ATTORNEY FOR APPELLANT: ATTORNEY FOR APPELLEE:
KRISTIN E. ERATO WILLIAM C. MENGES, JR.
UAW Legal Services Plan Kokomo, Indiana
COURT OF APPEALS OF INDIANA
SAMMY GRECO, )
vs. ) No. 34A02-0012-CV-754
KMA AUTO EXCHANGE, INC., )
APPEAL FROM THE HOWARD SUPERIOR COURT
The Honorable John C. Wood, Judge
Cause No. 343D03-9610-CP-160
January 16, 2002
OPINION FOR PUBLICATION
Appellant-defendant/counterplaintiff Sammy Greco (Greco) appeals the trial courts judgment for $11,783.53 in favor
of appellee-plaintiff/counterdefendant KMA Auto Exchange, Inc. (KMA) on KMAs claim against Greco and
on his counterclaim for conversion. We affirm in part and reverse and
remand in part.
Greco raises four issues for our review, which we consolidate and restate as
the following three:
I. whether the trial court properly admitted the Motor Vehicle Installment Sale Contract and
Security Agreement (the security agreement) into evidence;
II. whether the trial court properly awarded attorneys fees to KMA; and
III. whether the trial court properly found that Greco was not entitled to judgment
on his counterclaim of conversion.
Facts and Procedural History
On December 16, 1995, Greco and KMA entered into an agreement in which
KMA agreed to sell Greco a 1987 Dodge pickup truck and Greco agreed
to pay a down payment of $1000.00 and finance the remaining balance with
NBD Bank (NBD). This agreement consisted of two contracts. The first,
the security agreement, is on NBD letterhead and bears the following language on
the first page:
This [security agreement] covers your purchase of the motor vehicle described below.
In this [security agreement], Buyer, you and your refer to each and all
of the persons who sign below. We, us and our refer to
the Seller or anyone to whom the Seller transfers this Agreement. B
signing below, you promise to pay us the amount financed plus fixed interest
computed on the unpaid balance at the ANNUAL PERCENTAGE RATE
This page lists the amount financed, the finance charges, the annual percentage rate,
the total payments, and the total purchase price, which references the down payment.
The first page also contains a payment schedule, a description of the
truck, and all additional fees and requirements related to financing.
The second page of the security agreement includes an itemization of the amount
financed, which specifically excludes the down payment, a cosigners guarantee, and an assignment
clause stating, The Seller accepts this [security agreement] and assigns this [security agreement]
to NBD Bank
. The assignment clause further provides, The Seller has
assigned this [security agreement] to [NBD]. You must make all future payments
. Bob Shoemaker, a KMA salesperson, signed the assignment clause,
and this page also contained Grecos signature.
The third page of the security agreement contains provisions regarding early or late
payment of the loan, ownership and protection of the collateral, and default and
remedies on default as follows:
DEFAULT. You will be in default:
If you fail to make any payment when due.
If you break any promise under this or any other agreement with us.
If you gave us false or misleading information on your loan application.
REMEDIES ON DEFAULT. If you are in default the entire balance of
your loan is due immediately. We will have all rights and remedies
of a secured creditor, holder, or as otherwise provided by law or this
[security agreement], without relief from valuation and appraisement laws.
You agree that we may sue you in the city and county where
we have our main office. You agree to pay our attorneys fees
and any other costs for collection or enforcement of this [security agreement].
You must deliver the collateral to us if we direct. With or
without demanding delivery from you, we will have the right to take possession
of the collateral. We may sell it at any location convenient to
us and apply the proceeds to payment of our expenses and your loan.
Finally, the third page of the security agreement states, If we transfer this
[security agreement] to another creditor, that creditor will have all of our rights.
The second contract signed by Greco and KMA is a used vehicle order
(the order), which provides the year, make, model, stock number, odometer reading, sales
price, tax, filing fees, down payment due on delivery, and financing arrangements.
The order also provides: I have read the face and back of this
agree to this purchase contract. Finally, the conditions on the
back of the order list the various obligations of Greco and KMA including
8. If full payment for purchased used car is not made within
(5) days after notification that same is ready for delivery, dealer may cancel
this order and it is agreed that the advance deposit or proceeds of
sale of used car taken in trade as the case may be, may
be retained by dealer up to twenty percent of the sales price of
sic] used car ordered, or if used car has not been disposed
of, dealer shall have a lien thereon for such amount. Such retention
of fund or lien shall constitute liquidated damages for purchasers failure to complete
full payment. Dealer may, at its option, return such funds or used
car and hold purchaser liable for dealers loss or damage by reason of
purchasers failure to complete such payment within five (5) days mentioned herein.
10. This order shall not constitute a contract until accepted in writing
by dealer or his authorized representative and when so accepted is not transferable
Bob Shoemaker, a KMA salesperson, and Greco signed the order on December 16,
Greco took possession of the truck pursuant to the parties agreements and returned
it the same day complaining of a blown engine. KMA lent Greco
another vehicle and attempted to cash his $1000.00 personal check, which was returned
for insufficient funds. Unable to settle their differences regarding the engines repair,
Greco returned the loaner vehicle and refused to pay the down payment, and
KMA refused to allow Greco to remove the truck from its property despite
his repeated demands. Throughout the course of the proceedings, Greco made regular
payments to NBD and eventually paid the financed portion of the purchase price
On June 11, 1996, KMA filed suit in small claims court alleging that
Greco had breached the security agreement by failing to pay the $1000.00 down
payment and requested damages in the amount of $3,000.00 plus attorneys fees, interest,
and costs pursuant to the terms of the security agreement. On September
12, 1996, Greco answered the complaint and filed three counterclaims, one of which
was considered at trial. In that counterclaim, Greco alleged that KMAs continued
possession of the truck constituted conversion and requested treble damages, attorneys fees, and
costs pursuant Indiana Code Section 34-4-30-1.
The small claims court transferred the
case to the plenary docket because Grecos counterclaims exceeded its jurisdictional amount.
Greco filed a motion for summary judgment on December 20, 1996, which the
trial court denied on June 17, 1997. The trial court certified its
judgment for interlocutory appeal, and we affirmed the trial courts denial of summary
judgment in an unpublished memorandum decision.
See Greco v. KMA Auto Exch.,
Inc., No. 34A02-9710-CV-717 (Ind. Ct. App. 1998).
After a bench trial, the trial court issued the following findings of fact
and conclusions thereon:
FINDINGS OF FACT:
1. That on December 16, 1995, the parties entered into a written
[security agreement] for the sale and purchase of a certain used 1987 Dodge
truck. The purchase of the vehicle was As Is with no warranty.
2. That pursuant to the terms and conditions of said agreement, [Greco]
agreed to pay the sum of one thousand dollars ($1,000) down, and the
balance of the purchase price in installments, with interest on the unpaid balance
from and after December 16, 1995, until paid, at the annual rate of
eleven and twenty-five hundredths percent (11.25%).
3. That [Greco] tendered said down payment by means of personal check,
which was deposited by [KMA] in its normal course of business, and was
returned for insufficient funds.
4. That the [security agreement] provides that in the event of default,
the Seller may take possession of the collateral.
5. That the [security agreement] further provides, You [the buyer] agree that
we [the seller] may sue you in the city and county where we
have our main office. You agree to pay our attorneys fees and
any other costs for collection or enforcement of this Agreement.
6. That [KMAs] Attorney expended thirty-five (35) hours in connection with this
cause, at the trial level, and, in addition, represented [KMA] during the Interlocutory
Appeal; and that a reasonable compensation would be one hundred fifty dollars ($150.00)
per hour for trial level work, and an additional flat fee of five
thousand dollars ($5,000) for the appeal, for a total amount of ten thousand
two hundred fifty dollars ($10,250.00).
7. That any denominated finding herein which is a conclusion of law
should be considered as a Conclusion of Law.
CONCLUSIONS OF LAW:
1. [Greco] breached his agreement with [KMA] by failing to pay the
down payment as agreed.
2. That said breach placed [Greco] in default under the terms and
conditions of the [security agreement].
3. That [KMA] was entitled to possession of the truck, pursuant to
the terms and conditions of the [security agreement].
4. That [KMA] is entitled to judgment against [Greco] in the sum
of one thousand dollars ($1,000), together with pre-judgment interest thereon, at the rate
of eleven and twenty-five hundredths percent (11.25%) from December 16, 1995, until the
date hereof, in the sum of five hundred thirty-three dollars and fifty-three cents
($533.53); for its attorneys fee in the sum of ten thousand two hundred
fifty dollars ($10,250.00); and for its costs of this action.
5. That [Greco] is entitled to nothing by way of his counter-claim,
and [KMA] is entitled to judgment thereon.
6. That any denominated conclusion herein which is a finding of fact
should be considered as a Finding of Fact.
On October 13, 2000, Greco filed a motion to correct error, which the
trial court denied. Greco then discovered that the trial had not been
recorded, and on July 6, 2001, the trial court approved the parties joint
statement of the evidence. Greco now appeals.
Discussion and Decision
I. Admissibility of the Security Agreement
Greco argues that the trial court improperly admitted the security agreement into evidence
because KMA did not present a sufficient foundation that the document was made
at or near the time of the transaction pursuant to Indiana Evidence Rule
803(6). Indiana Evidence Rule 803(6) excepts from the hearsay rule certain business
records that meet the following criteria:
made at or near the time by, or from information
transmitted by, a person with knowledge, if kept in the course of a
regularly conducted business activity, and if it was the regular practice of that
business activity, and if it was the regular practice of that business activity
to make the memorandum,
all as shown by the testimony or affidavit
of the custodian or other qualified witness, unless the source of information or
the method or circumstances of preparation indicate a lack of trustworthiness.
The admission of evidence is a determination entrusted to the discretion of the
Fowler v. Napier, 663 N.E.2d 1197, 1200 (Ind. Ct. App.
1996). A trial court abuses its discretion when its action is clearly
erroneous and against the logic and effect of the facts and circumstances before
it or the reasonable inferences to be drawn therefrom. Id.
II. Attorneys Fees
At trial, Robert Snow (Snow), KMAs general manager, testified that he was involved
in the sale of the of the truck and that, while he did
not sign the security agreement, he was the keeper of the records and
the document was kept in the ordinary course of business at KMA,
it was signed during the regular course of its business, as part of
its regularly conducted business activity. Because Snow testified that he was involved
in the sale of the truck to Greco, a sufficient foundation exists from
which the trial court could have concluded that the security agreement was made
at or near the time of the transaction.
See, e.g., Williams v.
Hittle, 629 N.E.2d 944, 948 (Ind. Ct. App. 1994) (stating that sufficient evidence
existed from which the trial court could conclude that the contested expense reports
were made at or near the time of the transaction where employees of
a beauty parlor met weekly to report their earnings and the weekly earnings
were reported monthly to an auditor), trans. denied. Therefore, we cannot conclude
that the trial court abused its discretion in admitting the security agreement into
The standard of review for findings of fact and conclusions thereon issued pursuant
to Indiana Trial Rule 52(A) is one of great deference. S-Mart v.
Sweetwater Coffee Co., 744 N.E.2d 580, 585 (Ind. Ct. App. 2001), trans denied.
We engage in a two-tiered review and must first determine whether the
evidence supports the findings and second, whether the findings support the judgment.
Couchman v. Restoration Contractors, Inc., 743 N.E.2d 346, 347 (Ind. Ct. App. 2001).
We will not set aside the trial courts findings and conclusions unless
they are clearly erroneous. See id. A judgment is clearly erroneous
only if a review of the record leaves the court with a firm
conviction that a mistake has been made. S-Mart, 744 N.E.2d at 585.
Greco argues that the trial court improperly relied on the security agreement in
awarding attorneys fees to KMA because KMA assigned all of its rights to
NBD under the security agreement. Greco argues in the alternative that even
if KMA had rights under the security agreement, he was not in default
because under its terms, he was only obligated to pay (and did in
fact pay) the amount financed.
Upon thorough review of the security agreement, we conclude that KMA had no
right to recover attorneys fees under its terms because they govern only the
financing arrangements, not the down payment.
Indeed, the security agreement specifically excludes
the down payment in calculating the amount financed in the Itemization of Amount
Financed and specifically states, By signing below, you promise to pay us the
amount financed plus fixed interest computed on the unpaid balance at the ANNUAL
Thus, by signing the security agreement, Greco only agreed to
pay the amount financed, not the down payment. We are therefore firmly
convinced that a mistake has been made, which requires us to reverse the
award of attorneys fees to KMA.
KMA argues that we are required to review Grecos counterclaim for conversion under
a sufficiency of the evidence standard. We review claims tried to the
bench, however, under a clearly erroneous standard. See Dinsmore v. Lake Elec.
Co. 719 N.E.2d 1282, 1285 (Ind. Ct. App. 1999); Ind. Trial Rule 52(A).
A judgment is clearly erroneous when a review of the record leaves
us with a firm conviction that a mistake has been made. Id.
Greco argues that the trial court improperly granted judgment on his counterclaim in
KMAs favor because the trial court erroneously concluded [t]hat [KMA] was entitled to
possession of the truck, pursuant to the terms and conditions of the [security
agreement] since KMA had assigned all its rights to NBD. Greco further
argues that since he was not in default, the remedies on default provision,
which might have given a creditor rights in the truck, is inapplicable.
In response, KMA contends that it was entitled to possession of the truck
pursuant to the security agreement because Greco was in default.
As we concluded above, KMA does not have rights under the security agreement
because it governs only the financing arrangements between Greco and NBD; therefore, we
are firmly convinced that a mistake was made
when the trial court found
[t]hat the [security agreement] provides that in the event of default the Seller
may take possession of the collateral. Thus, the trial courts conclusions that
KMA was entitled to possession of the truck pursuant to the terms of
the security agreement and that Greco is entitled to nothing by way of
his counter-claim, and [KMA] is entitled to judgment thereon are clearly erroneous.
While we conclude that the trial court improperly granted judgment in KMAs favor,
we must also determine whether Greco is entitled to judgment on his counterclaim
Under Indiana Code Section 34-24-3-1, a person who proves the elements of criminal
conversion by a preponderance of the evidence can recover up to three times
the actual damages, the costs of the action, and reasonable attorneys fees.
See Gilliana v. Paniaguas, 708 N.E.2d 895, 899 (Ind. Ct. App. 1999) (citing
Ind. Code § 34-24-3-1), trans. denied. This section allows a person who
has suffered a pecuniary loss as a result of a violation of criminal
conversion to bring a civil action to recover the loss. Id.
Indiana Code Section 35-43-4-3 provides that [a] person who knowingly or intentionally exerts
unauthorized control over property of another person commits criminal conversion, a Class A
misdemeanor. Indiana Code Section 35-4-1-2-2 provides that (a) A person engages
in conduct intentionally if, when he engages in the conduct, it is his
conscious objective to do so. (b) A person engages in conduct
knowingly if, when he engages in the conduct, he is aware of a
high probability that he is doing so. Indiana Code Section 35-43-4-1(a) provides
that to exert control over property means to obtain, take, carry, drive, lead
away, conceal, abandon, sell, convey, encumber, or possess property, or to secure, transfer,
or extend a right to property. Finally, Indiana Code Section 35-43-4-1(b) provides,
a persons control over property of another person is unauthorized if it is
without the other persons consent
We have maintained that the mens rea requirement differentiates criminal conversion from the
more innocent breach of contract or failure to pay a debt situation that
the criminal conversion statute was not intended to cover.
See Gilliana, 708
N.E.2d at 899. The legislature did not intend to criminalize bona fide
contract disputes. Nations Credit Commercial Corp. v. Grauel Enter., Inc., 703 N.E.2d
1072, 1078 (Ind. Ct. App. 1998), trans. denied.
Here, the evidence adduced at trial indicates that after the trucks engine failed,
KMA towed the vehicle to its premises and offered to replace the engine
at cost. Greco decided to have the engine replaced elsewhere and informed
KMA that he wanted to retrieve his truck for that purpose. KMA
refused to return the vehicle to Greco unless or until he paid the
down payment. Greco then attempted to retrieve the truck from KMAs lot,
but other vehicles blocked it in, preventing Greco from removing it. Grecos
attorney also testified that he called KMA and informed the person in charge
that they had no right to hold Grecos vehicle and that it must
be returned. Two years after the purchase date, KMA had still refused
to return the truck. KMA presented no evidence to dispute this testimony.
Based on this evidence, we are convinced that KMA exerted unauthorized control over
Grecos property. We further conclude that KMA did so knowingly because neither
the security agreement nor the order gave KMA a right to possession of
the vehicle. Additionally, Grecos attorney testified that he informed KMA that they
had no right to the truck and that it must be returned[,] and
KMA presented no evidence indicating that it had acted upon a reasonable interpretation
of an ambiguous contract or that this was a transaction between sophisticated business
entities. See Gilliana, 708 N.E.2d at 900 (considering these factors in determining
whether the requisite mens rea was present in a claim of civil conversion).
In fact, the security agreement governed the financing arrangements and unambiguously assigned
any rights that KMA might have had to NBD. Further, nothing in
the record even intimates that Greco was a sophisticated business entity.
Thus, Greco established the elements of criminal conversion by a preponderance of the
evidence. We therefore reverse the trial courts judgment on the counterclaim and
remand to the trial court to amend its findings and conclusions in accordance
with this opinion and to calculate Grecos damages under Indiana Code Section 34-24-3-1.
Affirmed in part and reversed and remanded in part.
RILEY, J., and MATHIAS, J., concur.
This section has been recodified without substantial change as Indiana Code
Section 34-24-3-1, and we hereinafter refer to it as such.
Footnote: Brackets in quotation in original. We note that in this
finding, the trial court added the bracketed the buyer and the seller to
the language of the security agreement. As mentioned above, the security agreement
actually states, You agree that we may sue you in the city and
county where we have our main office. You agree to pay our
attorneys fees and any other costs for the collection or enforcement of this
In fact, it appears that the order, rather than the security
agreement, created rights in KMA to the down payment in describing the remedies
available to KMA if full payment is not timely made. We also
note that while the order contains a liquidated damages clause, it does not
provide for the award of attorneys fees.
We agree with Grecos first argument in that, even if KMA
did have rights under the security agreement, it assigned those rights to NBD.
This conclusion is based on the following clauses:
Sellers Acceptance. The Seller accepts this Agreement and assigns this Agreement to
Notice of Acceptance[.] The Seller has assigned this Agreement to the Bank
identified in the Sellers Acceptance above.
If we transfer this [security agreement] to another creditor, that creditor will have
all of our rights.
We further note that since the security agreement only governs the financed amount
and Greco timely paid that amount in full, he is not in default
under the security agreement.
Footnote: In the conclusion section of his appellate brief, Greco asks us
to vacate the trial courts award of prejudgment interest. Greco, however, does
not dispute the trial courts award of the down payment to KMA; thus,
we cannot reverse the trial courts award of prejudgment interest thereon.
Footnote: We note that this language tracks the language of the standard
Footnote: In its brief, KMA states that Snow testified that Greco had
not been denied permission to remove the truck from KMAs property. We
note, however, that the agreed statement of the evidence indicates that this statement
was ordered stricken from the record because KMA had failed to respond to
discovery requests, and thus Grecos earlier requests for admissions had been deemed admitted.