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Civil Liability For Conversion

A conversion is the unauthorized assumption of the right of ownership over the personal property of another to the exclusion of the owner’s rights[i].

The tort of conversion is an intentional exercise of dominion and control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel[ii].

Thus, conversion is the deprivation of another’s right of property in or use or possession of a chattel or other interference therewith without the owner’s consent and without lawful justification[iii].

The elements of conversion are[iv]:

  • the plaintiff’s ownership or right to possession of the property;
  • the defendant’s conversion by wrongful act inconsistent with the property rights of the plaintiff; and
  • damages.

A conversion may be committed by unreasonably withholding possession from one who has the right to it.

A person not in lawful possession of a chattel may commit conversion by [v]:

  • intentionally dispossessing the lawful possessor of the chattel,
  • intentionally using a chattel in his possession without authority so to use it,
  • receiving a chattel pursuant to an unauthorized sale with intent to acquire for himself or for another a proprietary interest in it,
  • disposing of a chattel by an unauthorized sale with intent to transfer a proprietary interest in it, or
  • refusing to surrender a chattel on demand to a person entitled to lawful possession.

A conversion may be proved in one of three ways:

  • by tortious taking;
  • by any use or appropriation to the use of the person in possession, indicating a claim of right in opposition to rights of the owner; or
  • refusal to give up possession to the owner on demand[vi].

A conversion is an intentional tort[vii].  The element of intent that must be proven is the intent to exercise dominion and control over the plaintiff’s property in a manner inconsistent with the plaintiff’s rights[viii].  The intent required is not necessarily a matter of conscious wrongdoing.

However, the intent or purpose to do a wrong is not a necessary element to establish conversion[ix].  In Chem-Age Indus. v. Glover, 2002 SD 122 (S.D. 2002), the court held that the foundation for the action of conversion rests neither in the knowledge nor the intent of the defendant.  It rests upon the unwarranted interference by a defendant with the dominion over the property of the plaintiff from which injury to the latter results.

Since the act must be knowingly done, neither negligence active or passive nor a breach of contract even though it result in injury to or loss of specific property, constitutes a conversion[x].  It follows therefore that mistake, good faith, and due care are ordinarily immaterial and cannot be set up as defenses in an action for conversion.

A person is not relieved of liability to another for trespass to a chattel or for conversion by his/her belief because of a mistake of law or fact not induced by the other that s/he:

  • has possession of the chattel or is entitled to its immediate possession;
  • has the consent of the other or of one with power to consent for him or her; or
  • is otherwise privileged to act.

The essence of a conversion is not the acquisition of property, but the wrongful deprivation of that property from its true owner[xi].  One who is lawfully in possession of property may nevertheless be liable for a conversion for exceeding the scope of authority for that lawful possession when the use seriously violates the true owner’s right of control.

To establish a conversion claim, a plaintiff must prove that:

  • it had a possessory interest in the property,
  • the defendants intentionally interfered with the plaintiff’s possession, and
  • the defendants’ acts are the legal cause of the plaintiff’s loss of property.

At common law, even unwitting acts by the trespasser are sufficient to sustain a cause of action for conversion.  A creditor’s improper treatment of collateral can amount to a conversion[xii].  A creditor who converts collateral is entitled to a credit against the debtor’s recovery for the debt secured by the collateral. The tort of conversion generally may extend to the type of intangible property rights that are merged or incorporated into a transferable document.

A possessory interest in personal property is sufficient to maintain an action for conversion against one who sells that property without notifying the lawful possessor.  Even though the lawful possessors do not have legal title, if s/he exercises control of it by taking possession of it and maintaining it for a period of time, his or her rights in the chattel are sufficient.

The gravamen of an action for conversion lies in the defendant’s taking the plaintiff’s personalty without consent and exercising dominion over it inconsistent with the plaintiff’s right to possession[xiii].  The focus of inquiry is whether a defendant has appropriated to his/her own use the chattel of another without the latter’s permission and without legal right.

In order to sustain an action for conversion of personal chattels, a plaintiff must demonstrate an ownership or possessory interest in the property at the time of the conversion[xiv].

A plaintiff must also identify the allegedly converted property with reasonable certainty, in order to render it capable of identification, for the purpose of determining whether the property in fact belonged to the plaintiff at the time of its conversion.

One jurisdiction states that a conversion is a continuing tort, lasting as long as the person entitled to the use and possession of property is deprived of it. It does not necessarily end when the original wrongdoer transfers physical possession to another.

However, another jurisdiction states that conversion is not a continuing tort and damages for a conversion are based upon the property’s fair market value at the time and place of the conversion, plus interest on it.

Further, another jurisdiction has held that a wrongful conversion cause of action must be filed before the statute of limitations runs out and the continuing tort theory does not apply.

A plaintiff who proved conversion in a common law action is entitled to damages equal to the full value of the chattel at the time and place of conversion[xv].  The measure of damages in conversion is the fair market value of the property at the time and place of the conversion[xvi].

When the defendant satisfies the judgment in the action for conversion, title to the chattel passes to him so that he is in effect required to buy it at a forced judicial sale.

The modern tort of conversion subjects the wrongdoer to liability to the possessor for the entire value of the chattel in addition to any special damages resulting from the conversion and this liability does not depend on the existence of the possessor’s responsibility to the owner for the loss of the chattel[xvii].

Although the normal measure of damages for conversion is the value of the property at the time of the conversion and a fair compensation for the time and money properly expended in pursuit of the property, emotional distress damages are  also allowed[xviii].

[i] Litzinger v. Estate of Litzinger (In re Litzinger), 340 B.R. 897 (B.A.P. 8th Cir. 2006)

[ii] Carver v. Quality Inspection & Testing, 946 P.2d 450 (Alaska 1997)

[iii] Stevenson v. Economy Bank of Ambridge, 413 Pa. 442 (Pa. 1964)

[iv] Kasdan, Simonds, McIntyre, Epstein & Martin v. World Sav. & Loan Ass’n (In re Emery), 317 F.3d 1064 (9th Cir. Cal. 2003)

[v] Baram v. Farugia, 606 F.2d 42 (3d Cir. Pa. 1979)

[vi] Litzinger v. Estate of Litzinger (In re Litzinger), 340 B.R. 897 (B.A.P. 8th Cir. 2006)

[vii] Vaughn v. Vaughn, 146 Md. App. 264 (Md. Ct. Spec. App. 2002)

[viii] Id

[ix] Chem-Age Indus. v. Glover, 2002 SD 122 (S.D. 2002)

[x] Taylor v. Forte Hotels Int’l, 235 Cal. App. 3d 1119 (Cal. App. 4th Dist. 1991)

[xi] Yaeger v. Magna Corp. (In re Magna Corp.), 2005 Bankr. LEXIS 1114 (Bankr. M.D.N.C. Mar. 14, 2005)

[xii] Chemical Sales Co. v. Diamond Chemical Co., 766 F.2d 364 (8th Cir. Mo. 1985)

[xiii] DeChristofaro v. Machala, 685 A.2d 258 (R.I. 1996)

[xiv] Id

[xv] Baram v. Farugia, 606 F.2d 42 (3d Cir. Pa. 1979)

[xvi] Vaughn v. Vaughn, 146 Md. App. 264 (Md. Ct. Spec. App. 2002)

[xvii] Wallander v. Barnes, 341 Md. 553 (Md. 1996)

[xviii] Spates v. Dameron Hospital Assn., 114 Cal. App. 4th 208 (Cal. App. 3d Dist. 2003)

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