Chapter 1-3 Conversion

• Jurisdiction: United States

1-3 Conversion

1-3:1 Introduction

The unauthorized and wrongful assumption and exercise of dominion and control over the personal property of another, to the exclusion of or inconsistent with the owner's rights, is in law a conversion. To constitute a conversion, it is not necessary that there be a manual taking of the property in question.

1-3:1.1 Related Causes of Action

Fraud, Breach of Fiduciary Duty, Money had and received, Negotiable Instruments, Quantum Meruit, Security Deposit Statute (Texas Property Code Section 92.109), Texas Theft Liability Act (Civil Practice and Remedies Code Sections 134.001-134.005)

1-3:2 Elements

(1) The plaintiff must have either ownership, possession, or the right to immediate possession of the property.⁶⁶

• The property in question must be personal property because Texas does not recognize a cause of action for conversion of real property.⁶⁷
• The property in question must be tangible personal property because Texas generally does not recognize a cause of action for conversion of intangible property⁶⁸ or money.⁶⁹

(2) The defendant wrongfully exercised dominion and control over the plaintiff's property in denial of or inconsistent with the plaintiff's rights.⁷⁰

• Defendant does not have to manually take the property for an act of conversion to occur, provided there is an unauthorized and wrongful exercise of control over the property to the exclusion of or inconsistent with the owner's rights.⁷¹
• Property initially obtained legally may still be the basis of a suit for conversion when the property departs so far from the conditions under which it was received as to amount to an assertion of right inconsistent with the owner's.⁷²
• However, there is authority for the argument that where a defendant's conduct would give rise to liability only because it breaches the parties' agreement, the plaintiff's claim ordinarily sounds only in contract, and the tort of conversion can be barred by the economic loss rule.⁷³
• A wrongful intent by the defendant is not necessary; it suffices that the defendant intends to assert a right in the property.⁷⁴

(3) Plaintiff made a demand for the property which the defendant refused.⁷⁵

• An exception to the demand requirement exists when the defendant's acts of control constitute a clear repudiation of the plaintiff's rights which would excuse a demand⁷⁶ or when the demand would be useless.⁷⁷

(4) The plaintiff suffered actual loss or injury as a natural and proximate result of the defendant's conversion.⁷⁸

1-3:3 Damages and Remedies

1-3:3.1 Actual Damages

Actual damages and the return of property are recoverable.⁷⁹ They are measured by the sum of money necessary to compensate the plaintiff for all actual losses, not merely the reasonable market value of the property.⁸⁰ See Chapters 10 and 11.

1-3:3.1a Loss of Value

General measure of damages for loss of value is the fair market value of the property at the time and place of the conversion.⁸¹

When conversion involves fraud, willful wrong, or gross negligence, and the property converted was of a changing value, damages for conversion may be measured by the fair market value at its highest rate for the period between the date of conversion and the date of filing suit.⁸²

measure of damages for stocks and bonds is the highest intermediate value of the stock between the time of conversion and a reasonable time after the owner has received notice of the conversion.⁸³

Damages are measured by intrinsic value of the property when the converted property is without market value.⁸⁴

1-3:3.1b Loss of Use

If the plaintiff recovers the converted property, damages for loss of use may be obtained for the period during which the plaintiff was deprived of its use.⁸⁵

1-3:3.1c Loss of Profits

A party who loses the opportunity to accrue earnings from the use of its converted property may also be entitled to recover loss of use damages in the form of lost profits.⁸⁶ See Chapter 11, Sections 11-4, 11-6, and 11-7.

1-3:3.2 Exemplary Damages

Exemplary damages may be recovered in a conversion action, in which case attorney's fees may be considered when determining the amount of exemplary damages.⁸⁷ See Chapter 11, Section 11-12.

1-3:3.3 Injunctive Relief

Injunction and temporary restraining orders are available.⁸⁸ See Chapter 8, Sections 8-1, 8-2, and 8-3.

1-3:3.4 Interest

See Chapter 11, Section 11-13:1.

1-3:3.5 Court Costs

See Chapter 11, Section 11-13:2.

1-3:4 Defenses

1-3:4.1 Qualified Good Faith Refusal

While an absolute refusal to transfer possession to one entitled to it generally constitutes conversion, a refusal to deliver property on request may be justified in order to investigate the rights of the parties, and no conversion results if such refusal is made in good faith to resolve a doubtful matter.⁸⁹ Any reasons for refusing to turn over the property which are not mentioned at the time of the refusal are lost and may not be raised later.⁹⁰

1-3:4.2 Statute of Limitations

The two-year statute of limitations applies.⁹¹

1-3:4.3 Good Faith Purchaser

• Defendant purchased the goods

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