasons, we affirm as to liability but, after applying a setoff of $38,803.12, remit the compensatory damages awarded in the judgment below from $306,196.88 to $6,236.88 and affirm the judgment as remitted to $6,236.88 provided this remitted judgment is accepted by Archie Wayne Courtney within ten (10) days of the final judgment of this Court. Otherwise, the judgment is vacated, a new trial confined to the issue of compensatory damages is granted, and the case is remanded for such. Should Courtney accept the remittitur, the principal sum of $6,236.88 will be payable together with interest at the legal rate from the date of the original judgment in the trial court. We reverse and render the punitive damages award.
¶ 40. AFFIRMED AS TO LIABILITY; JUDGMENT REMITTED FROM $306,196.88 TO $6,236.88, AND AFFIRMED AS REMITTED, CONDITIONED ON ACCEPTANCE BY ARCHIE WAYNE COURTNEY WITHIN 10 DAYS OF THE FINAL JUDGMENT OF THIS COURT. OTHERWISE, THE JUDGMENT IS VACATED, AND THE CASE IS REMANDED FOR A NEW TRIAL AS TO COMPENSATORY DAMAGES ONLY. REVERSED AND RENDERED AS TO PUNITIVE DAMAGES.
WALLER, P.J., AND CARLSON, J., CONCUR. COBB, P.J., CONCURS IN RESULT ONLY. EASLEY, J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY GRAVES, J. DIAZ, DICKINSON AND RANDOLPH, JJ., NOT PARTICIPATING.
. The Bank's attorney asked Courtney, "you are claiming [your father] is the owner of all these on this list?" The question referred to a list of equipment in the amended counterclaim, namely, the Super E backhoe, chains and binder, the Mack truck, the concrete truck, and the fast back trailer.