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IOS Capital, Inc. v. Phoenix Printing

April 22, 2004

[5] IOS CAPITAL, INC., PLAINTIFF-APPELLEE AND CROSS-APPELLANT,
v.
PHOENIX PRINTING, INC., D/B/A COLORTECH PRINTING; AND JOSEPH B. LEGENER, DEFENDANTS AND THIRD-PARTY PLAINTIFFS, AND ROBERT C. RUSSELL, DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT AND CROSS-APPELLEE,
v.
CANON U.S.A., INC., AND IKON OFFICE SOLUTIONS, INC., THIRD-PARTY DEFENDANTS.



[6] Appeal from Circuit Court of Sangamon County No. 00L360 Honorable Leslie J. Graves, Judge Presiding.

[7] The opinion of the court was delivered by: Justice Turner

[8]  In January 1998, plaintiff, IOS Capital, Inc., formerly known as IKON Capital Resources (IOS), and defendant, Phoenix Printing, d/b/a Colortech Printing (Colortech), entered into a five-year written agreement for the lease of two black-and-white photocopy machines (copiers). After May 2000, Colortech stopped making payments, which IOS deemed a default under the agreement. Plaintiff sued defendants, Colortech, Joseph Legener, and Robert Russell, on various counts, including conversion. The parties proceeded to trial on the conversion count only against Russell. Following a June 2002 bench trial, the trial court found for IOS and against Russell on the conversion count for $139,457.

[9]  On appeal, Russell argues the trial court erred because (1) IOS failed to prove he was guilty of conversion, (2) the award of damages and the elements making up the award were inappropriate, and (3) it admitted certain hearsay statements not subject to any exception into evidence. IOS cross-appeals, arguing the court erred in calculating damages. We reverse.

[10]   I. BACKGROUND

[11]   In January 1998, IOS and Colortech executed a written five-year agreement (Agreement) for the lease of the copiers by IOS to Colortech. The Agreement required Colortech to make monthly payments of $6,450. Pursuant to the Agreement, if Colortech defaulted, it would pay IOS, inter alia, attorney fees, all amounts due under the Agreement, and a 5% penalty on the overdue amount, and would return the system to IOS at Colortech's expense.

[12]   Russell was majority owner of Colortech and held a position on the three-member board of directors. He was not active in the daily business of Colortech or operating the copiers. He did authorize Legener, company president, to enter into the Agreement with IOS on behalf of Colortech.

[13]   Legener was a corporate officer and director of Colortech until March 2001, when Russell fired him as an employee, officer, and director. While president of Colortech, he managed daily business and oversaw operations at both corporate locations.

[14]   Legener testified for IOS that he signed the Agreement on behalf of Colortech and also as a personal guarantor. Colortech made only 26 of 60 payments on the Agreement, the last one on May 1, 2000. On cross-examination, Legener acknowledged whenever he needed IOS copiers moved or picked up, IOS had always been the party to do so. He asked IOS prior to the onset of litigation to pick up the copiers on three separate occasions, but IOS did not do so. He stated the copiers were not performing and maintenance and service were not adequate, such that "[i]t was costing me more to own the copier than I could possibly get out of the sales and production of the jobs they were designed to produce."

[15]   IOS presented evidence Colortech retained the copiers after May 1 and continued to use them for 23 months, made 706,408 photocopies on the copiers during that time, and collected $49,007.88 of revenue from the sale of those photocopies. Almost all of the copies and revenue occurred before November 2000. IOS stated it had demanded Colortech return the copiers to IOS but Colortech refused to do so.

[16]   Stephen Young, IOS's recovery analyst, testified he phoned Colortech in October 2000 and "asked to speak to someone in authority." He was transferred to "Diane." Young believed she was someone in authority who could make a decision and resolve the dispute over the copiers. When Young asked about getting the copiers back, "Diane" told him "she was not going to release the equipment and did not want to discuss it any further."

[17]   Colortech was served with summons on December 5, 2000. After that date, but before or during March 2001, Russell met with his attorneys, Scott and Scott, who advised him not to return the copiers to IOS. Russell took the advice and ordered Legener not to return the copiers to IOS. At trial, Russell admitted he did not have to take the advice and the decision was his to make.

[18]   IOS retrieved the copiers on April 30, 2002. After bench trial, the trial court found for IOS and against Russell on the conversion count and awarded total damages of $139,457, categorized as follows:

[19]  
"1. Six months of lost rent [at] $38,700.00 $6,450.00

[20]   2. Attorney's fees $38,445.00

[21]   3. Interest at statutory rate $13,352.00

[22]   4. Punitive damages--equal to the amount of income derived from the 706,408 copies made after conversion." $48,960.00

[23]   This appeal ...


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