Cameron Miranda
Conversion in Texas is a legal concept that deals with the unauthorised taking of property without the owner's consent. It is a common law tort and is often associated with theft. In Texas, conversion specifically refers to the wrongful exercise of dominion and control over another's property in violation of the property owner's rights. This means that if someone takes or uses someone else's property without their permission, they can be sued for conversion. The limitations period for a claim of conversion in Texas is two years, and the plaintiff must prove their title, right to possession, and demand for the return of the property. There are also specific rules and requirements for business conversions in Texas, including the filing of certain documents and the payment of taxes.
| Characteristics | Values |
|---|---|
| Definition | "Under Texas law, conversion is the wrongful exercise of dominion and control over another's property in violation of the property owner's rights" |
| Conversion of money | "Money can be the subject of conversion, but only when it is in the form of specific chattel, such as old coins, or when the money is delivered to another party for safekeeping, the keeper claims no title, and the money" |
| Conversion of intangible property | Limited to cases "where the underlying intangible right has been merged into a document" |
| Limitations period for a claim of conversion | Two years |
| Theft | "A person commits the offense of theft if he 'unlawfully appropriates property with intent to deprive the owner of property' without the owner's 'effective consent.' " |
| Common entity types | Corporation, limited liability company (LLC), limited partnership (LP), or general partnership (GP) |
| Common ways of conversion | (i) dissolution/formation, (ii) merger, and (iii) statutory conversion |
| Statutory conversion | The converting entity ceases to exist, and the converted entity is formed by filing required conversion documents with the secretary of state of the relevant state(s) |
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What You'll Learn
Conversion of money
Conversion is a common law offence in Texas. Conversion of money is a theft offence, and the Texas Penal Code defines theft as the unlawful appropriation of property with the intent to deprive the owner of that property without their effective consent. Appropriation is defined as bringing about a transfer of title or other non-possessory interest in property, or exercising control over property other than real property.
The Texas Theft Liability Act provides that a person who commits a theft is liable for damages resulting from the theft. A person found guilty of theft can be forced to pay back the plaintiff's damages sustained from the theft and a sum not exceeding $1,000. The limitations period for a claim of conversion is two years.
The elements of conversion are:
- The plaintiff owned, had legal possession of, or was entitled to possession of the property.
- The defendant assumed and exercised dominion and control over the property in an unlawful and unauthorised manner, to the exclusion of and inconsistent with the plaintiff's rights.
- The defendant refused the plaintiff's demand for the return of the property.
Conversion of intangible property is limited to cases where the underlying intangible right has been merged into a document. For example, in the case of Neles-Jamesbury, Inc. v. Bill's Valves, the court found that the defendant did not convert the plaintiff's checks under Section 3.420 of the Texas Business and Commerce Code because the checks were payable to either the plaintiff or the defendant, and the defendant was therefore entitled to enforce the instruments.
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Conversion of intangible property
Conversion is an unauthorized act that deprives another of their property permanently or for an indefinite time. In Texas, conversion of intangible property is limited to cases "where the underlying intangible right has been merged into a document." This means that the conversion of intangible property occurs when a right to immediate possession and the power to acquire such possession are represented by a document.
Negotiable instruments, like checks and promissory notes, can be subject to conversion. For example, when a bank returns a check to the drawer without the owner's authority, it is an interference with the plaintiff's property and constitutes a conversion. Similarly, letters may be subject to an action for conversion, as can an unpublished manuscript.
Money can also be the subject of conversion if the specific money in question can be identified. An exception exists when a plaintiff can allege that the defendant converted specific, segregated, or identifiable funds. For instance, the identification of a named bank account satisfies the identifiable fund requirement for a conversion claim.
However, confidential information, trade secrets, and similar intangible property are generally not considered property that can be subject to an action in conversion.
In Texas, the limitations period for a claim of conversion is two years.
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Civil theft and conversion
Conversion and civil theft are two separate legal matters with distinct elements and remedies. In Texas, conversion of property occurs when a person "unlawfully appropriates property with [the] intent to deprive the owner of [that] property" without the owner's "effective consent." This definition of conversion is similar to civil theft, which involves the unauthorized taking of property with the intent to deprive the owner of it. However, civil theft claims may arise independently of conversion claims, especially in contractual disputes.
Conversion
In the context of Texas law, conversion involves the unlawful appropriation of property with the intent to deprive the owner of that property. This definition is provided by the Texas Penal Code, which further clarifies the terms "appropriate," "owner," and "intent." Conversion of intangible property is limited to cases where the underlying intangible right has been merged into a document. The limitations period for a conversion claim is two years, and a person found liable for conversion may be ordered to pay damages, including the value of the converted property and any resulting financial losses.
Civil Theft
Civil theft, on the other hand, typically refers to a legal claim allowing someone to seek damages for the unauthorized taking of their property with the intent to deprive them of it. This is distinct from criminal theft, which is prosecuted under the state's criminal laws. In a civil theft case, the plaintiff must show that it is more likely that the defendant took the property without their consent. Additionally, civil theft claims must go beyond a mere breach of contract and establish an independent wrongful act.
Key Differences
The primary distinction between conversion and civil theft lies in the element of intent. Conversion requires proof of unauthorized acts by the defendant, while civil theft involves a showing of criminal intent to deprive the owner of their property. Additionally, civil theft claims must go beyond a mere breach of contract and establish an independent wrongful act.
In summary, while both conversion and civil theft involve the unlawful taking of property, the key differences lie in the specific elements that must be proven and the resulting remedies available to the plaintiff. Understanding these distinctions is crucial for business owners to protect their interests and navigate potential disputes effectively.
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Texas Theft Liability Act
The Texas Theft Liability Act (TTLA) was enacted in the late 1980s to create a statutory civil cause of action against individuals who steal property from another. Prior to the act, theft was a criminal offense, but the penalty was minimal and property owners had little recourse to sue for the recovery of lost property. The TTLA creates a civil cause of action for committing certain types of theft as defined by Chapter 31 of the Texas Penal Code.
Under the Texas Penal Code, a person commits the offense of theft if they "unlawfully appropriate property with intent to deprive the owner of property" without the owner's "effective consent". "Appropriate" is defined under the Penal Code as "to bring about a transfer or purported transfer of title to or other nonpossessory interest in property, whether to the actor or another" or "to acquire or otherwise exercise control over property other than real property".
The TTLA allows a plaintiff to hold the defendant accountable for damages resulting from the theft of property and theft of service. The plaintiff owns the property or provides the service that has been appropriated. The defendant uses those goods or services unlawfully and does not compensate the plaintiff. The plaintiff suffers damages as a direct result of the defendant’s actions.
To prove theft of property, the plaintiff must prove that the defendant withheld the property permanently or until there was a significant loss in value and use. If the plaintiff successfully proves that the defendant is liable for theft, they may be eligible for actual damages, exemplary damages, court costs, attorney fees, and more. However, if the plaintiff is unsuccessful, they may be liable for the defendant's costs.
A suit under the TTLA may be brought in the county where the theft occurred or in the county where the defendant resides. A person found to have committed theft can be forced to pay back the plaintiff's damages sustained from the theft and a sum not to exceed $1,000. A parent or guardian who has a duty of control and reasonable discipline of a child may also be held liable for a theft committed by the child.
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Texas Penal Code
Conversion in Texas is considered a common law tort. Under Texas law, conversion is the "wrongful exercise of dominion and control over another's property in violation of the property owner's rights".
The Texas Penal Code defines theft as the unlawful appropriation of property with the intent to deprive the owner of the property without their effective consent. "Appropriate" is defined in the Penal Code as bringing about a transfer of title or nonpossessory interest in property, or acquiring/exercising control over property other than real property.
To establish a claim for conversion, a plaintiff must prove title, right to possession, and a demand for the return of the property unless the possessor's acts clearly repudiate the plaintiff's rights. The limitations period for a claim of conversion is two years.
There are three common ways of conversion: dissolution/formation, merger, and statutory conversion. In dissolution/formation, the converting entity is dissolved and the converted entity is formed through separate agreements between the owners. This process can be time-consuming and involve complicated taxation issues. In a merger, the converting entity ceases to exist, and the converted entity is formed by filing the required conversion documents with the secretary of state. The ownership, assets, and liabilities of the converting entity are transferred to the converted entity by law. In statutory conversion, the statutory requirements of the relevant jurisdiction must be satisfied, and the converting entity's governing documents may provide rules or restrictions on the conversion.
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