Conversion Law Definition Elements Remedies Defenses Lawyer

Definition. Conversion if an “ancient theory of recovery” with roots in the common law action of trover. (Voris v. Lampert (2019) 7 Cal.5th 1141, 1150.) Conversion is any act of dominion wrongfully exerted over another’s personal property. (Ibid.) There must exist an actual interference with one’s ownership or right of possession. (Welco Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 208.)


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California Jury Instruction Elements of Conversion CACI 2100

The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages resulting from the conversion. (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.)

Paula claims that Daniel wrongfully exercised control over her personal property, a antique necklace. To establish this claim, she must prove all of the following:

(1) that Paula owned/possessed/had a right to possess the necklace;

(2) that Daniel substantially interfered with Paula’s property by intentionally or knowingly doing one or more of the following: (a) taking possession of the necklace, (b) preventing Paula from having access to the necklace, (c) destroying the necklace, or (d) refusing to return the necklace after Paula demanded its return;

(3) that Paula did not consent;

(4) that Paula was harmed and that Daniel’s conduct was a substantial factor in causing Paula’s harm.

Element 1: Plaintiff’s Right to Possession

 The first element of conversion is plaintiff’s ownership or right to possession of the property at the time of the conversion. (Cerra v. Blackstone (1985) 172 Cal.App.3d 604, 609.) Neither legal title nor absolute ownership of the property is necessary. A party need only allege he is entitled to immediate possession at the time of conversion. The fact that plaintiff regained possession of the converted property does not prevent him from suing for damages for the conversion. (Enterprise Leasing Corp. v. Shugart Corp. (1991) 231 Cal.App. 3d 737, 748.)


“Neither legal title nor absolute ownership of the property is necessary. . . . A party need only allege it is ‘entitled to immediate possession at the time of conversion. . . .’ . . . However, a mere contractual right of payment, without more, will not suffice.” (Plummer v. Day/Eisenberg, LLP (2010) 184 Cal.App.4th 38, 45.)


“The existence of a lien . . . can establish the immediate right to possess needed for conversion. ‘One who holds property by virtue of a lien upon it may maintain an action for conversion if the property was wrongfully disposed of by the owner and without authority . . . .’ Thus, attorneys may maintain conversion actions against those who wrongfully withhold or disburse funds subject to their attorney’s liens.” (Ibid., internal citation omitted.)


Personal Property Only:

Real property may not be the object of a conversion claim. (Munger v. Moore (1970) 11 Cal.App.3d 1, 7, disagreeing with Katz v. Enos (1945) 68 Cal.App.2d 266, 269.)


Tangible Property:

The converted property must be tangible; courts have traditionally refused to recognize as conversion the unauthorized taking of intangible interests that are not merged with, or reflected in, something tangible. (Thrifty-Tel, Inc. v. Bezenek (1996) 46 Cal.App.4th 1559.) Thus, conversion does not lie with intangibles such as business goodwill (Adkins v. Model Laundry Co. (1928) 92 Cal.App.575, 583) or a competitor’s customer route list (Olschewski v. Hudson (1927) 87 Cal. App. 282, 286-288.)


Nonetheless, some interests generally viewed as intangible have been recognized in conversion actions when coupled with documents such as bonds, notes, bills of exchange, stock certificates, and warehouse receipts. (Miles, Inc. v. Scripps Clinic & Research Found (S.D. Cal. 1993) 810 F. Supp. 1091, 1094 [citing 5 B.E. Witkin Summary of California Law, Torts § 613].) To determine if an intangible item can be converted, the Ninth Circuit uses the three part Rasmussen test: First, there must be an interest capable of precise definition; second, it must be capable of exclusive possession or control; and third, the putative owner must have established a legitimate claim to exclusivity. (G.S. Rasmussen & Assoc., Inc. v. Kalitta Flying Service, Inc. (9th Cir. 1992) 958 F.2d 896, 903.)


Money

Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment. A generalized claim for money is not actionable as conversion. (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395.)


Stocks, Bonds, Notes, Bills (Intangible Property Rights)

Generally, conversion has been held to apply to the taking of intangible property rights when represented by documents, such as bonds, notes, bills of exchange, stock certificates, and warehouse receipts. As one authority has written, courts have permitted a recovery for conversion of assets reflected in such documents as accounts showing amounts owed, life insurance policies, and other evidentiary documents. These cases are far removed from the paradigm case of physical conversion; ] they are essentially financial or economic tort cases, not physical interference cases. (Welco Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 209.)


Stocks. It is well settled in California that shares of corporate stock are subject to an action in conversion and it is not necessary that possession of the certificate evidencing title be disturbed. Instead, it is sufficient that there is interference with the owner’s free and unhampered right to dispose of property without limitations imposed by strangers to the title. (Applied Medical Corp. v. Thomas (2017) 10 Cal.App.5th 927, 938.)


Money in Bank. “There is no special rule preventing a depositor from pursuing a conversion action against the bank that holds his or her money. . . . The law applicable to conversion of personal property applies to instruments, which includes certificates of deposit.” (Fong v. East West Bank (2018) 19 Cal.App.5th 224, 232-233.)


Credit Card, Debit Card, Paypal, Venmo, Apple Pay. “Credit card, debit card, or PayPal information may be the subject of a conversion.” (Welco Electronics, Inc. v. Mora (2014) 223 Cal.App.4th 202, 212.)

Buyer of Stolen Property Lack of Good Faith

“One who buys property in good faith from a party lacking title and the right to sell may be liable for conversion. The remedies for conversion include specific recovery of the property, damages, and a quieting of title.” (State Farm Mut. Auto. Ins. Co. v. Department of Motor Vehicles (1997) 53 Cal.App.4th 1076, 1081-1082.)

Element 2: Defendant’s Wrongful Act

To prove a cause of action for conversion, the plaintiff must show the defendant acted intentionally to wrongfully dispose of the property of another. (Duke v. Superior Court (2017) 18 Cal.App.5th 490, 508.)



Defendant’s Intent:

Conversion must be knowingly or intentionally done, but a wrongful intent is not necessary. Because 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.’ 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. (Taylor v. Forte Hotels Int’l (1991) 235 Cal.App.3d 1119, 1124.)


Conversion is a strict liability tort. The foundation of the action rests neither in the knowledge nor the intent of the defendant. Instead, the tort consists in the breach of an absolute duty; the act of conversion itself is tortious. Therefore, questions of the defendant’s good faith, lack of knowledge, and motive are ordinarily immaterial. The basis of a conversion actions rests upon the unwarranted interference by defendant with the dominion over the property of the plaintiff from which injury to the latter results. Therefore, neither good nor bad faith, neither care nor negligence, neither knowledge nor ignorance, are the gist of the action. (Los Angeles Federal Credit Union v. Madatyan (2012) 209 Cal.App.4th 1383, 1387.)


Substantial Act:

Where the interference with personal property is not sufficiently substantial to require the defendant to pay the full value of property, the action is one for trespass to chattel and not conversion. (Zaslow v. Kroenert (1946) 29 Cal.2d 541, 551.) For example, a hacker’s unauthorized access to a computer is more in the nature of trespass than a conversion. (Thrifty-Tel, Inc. v. Bezenek (1996) 46 Cal.App.4th 1559.)


Conspiracy:

A conspiracy to convert renders each participant in the wrongful act responsible for damages as a joint tortfeasor, irrespective of whether or not he or she was a direct actor and regardless of the degree of their activity. The time when the common design of the conspirators is fully accomplished depends on the individual facts and circumstances of each case, and on the nature and purpose of the conspiracy. Such matters are for the determination of the trier of act. (De Vries v. Brumback (1960) 53 Cal.2d 643, 647.)

Element 3: Conversion Damages

 In an action for conversion, the fact that the amount of damage may not be susceptible of exact proof does not bar recovery. (Arques v. National Superior Co. (1945) 67 Cal.App.2d 763, 779.)


Damages for emotional distress growing out of a defendant’s conversion of personal property are recoverable. (Hensley v. San Diego Gas & Electric Co. (2017) 7 Cal.App.5th.1337, 1358.)


The appropriate measure of damages is first the value of the property at the time of the conversion, plus interest. (Cal. Civ. Proc. Code, § 3336.)


Market value:

Ordinarily the value of the property is determined by its market value at the time of conversion. (In re Brian S. (1982) 130 Cal.App.3d 523, 530.)


Market value plus personal value:

If a property has some market value coupled with a personal or peculiar value, the value is deemed that peculiar value. However, defendant must first have notice of this special value or be a wilful wrongdoer. (Cal. Civ. Proc. Code, § 3356; Kimes v. Grosser (2011) 195 Cal.App.4th 1556.)


No market value, but unusual character:

If a property has no market value but is of unusual character, such as scrapbooks, the plaintiff can testify as to the personal value of the contested property, even though it may only be of sentimental value. In such an instance, elements such as the difficulty and expense to which plaintiff was put in acquiring the property, the nature and character of the use to which it was put by plaintiff, etc. are to be factored by the court or jury in their discretion in assessing value. (Cal. Civ. Proc. Code, § 3356; Kimes v. Grosser (2011) 195 Cal.App.4th 1556.)


Promissory note:

Where a promissory note is converted, the face value of the note is the prima facie value of the written instrument, but evidence is admissible to establish that actual value of the note is less than the face value, and the burden falls on defendant to prove it. (Knudsen v. Hill (1964) 227 Cal. App. 2d 639, 643-644 [interpreting Cal. Civ. Proc. Code, § 3356].)


Negotiable instrument:

Section 3420 of the California Commercial Code generally provides that a converter is liable for the amount payable on the instrument, a plaintiff may only recover for that portion of the instrument in which he has an interest. (Stenseth v. Wells Fargo Bank (1995) 41 Cal.App.4th 457, 465-466.)

Statute of Limitations

 The statute of limitations is three years from the date of the conversion, unless there has been fraudulent concealment of the facts or failure of disclosure by a fiduciary. In that case, the statute of limitations does not commence to run until the aggrieved party discovers or ought to have discovered the conversion. (Cal. Civ. Proc. Code, § 338, subd. (c); Strasberg v. Odyssey Group, Inc. (1996) 51 Cal.App.4th 906, 916.)

Remedies

 
Compensatory Damages

Under Cal. Civ. Code section 3336, the appropriate measure of damages is first the value of the property at the time of the conversion, plus interest. (Cal. Civ. Code, § 3336; In re Brian S. (1982) 130 Cal.App.3d 523, 530.)


Emotional Distress

If conversion of property is legal cause of harm to plaintiff’s feelings, damages may be allowable for the harm, as when defendant intentionally deprives plaintiff of essential household furniture, which humiliates plaintiff, a result that defendant should have realized would follow. (Gonzales v. Personal Storage, Inc. (1997)56 Cal.App.4th 464, 475-479.)


Injunctive Relief

Preliminary injunction generally not proper method to obtain possession of personal property. (Cal. Code Civ. Proc., §§ 525 et seq.; Voorhies v. Greene (1983) 139 Cal.App.3d 989, 997-998.) However, injunction is proper method to prevent dissipation of wrongfully obtained res. (Heckmann v. Ahmanson (1985) 168 Cal.App.3d 119, 136.)


Negotiable Instruments

Liability is presumed to be amount payable on instruments, although recovery cannot exceed amount of plaintiff’s interest in instrument. However, unlike Cal. Civ. Code section 3336, there is no recovery of damages for time and effort spent attempting to recover the converted property. (Cal. Comm. Code, § 3420; Stenseth v. Wells Fargo Bank (1995) 41 Cal. App. 4th 457, 466.)


Punitive Damages

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. (In re Brian S. (1982) 130 Cal.App.3d 523, 530.)


Constructive Trust

Plaintiff should also consider bringing a separate claim for an accounting where a confidential or statutory relationship exists and there is an unknown amount due from defendant that cannot be determined but for an accounting. (Cal. Civ. Code, §§ 2223, 2224.) However, this accounting action cannot duplicate the conversion action if only money is involved because the accounting action arises out of an unknown sum, while the conversion action arises out of an identifiable sum.


Equitable Lien

(Cal. Civ. Code § 2872) Farmers Ins. Exchange v. Zerin, 53 Cal. App. 4th 445, 454-455 (equitable lien is proper if unjust enrichment and detrimental reliance are implicated; however, a mere promise to pay a debt out of a particular fund or a promise to hold property in trust for another, standing alone, will not create an equitable lien).


Limited Recovery Based On Preexisting Lien

One having a mere lien on personal property cannot recover greater damages for its conversion from one having a superior right, after the lien is discharged, than the amount secured by the lien, as well as the amounts allowed by Cal. Civ. Code section 3336 for loss of time and expenses. (Cal. Civ. Code, § 3338.)


Attorneys’ Fees Not Available

Damages under California Civil Code section 3336 do not include attorneys’ fees. (Haines v. Parra (1987) 193 Cal. App. 3d 1553, 1559.)

Affirmative Defenses


Consent

If plaintiff consented to the taking of the property, the taking is not a conversion. (Klett v. Security Acceptance Co. (1952) 38 Cal.2d 770, 789.)


Unclean Hands

Equitable defense of “unclean hands” could be submitted to jury where defense was raised against plaintiff’s legal claim for conversion. (Unilogic, Inc. v. Burroughs Corp. (1992) 10 Cal.App.4th 612.)


Bona Fide Innocent Purchaser for Value Without Notice

The elements of a bona fide purchase are payment of value, in good faith and without actual or constructive notice of another’s rights. Absence of notice is an essential requirement in order that one may be regarded as a bona fide purchaser. (Oakdale Village Group v. Fong (1996) 43 Cal.App.4th 539, 546.)


Cal. Comm. Code, § 9609

As a secured party, defendant had a right to take possession of the personal property after plaintiff’s default.


Cal. Civ. Code, § 1859-1861

Limited liability for innkeepers, hotelkeepers, hospitals, rest homes or boardinghouses for losses or injuries to personal property.


Qualified Refusal

One who holds property of another as a trustee or bailee or in similar circumstances is not a converter if, upon demand of another party for the property, he or she makes a qualified refusal to surrender the property if their real and stated purpose is to secure a reasonable opportunity to inquire into the claimant’s right. (Giacomelos v. Bank of America (1965) 237 Cal.App.2d 99, 100-101.)


Waiver and Estoppel

Where an action for conversion of money has been brought, a defendant can show as a defense that it disbursed the sums in the due course of the business between itself and the plaintiff and to show that plaintiff has waived or is estopped from making its claims.(Eistrat v. Western Hardwood Lumber Co. (1958) 164 Cal.App.2d 374, 383; Bastanchury v. Times-Mirror Co. (1945) 68 Cal.App.2d 217, 236.)


Statute of Frauds

Regardless of the statute of frauds, plaintiff would still be entitled to recover since his cause of action was not to enforce the contract but for the conversion of his personal property. (MacDonald v. Kingsley (1957) 149 Cal.App.2d 376, 378; Cal. Civ. Code, §§ 1624, 982, 955.1; Cal. Comm. Code, §§ 1206, 2201, 8319, 10103, 10201.)