Lead Opinion
Opinion
INTRODUCTION
Defendant Nicholas J. Mora appeals from a judgment in favor of plaintiff Welco Electronics, Inc., and against defendant, on plaintiff’s claim for conversion, and against defendant and in favor of plaintiff on defendant’s cross-complaint. Defendant contends the trial court erred in denying his motion for nonsuit based on the ground of insufficient evidence to support plaintiff’s cause of action for conversion.
FACTUAL BACKGROUND
In 1996 plaintiff employed Lidia Gimenes as a certified bookkeeper. Between 1996 and February 2010, she was not plaintiff’s employee, but she made social visits at plaintiff’s place of business “all the time,” visiting Darrel Derouis, plaintiff’s then president, and other employees of plaintiff.
In February 2010, Derouis hired Gimenes to work for plaintiff because he wanted her assistance in “find[ing] where his money went.” A few weeks before Derouis hired Gimenes, plaintiff no longer employed defendant Natalie Anderson,
Gimenes conducted an investigation and. noticed that there was a discrepancy between the entries on plaintiff’s credit card statements and the amount of expenses. She examined plaintiff’s credit card statements contained in plaintiff’s files located in Anderson’s office and determined that the entries on those statements did not match the total sum listed on the statements, thus suggesting that entries had somehow been deleted.
Gimenes reviewed plaintiff’s credit card statements she obtained from the credit card company and determined that they contained numerous charges to “AQM,” a fictitious name used by defendant for a company he had established. Plaintiff’s credit card statements located in Anderson’s office did not contain charges to AQM. Gimenes also found plaintiff’s accounting “chart” for AQM, but, unlike the charts for all of plaintiff’s other vendors, no transactions were entered on it.
Based upon her review of the records, Gimenes determined that the AQM charges made on plaintiff’s credit card account from 2009 to 2010 totaled $372,039.01, the principal amount that plaintiff sought in this case against defendant. She said that based on her investigation, she determined that plaintiff made the payments for the credit card statements reflecting entries for AQM.
Gimenes said she discussed this matter with Derouis, and Derouis decided to hire counsel and proceed with a lawsuit against defendant. In December 2010, Derouis died and Gimenes became plaintiff’s president.
Defendant provided an explanation for the accounting discrepancies. In 2006, defendant started a business called Nicholas Mora Property Management, a real property management company, and he operated that business from plaintiff’s place of business. From 2006 to 2010 defendant also performed work for plaintiff as a quality assurance manager,
Defendant said that in June 2008, the quality assurance computer system was certified with a score of 99 percent, and Derouis agreed to compensate defendant for his prior services. According to defendant, Derouis was concerned about a garnishment of defendant’s wages if plaintiff paid defendant by check; therefore, Anderson, plaintiff’s accountant at the time, whose responsibilities included payment of accounts payable, suggested, and Derouis “ultimately” agreed, that defendant be paid like a vendor using plaintiff’s credit card account. Defendant said he and Derouis agreed that defendant would be paid $100,000 for defendant’s work the prior year. Anderson set up in her office a “swiping machine” credit card terminal. Defendant opened a bank account in his name and the name of Nicholas Mora Property Management, which did business under the name of AQM Supplies. Defendant, as owner of Nicholas Mora Property Management, doing business as AQM Supplies, leased a swiping machine credit card terminal.
Defendant said that from 2008 to January 2010, he submitted to plaintiff about 50 or 60 invoices for the work he performed, and that although he “was not the one who processed” the charges to plaintiff’s credit card account, he collected money on the credit card transactions. That money was paid
Defendant stated that in 2010, he and Derouis had an argument; Derouis was angry, believing that defendant had “ripped him off” by over $300,000. Derouis asked defendant to leave the premises, would not allow defendant to return to gather his possessions, and said that everything in defendant’s office belonged to plaintiff.
PROCEDURAL BACKGROUND
In its complaint against defendant and Anderson, plaintiff asserted one cause of action—conversion of money. Plaintiff alleged that from January 1, 2008, to the time the complaint was filed on March 22, 2010, defendant and Anderson took from plaintiff, without plaintiff’s knowledge or consent, $376,142.70 in cash belonging to plaintiff, and converted it for their own use. Plaintiff sought judgment against defendant and Anderson for $376,142.70 as the value of the money he alleged was converted, as well as for interest, expenses, punitive damages, and costs. Because Anderson failed to file an answer to the complaint, her default was entered.
Defendant answered, and in a cross-complaint alleged that he and plaintiff entered into a contract pursuant to which plaintiff agreed to use defendant’s services and share building space, and plaintiff breached that contract “by maliciously removing] [defendant] from his place of business without compensation for over thirty (30) days and was informed by [plaintiff] that any and all of [defendant’s] business records and/or materials were now the property of [plaintiff].” Defendant alleged that plaintiff removed him from his place of business “with the intent of acquiring [defendant’s] computer software/hardware, quality management material, personal business records, and sensitive clientele information for [plaintiff’s] personal and business gain.” Plaintiff allegedly refused defendant’s requests to return the items to him.
During a bench trial, defendant made a motion for nonsuit on the grounds that plaintiff failed to submit sufficient evidence to establish a cause of action for conversion. The trial court denied the motion. Following the bench trial, judgment was entered in favor of plaintiff and against defendant in the amount of $446,447.81, and against defendant and in favor of plaintiff on defendant’s cross-complaint. The parties did not request a statement of decision. Defendant timely appealed.
A. Motion for Nonsuit
1. Standard of Review
“A motion for nonsuit allows a defendant to test the sufficiency of the plaintiff’s evidence before presenting his or her case. Because a successful nonsuit motion precludes submission of plaintiff’s case to the jury, courts grant motions for nonsuit only under very limited circumstances.” (Carson v. Facilities Development Co. (1984)
2. General Principles
“ ‘Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages. . . .’ [Citation.]” (Los Angeles Federal Credit Union v. Madatyan (2012)
3. Analysis
Defendant contends that the transactions here—the use of a credit card to obtain money wrongfully from plaintiff—did not constitute the tort of conversion.
(a) Credit Card Transaction as a Wrongful Taking of Property
The authorities have recognized the evolution of the common law tort of conversion. The California Supreme Court in Payne v. Elliot (1880)
Generally, conversion has been held to apply to the taking of intangible property rights when “represented by documents, such as bonds, notes, bills of exchange, stock certificates, and warehouse receipts.” (5 Witkin, supra, Torts, § 702, p. 1026.) As one authority has written, “courts have permitted a recovery for conversion of assets reflected in such documents as accounts showing amounts owed, life insurance policies, and other evidentiary documents. These cases are far removed from the paradigm case of physical conversion; they are essentially financial or economic tort cases, not physical interference cases.” (3 Dobbs, The Law of Torts (2d ed. 2011) § 710, p. 804,
As stated in the Restatement Second of Torts in section 242, comment f, page 475 “The process of extension [of the law of conversion] has not, however, necessarily terminated; and nothing that is said in this Section is intended to indicate that in a proper case liability for intentional interference with some other kind of intangible rights may not be found.” There is no reason why we should be “encumbered with the incrustations of ancient lore associated with the tort of conversion.” (Harper, James and Gray on Torts (3d ed. rev. 2006) § 2.13, p. 212 (Harper).)
In California, the tort of conversion has expanded well beyond its original boundaries. In holding that a misappropriation of a net operating loss without compensation constitutes conversion, the court in Fremont Indemnity Co. v. Fremont General Corp. (2007)
In A & M Records, Inc. v. Heilman (1977)
Defendant wrongfully caused a charge to plaintiff’s credit card account by having a specific sum of money paid through defendant’s credit card terminal into defendant’s bank account. Plaintiff had a property right in its credit card account because plaintiff’s interest was specific, plaintiff had control over its credit card account, and plaintiff had an exclusive claim to the balance in the account. (See Kremen v. Cohen, supra,
In Acme Paper Co. v. Goffstein (1954)
Credit card, debit card, or PayPal
Defendant, or Anderson on defendant’s behalf, had to take plaintiff’s credit card or its information in order to obtain the money from the credit card company, resulting in charges showing up on the statement for which plaintiff
As the court in Fremont, supra,
Cases holding that a conversion claim “fails because the simple failure to pay money owed does not constitute conversion” (Kim v. Westmoore Partners, Inc. (2011)
Defendant cites Moore v. Regents of University of California (1990)
Without citing to legal authority, defendant contends that if the misappropriation of a credit card that occurred here constitutes a conversion, then any transaction involving a credit card that leads to a dispute is subject to a cause of action for conversion. Defendant gives examples of what might be conversions under this hypothesis: persons using a credit card to purchase or pay for goods, medical bills, or lawyer bills, and disputes later arise regarding the quality of the goods, fault concerning the medical treatment, or the appropriateness of the legal bills. This argument lacks merit. A person’s willing use of a credit card to pay for goods or services has no relationship to what occurred here. Plaintiff did not consent to its credit card or its information being used by or on behalf of defendant. This case does not involve “the simple failure to pay money owed[, which] does not constitute conversion” (Kim v. Westmoore Partners, Inc., supra,
Although the parties have not cited any authority that expressly covers the facts here, our application of the tort of conversion in this case is consistent with existing legal principles.
(b) Specific Sum of Money Entrusted to Defendant
Defendant contends that the trial court erred in denying his motion for nonsuit, arguing that' there was insufficient evidence that a specific sum of money was entrusted to defendant, and the taking of “various amounts of money over time” is not conversion.
As discussed ante, the intangible property converted was plaintiff’s credit card or its number and a portion of plaintiff’s credit card account, resulting in the taking from plaintiff, or unauthorized transfer of, a specific sum of money. Even if the conversion were to be treated as a conversion of money, a conversion claim does not require that a specific lump sum of money be entrusted to the defendant; the plaintiff must merely prove a specific, identifiable sum of money that was taken from it. “California cases permitting an action for conversion of money typically involve those who have misappropriated, commingled, or misapplied specific funds held for the benefit of others. [Citations.]” (ECO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, supra,
A plaintiff must specifically identify the amount of money converted, not that a specific, identifiable amount of money has been entrusted to the defendant. Here, plaintiff’s agents have misappropriated a specific sum of money from plaintiff. There is no requirement that the money have been held in trust—only that it be misappropriated. The court in McKell v. Washington Mutual, Inc., supra,
Citing Software Design, supra,
Although in Software Design, supra,
(c) Plaintiff’s Lack of Consent
B.-D.
DISPOSITION
The judgment is affirmed. Plaintiff is awarded its costs on appeal.
Turner, P. J., concurred.
Notes
Anderson is not a party to this appeal; her default was entered prior to trial.
Defendant testified that as a quality assurance manager, he dealt with a computer system concerning the manufacture of parts.
The Ninth Circuit in Kremen v. Cohen (9th Cir. 2003)
“PayPal provides an intermediary account for internet purchases. PayPal charges the seller a fee for its service. The customers fund their PayPal accounts through electronic transfers from their own financial institution (e.g., checking account, debit card, or credit card). PayPal keeps the customers’ financial information confidential, thereby, providing a measure of security for online purchases. [Citation.]” (In re Easysaver Rewards Litigation (S.D.Cal. 2010) 737 F.Supp.2d 1159, 1163, fn. 1.)
See Nelson, The Virtual Property Problem: What Property Rights in Virtual Resources Might Look Like, How They Might Work, and Why They Are a Bad Idea (2010) 41 McGeorge L.Rev. 281, 299, 302 [a “thief’ of virtual property may be liable for conversion];
See footnote, ante, page 202.
Concurrence Opinion
I concur in the result, but not the reasoning, of the majority opinion. The appellate record conclusively demonstrates that defendant Nicholas J. Mora misappropriated $372,039.01 from plaintiff Welco Electronics, Inc. The trial court characterized Mora’s version of events as “absolutely nonsense,” “difficult to listen to,” and “absolutely ludicrous.” But the ultimate conclusion articulated by the court was not that there was a conversion of the balance of a credit card account; instead, the court quite accurately described Mora’s conduct as a “theft,” finding that Mora “stole the money,” and he conspired with codefendant Natalie Anderson “in committing theft and committed a theft in the amount of $372,039.01.” I would affirm the judgment on the basis of the trial court’s finding of theft.
This case was tried on the straightforward theory that Mora committed a series of thefts, in differing amounts and at various times, from Welco. Although labeled a cause of action for conversion, Welco alleged in part that Mora and Anderson “took the property described above from plaintiff’s possession without its consent or knowledge . . . .” It was alleged that Welco “was, and still is, the owner, and was and is, entitled to possession of the following personal property, namely, cash in the sum of $376,142.70.” In closing argument, Welco’s counsel stated: “The long and short of it is the
We are required to liberally construe Welco’s complaint to effect substantial justice. (Code Civ. Proc., § 452.) Regardless of the label attached to a pleading, “ ‘[a] party is entitled to any and all relief which may be appropriate under the scope of his pleadings and within the facts alleged and proved, irrespective of the theory upon which the facts were pleaded, [or] the title of the pleading ....’” (Cooper v. State Farm Mutual Automobile Ins. Co. (2009) 177 Cal.App.4th 876, 904 [
My colleagues go to great lengths to conclude Mora’s conduct constituted a conversion based on the theory—not alleged in the complaint or asserted on appeal until prompted by a letter from the court—that a conversion occurred because Mora took Welco’s right to a balance in its credit card. I see no need to engage in that analysis. “Suffice it to say, defendants may not appropriate” Welco’s property by engaging in 50 to 60 unauthorized credit card transactions “without having to answer legally . . . .” (Hernandez, supra,
Treating Welco’s claim as one of theft of money avoids the further problem created by the majority’s analysis of the requirement that conversion of money requires the identification of a sum certain. California law has recognized liability for conversion of money in limited circumstances: there must be a sum certain and the holder of the money must do so in trust, for the benefit or another, or for his principal’s account. (Haigler v. Donnelly (1941)
Mora did not receive a fixed sum of money in an agency, fiduciary, or trust relationship with Welco. Mora took a variety of sums, over a period of time, by use of multiple larcenous transactions. I would affirm the judgment on that basis.
A petition for a rehearing was denied February 19, 2014.