An innocent third person into whose hands a property falls without consideration has an obligation to restore it to the rightful owner if the property is fraudulently converted and diverted from its proper use[i]. However, generally, an innocent purchaser for value and without notice, actual or constructive, that his or her vendor had secured the goods by a fraudulent purchase is not liable for conversion[ii]. The result is different if the goods are taken from the fraudulent possessor with knowledge of the fraud[iii].
Where a landowner is charged with conversion, the circumstances that have been given weight include:
- knowledge of the ownership of the chattel,
- consent of the landowner to the placing of the chattel on his or her land, or
- the right of the owner of the chattel to do so[iv].
The owner of the premises is not considered liable for conversion in the following circumstances[v]:
- lack of knowledge of the ownership of the chattel;
- absence of a right to leave the chattel on the premises;
- notice to the owner to remove it;
- failure to remove the chattel within a prescribed time;
- apparent lack of value of the property; and
- apparent abandonment of the chattel by the owner[vi].
A plaintiff must allege the following in order to state a claim for aiding and abetting an alleged common-law conversion:
- the existence of a primary violation;
- knowledge of this violation on the part of the aider and abettor; and
- substantial assistance by the aider and abettor in the achievement of the primary violation[vii].
Moreover, the plaintiff must demonstrate a wrongful invasion by the defendant of some legal right of the plaintiff. He/she must also demonstrate some damage resulting to the plaintiffs from the wrongdoing[viii]. Persons acting together in effecting a conversion may be held jointly and severally liable[ix]. However, the mere act of advising another not to surrender property on demand does not make the adviser a party to a conversion where he/she had no authority over the other[x]. Evidence of the scope of employment must be plain in order to charge an employer with liability for the conversion or destruction of property[xi].
An agent who wrongfully converts another’s property or assists a principal in doing so is personally liable for conversion even if the agent commits the act:
- in good faith,
- without knowledge of the owner’s rights,
- in obedience to the principal’s commands and
- without gaining from the transaction[xii].
An agent who takes the property of another without consent and delivers it to a principal is guilty of a conversion. He/she may be held liable although acting in ignorance of the true owner’s title and in perfect good faith[xiii]. An agent, factor, commission merchant, or auctioneer is guilty of conversion when he/she receives property from his or her principal and sells it and pays the proceeds of the sale to the principal, if the principal has no title to the property, even though the agent acts without knowledge of the defect in the title[xiv].
An officer or agent of a corporation is personally liable for his or her acts which constitute a conversion of the property of a third person[xv]. Any officer or director who aids, instigates, or assists in the conversion by a corporation becomes personally liable[xvi]. However, an officer or director of a corporation is not personally liable for a conversion committed by the corporation or one of its officers merely by virtue of the office or directorship that he/she holds. He/she must participate or have knowledge amounting to acquiescence or commit a breach of the duty he/she owes to the owner of the property before being held liable[xvii].
A director or officer has been held not liable to creditors or persons dealing with a corporation for negligence in the management of its affairs , in suits instituted by third persons whose property has been converted by the corporation[xviii]. An action for conversion may be maintained against a public officer in a proper case[xix].
[i] Widen v. Norman, 9 Chest. 348 (Pa. C.P. 1960).
[ii] McCullen v. Hereford State Bank, 214 F.2d 185 (5th Cir. 1954)
[iii] Federal Ins. Co. v. Smith, 63 Fed. Appx. 630 (4th Cir. 2003)
[iv] Newhall Chain, Forge & Iron Co. v. William J. Oliver Mfg. Co., 7 Tenn. App. 127, 1927 WL 2262 (1927); Navratil v. Smart, 400 So. 2d 268 (La. Ct. App. 1st Cir. 1981); Poggi v. Scott, 167 Cal. 372, 139 P. 815 (1914).
[v] Row v. Home Sav. Bank, 306 Mass. 522, 29 N.E.2d 552, 131 A.L.R. 160 (1940)
[vi] Blackinton v. Pillsbury, 260 Mass. 123, 156 N.E. 895 (1927); Row v. Home Sav. Bank, 306 Mass. 522, 29 N.E.2d 552, 131 A.L.R. 160 (1940); McGlamory v. Marcum, 118 Ga. App. 516, 164 S.E.2d 274 (1968); Druckenmiller v. Kuzenski, 181 Pa. Super. 246, 124 A.2d 141 (1956); Bush v. Lane, 139 Cal. App. 2d 376, 293 P.2d 465 (3d Dist. 1956); Row v. Home Sav. Bank, 306 Mass. 522, 29 N.E.2d 552, 131 A.L.R. 160 (1940); Boston Educational Research Co., Inc. v. American Mach. & Foundry Co., 355 F. Supp. 1272 (D. Mass. 1973).
[vii] Calcutti v. SBU, Inc., 273 F. Supp. 2d 488 (S.D. N.Y. 2003)
[viii] Hirsch v. Bank of America, 107 Cal. App. 4th 708, 132 Cal. Rptr. 2d 220 (1st Dist. 2003)
[ix] Norton Refrigerated Express, Inc. v. Ritter Bros. Co., Inc., 552 S.W.2d 910 (Tex. Civ. App. Texarkana 1977)
[x] Lewiston Trust Co. v. Deveno, 145 Me. 224, 74 A.2d 457 (1950)
[xi] Inland Trucking Corp. v. U S., 150 Ct. Cl. 642, 281 F.2d 457 (1960);
[xii] Continental Supply Co. v. White, 92 Mont. 254, 12 P.2d 569 (1932)
[xiii] Ashcraft v. Tucker, 73 Colo. 363, 215 P. 877, 28 A.L.R. 692 (1923)
[xiv] U.S. v. Union Livestock Sales Co., 298 F.2d 755, 20 Ohio Op. 2d 253, 96 A.L.R.2d 199 (4th Cir. 1962)
[xv] Matter of Durand Milling Co., 9 B.R. 669 (Bankr. E.D. Mich. 1981)
[xvi] Texful Textile Ltd. v. Cotton Exp. Textile, Inc., 891 F. Supp. 1381 (C.D. Cal. 1995)
[xvii] Aeroglide Corp. v. Zeh, 301 F.2d 420 (2d Cir. 1962)
[xviii] Tennessee Chemical Co. v. Cheatham, 217 Ala. 399, 116 So. 420 (1928)
[xix] Wade v. Ray, 1917 OK 148, 67 Okla. 39, 168 P. 447 (1917)