Statutory Conversion: Recent Rulings Provide Clarity and Relief for Litigation Plaintiffs

(July 7, 2015) Statutory conversion (i.e., civil theft) under MCL § 600.2919a permits a plaintiff to sue a defendant for “converting property to [that] person’s own use.” It is an often-alleged claim by Michigan plaintiffs, and for good reason. A successful statutory conversion claim opens the door to recovering treble damages and legal fees, and with that added leverage it is no wonder that Michigan plaintiffs often include claims for statutory conversion in their complaints. Two recent decisions – one issued by the Michigan Supreme Court and another by the Kent County Business Court – clarify the separate, independent nature of a statutory conversion claim and the real impact of the treble damages penalty.

First, in Aroma Wines & Equipment, Inc. v. Columbian Distribution Services,¹ decided on June 17, 2015, the Michigan Supreme Court addressed the requirements for statutory conversion and its relationship to common-law conversion. In that case, plaintiff Aroma agreed to rent defendant Columbian’s climate-controlled warehouse space to store its wine. After Aroma fell behind on payments, Columbian moved Aroma’s wine to a different storage area, allegedly destroying the wine’s salability. Aroma sued for common-law and statutory conversion. The trial court, however, ordered a directed verdict in favor of Columbian on Aroma’s statutory conversion claim because, according to the court, Columbian did not convert the wine to its “own use” by drinking or selling it. On appeal, the Michigan Supreme Court disagreed, explaining that converting property to a defendant’s “own use” simply “requires a showing that the defendant employed the converted property for some purposes personal to the defendant’s interests, even if that purpose is not the object’s ordinarily intended purpose.” Because there was evidence to support that Columbian converted the wine to its “own use” by, for example, moving the wine as leverage in its payment dispute with Aroma, the Michigan Supreme Court remanded the case back to the trial court so Aroma could pursue its statutory conversion claim. As part of its ruling, the Michigan Supreme Court clarified that statutory conversion is a distinct claim from common-law conversion, as it requires a plaintiff to establish that the property was converted to the defendant’s “own use.”

Only days after the Michigan Supreme Court issued its decision in Aroma, the Kent County Business Court rendered a verdict in Jackson v. Spencer,² a case also involving common-law and statutory conversion claims. In that case, the plaintiff, Jolan Jackson, provided $241,000 of his retirement funds to the defendant, Jay Spencer, who was supposed to use those funds to purchase and rehabilitate a number of properties. Spencer, however, transferred the money to a bank account held in the name of his own company and then proceeded to spend the money on his personal expenses. Jackson sued Spencer and included claims for both common-law and statutory conversion. After granting Jackson’s motion for summary disposition on the conversion claims, the Kent County Business Court issued its verdict, citing to the Michigan Supreme Court’s recent decision in Aroma to support its conclusion that Spencer committed both common-law and statutory conversion. Because Spencer used Jackson’s funds to pay for Spencer’s personal expenses, the Court noted that the statutory conversion requirement that the conversion be to the defendant’s “own use” was easily met. Moreover, the Kent County Business Court awarded Jackson treble damages under the statute, finding that Spencer’s conduct was egregious and fully justified the imposition of the treble damages penalty. Due to the treble damages award, Jackson will receive a judgment in an amount far greater than what Spencer actually took.

The Michigan Supreme Court’s decision in Aroma is an important case that will be cited often by attorneys and courts in any case involving conversion, as exemplified by the Kent County Business Court’s immediate reliance on that case. Statutory conversion is now confirmed as a separate, distinct cause of action from common-law conversion that requires a plaintiff to establish that the defendant converted the property to their “own use.” “Own use,” however, is broadly defined. In addition, as the Kent County Business Court’s verdict in Jackson makes clear, the prospect of treble damages under a statutory conversion claim remains a real threat for defendants.

For more information or questions regarding statutory conversion, contact Stephen Hulst.

¹ 2015 WL 3772434; — NW2d – (2015).

² Case No. 13-04271-NZB