Los Angeles Conversion Attorneys

Conversion is a type of theft that can often occur when funds or assets change hands. When someone “converts” an asset, they prevent the rightful owner from accessing and controlling that asset. Acts of conversion deprive a business of its money and property and may require litigation to resolve. 

In business litigation claims, conversion usually would not refer to stealing as one might typically think about it, for example, burglary.  The conversion claims prosecuted and defended by our attorneys have included claims brought against a company’s insiders for embezzlement of company funds, against borrowers who have defaulted under secured loans, and where one party refuses to turn over business assets to another party.  Unlike a breach of contract claim, conversion is a tort claim.

Under California law, the elements required to prove a claim of conversion are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or in a manner that is inconsistent with the plaintiff’s property rights; and (3) resulting damages. (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066; Regent Alliance Ltd. v. Rabizadeh (2014) 231 Cal.App.4th 1177, 1181. The “Essential Elements” of a conversion claim in California are set forth in the Judicial Council of California’s Civil Jury Instructions, or CACI’s, No. 2100.  (“CACI” is an acronym for California Civil Instructions).

Corporations Code, Section 17300

Further, a party cannot bring a conversion claim on the basis that the value of their stock in a corporation dropped.  This is because property of a corporation is separate from the property of the shareholder, who holds interest in the company’s stock, not its separate personal property or cash.  Corporations Code, section 17300 provides: “A membership interest and an economic interest in a limited liability company constitute personal property of the member or assignee.  A member or assignee has no interest in specific limited liability company property.” (Corp. Code, § 17300.)  The same rule applies under Delaware corporate law: “Like corporate shareholders, members of a limited liability company hold no direct ownership interest in the company’s assets.” (Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, 1214, fn. 1.)  This would be a different case, however, if the plaintiff’s claim was that it was that plaintiff’s paper stock certificates or LLC membership interests representing the stock or membership units were stolen. (See Virtanen v. O’Connell (2006) 140 Cal.App.4th 688, 706.) 

Under certain circumstances, conversion can be considered an implied or quasi-contract that will support the prejudgment remedy of a writ of attachment, whereby a plaintiff can seek provisional relief to fix a lien upon assets of defendant and to have the County Sheriff seize assets.  This relief is set forth in California’s Code of Civil Procedure, section 483.010 et seq.  Under this statutory scheme, a plaintiff can obtain relief prior to trial and judgment, and as soon as upon the filing of the complaint.  Code of Civil Procedure section 483.010 provides that attachment may be sought on claims which are “based upon a contract, express or implied.”  These “implied contract” or “quasi-contract” theories include situations where a defendant acquires property through fraud, conversion, or theft and refuses to return it. 

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