Statute of Limitations
A conversion occurs when the person in possession of property unequivocally exercises dominion over the property inconsistent with the claims of the owner. Statutes of limitations applicable to actions for conversion are defined by legislative jurisdiction. For example, pursuant to New York law, a claim for conversion/trespass to chattels is subject to a three-year statute of limitations, whereas in Pennsylvania and Kansas it is two years.
However, there are certain limitations or special provisions available to the statute of limitations. Pursuant to 28 U.S.C.A. § 2415(b), an action for conversion of property of the United States may be brought within six years after the right of action accrues, with specified exceptions regarding actions for or on behalf of a recognized tribe, band or group of American Indians.
The statute of limitations begins to run when the cause of action accrues. In some states, the cause of action accrues at the time the harm is committed and in some states it accrues when such harm is discovered. In Serafini v. Mariani, 2010 U.S. Dist. LEXIS 31819, 14-15 (M.D. Pa. Mar. 31, 2010), the court stated that under Pennsylvania law, a cause of action for conversion does not accrue until there has been a demand for the goods and a refusal to deliver.
In Virginia, a cause of action accrues and the limitation period begins to run from the date the injury is sustained. The court found in Halstead v. Bilter (In re Bilter), 413 B.R. 290 (Bankr. E.D. Va. 2009), that Virginia case law recognizes that the limitations period may be tolled if a defendant intentionally misleads a plaintiff who is unaware of the wrongful act. But, the limitations period is tolled only until the plaintiff could reasonably have discovered the injury and will not be tolled where the plaintiff failed to make a reasonable inquiry.
In Flores v. Emerich & Fike, 2008 U.S. Dist. LEXIS 49385, 50-51 (E.D. Cal. June 17, 2008), the court held that when the defendant in a conversion action fraudulently conceals the relevant facts or fails to disclose such facts in violation of his or her fiduciary duty to the plaintiff, the statute of limitations does not commence to run until the aggrieved party discovers or ought to have discovered the existence of the cause of action for conversion.
In O’Keeffe v. Snyder, 83 N.J. 478 (N.J. 1980), the court stated that under the discovery rule, the statute of limitations on an action for replevin begins to run when the owner knows or reasonably should know of his cause of action and the identity of the possessor of the chattel. Subsequent transfers of the chattel are part of the continuous dispossession of the chattel from the original owner.
Generally, the expiration of the statute of limitations bars the remedy to recover possession and also vests title in the possessor. The lapse of a limitations period is an affirmative defense that a defendant needs to plead and prove. However, in cases where the defendant is an innocent purchaser, the affirmative defense shall not be acceptable if the court finds that the defendant refused to convey the chattel upon demand.
The New York County Supreme Court, in Menzel v. List, 49 Misc. 2d 300 (N.Y. Sup. Ct. 1966), stated that an innocent purchaser of stolen goods becomes a wrongdoer only after refusing the owner’s demand for their return. Here, the defendant established that he was an innocent purchaser who had no notice that the painting had been stolen and pleaded the statute of limitations as a defense, based on either (1) the lapse of time since 1941, when the plaintiff had first been divested of custody, or in the alternative, (2) the lapse of time since 1955, when he purchased the piece. However, the court disagreed and held that a cause of action for conversion or replevin accrues against a person who lawfully comes by a chattel arises, not upon the stealing or the taking, but upon the defendant’s refusal to convey the chattel upon demand.