(PS) Societe D'Equipments Internationaux Nigeria, Ltd. v. Dolarian Capital, Inc.
1:15-cv-01553
E.D. Cal.Sep 12, 2017Background
- SEI (a Nigerian company) contracted with Dolarian Capital, Inc. (DCI) in June 2014 to buy military assets for $8,616,042.50; payments of at least $8,618,646.57 were wired into DCI’s attorney client trust account.
- DCI, controlled by Ara G. Dolarian, never delivered the contracted goods; SEI cancelled the contract in May 2015 and demanded return of the funds.
- Funds were disbursed by DCI/Dolarian: payments to a representative ($750,000), taxes (~$50,000), transfers (~$6.8 million) to companies controlled by Dolarian’s family, purchase of a BMW, and ~ $900,000 unaccounted for; remaining funds later seized by DHS from related entities.
- SEI sued Dolarian and DCI asserting rescission, money had and received, breach of contract, conversion, and fraud; DCI was defaulted; SEI moved for partial summary judgment on conversion against Dolarian alone.
- On summary judgment SEI argued it had a right to possession of the funds (contract remedies or equitable rescission) and that Dolarian’s misappropriation supported conversion; Dolarian disputed the entitlement to immediate possession and factual issues about contract performance.
- The court found disputed issues of fact about whether SEI had an independent right to possess the funds (apart from contract remedies) and whether DCI breached the contract, defeating SEI’s entitlement to a directed verdict on conversion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SEI had an immediate right to possession of funds sufficient to support conversion | SEI contends it was entitled to possession upon cancellation and thus conversion remedies apply | Dolarian contends SEI’s rights are contractual only and contested factual issues (e.g., conditions precedent, performance) exist | Denied summary judgment: SEI did not show an undisputed independent right to possession separate from contract remedies |
| Whether Dolarian can be liable individually for conversion for applying corporate receipts to his own use | SEI relies on agent-conversion doctrine (agent applying specific funds for own use) to impose liability on Dolarian | Dolarian argues that any conversion theory depends on SEI’s contractual right to possession and factual disputes prevent summary judgment | Court held that even if agent-conversion theory applies, factual disputes about contract breach and entitlement preclude summary judgment |
| Whether breach of contract alone suffices for conversion against corporate agent | SEI effectively asserts conversion arising from DCI’s breach and Dolarian’s misappropriation | Dolarian asserts this collapses tort into contract and factual issues exist whether breach occurred | Court declined to hold breach-alone establishes conversion on these facts and found SEI failed to meet its burden |
| Whether SEI established entitlement to a directed verdict on conversion at summary judgment | SEI argued evidence entitled it to judgment as a matter of law | Dolarian emphasized disputed material facts and lack of independent possession right | Court: SEI failed to carry its initial burden; genuine issues remain, so motion denied |
Key Cases Cited
- Lee v. Hanley, 61 Cal.4th 1225 (establishes elements of conversion in California)
- Welco Elecs., Inc. v. Mora, 223 Cal. App. 4th 202 (conversion is strict liability; intent/knowledge immaterial)
- Burlesci v. Petersen, 68 Cal. App. 4th 1062 (conversion elements and remedies)
- Erlich v. Menezes, 21 Cal.4th 543 (contract breach becomes tortious only when a duty independent of contract is violated)
- Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503 (distinguishing contract and tort duties)
- Fischer v. Machado, 50 Cal. App. 4th 1069 (agent can be liable for conversion when applying another’s funds to own use)
- C.A.R. Transp. Brokerage Co. v. Darden Restaurants, Inc., 213 F.3d 474 (movant bearing trial burden must produce evidence sufficient for directed verdict at trial)
- Houghton v. South, 965 F.2d 1532 (same principle on summary judgment burdens)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (summary judgment standards on genuine disputes)
- Celotex Corp. v. Catrett, 477 U.S. 317 (movant’s burden under Rule 56)