Conversion is an unauthorized act which deprives another of his/her property permanently or for an indefinite time[i]. The using of a thing, without the license of the owner, and also a wrongful sale of it, is a conversion[ii]. An action for conversion may be maintained by persons having the immediate right to possession of the article converted[iii].
Where a bank takes up a check and returns it to the drawer without authority from the owner to do so, this is an interference with plaintiff’s property and constitutes a conversion, since, when the bank undertakes to return the check to the maker, it exercises ownership over it[iv]. Similarly, a mortgagee is liable for conversion where he takes possession under a mortgage and either refuses to sell or delays making a sale for an unreasonable time[v].
Three criteria that should be met before the law recognize a property right are[vi]:
- there must be an interest capable of precise definition;
- it must be capable of exclusive possession or control; and
- the putative owner must have established a legitimate claim to exclusivity.
Wrongful conversion applies only to personal property[vii]. Personal property consists of every kind of property that is not real[viii]. Thus, an action for conversion generally lies only with respect to personal property and real estate is not subject to conversion[ix].
Further, personal property is the subject of conversion if it is of a tangible nature or if it is tangible evidence of title to intangible or real property[x].
Conversion does not lie for trade secrets and similar intangible property[xi]. The right to use a domain name is a form of intangible personal property[xii]. Similarly, confidential information is not property that is the subject of an action in conversion[xiii]. A conversion action will not lie for a partnership interest[xiv]. Also, a conversion action cannot be maintained where the damages sought are for breach of a contract[xv].
Thus, an action for conversion ordinarily lies only for personal property that is tangible, or to intangible property that is merged in, or identified with, some document. An intangible is merged in a document when, by the appropriate rule of law, the right to the immediate possession of a chattel and the power to acquire such possession is represented by the document, or when an intangible obligation is represented by the document, which is regarded as equivalent to the obligation[xvi].
Courts follow the tradition rule limiting the tort of conversion to certain types of intangible interests. Under that rule, conversion may apply to three situations involving intangible property such as[xvii]:
- conversion of documents in which intangible rights are merged such as promissory notes, bank checks, bonds, and bills of lading.
- conversion of tangible objects which are highly important to the exercise of an intangible right such as bank savings books, insurance policies, tax receipts, and account books.
- conversion of rights without an accompanying conversion of something tangible like a corporation’s refusal to register a transfer of shareholder rights.
The law recognizes conversion of intangibles represented by documents, such as bonds, notes, bills of exchange, stock certificates, and warehouse receipts. However, ordinarily, there can be no conversion of the goodwill of a business, trade secrets, a newspaper route, or a laundry list of customers[xviii]. Since good will inseparably adheres to a business and its assets, it cannot be the subject of conversion unless the business or its assets are also the subject of conversion[xix].
The tort of conversion applies to many types of personal property, including money[xx]. Money can be the subject of conversion if the specific money in question can be identified[xxi].
The general rule is that money is an intangible and therefore not subject to a claim for conversion[xxii]. An exception exists, however, when a plaintiff can allege that the defendant converted specific segregated or identifiable funds.
Hence, an action for conversion of money consists of three elements[xxiii]:
- specific and identifiable money,
- a deprivation of money belonging to another, and
- an unauthorized act which deprives another of his money.
Conversion claims generally are recognized in connection with funds that have been or should have been segregated for a particular purpose or that have been wrongfully obtained or retained or diverted in an identifiable transaction. The identification of a named bank account satisfies the identifiable fund requirement for a conversion claim[xxiv].
In Taylor Pipeline Constr., Inc. v. Directional Rd. Boring, Inc., 438 F. Supp. 2d 696 (E.D. Tex. 2006), the court held that money can be the subject of a conversion, but only when it is in the form of a specific chattel such as old coins or when the money is delivered to another party for safekeeping, the keeper claims no title, and the money is required and intended to be segregated either substantially in the form in which it was received or as an intact fund. The court observed that from its nature the title to money passes by delivery and its identity is lost by being changed into other money or its equivalent in the methods ordinarily used in business for its safekeeping and transmission.
Thus, a cause of action for conversion fails when the plaintiff cannot trace the exact funds claimed to be converted, making it impossible to identify the specific monies in dispute. Also when indebtedness can be discharged by payment of money, an action in conversion is inappropriate.
An action will not lie for the conversion of a mere debt or chose in action[xxv]. Consequently, where there is no obligation to return identical money, but only a relationship of debtor and creditor, an action for conversion of the funds representing the indebtedness will not lie against the debtor[xxvi].
Negotiable instruments, like checks and promissory notes, can be be subject to conversion. Since a certificate of deposit is in effect a promissory note evidencing a loan from the depositor to the bank, any right under the certificate is a chose in action and cannot form the basis of an action for conversion[xxvii]. The conversion of a negotiable instrument includes the full value of the intangible rights identified with the document.
A judgment creditor does not have a right to a specific portion of a creditor’s assets. Hence an action for conversion does not lie. Also, money that is part of a judgment cannot generally be described or identified as a specific chattel.
An action may be maintained for the conversion of an unpublished manuscript. Similarly, letters may be subject to an action for conversion. However, when a book has already been published, there is no conversion when a subsequent publisher did not take, from their rightful possessor, control of the original plates used to create the book.
Except for special kinds of accounts in some jurisdictions, bank accounts generally cannot be the subject of conversion, because they are not specific money but only an acknowledgment by the bank of a debt to its depositor[xxviii].
[i] National Union Fire Ins. Co. v. Carib Aviation, Inc., 759 F.2d 873 (11th Cir. Fla. 1985)
[ii] Clark v. Whitaker, 19 Conn. 319 (Conn. 1848)
[iii] Owens v. Andrews Bank & Trust Co., 265 S.C. 490 (S.C. 1975)
[iv] Louisville & N. R. Co. v. Citizens’ & Peoples’ Nat’l Bank, 74 Fla. 385 (Fla. 1917)
[v] McLaughlin v. Clementi, 144 Colo. 34 (Colo. 1960)
[vi] G.S. Rasmussen & Assoc., Inc. v. Kalitta Flying Service, Inc., 958 F.2d 896 (9th Cir. Cal. 1992)
[vii] Hartlin v. Cody, 144 Conn. 499 (Conn. 1957)
[viii] Olschewski v. Hudson, 87 Cal. App. 282 (Cal. App. 1927)
[ix] Waldron v. Rotzler, 862 F. Supp. 763 (N.D.N.Y 1994)
[x] Roystone v. John H. Woodbury Dermatological Institute, 67 Misc. 265 (N.Y. Sup. Ct. 1910)
[xi] Diamond Phoenix Corp. v. Small, 2005 U.S. Dist. LEXIS 12798 (D. Me. June 28, 2005)
[xii] Office Depot, Inc. v. Zuccarini, 596 F.3d 696 (9th Cir. Cal. 2010)
[xiii] Thompson v. Mobil Producing Co., 163 F. Supp. 402 (D. Mont. 1958)
[xiv] Allied Inv. Corp. v. Jasen, 354 Md. 547 (Md. 1999)
[xv] Geler v. National Westminster Bank, 770 F. Supp. 210 (S.D.N.Y. 1991)
[xvi] Kremen v. Cohen, 337 F.3d 1024 (9th Cir. Cal. 2003)
[xvii] Bloom v. Hennepin County, 783 F. Supp. 418 (D. Minn. 1992)
[xviii] Miles, Inc. v. Scripps Clinic & Research Found., 810 F. Supp. 1091 (S.D. Cal. 1993)
[xix] Weinberg v. Wallace, 314 S.C. 183 (S.C. Ct. App. 1994)
[xx] Navid v. Uiterwyk Corp., 130 B.R. 594 (M.D. Fla. 1991)
[xxi] Allen v. Gordon, 429 So. 2d 369 (Fla. Dist. Ct. App. 1st Dist. 1983)
[xxii] Allied Inv. Corp. v. Jasen, 354 Md. 547 (Md. 1999)
[xxiii] Navid v. Uiterwyk Corp., 130 B.R. 594 (M.D. Fla. 1991)
[xxiv] ADP Investor Commun. Servs. v. In House Atty. Servs., 390 F. Supp. 2d 212 (E.D.N.Y. 2005)
[xxv] Kindergartners Count Inc. v. DeMoulin, 171 F. Supp. 2d 1183 (D. Kan. 2001)
[xxvi] ATD Corp. v. DaimlerChrysler Corp., 261 F. Supp. 2d 887 ( E.D. Mich. 2003)
[xxvii] Geler v. National Westminster Bank, 770 F. Supp. 210 (S.D.N.Y. 1991)
[xxviii] Reliance Ins. Co. v. U.S. Bank, N.A., 143 F.3d 502 (9th Cir. Wash. 1998)