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Conversion

Conversion relates to tort law wherein a property owner generally seeks compensation from someone whose has taken (stolen), used, or is controlling the property without the owner's permission.

Excerpts from Harwood State Bank v. Charon, 466 N.W.2d 601 (ND 1991)

Charon owns a commercial building in Fargo, which he leased to Terry Sexton. Sexton operated a business there, rebuilding auto parts. Harwood State Bank (the Bank) had a purchase money security interest in Sexton's equipment. During the fall of 1987, Sexton ceased doing business in Charon's building but left some of the equipment on the premises. Sexton apparently did not continue paying rent and during July of 1988, Charon prevented Sexton from removing the equipment from the building.

Sexton was in default on his loan from the Bank. Sexton gave the Bank a bill of sale for the secured personal property on October 11, 1988. Among the equipment transferred to the Bank were a milling machine, lathe and welding table. In a November 29, 1988, letter to Dwight Cuffe, Charon's lawyer, the Bank notified Charon of its interest in the equipment. Cuffe gave Charon a copy of the Bank's letter within a few days of its receipt.

On December 9, Charon sold the milling machine, lathe and welding table to Larry Skalet. Cuffe prepared a written agreement between Charon and Skalet which stated the sale of the equipment was conditioned upon the Bank and Sexton's consent. Charon received a $1,000 check from Skalet, which he did not cash. Skalet took possession of the milling machine, the lathe and the welding table on December 12. The Bank learned of the sale, objected to the sale, and renewed its demand that it be allowed to take possession of all of the equipment covered by the bill of sale.

On December 15, the Bank filed its complaint, alleging conversion and moved for a temporary restraining order, preventing Charon's disposal of the equipment covered by the bill of sale …

After a bench trial, the court found that Charon had converted the three pieces of equipment and that their value at the time of conversion was $7,600. After a separate hearing on the issues of exemplary damages and attorney's fees, the court awarded the Bank $7,600 plus interest as actual damages, $500 for attorney's fees, and $1,000 for exemplary damages. Charon appeals, challenging the finding of conversion, the proof of value for the converted property, the imposition of punitive damages, and the assessment of attorney's fees.

Charon argues that he did not convert the Bank's property because he acted on advice of counsel and because the sale to Skalet was "conditional." Conversion is the wrongful exercise of dominion over the personal property of another in a manner inconsistent with, or in defiance of, the owner's rights ... Conversion does not require a bad intention on the converter's part; it only requires an intent to exercise control or interfere with an owner's use to an actionable degree...

Charon's argument respecting the "conditional" sale is essentially that he did not act in a manner inconsistent with the Bank's rights. The court found, however, that Charon delivered the equipment to Skalet. Findings of fact will be set aside only if clearly erroneous … A finding of fact is clearly erroneous when, although there is some evidence to support it, the reviewing court is left with a definite and firm conviction that a mistake has been made … Charon does not deny that he gave possession of the milling machine, the lathe and the welding table to Skalet, and not to the Bank. Even though Charon attempted to acknowledge that the Bank had some interest in the property by making the sale "conditional" upon the Bank's approval, Charon refused the Bank's demand that it be given the equipment, and Charon gave possession of the property to Skalet, These are acts of dominion inconsistent with the Bank's interest. The trial court's finding that Charon converted the property is, therefore, not clearly erroneous …

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