AMI425Issues—Claim for Damages Based Upon Conversion of Personal Property
Ark. Model Jury Instr., Civil AMI 425
Arkansas Model Jury Instructions-Civil
November 2020 Update
Chapter 4. Intentional Torts and Defamation
AMI 425 Issues—Claim for Damages Based Upon Conversion of Personal Property
(Plaintiff) claims damages from (defendant) for conversion of (personal property) and has the burden of proving each of two essential propositions:
First, that (plaintiff)[owned][or][was entitled to possess] the (personal property); and
Second, that (defendant) intentionally took or exercised dominion or control over the (personal property) in violation of (plaintiff)'s rights.
[If you find from the evidence in this case that each of these propositions has been proved, then your verdict should be for (plaintiff); but if, on the other hand, you find that any of these propositions has not been proved, then your verdict should be for (defendant).]
NOTE ON USE
Do not use the bracketed last paragraph if the case is submitted on interrogatories.
In the first proposition, use either of the bracketed options, or both, depending upon the evidence of the case. The item(s) of personal property allegedly converted would typically be inserted in the instruction, but “(plaintiff's) property” would be an acceptable alternative.
For damages instructions, use AMI 419, modified as necessary, and AMI 2221 for the definition of “fair market value.” Elements from instructions in Chapter 22 or from appropriate clauses prepared for the circumstances of the case may be inserted. See, e.g., AMI 2228.
This instruction should not be used for a statutory claim for conversion of a negotiable instrument pursuant to Ark. Code Ann. § 4-3-420, for which an appropriate instruction will have to be prepared.
The tort of conversion is the exercise of dominion over property in violation of the rights of the owner or the person entitled to possession. Grayson v. Bank of Little Rock, 334 Ark. 180, 188, 971 S.W.2d 788, 792 (1998). “Unlike some jurisdictions, Arkansas does not require that the owner or person entitled to possession be completely deprived of their property in order for a conversion to occur.” Integrated Direct Marketing, LLC v. May, 2016 Ark. 281 at 4. Ownership is not always an essential element in conversion actions; withholding goods from those entitled to possession constitutes conversion. Car Transp. v. Garden Spot Distribs., 305 Ark. 82, 86, 805 S.W.2d 632, 634 (1991). An allegation of an ownership interest or right to possession is essential in a conversion action. Big A Warehouse Distribs., Inc. v. Rye Auto Supply, 19 Ark. App. 286, 290, 719 S.W.2d 716, 718 (1986). “Possessory interest” is the present right to control property, including the right to exclude others, by a person who is not necessarily the owner. Buck v. Gillham, 80 Ark. App. 375, 381, 96 S.W.3d 750, 754 (2003).
For a case overturning a jury verdict for the defendant as against the weight of the evidence, applying many of the foregoing principles, and considering the defendant's argument that the plaintiff had abandoned the property, see Schmidt v. Stearman, 98 Ark. App. 167, 253 S.W.3d 35 (2007).
Conversion is an intentional tort. The intent required is not conscious wrongdoing, but rather an intent to exercise dominion or control over the property that is in fact inconsistent with the plaintiff's interest. The conversion does not have to be for the defendant's use. McQuillan v. Mercedes—Benz Credit Corp., 331 Ark. 242, 247, 961 S.W.2d 729, 732 (1998). A defendant may be liable for conversion for directing an agent to exercise dominion or control over property in a way that is inconsistent with the plaintiff's interest. See DWB, LLC v. D&T Pure Trust, 2018 Ark. App. 283, 550 S.W.3d 420 (holding that the evidence supported a circuit court's finding that parties had exercised dominion and control over a check that was deposited in the court registry because the parties had placed conditions on the release of the funds despite admitting that they had no legal claim to the funds); Guy Maris Trust v. Truempor, 2012 Ark. App. 232 (reversing a grant of summary judgment for the defendants on conversion in a timber cutting case on the grounds that a question of material fact existed as to whether the defendants' son had authority to order the trees to be harvested).
Conversion's origins in the common law form of action for trover at one time limited its reach to tangible personal property, a constraint eventually relaxed to include “conversion of a document in which intangible personal property rights are merged” and the prevention of “the exercise of intangible rights of the kind customarily merged in a document” even if the document itself is not converted. Restatement (Second) of Torts § 242. The Arkansas Supreme Court recounted this history and extended conversion to include not only intangible rights “merged” into a document (e.g., a promissory note), but intangible rights that are merely recorded in a document over which the defendant exercised dominion or control. Plunket-Jarrell Grocery Co. v. Terry, 222 Ark. 784, 788-94, 263 S.W.2d 229, 230-35 (1953) (affirming jury verdict for conversion of accounts receivable, effected when defendants exercised control over plaintiff's account books). The court abandoned this last vestige of conversion's relation to chattels in Integrated Direct Marketing LLC v. May, 2016 Ark. 281 at 6, in which the court ruled that “intangible property, such as electronic data, standing alone and not deemed a trade secret, can be converted” if the defendant's actions deny, or are inconsistent with, the rights of the owner or person entitled to possession. In that case, the intangible property consisted solely of electronic files that the defendant downloaded to his own external hard drive.
An exculpatory clause in a lease providing that the lessor shall not be liable for loss, theft, or damage to the lessee's property, or for any act of any person, does not preclude the lessee's conversion claim for intentional acts by the lessor or its agent. Gurlen v. Henry Mgmt., Inc., 2010 Ark. App. 855, at 5–6.
An unqualified refusal to surrender goods, stating no reason, or stating the wrong reason, is conversion even where there are unstated justifications. If the defendant insists upon charges or other conditions of delivery that he has no right to impose, conversion has occurred. McQuillan, 331 Ark. 242, 248, 961 S.W.2d 729, 732 (1998).
Proof of demand for return of property and refusal to do so is not necessary to support a conversion claim. City Nat'l Bank of Fort Smith v. Goodwin, 301 Ark. 182, 192, 783 S.W.2d 335, 340 (1990).
In a case involving a claim for conversion of timber under Ark. Code Ann. § 18-60-102, the Arkansas Court of Appeals ruled that the Civil Justice Reform Act of 2003, Ark. Code Ann. § 16-55-201(a), which abolished joint and several liability for “any action for personal injury, medical injury, property damage, or wrongful death,” did not apply. Shamlin v. Quadrangle Enters., Inc., 101 Ark. App. 164, 175–76, 272 S.W.3d 128, 136–37 (2008) (emphasis added). The court reasoned that because conversion is a claim “for the wrongful possession or dispossession of another's property,” but “does not necessarily involve damage to property, which would bring it within the reach of the statute,” the Act fails to evince with sufficient clarity an intention to modify the common law. Id. In Shamlin, the court affirmed a decision to hold the defendants jointly and severally liable for the fair market value of the timber cut and to apportion the award for the cost of restoring the damaged land.
Proximate causation is not an element of the tort of conversion, as damages naturally flow from a conversion, and nominal damages are recoverable, Car Transp., 305 Ark. at 89, 805 S.W.2d at 636; see Dan B. Dobbs, The Law of Torts § 67, 150–153 (2000).
Ordinarily, the proper measure of damages for conversion of property is the fair market value of the property at the time and place of its conversion. Evidence based upon purchase, replacement, or rental prices is improper. McQuillan, 331 Ark. at 250, 961 S.W.2d at 733. The market value of the property is not, however, the only measure of the damages recoverable in an action for conversion; the circumstances of the case may require a different measure, including the expenses incurred as a result of the conversion. First Nat'l Bank of Brinkley v. Frey, 282 Ark. 339, 342, 668 S.W.2d 533, 535 (1984). In the illustrative instruction found in the Note on Use to AMI 419, nominal damages or actual damages based on fair market value do not require the element of proximate causation, but for consequential or special damages being sought, proximate causation may be an element.
The Restatement (Second) of Torts § 927 states that the plaintiff may recover either the fair market value at the time of the conversion, or in the case of commodities of fluctuating value, which are customarily traded on an exchange to which traders customarily resort, the highest replacement value of the commodity within a reasonable period during which it might have been replaced. See Newburger Cotton Co. v. Stevens, 167 Ark. 257, 267 S.W. 777 (1925). Additional special damages, discussed in the Restatement, include the following: (a) the additional value of a chattel due to additions or improvements made by a converter not in good faith (see Bradley Lumber Co. v. Hamilton, 117 Ark. 127, 173 S.W. 848 (1915); In re Honeycutt, 198 B.R. 306 (Bankr. E.D. Ark. 1996)); (b) the amount of any further pecuniary loss of which the deprivation has been a legal cause (see Shepherd v. Looper, 293 Ark. 29, 732 S.W.2d 150 (1987) (lost profits)); (c) interest from the time at which the value is fixed (see Dugal Logging, Inc. v. Ark. Pulpwood, 66 Ark. App. 22, 988 S.W.2d 25 (1999)); and (d) compensation for the loss of use not otherwise compensated.
The fact that the item was eventually returned to the owner does not necessarily bar recovery of damages for its conversion, but it may mitigate the damages. Ford Motor Credit Co. v. Herring, 267 Ark. 201, 206, 589 S.W.2d 584, 587 (1979). Generally, the law permits evidence of the return of the property to its owner in mitigation of damages only when certain circumstances are present: (1) that the owner accepted the return of the goods; (2) that the original conversion occurred by mistake; and (3) that the return of the goods occurred promptly after the discovery of the mistake and before the commencement of the action for conversion. McQuillan, 331 Ark. at 250, 961 S.W.2d at 733 (citing McKenzie v. Tom Gibson Ford, Inc., 295 Ark. 326, 749 S.W.2d 653 (1988)). When the plaintiff brings a conversion action after return of the property, his damages may include any deterioration in value between the time of the conversion and the time of return, plus special damages, such as loss of use and expenses of recovery. Restatement (Second) of Torts § 922, cmt. B (1979). Special damages resulting from the withholding of the property or properly incurred by the owner in the pursuit of it were discussed in McQuillan. The plaintiff eventually received possession of the converted property, and the court awarded damages in the amount of the costs that were expended in recovering the property, including attorney's fees, storage charges, and hauling expenses. The attorney's fees were incurred in attempting to recover possession of the trucks, not in prosecuting the conversion action. “[A]lthough attorney's fees incurred in the prosecution of a conversion action were not recoverable, those attorney's fees spent in recovering possession of the converted property were properly awarded as special damages by the trial court.” McQuillan, 331 Ark. at 251, 961 S.W.2d at 734.
If the defendant has an equitable interest in the property, the plaintiff's recovery is limited to actual net amount of the plaintiff's interest. Barham v. Standridge, 201 Ark. 1143, 1146, 148 S.W.2d 648, 649 (1941).
For discussion of an Article 9 security interest raising issues of self-help and damages for the creditor's improper retention of the collateral, see McIlroy Bank & Trust v. Seven Day Builders of Ark., Inc., 1 Ark. App. 121, 133, 613 S.W.2d 837, 843 (1981) (“The judgment should have been entered for the value of the equipment at the time of taking less the balance due on the purchase price, not by way of setoff, but as a proper application of the measure of damages.”). If “breach of the peace” under Ark. Code Ann. § 4-9-609 is an issue, see Ford Motor Credit Co., 267 Ark. at 203, 589 S.W.2d at 585–586 (“In pre-code cases, we have sustained a finding of conversion only where force, or threats of force, or risk of invoking violence, accompanied the repossession.”) and Rogers v. Allis—Chalmers Credit Corp., 679 F.2d 138 (8th Cir. 1982) (issue of breach of the peace was for jury).
When punitive damages are sought, City National Bank of Fort Smith provides language to be used in modifying the punitive damages instruction (AMI 2218) for use in a conversion case. The plaintiff must show the defendant intentionally exercised control or dominion over the plaintiff's property for the purpose of violating the plaintiff's right to the property or for the purpose of causing damages. City Nat'l Bank of Fort Smith, 301 Ark. at 188, 783 S.W.2d at 338. An act of conversion by itself will not support an award of punitive damages. When the defendant exercised dominion and control over the plaintiff's property based on its uncontroverted belief that it had a contract right and a power of attorney to do so, a punitive damage claim will not lie. Huffman v. Landers Ford North, Inc., 100 Ark. App. 159, 164–65, 265 S.W.3d 783, 787 (2007).
© 2020 Arkansas Supreme Court Committee on Jury Instructions-Civil
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