Conversion is an unauthorized act, which deprives a person of his property permanently, or for an indefinite time. See, In re Thebus, 108 Ill.2d 255, 259 (1985). Accordingly, to prove conversion, the plaintiff must prove the following elements by preponderance of the evidence: (1) the defendant’s unauthorized and wrongful assumption of control, dominion, or ownership of the plaintiff’s personal property; (2) the plaintiff’s right in the property; (3) the plaintiff’s right to immediate possession of the property, absolutely and unconditionally; and (4) the plaintiff’s demand for possession of the property. Stathis v. Geldermann, 295 Ill.App.3d 844, 856 (1998). In Hyer Standards, LLC v. Super G Capital, LLC, 2020 WL 2836774 (N.D.Ill. June 1, 2020), the court described slightly different elements and stated that to state a claim for civil theft (i.e., conversion), the plaintiff must allege: (1) a right to the property at issue; (2) a right to the immediate possession of property; (3) a demand for possession; and (4) that defendant wrongfully and without authorization assumed control, dominion, or ownership over the property. Similarly, under New Jersey law, to establish a claim for conversion, a plaintiff must prove (l) that the alleged offender assumed and exercised the right of ownership over the party’s goods or chattels without permission, and (2) excluded the owner from exercising dominion over the party’s goods or chattels. Dessert Beauty, Inc. v. Platinum Funding Corp., 519 F.Supp.2d 410 (S.D.N.Y.2007).
A conversion action only exists for the return of specific property, or an identifiable object. Karimi v. 401 North Wabash Venture, LLC, 2011 Ill App (1st) 102670. Therefore, according to General Motors Corp. v. Douglas, 206 Ill.App.3d 881 (1st Dist. 1990), to maintain a conversion action for money against a defendant who wrongfully refuses to return the money, the plaintiff must establish that the defendant had a duty to segregate the funds. See also, In re Ogden, 314 F.3d 1190 (10th Cir. 2002) (noting that although in many circumstances money cannot be the subject of an action for conversion, misappropriated funds placed in the custody of another for a definite application may be subject to an action for conversion). However, according to Bill Marek’s The Competitive Edge, Inc. v. Mickelson Group, Inc., 346 Ill.App.3d 996 (2d Dist. 2004), it is no longer necessary that money be specifically earmarked in order to sustain an action for conversion and the failure to segregate funds does not make them unidentifiable. Rather, an action for conversion may also be maintained where the converted funds are capable of being described, identified, or segregated in a specific manner. The one limitation to bringing an action for conversion of money is that the money cannot represent a general debt or obligation or an indeterminate sum.
According to Dessert Beauty, Inc. v. Platinum Funding Corp., 519 F.Supp.2d 410 (S.D.N.Y.2007), when money, as opposed to tangible property, is the subject of a conversion claim, courts require that a plaintiff show something more than a contractual obligation on the part of a defendant to pay the plaintiff to establish conversion. Rather, plaintiff must show that the money in question was identifiably the plaintiff’s property or that the defendant was obligated to segregate such money for the plaintiff s benefit.
In In re Montagne, 413 B.R.148 (Bankr.D.Vt.2009), the court interpreting Vermont law stated that although a conversion cause of action typically involves “property” and “chattel,” money as well as negotiable instruments, including checks, can support a conversion claim. The court noted that an owner of a check, whether it was made payable to him, or had been properly endorsed or not, may maintain an action for its wrongful conversion. Id. at 157.
In Karimi v. 401 North Wabash Venture, LLC, 2011 Ill App (1st) 102670, the plaintiff alleged conversion based on the defendants’ alleged wrongful possession and ownership of plaintiff’s earnest money and earned interest. Here, the court stated that money may be the subject of conversion, but only if it is shown that the money “at all times belonged to the plaintiff and that the defendant converted it to his own use.” Id. at 1285. In this case, a claim for conversion was not available. The court noted that the purchase agreement stated that “[e]arnest money so paid and deposited shall be held for the mutual benefit of Seller and Purchaser.” With the earnest money held for “mutual benefit of the Seller and Purchaser,” it did not belong to plaintiff at all times. Rather, the earnest money “represent[ed] plaintiffs’ obligation to fulfill the contract.” Id.
In Swervo Entertainment Group, LLC v. Mensch, 2017 WL 1355880 (N.D.Ill. April 13, 2017), the plaintiff sought the return of a $500,000 good faith deposit which, plaintiff alleges, should have been escrowed. With respect to the conversion of money, the court noted both the general rule and the exception: “[a]n asserted right to money generally does not support a claim for conversion under Illinois law. An exception to this general rule exists where the money at issue is “specific chattel” – that is, “a specific fund or specific money in coin or bills.” Id. at *3 (quoting Horbach v. Kaczmarek, 288 F.3d 969, 978 (7th Cir.2002)). It then noted that an “advance deposit qualifies as “specific chattel,” as the deposit constitutes a determinable amount and was segregated in an escrow account. Id. at *3.
However, one of the conditions for a conversion claim is that the plaintiff have an “absolute and unconditional right to the immediate possession of the property.” The court stated that under Illinois law, to establish a conversion claim a plaintiff must allege: (1) the defendant’s unauthorized and wrongful assumption of control, dominion, or ownership of the plaintiff’s property; (2) the plaintiff’s right in the property; (3) the plaintiff’s absolute and unconditional right to the immediate possession of the property; and (4) a demand for the possession of property. In this case, the court noted that the disbursal of the funds in the account was conditioned on the parties executing a “final Tour Agreement.” Because of this fact, the court held that the plaintiff had no conversion claim. The court explained that while the “advance deposit qualifies as ‘specific chattel,’ because plaintiff alleged that its right to the return of the advance deposit was subject to a condition, plaintiff could not show that this right was absolute and unconditional, a required element for any conversion claim.
Hyer Standards, LLC v. Super G Capital, LLC, 2020 WL 2836774 (N.D.Ill. June 1, 2020), involved a portfolio purchase agreement in which the plaintiff sold its portfolio residuals subject to certain conditions. The agreement also required that 50% of the portfolio’s residuals be paid to the plaintiff’s sale representatives. In addition, the defendant had to pay the plaintiff 10% of the residuals earned from the portfolio and 50% of the residuals earned from future accounts that the plaintiff signed up for payment processing. The plaintiff alleged that the that it had not been paid the residuals specified under the agreement.
The court noted that although a specific dollar amount has not been plead, the funds at issue were sufficiently determinable for a conversion claim because the money could be identified by its source or description, i.e., ten percent of the residuals from the portfolio and 50 percent of residuals from new accounts. Alleging only a percentage of a certain amount does not make the money indeterminable. Id. at *5.
Matthew T. Gensburg
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