Chapter 7-8 Tort Conversion

• Jurisdiction: United States

7-8 Tort Conversion

7-8:1 Overview

Conversion is an intentional exercise of dominion or control over personal property which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the property. Oil and gas is considered real property when in place and personal property when severed from the ground. Thus, a plaintiff may only bring a Conversion Action if the defendant brings the minerals to the surface. Conversion and Trespass to Chattel and Personalty are distinguished by the degree of control the defendant exercises over the property.

Trespass to Chattel and Personalty only requires interference with the plaintiff's use of the chattel. Conversion requires affirmative control over the chattel. The importance of the distinction lies in the measure of damages. In trespass the plaintiff may recover for the diminished value of his chattel because of any damage to it. In conversion the measure of damages is the full value of the chattel, which is typically more than a recovery for diminished value. Removal of minerals from the ground is irreparable and always constitutes affirmative control over chattel.¹⁵¹ Therefore, Conversion is always an available cause of action that entitles a plaintiff to a greater recovery. For these reasons, a Conversion Action subsumes Trespass to Chattel and Personalty Actions and is the only appropriate method for adjudicating dispossession of minerals.

7-8:1.1 Related Causes of Action

Trespass to Chattel, Trespass to Real Property, Fraud, Negligence

MUST READ CASES

Pan Am. Petroleum Corp. v. Long, 340 F.2d 211 (5th Cir. 1964)

Harrington v. Texaco, Inc., 339 F.2d 814 (5th Cir. 1964)

7-8:2 Elements

(1) An intentional exercise of control over the personal property of another;

• A distinct act of dominion or control over the personal property of another must occur.¹⁵²
• The convertor may either have actual or constructive possession of the property.¹⁵³

• Control must be intentional, but a wrongful or fraudulent intent or purpose is not required.¹⁵⁴

(2) To the exclusion of the same rights by the owner.

• The defendant must actually exclude the owner from exercising control over the property. Temporary interference with the property is not sufficient.¹⁵⁵

7-8:3 Damages and Remedies

7-8:3.1 Value of Converted Property

The measure of damages for a Conversion Action is the value of the converted property.¹⁵⁶

• In oil and gas cases, this is the market value of the oil at the surface.¹⁵⁷

• Market value is defined as the price property would bring when it is offered for sale by one who desires, but is not obligated, to sell and is bought by one who is under no necessity of buying it.¹⁵⁸
• Market value may be calculated by using sales of gas that are comparable in time, quality, quantity and availability of marketing outlets.¹⁵⁹

• A defendant who is guilty of conversion but acted without fraudulent intent is entitled to set off the costs of production.¹⁶⁰

• The defendant has the burden of pleading and proving that the conversion was not willful, and the dollar amount of the claimed costs of production.¹⁶¹

7-8:3.2 Exemplary Damages

Exemplary damages are recoverable for conversion accompanied by fraud or oppression, or by willfulness and malice.¹⁶²

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