Montgomery Ward & Co., Inc. v. Andrews

Rule of Law:

A secured creditor, even with a right to repossess collateral, can be held liable for torts such as trespass, conversion, outrageous conduct, and tortious interference if its actions exceed the scope of its contractual or statutory rights, particularly by taking unsecured property, exerting exclusive possession of premises beyond what is necessary for repossession, or improperly interfering with a prospective business transaction.

Facts:

• In October 1976, Robert W. Andrews contracted with Montgomery Ward and Company, Inc. (Wards) to operate a catalog sales agency in his Aspen building and also entered into a financing agreement giving Wards a security interest in some of his equipment and merchandise.
• In March 1979, Andrews decided to sell the agency, a sale which required Wards' approval per their contract.
• In May 1979, Andrews discussed selling the agency to the Weilands for $68,000, and Wards' district sales manager told the Weilands they could not afford the agency and that it was losing money, despite lacking actual financial knowledge.
• In June 1979, a second Wards' agency sales manager reiterated to the Weilands that they could not afford the agency and that the price was too high, then asked them to call back in a few days.
• Mrs. Weiland later called the second sales manager but learned he had been replaced, and the new manager required them to restart the application and interview process anew, which discouraged the Weilands and led them to abandon the purchase.
• Prior to August 21, 1979, Andrews had refused to pay his remittances to Wards.
• On August 21, 1979, Wards decided to close the store, gave Andrews one day's notice, and a Wards controller then loaded everything from the business premises, including Andrews' personal goods, into a truck and took it to Wards' dock in Denver.
• All locks at the business premises were changed, and the key was delivered to Wards’ attorney; Andrews was unable to obtain the key until 10 days later at a meeting with Wards' agents in Denver.

Procedural Posture:

• In September 1979, Montgomery Ward and Company, Inc. (Wards) commenced an action in state trial court against Robert W. Andrews, alleging breach of contract for a balance due under the sales agency contract.
• Andrews filed counterclaims for breach of contract, trespass, conversion, outrageous conduct, interference with a prospective sale of his business, fraud, and negligent misrepresentations, seeking exemplary damages on all but the breach of contract counterclaim.
• At trial, the court dismissed Andrews’ fraud and negligent misrepresentation counterclaims at the close of his presentation.
• The trial court directed a verdict in favor of Andrews on his claims for trespass and for conversion of unsecured goods, allowing the issue of damages to be determined by the jury.
• The jury returned a verdict finding for Wards on its breach of contract claim, awarding $24,000, and for Wards on Andrews’ counterclaims for breach of contract and conversion of secured goods.
• The jury found in favor of Andrews and against Wards on his counterclaims for trespass ($1,428 plus $1,000 exemplary damages), conversion of unsecured goods ($15,002 plus $10,000 exemplary damages), outrageous conduct ($3 actual plus $1 exemplary damages), and interference with a prospective sale ($68,000 plus $1 exemplary damages).
• The trial court, upon Wards’ motion, reduced the interference award by $928 and subsequently denied Wards’ post-judgment motion to amend its breach of contract judgment to include attorney fees.
• Judgments were entered on the verdicts as modified on February 1, 1983.
• Timely post-trial motions were argued on July 11, 1983, at which time the trial court announced its rulings and directed Andrews’ attorney to prepare a written order.
• A written order, setting forth the court’s rulings, was signed by the court on August 5, 1983, and entered on the register of actions.
• Wards (appellant) appealed the judgments against it and the trial court’s refusal to add attorney fees to its breach of contract judgment.
• Andrews (cross-appellant) cross-appealed, challenging the adequacy of the exemplary damages awarded for interference (one dollar) and the compensatory damages awarded for conversion ($15,000).