James Keith Cooley v. J.M. Smith Corporation , 2016 Miss. App. LEXIS 402 ( 2016 )

IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2015-CA-00398-COA
JAMES KEITH COOLEY AND COOLEY DRUG, APPELLANTS
INC.
v.
J.M. SMITH CORPORATION D/B/A SMITH APPELLEE
DRUG COMPANY
DATE OF JUDGMENT: 11/20/2013
TRIAL JUDGE: HON. ROBERT WALTER BAILEY
COURT FROM WHICH APPEALED: WAYNE COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANTS: MICHAEL W. CROSBY
ATTORNEY FOR APPELLEE: BRADLEY TRUETT GOLMON
NATURE OF THE CASE: CIVIL - CONTRACT
TRIAL COURT DISPOSITION: GRANTED THE APPELLEE A REPLEVIN
AND CONTRACTUAL DAMAGES
DISPOSITION: AFFIRMED - 06/21/2016
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE LEE, C.J., CARLTON AND FAIR, JJ.
CARLTON, J., FOR THE COURT:
¶1. James Cooley (Cooley), on behalf of himself and Cooley Drug Inc. (Cooley Drug),
appeals the Wayne County Circuit Court’s judgment granting J.M. Smith Corporation d/b/a
Smith Drug Co. (Smith Drug) a replevin and contractual damages. On appeal, Cooley raises
the following issues: (1) whether the circuit court erred by allowing Smith Drug to present
evidence of contractual damages at the replevin hearing; and (2) whether the circuit court
erred by awarding Smith Drug contractual damages. Finding no error, we affirm.
FACTS
¶2. On May 4, 2006, Cooley, as the principal of Cooley Drug, executed an “Application
for Credit,” a “Continuing Guaranty of Payment,” and a “Security Agreement” with Smith
Drug. Under the terms of the security agreement, Cooley Drug paid for inventory, which
Smith Drug then shipped to Cooley Drug. Cooley guaranteed his company’s financial
obligation for the inventory, and Smith Drug retained a security interest in certain specified
collateral, including the inventory it shipped to Cooley Drug. The parties’ security agreement
required Cooley Drug to “keep all of [the] collateral at its principle place of business unless
and until such collateral is disposed of in the ordinary course of [Cooley Drug’s] business.”
If Cooley defaulted on his payments or in the performance of his obligations and forced
Smith Drug to institute legal proceedings or hire an attorney, Cooley agreed to pay all costs
for the collection of the collateral, including Smith Drug’s reasonable attorney’s fees.
¶3. After executing their agreement, Smith Drug shipped Cooley Drug inventory valued
at $141,148.57. However, Cooley Drug defaulted on its payment obligation to Smith Drug.
Therefore, on January 28, 2013, Smith Drug filed a complaint against Cooley and Cooley
Drug for a replevin and damages. Smith Drug attached the parties’ “Application for Credit,”
“Continuing Guaranty of Payment,” and “Security Agreement” to its complaint. The
complaint requested that the circuit court award Smith Drug immediate possession of the
collateral at issue or, in the alternative, the proceeds of the collateral. In addition, Smith
Drug requested attorney’s fees as provided in the parties’ agreement.
¶4. Cooley neither filed an answer to Smith Drug’s complaint nor responded to Smith
Drug’s requests for admission. Instead, on March 15, 2013, Cooley filed a motion to dismiss
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Smith Drug’s complaint, and Smith Drug filed a timely response. Although Cooley’s motion
to dismiss was never formally set for a hearing, the circuit court heard the motion to dismiss
when it heard Cooley’s motion for a new trial. On September 30, 2013, the circuit court
entered an order setting the trial for November 20, 2013, on Smith Drug’s request for a writ
of replevin. Also on September 30, 2013, the circuit court entered a fiat directing that Cooley
appear on the trial date to answer Smith Drug’s complaint and for “a final hearing to
determine the rights of the parties . . . as to the property described in the [c]omplaint[.]”
¶5. At the hearing on November 20, 2013, Smith Drug’s attorney informed the circuit
court of Cooley’s failure to respond to Smith Drug’s requests for admission. Specifically,
Smith Drug sought to admit evidence as to the value of the collateral at issue. Due to
Cooley’s failure to answer the complaint and to respond to discovery requests for admission,
the circuit court deemed the value of the collateral admitted.
¶6. During the hearing, the only witness called by either of the parties was Smith Drug’s
corporate representative, Tony Thompson. Thompson testified that he visited Cooley Drug’s
premises the morning of the trial. Although Cooley Drug’s front door was padlocked,
Thompson testified that he could see into the store. Based on his observations, Thompson
testified that Cooley Drug’s shelves appeared almost empty and that the building appeared
to hold no inventory. Thompson also testified that he possessed no information to indicate
that any of Smith Drug’s inventory remained within the building. Thompson confirmed that,
as of November 15, 2013, Cooley Drug owed Smith Drug $141,148.57 for the inventory
Smith Drug shipped to Cooley Drug. During Thompson’s testimony, Smith Drug established
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the value of its security interest in the collateral by offering into evidence several documents,
including its Uniform Commercial Code filing statement and the parties’ security agreement.
After Thompson’s testimony, Smith Drug rested, and Cooley elected not to call any
witnesses.
¶7. Following the trial, the circuit court entered a judgment awarding Smith Drug a
replevin and contractual damages. Finding that Smith Drug retained an interest in the
collateral, the circuit court granted Smith Drug immediate possession of and ownership over
any collateral that might be found. However, the circuit court also determined that Cooley
Drug no longer had possession of or control over the collateral and that no proof existed that
any of the collateral remained. Thus, the circuit court awarded Smith Drug $141,148.57,
which constituted the value of the unrecovered collateral. Pursuant to the parties’ security
agreement, the circuit court also awarded Smith Drug $11,396 in attorney’s fees.
¶8. Following the circuit court’s judgment, Cooley filed an unsuccessful motion for a new
trial. Aggrieved by the circuit court’s judgment and the denial of his new-trial motion,
Cooley appeals.
STANDARD OF REVIEW
¶9. As this Court has previously acknowledged:
An appellate court, when reviewing the decision of a trial judge sitting without
a jury, may only reverse when the findings of the trial judge are manifestly
wrong or clearly erroneous. Further, a circuit court judge’s findings are safe
on appeal where they are supported by substantial, credible, and reasonable
evidence.
Hammond v. Caterpillar Fin. Servs. Corp., 66 So. 3d 700, 701 (¶6) (Miss. Ct. App. 2011)
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(internal citations and quotation marks omitted).
DISCUSSION
I. Whether the circuit court erred by allowing Smith Drug to present
evidence of contractual damages at the replevin hearing.
II. Whether the circuit court erred by awarding Smith Drug
contractual damages.
¶10. We address Cooley’s two assignments of error together. According to Cooley, Smith
Drug sought a hearing only on a replevin. Cooley therefore asserts that he prepared for a
hearing only on a replevin and not on the additional issue of contractual damages. Arguing
that the circuit court should have limited the hearing to the issue of a replevin, Cooley
contends that the circuit court erred by allowing Smith Drug to also present evidence of
contractual damages and by awarding Smith Drug a judgment of $141,148.57 for damages.
Cooley asserts that the circuit court should have instead determined whether a replevin was
appropriate and then, if necessary, conducted a separate hearing to determine a damages
award.
¶11. Replevin is a statutorily governed action. Lacoste v. Sys. & Servs. Techs. Inc., 126 So.
3d 111, 112 (¶1) (Miss. Ct. App. 2013). “Mississippi’s replevin statute gives would-be
possessors two procedural options[.]” Id. Under the first option, the plaintiff may seek
immediate seizure of the disputed property by requesting that the court issue a writ to seize
the property from the defendant. See Miss. Code Ann. § 11-37-101 (Rev. 2012). “The action
may be maintained only if the plaintiff is entitled to immediate possession, the property is in
the possession of the defendant when action is commenced, and the detention by the
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defendant is wrongful.” Jeffrey Jackson & Mary Miller, Encyclopedia of Mississippi Law
§ 41:97, at 405-06 (2015) (citing Miss. Code Ann. § 11-37-101).
¶12. Under the second option, as provided by Mississippi Code Annotated section 11-37-
131 (Rev. 2012), “a plaintiff may ask the court to summon the defendant for a hearing to
determine who has the right to possess the property.” Lacoste, 126 So. 3d at 112 (¶1).
“[W]hen an action is commenced under section 11-37-131, instead of a writ, the court issues
a summons. This summons directs the defendant ‘to appear for a final hearing to determine
the rights of the parties as to possession.’” Id. at 114 (¶14) (quoting Miss. Code Ann. § 11-
37-131).
¶13. The record in the present case reflects that Smith Drug sought a replevin against
Cooley and Cooley Drug under the second procedural option provided by section 11-37-131.
As the Mississippi Supreme Court has often stated, “[a] replevin is a possessory action only,
the gist of which is the right of possession in the plaintiff. The primary relief sought is the
return of the identical property; damages are merely incidental.” Deposit Guar. Nat’l Bank
v. Ellzey, 222 So. 2d 680, 681 (Miss. 1969) (citing Rd. Material & Equip. Co. v. McGowan,
229 Miss. 611, 624, 91 So. 2d 554, 556 (1956)). However, Mississippi statutory law
provides that, “[i]n addition to the recovery of the property, the plaintiff may recover
damages sustained by the wrongful taking” of the property. Jackson, § 41:97, at 406 (citing
Miss. Code Ann. § 11-37-127 (Rev. 2012)). According to section 11-37-127, “[i]f, upon a
trial, the judgment shall be for the plaintiff, he shall retain possession of the property
delivered to him under the writ of replevin, or if said property has not been found, then the
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plaintiff shall have a judgment for its value as determined by such hearing, or the value of
the plaintiff’s interest therein.”
¶14. With regard to this issue, the supreme court has stated:
The judgment in a replevin action must be in the alternative: either for
possession of the property replevied and damages for its wrongful detention;
or the value of the property if possession cannot be restored. We expressed it
in this way in Road Material & Equipment Co. . . . :
It is well established that where the plaintiff has a limited
interest in the chattel, by way of security for payment of any
balance due on the purchase price, the judgment should be for
return of the property or, in the alternative, for the value of
plaintiff’s interest therein measured by the balance due with
interest and damages. . . .
Because the gist of a replevin action is possessory and damages
are only incidental, it is well established that, in the absence of
a consent judgment agreed upon by both parties, a judgment in
replevin cannot be for debt, but must be in the alternative. . . .
Deposit Guar. Nat’l Bank, 222 So. 2d at 681-82 (quoting Rd. Material & Equip. Co., 229
Miss. at 624-25, 91 So. 2d at 556-57).
¶15. The supreme court reiterated these principles in Hung Kwong Leung v. Law, 247 So.
2d 695 (Miss. 1971). In Hung Kwong Leung, the plaintiff, Law, filed a replevin action in
county court against her former husband, Leung, to recover jewelry. Id. at 695-96. In that
case, several of the items remained unrecovered, and the county court awarded Law a
monetary judgment for $8,644 (the value of the unrecovered items) and $1,200 in attorney’s
fees. Id. at 696. The circuit court affirmed the county court’s award of the monetary
judgment but reversed the award of attorney’s fees. Id. In affirming the circuit court’s
decision, the supreme court held:
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[T]here was substantial evidence supporting the judgment of the county court
that [Leung] had possession of [Law’s] jewelry and wrongfully kept it from
her, that she was entitled to the possession of her jewelry, and [that,] if it were
not returned to her, then she was entitled to $8,644.00, the value of the jewelry
withheld.
Id. at 697.
¶16. In the present case, Cooley argues he should not be penalized for failing to answer
Smith Drug’s complaint because he filed a motion to dismiss. However, Cooley’s argument
overlooks his failure to respond to Smith Drug’s discovery requests. Prior to the replevin
hearing, the circuit court found that the value of the collateral was deemed admitted due to
Cooley’s failure to answer the complaint and to respond to discovery requests, including
Smith Drug’s requests for admission.1 In addition, the circuit court heard evidence at the
replevin hearing from Thompson, the only witness to testify, that Smith Drug shipped
inventory to Cooley Drug valued at $141,148.57. Although the parties’ security agreement
instructed Cooley Drug to “keep all of its collateral at its principal place of business unless
and until such collateral is disposed of in the ordinary course of . . . business[,]” Thompson
testified that Cooley Drug’s shelves appeared almost empty and devoid of any of Smith
Drug’s collateral. Furthermore, Thompson testified that he lacked any information to
indicate that the collateral remained somewhere else inside the building. Despite being
present at the replevin hearing, Cooley failed to testify or to present any witnesses or
evidence.
¶17. Based on Thompson’s uncontroverted testimony, the circuit court concluded that no
1
See M.R.C.P. 36 (discussing requests for admission).
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proof existed to show that any of Smith Drug’s collateral remained within Cooley Drug’s
possession or control. Thus, in accordance with Mississippi caselaw, the circuit court
ordered that Cooley pay Smith Drug $141,148.57—the value of the property at issue—since
the actual property could not be discovered and returned to Smith Drug. See Deposit Guar.
Nat’l Bank, 222 So. 2d at 681-82; Hung Kwong Leung, 247 So. 2d at 697. The circuit court
also awarded Smith Drug attorney’s fees, which we acknowledge was supported by the
parties’ security-agreement contract. See Lacoste, 126 So. 3d at 117-18 (¶¶30-32). See also
Miss. Code Ann. § 11-37-157 (Rev. 2012) (stating that an action for replevin “shall be
cumulative and in addition to all other actions presently available at law or in equity”).
¶18. After reviewing the record and relevant caselaw, we find no error in the circuit court’s
judgment. The record reflects that substantial credible evidence supported the circuit court’s
findings of fact. See Hammond, 66 So. 3d at 701 (¶6). As a result, we find that Cooley’s
assignments of error lack merit.
¶19. THE JUDGMENT OF THE WAYNE COUNTY CIRCUIT COURT IS
AFFIRMED. ALL COSTS OF THIS APPEAL ARE ASSESSED TO THE
APPELLANTS.
LEE, C.J., IRVING AND GRIFFIS, P.JJ., BARNES, ISHEE, FAIR AND
WILSON, JJ., CONCUR. JAMES, J., CONCURS IN PART WITHOUT SEPARATE
WRITTEN OPINION. GREENLEE, J., NOT PARTICIPATING.
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