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Commercial Fitness Concepts, LLC v. WGL, LLC

Court of Appeals of Arkansas, Divisions II & III

December 12, 2018

COMMERCIAL FITNESS CONCEPTS, LLC APPELLANT
v.
WGL, LLC APPELLEE

          APPEAL FROM THE BENTON COUNTY CIRCUIT COURT [NO. 04CV-15-1241] HONORABLE JOHN R. SCOTT, JUDGE

          Dover Dixon Horne PLLC, by: Carl F. "Trey" Cooper III, for appellant.

          Stephen Lee Wood, P.A., by: Stephen Lee Wood, for appellee.

          DAVID M. GLOVER, JUDGE

         On October 31, 2018, in Commercial Fitness Concepts, LLC v. WGL, LLC, 2018 Ark.App. 522, ___ S.W.3d ___, we reversed and dismissed the trial court's September 13, 2017 judgment. On November 13, 2018, WGL, LLC, filed a petition for rehearing, and Commercial Fitness Concepts, LLC, responded on November 19, 2018. We grant the petition for rehearing and issue the following substituted opinion.

         The underlying facts of this case were set forth in Commercial Fitness Concepts, LLC v. WGL, LLC, 2017 Ark.App. 148, 516 S.W.3d 764, where we affirmed in part and reversed and remanded in part. Briefly, we affirmed the trial court's finding that Commercial Fitness was liable for the conversion of a computer-interface module/panel that controlled the heating and cooling equipment. We reversed and remanded, however, on the trial court's awards of damages: "We therefore reverse and remand the damages awards for the panel/module and for lost rents for the trial court to take further action in accordance with this decision." Id. at 11, 516 S.W.3d at 771. On remand, the trial court accepted the parties' stipulation that WGL "should recover damages in the amount of $2, 888.46 for the fair-market value of the controller, the cost of replacement software, and the cost of installing the software and controller." Consequently, as stated in the September 13, 2017 judgment, "[t]he only issue before the Court was the lost rents incurred by [WGL] which were proximately caused by the conversion of the controller." The trial court found WGL was "entitled to one-month's rent in the amount of $55, 000 as special or consequential damages caused by the conversion of the controller." WGL filed a motion for reconsideration, and Commercial Fitness responded. The trial court denied the motion, explaining in part: "The award for lost rents is proper and consistent with the instructions, on remand, from the Arkansas Court of Appeals[, ]" and "[t]he Court of Appeals remanded this case back to the trial court for proof of the Plaintiff's lost rent damages."[1]

         In the instant appeal, Commercial Fitness raises three points: 1) the trial court erred as a matter of law in ruling that WGL could recover damages for loss of use of real property based on conversion of personal property; 2) the trial court's finding that WGL proved by a preponderance of the evidence that it was deprived of the use of its building is clearly erroneous; and 3) the trial court's finding that WGL proved by a preponderance of the evidence that Commercial Fitness's conversion proximately caused WGL not to collect rents for one month is erroneous and should be reversed. We reverse and vacate the portion of the September 13, 2017 judgment that awards $55, 000 for lost rent, leaving intact the stipulated award of $2, 888.46, and remand to the trial court with instructions to enter a new judgment in the stipulated amount of $2, 888.46.

         At the August 30, 2017 hearing on remand, WGL presented only two witnesses- Mike Charlton and Tim Salmonsen. Charlton testified that he had been the manager of WGL since 2006. He explained WGL was formed to build a custom-lease property for Rhett Garner. He testified WGL had a ten-year written lease with Garner, signed on November 14, 2006, and designated to cover the period 2008-2018; Garner declared bankruptcy; the bankruptcy trustee had possession during the bankruptcy; when WGL regained possession, the first problem was there was no air conditioning, and the building was not habitable in the summertime without air conditioning. Charlton testified there was no air conditioning in the facility because the computer and the interface between the computer and the sixteen HVAC units were missing. He explained he was in possession of the property for two months before the computer was replaced in August 2015. He further explained that "once he started the process, it did not take two months to replace the computer," but his discussions with Brandon Outlaw (who owned Commercial Fitness) about returning the computer "lasted a number of weeks." Charlton stated he could not rent the building without the air-conditioning systems because it was hard to get realtors to walk inside because it was so hot, and it was uninhabitable without the air conditioning. He said WGL sold the property in late November 2015. He described his own work experience and stated WGL was asking $55, 000 a month to lease the building.

         On cross-examination, Charlton said the last time WGL received rent for the property was when Garner made his last payment before filing for bankruptcy. Charlton described his efforts to learn if insurance covered the air-conditioning situation but reported he never received anything from insurance. He acknowledged responding to an interrogatory that "when it became apparent to plaintiff that defendant's insurance company was not going to replace the BCMETH and BCMPWS, plaintiff borrowed the money to pay for the cost of replacing BCMETH and BCMPWS." He acknowledged WGL was not able to lease the property the day after the modules were in place; not able to lease it in September; and not able to do so in October. In fact, he acknowledged WGL was never able to lease the property; instead, the property was sold in November, explaining, "I couldn't find anyone to pay what I needed to rent the property." He then acknowledged the reason WGL did not collect any rent for May, June, July, and August was because its tenant had declared bankruptcy and moved out, and if the tenant had still been in the facility, the tenant would have been paying.

         On redirect examination, Charlton stated he had to borrow the money to pay for the controller WGL purchased from Northwest Controls; it was inconceivable to rent the property during the months of May, June, and July 2015 without air conditioning; and WGL had someone interested in renting if the building had air conditioning, but when that person learned there was no air conditioning, the individual was no longer interested.

         Tim Salmonsen also testified at the hearing on remand. He explained he was a commercial real-estate broker in Benton County and had been for eleven years. He said he was knowledgeable about commercial rental rates in Benton County, and he described the variety of factors that determine the fair-rental value of a commercial property. He stated he was familiar with the property in question, and his job was to find another tenant that could utilize the building.

         Salmonsen was then asked if he had an opinion regarding the fair monthly rental value of the property from May to August 2015. Commercial Fitness objected to the testimony as irrelevant, but the trial court overruled the objection. Salmonsen then stated his opinion that the fair monthly rental value of the property was $56, 000 a month. He further stated, "We had it listed for sale or lease, and we even had a couple of people ask about it, but we couldn't let a renter lease it because the air conditioner was not working at that time." He did not believe anyone would want to occupy a building with no air conditioning in the summer.

         On cross-examination, Salmonsen acknowledged that renters or buyers often have demands or issues they want to address before closing a deal; he said he did not know whether a $6, 000 issue would prevent a closing in a transaction involving a $50, 000 a month rental payment or a $5 million purchase price. He acknowledged the air- conditioning system had been fixed in August, and he still did not lease or sell the property until the end of November.

         For its first point of appeal, Commercial Fitness contends the trial court erred as a matter of law in ruling WGL could recover damages for loss of use of real property based on conversion of personal property. We are not willing to rule, as a matter of law, that consequential damages can never be established in a conversion ...


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