Damages

Damages are awarded in conversion cases and such damages are intended to compensate an aggrieved party for the loss sustained because such person’s property was wrongfully taken by somebody[i].  An owner of converted property may be entitled to recover its value at the time of the wrongful taking and the interest to the date of trial[ii].  The purpose of damages is to award the injured party full compensation for actual losses[iii].  Courts have held that damages must be proven with reasonable certainty by showing sufficient evidence to enable the jury a fair and reasonable approximation of damages[iv].

However, the amount of damages differs in situations where the act of conversion is tainted with fraud.  Thus, the plaintiff will have an option, when conversion was attended with fraud, willful wrongdoing or gross negligence, to determine the fair market value at its highest rate over the period between the date of conversion and the date of filing of suit[v].  In this situation, a plaintiff can maximize his/her damage award in order to punish especially egregious acts of conversion.  However, where conversion is not combined with fraud or other egregious conduct by the defendant, conversion damages are not subject to the whim of the plaintiff and the courts are prohibited from granting exorbitant damages so as to unjustly enrich either the wrongdoer or the complaining party[vi].

The fair market value is the price which the property will bring between a willing seller and a willing buyer in the open market after negotiations[vii].  In the absence of sufficient market information to establish the value, damages will be calculated on the basis of the reasonable value of the property at the time of conversion.

The measure of damages rests on the notion of fairness and is generally the fair reasonable market value of the property at the time and place of conversion.  The requirement of fairness mandates that damages may also include other losses or expenses necessary to compensate the plaintiff for all actual losses or injuries sustained as a natural and proximate result of the defendant’s wrongdoing.

While calculating damages, the value of the property is ordinarily determined at the place of conversion[viii].  The place of conversion has particular significance in the calculation of damages.  For instance, if a person who purchases a property from the original converter further converts it and the conversion occurred at a place where it has increased in value by transportation, calculation of damages will become complicated.  The difference of opinion of courts in this regard is evident in various decisions.  While some courts have held that the purchaser is liable for the value at the place of the original conversion, other courts have held that the purchaser is liable for the value of the property at the place to which it has been transported, without any reduction for the cost of transportation.

If the converted commodity is not of fluctuating value, the value of the property is ordinarily determined at the time of conversion, making damages arising from conversion fixed and complete as of the date of conversion[ix].

There is a statutory presumption that the damage caused by a wrongful conversion of personal property is its value at the time of the conversion.  However, such a presumption is not absolute and statutes at times grant the plaintiff the benefit of an increase in value after the conversion.  In such a case, a plaintiff can recover the highest value of the property between the time of the conversion and the time of the action, trial, or verdict.  It is also to be noted that such recovery is permissible only when the property continues to be unlawfully detained[x].  A plaintiff can elect such a remedy at any time during the trial.

In certain exceptional cases, a person with a limited interest in the converted property may recover the full value of the property.  Thus, a court has held that “the measure of damages for conversion by a lessor of personal property sold by a third party to the lessee under a conditional sales contract by which title is retained in the vendor and installed in a building erected by the lessee on the premises is not the unpaid portion of the purchase money, but the value of the property at the time of conversion, with interest[xi].”  Conversely, a plaintiff having a special or qualified interest in the converted goods is entitled only to the value of such interest.

While determining damages, a court may also consider the motive or good or bad faith of a defendant by analyzing factors such as the extent and duration of the person’s exercise of dominion or control, the harm done to the chattel, and the harm and expense caused to the aggrieved party.

The measure of damages differs considerably depending upon the facts and circumstances of each case.  Thus, courts have awarded exemplary or punitive damages even in cases where compensatory damages could not be proved beyond a nominal amount.  Generally, punitive damages may be allowed when the conversion involves elements of fraud, ill will, malice, recklessness, wantonness, oppression, insult, willful,  conscious disregard of the plaintiff’s rights, or other aggravating circumstances[xii].  The defendant’s conduct subsequent to the act of conversion is a relevant factor in the determination whether punitive damages are warranted.

When there is a violation of an ascertained legal right without any actual damages, courts may award nominal damages[xiii].  Thus, “nominal damages could be awarded for conversion resulting from the release of pledged stock before there was proof of full payment of notes and prior notice to noteholders, even though there were no actual damages since defendants ultimately satisfied all payment obligations secured by the stock certificates[xiv].”

An aggrieved party can elect to sue in assumpsit or in tort for a conversion.  Where an election has been made to sue in assumpsit, the basis of the action will be the benefit the wrongdoer has received rather than damages for the tort.

Although the aggrieved person is not entitled to recover damages for remote injuries, courts often grant special damages for any injury proximately resulting from the conversion[xv].  Hence, compensation for time lost as a proximate result of the conversion or for time and money spent in pursuit of the property converted may be recovered[xvi].
In addition, a plaintiff is entitled to recover interest or the equivalent of interest on the value of the property converted[xvii].  While some jurisdictions allow the recovery of interest as a matter of right or by virtue of a specific statutory provision, in some other states the matter is left to the discretion of court or jury.  Also, interest on damages for conversion is computed in accordance with statutory interest rates.

Mitigation of damages is permissible in conversion cases upon proper evidence produced by the defendant.  Ordinarily, a defendant is not entitled to mitigation of damages as to the expenses incurred for the care and preservation of the property where the property was not returned to the plaintiff and where the defendant was charged with the value of the property as of the time of the conversion.  Mitigation of damages are allowed when the defendant’s act of preserving the property operated to change it into a form of greater value and where the plaintiff was awarded as damages the highest market value of the property between the date of the conversion and that of the trial.

Similarly, return of converted goods to their rightful owners may mitigate damages if such return and acceptance occur prior to the beginning of the action.  Mitigation is permissible for return of property only on fulfillment of the following conditions: “(1) the owner must have accepted return of the goods; (2) the original conversion must have occurred by mistake; and (3) return of the goods must have occurred promptly after discovery of the mistake and before commencement of an action for conversion[xviii].”

A defendant having an interest in the property is permitted to interpose his/her interest in the mitigation of damages.  Thus, in an action for conversion, the amount of the debt due the defendant and secured by a lien on the converted property is deductible from the value of the property at the time of the conversion and it is the balance which the plaintiff is entitled to recover[xix].  Similarly, mitigation of damages is also allowed by courts where a third person has an interest in the converted property.

The rule permitting recovery of an increased value of property after conversion has several exceptions.  For instance, in the matter of conversion of a business enterprise, the reasonable market value measured as of the time and place of conversion is the determinant factor.  Damages for the conversion of corporate stocks are computed in the same manner.  However, if the conversion of stock is tainted by fraud, willful wrongdoing, or gross negligence, the measure of damages is the highest market value between the date of conversion and the filing of the suit[xx].  Whereas, in the case of insurance policies, nominal and substantial damages are sometimes recoverable.  However, the value of the property insured is not the determinant factor in such a case.

The value of the property plays a determinant role in cases pertaining to conversion of property severed from real estate, irrespective of whether the act was done by a willful trespasser or in good faith by an inadvertent trespasser.

There is some difference of opinion among courts regarding cases relating to conversion of timber and trees.  Some courts have calculated damages “on the basis of value of the timber at the time of its removal, less any value a putative adverse possessor may have added to the property[xxi].”

In cases where an innocent party purchases converted timber, courts have observed that such purchaser of converted timber acquires no title and remains liable to the true owner for the value of the timber[xxii].  Hence, courts have held that “the appropriate measure of damages is the delivered value, and delivered value is computed by adding the stumpage price and logging costs of the converted timber[xxiii].”

Damages awarded for the conversion of ordinary personal property is the reasonable market value of the personal property at the time of conversion.  However, if the personal property is something of sentimental value, courts will take into consideration the reasonable special value of such articles while computing the measure of damages.

In certain cases, difficulty may arise in the computation of the accurate market value of property held for personal use.  In such cases, courts will consider several factors like the original cost and the cost to the plaintiff for producing the article.  Courts will also consider the evidence of wear and tear, the length of time of use, and the condition of the property at the time of the conversion.

[i] Production Credit Asso. v. Nowatzski, 90 Wis. 2d 344 (Wis. 1979), Traeger v. Sperberg, 256 Wis. 330, 333, 41 N.W.2d 214 (1950)

[ii] Management Computer Servs. v. Hawkins, Ash, Baptie & Co., 206 Wis. 2d 158, 188 (Wis. 1996)

[iii] State v. Corbitt, 2003 UT App 417 (Utah Ct. App. 2003)

[iv] Cutler Cranberry Co. v. Oakdale Electric Cooperative, 78 Wis. 2d 222 (Wis. 1977)

[v] Miller v. Kendall, 804 S.W.2d 933 (Tex. App. Houston 1st Dist. 1990)

[vi] Varel Mfg. Co. v. Acetylene Oxygen Co., 990 S.W.2d 486, 498 (Tex. App. Corpus Christi 1999)

[vii] Hudson v. Cook, 82 Ark. App. 246 (Ark. Ct. App. 2003)

[viii] Am. State Bank v. Union Planters Bank, N.A., 332 F.3d 533 (8th Cir. Ark. 2003)

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

[x] Lamb v. Salvage Disposal Co., 244 Ga. App. 193 (Ga. Ct. App. 2000)

[xi] National Bank of Republic v. Wells-Jackson Corp., 358 Ill. 356 (Ill. 1934)

[xii] Flavor-Inn v. NCNB Nat’l Bank, 309 S.C. 508 (S.C. Ct. App. 1992)

[xiii] Knickerbocker v. Cannon (In re Estate of Knickerbocker), 912 P.2d 969 (Utah 1996)

[xiv] MacGuire v. Elometa Corp., 189 A.D.2d 708 (N.Y. App. Div. 1st Dep’t 1993)

[xv] Alcaraz v. State, 2002 WY 57, P8 (Wyo. 2002)

[xvi] Fulks v. Fulks, 95 Ohio App. 515, 519 (Ohio Ct. App., Lawrence County 1953)

[xvii] Medi-Cen Corp. v. Birschbach, 123 Md. App. 765 (Md. Ct. Spec. App. 1998)

[xviii] Am. State Bank v. Union Planters Bank, N.A., 332 F.3d 533 (8th Cir. Ark. 2003)

[xix] Salter v. Leventhal, 337 Mass. 679, 698-699 (Mass. 1958)

[xx] Quest Medical v. Apprill, 90 F.3d 1080 (5th Cir. Tex. 1996)

[xxi] Penn v. McElheney, 191 Ga. App. 465 (Ga. Ct. App. 1989)

[xxii] Bay Springs Forest Products, Inc. v. Wade, 435 So. 2d 690 (Miss. 1983)

[xxiii] Greenlee v. Mitchell, 607 So. 2d 97 (Miss. 1992)


Inside Damages