Conversion is a cause of action with similarities to both theft and trespass. Conversion, however, focuses on whether a party has exercised such “dominion and control” over the property of another, in an unauthorized manner, so as to deprive the rightful owner of their use of the property to the extent that fairness dictates that the rightful owner should be compensated. This sounds a lot like theft, but the principal difference between conversion and theft is that theft requires the intent to permanently deprive the rightful owner of their property, whereas conversion has no such requirement.
The essential elements of a conversion claim are that a person has committed an unauthorized act of ownership or control over the property of another. The unauthorized act of control can come about in any number of circumstances, from the most basic instance of taking something that belongs to another, to more complicated circumstances where a person has the right to control the property of another and then that authority is properly revoked by the rightful owner. Within the context of a conversion claim, this is called a demand for possession, but such a demand is not required where the initial possession was unauthorized. There is no requirement that possession be anything but unauthorized. The possession need not be accompanied by fraud or malice, although those factors can relate to the damages that the rightful owner may be entitled to.
The second element of conversion is that the person claiming conversion must have a legitimate interest in the property generally, and must have a right to possess the property at the time of the conversion. A basic example of this is in a pawn shop, where a person who has pawned property still owns the property, which is to say they have an interest in the property, but they may not necessarily have the right to possess the property until they comply with the terms of the pawn arrangement. Sticking with this example, after repaying the loan to the pawn broker, they will again have a right to possess the property and if the pawn shop refuses to give the property back (or has sold the property before the time limit within which to repay the loan), then a conversion may have taken place.
Of course having consent to control the property of another is a valid defense to conversion, until the property is rightfully demanded by the owner. However when a demand for property is made, there are circumstances where the person controlling the property may refuse the demand. Such a refusal must be “qualified” in order to be valid, which means it must be made in good faith and must recognize the rights of the party who owns the property. Going back to the pawn shop example, the pawn broker may make a qualified refusal of a demand for possession, where the owner of the property in questions has not complied with the reasonable conditions for the return of the property.
When a party has proven a claim of conversion, they are generally entitled to the value of the property that has been converted, plus interest from the date of the conversion. This valuation can include lost profits, but as in most circumstances, the party suffering the harm must take reasonable steps to mitigate the amount of damages they suffer. As alluded to earlier, where the conversion is accompanied by fraud, malice, or a reckless and wanton disregard for the rights of the rightful owner of the property, the party proving the conversion claim may be entitled to exemplary damages (additional damages to make an example of the party that has acted wrongly). These exemplary damages are in addition to the actual damages suffered by the rightful owner of the property, but typically the amount of exemplary damages cannot exceed the amount of actual damages.
