Don't Bet the Business

In Michigan, the common law tort of conversion occurs by any distinct act of dominion that is wrongfully exerted over another’s personal property. 

A conversion occurs by any conduct that is inconsistent with the true owner’s property rights. Statutory conversion under MCL 2919a is similar, but statutory conversion requires a showing that the alleged convertor used the converted property for some purpose personal to the convertor’s interests.

The bonus here is that under §2919a one has the potential of recovering three times the amount of actual damages, plus the costs and reasonable attorney fees incurred to bring the claim.

To bring a conversion action the plaintiff must show a superior title or possessory right to the converted property at the time of the claimed conversion. Pretty straight forward stuff, one would think. 

So what if one holds personal property based on a claimed purchase of the property, but under circumstances where the property was not actually paid for? If the supposed purchaser transfers or sells the property having never actually paid for it, is there a conversion? As in many instances, the answer is “maybe yes and maybe no.”

In Michigan, the law is clear that possessing property based on a claimed credit purchase is not a conversion. However, this is only true if the owner/seller has voluntarily consented to the debtor-creditor relationship. Without proof of such status between a supposed buyer and seller, actionable conversion may still be found.

To avoid this potential pitfall, it is always important to properly document any sale of personal property. In business, and particularly concerning property sales, stuff happens. Without proper documentation of a contractual sale, your contract may turn into a very expensive tort.