Steven Sheeder, plaintiff-appellee/cross-appellant v. James Jamison, Individually, and D/B/A Jamison & Sons, A/K/A J&S Ag Services, defendant-appellant/cross-appellee. ( 2016 )

IN THE COURT OF APPEALS OF IOWA
No. 15-1120
Filed September 28, 2016
STEVEN SHEEDER,
Plaintiff-Appellee/Cross-Appellant,
vs.
JAMES JAMISON, Individually, and d/b/a Jamison & Sons, a/k/a J&S Ag
Services,
Defendant-Appellant/Cross-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Dallas County, Gregory A. Hulse,
Judge.
Both parties appeal following the district court’s decision adjudicating a
custom farming contract dispute. AFFIRMED.
John P. Roehrick of Roehrick Law Firm, P.C., Des Moines, for
appellant/cross-appellee.
Steven P. Wandro, Kara M. Simons, and Brian J. Lalor of Wandro &
Associates, P.C., Des Moines, for appellee/cross-appellant.
Heard by Vogel, P.J., and Vaitheswaran and McDonald, JJ.
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VOGEL, Presiding Judge.
James Jamison appeals, and Steven Sheeder cross-appeals, the district
court’s decision adjudicating the parties’ dispute over a custom farming
agreement. Jamison asserts there is a lack of substantial evidence to support
the district court’s decision that he converted grain-sale proceeds by
overcharging for services and products under the custom farming agreement.
He also asserts the court erred in awarding punitive damages because he claims
his breach of the parties’ contract did not rise to the level of an intentional tort.
Sheeder contends the court correctly discerned Jamison converted the proceeds
from the grain sales and correctly awarded punitive damages in light of
Jamison’s conduct. However, Sheeder cross-appeals the district court’s
decision, claiming the court erred in failing to find Jamison stole grain from
Sheeder’s 2011 harvest. For the reasons stated below, we affirm the district
court’s decision.
I. Background Facts and Proceedings.
In the winter of 2010-2011, Sheeder discovered that while he had rented
over 1500 acres of farm land for the 2011 growing season and paid most of the
rent in advance, he was without the financing needed to secure the seed and
other inputs necessary for a crop. Sheeder was introduced to Marvin Mitchell, an
employee of Jamison.1 Thereafter, Mitchell, Jamison, and Sheeder worked out a
custom farming agreement whereby Jamison would provide the seed, other
inputs, and labor through Mitchell to plant and harvest the crop. In return,
1
In addition to performing custom farming, Jamison was also a seed salesman for
various companies and had a trucking business.
3
Jamison would have a lien on the crop harvest in the amount of the services
provided under the agreement during the growing season. The contract, initially
signed on March 31, 2011, and later amended, was drafted by Jamison’s
employee, Mitchell. Mitchell also negotiated a line of credit with Agriland FS for
the operating funds for anhydrous ammonia, chemicals, and spraying. Jamison
was required by Agriland FS to personally guarantee the line of credit for
Sheeder, and in light of his guarantee, Jamison demanded that the only people
who could make purchases on the line of credit included himself or his agent.
Mitchell and Jamison performed the planting of the various tracts of land
Sheeder had rented, and by all accounts prior to harvest, the crop looked good.
Mitchell also prepared invoices for Sheeder for the work done during the planting
season, though these invoices would await payment from the proceeds of the
harvest.
The relationship between the parties soured during harvest. Sheeder
believed the yields Jamison was reporting were too low, leading Sheeder to
believe Jamison was stealing grain from the harvest. The harvest was recorded
on digital devices in the harvesting equipment, and the district court noted the
parties agreed the record of the harvest from the equipment roughly equaled the
amount of grain sold in Sheeder’s name at the grain elevators. However,
Jamison admitted the digital devices could be turned off or otherwise
manipulated. Sheeder also testified Jamison loaded some of the harvested grain
into a bin against Sheeder’s wishes. Sheeder placed locks on the grain bin to
ensure the grain was not removed without his consent. Those locks were
repeatedly cut, and the grain removed without Sheeder’s knowledge or consent.
4
Sheeder asked Jamison to leave “test strips” of grain if the yield on the
field seemed low so that an insurance agent could ascertain the average yield
after which claims could be submitted. Jamison failed to leave any test strips.
Jamison also commingled grain while harvesting from various fields, but the
district noted the digital records indicated how much grain was removed from
each field.
During the settling up of the account after harvest, it was discovered
Agriland FS had intermingled Jamison’s various accounts. Jamison and Mitchell
met with Agriland FS to review the accounts and adjustments were made.
However, there remained a $16,296.79 fuel charge to Sheeder that could not be
explained, and Mitchell had improperly directed Agriland FS to credit $4000 of
Sheeder’s harvest money toward Mitchell’s personal account at Agriland FS.
Checks for the harvest were mailed to Sheeder from the grain elevators as
multiparty checks. Sheeder would endorse the check and then deliver the check
to Jamison. Jamison kept what he thought he was owed based on the invoices
prepared. Unhappy with the profit from the 2011 harvest, Sheeder filed suit
against Jamison and others alleging a number of causes of action. By the time
the matter went to trial, only Jamison remained as a defendant, and Sheeder had
confined his causes of action to conversion and breach of contract.
After hearing testimony over the course of five days, the district court filed
its decision April 15, 2015. The court concluded Sheeder had failed to prove
Jamison had converted grain, but it did find Jamison improperly billed Sheeder
under the contract resulting in both a breach of contract and the conversion of
grain proceeds. Based on these findings, the court awarded Sheeder
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$56,263.62. Sheeder was also awarded $70,000 in punitive damages against
Jamison because of Jamison’s egregious conduct.
Both parties appeal.
II. Scope and Standard of Review.
A claim for the conversion of property is an action at law and is thus
reviewable for correction of errors at law. Lewis v. Jaeger, 818 N.W.2d 165,
175–76 (Iowa 2012). Pursuant to this standard, the district court’s factual
findings have the force of a special verdict and are binding on appeal if supported
by substantial evidence. Van Sloun v. Agans Bros. Inc., 778 N.W.2d 174, 179
(Iowa 2010). However, the district court’s legal conclusions are not binding on
us. Id.
A district court’s decision to award punitive damages is likewise reviewed
for errors at law. Wolf v. Wolf, 690 N.W.2d 887, 893 (Iowa 2005). “Punitive
damages are only appropriate when a tort is committed with ‘either actual or legal
malice.’” Id. (citation omitted).
III. Conversion—Grain-Sale Proceeds.
In his first claim on appeal, Jamison contends the improper billing that
occurred, if it occurred at all, does not amount to a master plan to deprive
Sheeder of the proceeds of the grain sale and thus does not amount to an
intentional tort. Jamison contends the overbilling occurred over the course of
several months as the invoices were prepared, only six of the twenty-five
services billed were invoiced improperly, and the amount of the improper billing
was minor when viewed from the perspective of the entire contract, which
consisted of over $450,000 worth of products provided and services performed.
6
Jamison also contends conversion cannot occur in this case because both he
and Sheeder had a right of possession to the grain proceeds as Jamison had a
first lien on all of the crop proceeds. While conceding there may have been a
breach of the contract, Jamison maintains that his actions did not amount to
conversion because the invoices were not prepared with a wanton disregard for
Sheeder’s rights.
“Conversion is ‘the wrongful control or dominion over another’s property
contrary to that person’s possessory right to the property.’” Blackford v. Prairie
Meadows Racetrack & Casino, Inc., 778 N.W.2d 184, 188 (Iowa 2010) (citations
omitted). In order to prove conversion, a party “must establish a possessory
interest in the property.” Id. “[M]oney can be the subject of conversion if the
specific money in question can be identified.” Allen v. Gordon, 429 So. 2d 369,
371 (Fla. Dist. Ct. App. 1983). There is no dispute as to Sheeder’s rights to the
grain proceeds as the person who rented the land for the 2011 growing season.
However, Jamison contends he likewise had a possessory interest in the
property by virtue of his lien under the parties’ contract. We agree Jamison had
a possessory interest in the proceeds but only to the extent of the value of the
services and products provided pursuant to the contract.
Conversion may be predicated upon any distinct act of
dominion over another’s personal property in denial of his right or
inconsistent with it. It may be proved by showing (1) a tortious
undertaking, or (2) any use or appropriation to the use of the
person in possession indicating a claim of right in opposition to the
rights of the real owner, or (3) by a refusal to surrender on demand.
Even if the defendant in such proceeding came into possession of
the property lawfully, yet if he afterward assumes the control of it as
owner, asserting rights therein inconsistent with the rights of the
owner, there is a conversion.
7
Lee v. Coon Rapids Nat’l Bank, 144 N.W. 630, 633 (Iowa 1913) (citations
omitted).
The checks for the grain proceeds were multiparty checks. Sheeder
endorsed the checks and turned them over to Jamison for payment of Jamison’s
lien under the contract. The conversion occurred in this case when Jamison
retained more money from those checks than he was entitled to take under the
parties’ contract. While he was lawfully in possession of the grain proceeds,
Jamison committed conversion when he failed to surrender to Sheeder the
amount Sheeder was entitled to receive from those proceeds. By invoicing
Sheeder for services above the agreed-upon rate in the contract and then
retaining the money from the checks to satisfy the inflated invoices, Jamison
unlawfully converted the grain proceeds to his own purposes, which was
inconsistent with the rights of the lawful owner, Sheeder.
The court found ten services for which Sheeder was improperly charged,
totaling $56,236.62 that Jamison kept from the grain proceeds that he was not
entitled to keep. It is not an excuse to the tort of conversion to assert that the
amount improperly withheld was small in comparison to the total amount that was
properly acquired. Mau v. Rice Bros., 249 N.W. 206, 208 (Iowa 1933) (“The fact
that the defendant’s profit from the transaction was small is immaterial, because
it is not necessary that profit flow to the party guilty of the conversion to create
liability for the conversion.”).
Jamison contends it was improper to assess to him the amount Sheeder
was overcharged by Agriland FS because Jamison was not a party to the
contract between Sheeder and Agriland FS, only a guarantor. As the district
8
court found, before becoming the guarantor Jamison made sure only he or his
agent could make charges on the account. Jamison maintained several
accounts at Agriland FS and met with Agriland FS to allocate charges to the
various accounts when the accounts became intermingled. During this process,
Mitchell directed, and Jamison approved, Agriland FS allocating $16,296.79
worth of fuel charges to Sheeder’s account, which was ultimately added to
Sheeder’s bill and withheld from Sheeder from the grain proceeds. The court
noted the custom farming agreement rates had the fuel cost already built in.
Thus, Jamison, by virtue of his position as guarantor and as the only person who
could incur charges on Sheeder’s account, assessed Sheeder fuel costs that
were not proper under the contract. For that reason, it was appropriate to include
the Agriland FS fuel charge in the amount Jamison converted. Any issue
Jamison raised on appeal that the language of the contract is ambiguous as to
the specific charges invoiced should be resolved Sheeder’s favor because it was
Jamison, through his agent Mitchell, who drafted the contract. Iowa Fuel &
Minerals, Inc. v. Iowa State Bd. of Regents, 471 N.W.2d 859, 862–63 (Iowa
1991) (“When a contract is not ambiguous, it will be enforced as written, but
when there are ambiguities in a contract, they are strictly construed against the
drafter.” (citation omitted)).
Ultimately, we find substantial evidence supports the district court’s
conclusion:
[W]hen Jamison withheld the above amounts from the 2011 harvest
proceeds, he wrongfully exercised control over Sheeder’s property
and wholly interfered with Sheeder’s ability to use the same. The
record does not support that Jamison (or Mitchell, as his employee)
had a good faith basis to charge fees for consulting, fuel, or a
9
$4000 credit to Mitchell farms account at Agriland, or to overcharge
for scouting, mowing, hauling, grain vacuum, or grain auger fees.
These overcharges and unauthorized charges were egregious in
light of the parties’ express agreement.
IV. Punitive Damages.
Next, Jamison contends the court should not have awarded punitive
damages in this case. He asserts the evidence in this case does not show a
willful and wanton disregard for Sheeder’s rights but simply a dispute over the
legitimate charges for the services provided under the contract. He claims the
evidence does not show a persistent course of conduct amounting to a conscious
indifference to the consequences.
Punitive damages are meant to “punish bad behavior and deter future bad
conduct.” Miranda v. Said, 836 N.W.2d 8, 34 (Iowa 2013). To justify an award of
punitive damages, a party must prove “by a preponderance of clear, convincing,
and satisfactory evidence, the conduct of the defendant from which the claim
arose constituted willful and wanton disregard for the rights or safety of another.”
Id. (quoting Iowa Code § 668A.1(1)(a) (2013)).
Generally, a breach of contract, even if intentional, is
insufficient to support an award of punitive damages. We will only
uphold an award of punitive damages for breach of contract when
the breach (1) constitutes an intentional tort, and (2) is committed
maliciously, in a manner that meets the standards of Iowa Code
section 668A.1.
Seastrom v. Farm Bureau Life Ins. Co., 601 N.W.2d 339, 347 (Iowa 1999). In
addition, some form of malice, actual or legal, must be shown to support an
award of punitive damages. Cawthorn v. Catholic Health Initiatives Iowa Corp.,
743 N.W.2d 525, 529 (Iowa 2007). “Actual malice may be shown by such things
as personal spite, hatred, or ill-will and legal malice may be shown by wrongful
10
conduct committed with a willful or reckless disregard for the rights of another.”
Id. (citations omitted).
The district court concluded the evidence was insufficient to prove actual
malice between Jamison and Sheeder but sufficient to show legal malice. The
court concluded Jamison and Mitchell “intentionally and systematically took
advantage of Sheeder[] and deprived [him] of [his] property, causing great harm
to Sheeder[’s] ability to fulfill [his] financial commitments.”
They blatantly charged whatever amounts they felt like
despite the parties’ unequivocal and express agreements on rates.
The likelihood of this harm was entirely foreseeable to Jamison.
The evidence shows that Mitchell repeatedly and intentionally
charged Sheeder[] fees at rates above those agreed to in the
contract and also allocated charges to Sheeder[] that were not
authorized under the contract. Mitchell lied about the principal and
interest owing to Agriland, which demonstrates an intent to deceive
Sheeder[]. Mitchell even admitted some of his actions were wrong.
Jamison and his employee, Mitchell, were indifferent to the fact
they caused [Sheeder] great harm by converting his harvest
proceeds. The Court finds by a preponderance of clear, convincing
and satisfactory evidence that Jamison and Mitchell, as his
employee, acted with willful and wanton disregard for Sheeder[’s]
rights and caused actual damage to Sheeder[]. Jamison,
individually and as employer of Mitchell, is liable for punitive
damages based on his conduct in breaching the custom farm
agreement and converting proceeds from the sale of Sheeder[’s]
crops to his own use.
Jamison contends it was improper for the court to rely on the $4000
Mitchell directed Agriland FS to credit to Mitchell’s personal account as a basis
for the punitive damage award. The district court had earlier determined that
Mitchell’s action in this regard was not authorized by Jamison and was outside
the scope of Mitchell’s authority. We note the district court, in determining
whether punitive damages should be award specifically stated, “Even without
considering the $4000 that Mitchell converted to his own use, Jamison and
11
Mitchell as his employee intentionally and systematically took advantage of
Sheeder[] . . . .” While the court later referred to Mitchell’s lies to Sheeder “about
the principal and interest owing to Agriland” and this could be considered a
reference to this same $4000,2 it also could be a reference to the $16,296.79 fuel
charge that Mitchell told Agriland FS to assess to Sheeder when such fuel
charges were already built in to the rates charged under the contract.
We conclude the court’s award of punitive damages in this case is
supported by substantial evidence.
V. Conversion—Grain.
In his cross-appeal, Sheeder asserts the district court erred in finding a
lack of proof to support his claim that Jamison stole grain during the 2011
harvest, amounting to either a conversion of the grain or a breach of the custom
farming agreement. Sheeder points to his expert’s testimony that the crop land
should have yielded at least county averages. If county averages are used,
Sheeder contends Jamison stole approximately $282,000 worth of grain.
Sheeder claims that while he did not have information about the nutrients and
fertilizer used on the land to support his assertion that the ground should have at
least yielded county averages, this information was outside his control or
knowledge because he relied on Jamison to use whatever products were
necessary to support the crop. Any failure of proof Sheeder claims was the
result of Jamison failing to provide him the scale tickets segregated by field and
Jamison’s failure to leave test strips when it became apparent during harvest that
2
Mitchell had disguised this $4000 credit to his account by informing both Jamison and
Sheeder it was part of the interest owed to Agriland FS on the line of credit.
12
the yield was low compared to what was expected. He also points to Jamison’s
admission that the digital devices meant to monitor the harvest could be
manipulated and Jamison’s harvest of some of the fields at unusual times when
Sheeder’s representatives were not present.
The district court extensively and exhaustively analyzed the evidence
submitted with respect to the harvest, matching records generated both at the
field and at the grain elevator and considering the parties’ testimony as to the
process and timing of the harvest. The court noted to get the yields up to county
averages on three of the farms in Cass County would have taken an additional
twenty-three truck loads, which would have required two additional ten-hour days
or at least more than three hours each day over the seven-day harvest period.
The district court concluded:
It is highly unlikely that such a scenario could have taken place
without some record of corn being delivered somewhere or
someone observing the trucks coming and going at all hours. No
evidence was produced except the assumptions, and those are
insufficient on which to make a finding of stolen grain from Cass
County.
With respect to the other fields, Sheeder alleged Jamison stole grain from
a grain bin because the locks Sheeder placed on the bin were cut and the grain
removed without his knowledge or consent. In considering this claim, the district
court noted to conclude the grain inside the bin, which held 35,000 to 40,000
bushels, was stolen would have meant the farm ground yield between 161 and
184 bushels per acre, which was much higher than even Sheeder’s expert
contended it should have yielded based on county averages—126 bushels per
acre. The evidence showed that no less than five people were watching the
13
harvest at various points in time for Sheeder, but for reasons unexplained none
of the written records from these observers were admitted at trial.
Ultimately, in rejecting Sheeder’s claim, the court stated:
When southern Iowa, particularly the Corydon farm is
considered, the claim is that 70,000 to 80,000 bushels were
converted, taken from the bin, because [Sheeder] had put on three
padlocks and they were all “cut off” and the bin emptied.
First, the Court finds it incredulous to believe that if Jamison
were to convert 70,000 to 80,000 bushels, he would have taken the
time to fill and empty a bin three times. Why not simply have his
trucks carry the grain away to wherever he was going to hide it?
Further hauling of 70,000 to 80,000 bushels would have required
over 60 truckloads. That would have meant that the two trucks of
Jamison would have hauled no less than 30 loads each. That
would have required, per the testimony of both Sheeder and
Jamison, almost five days of harvest (assuming 15,000 bushels a
day) to transport away 60 truckloads. The loss of 70,000-80,000
bushels falls within the realm of speculation and conjecture. Again,
the absence of records which purportedly were kept by Sheeder’s
“watchers” militates against the credibility of such a loss.
Finally, to use county averages without any historical records
of production and no information as to nutrients and fertilizer and
the application or lack thereof does not permit an inference of
county-wide averages for each farm, particularly taking into account
the lack of evidence by Sheeder as to the yields from each farm.
We conclude substantial evidence supports the court’s conclusion that to
award Sheeder damages for grain he believed Jamison stole during the harvest
would amount to “speculation and conjecture.” We therefore affirm the district
court’s denial of Sheeder’s claim that Jamison stole grain during the 2011
harvest.
VI. Conclusion.
The district court thoroughly analyzed the evidence and claims made by
each of the parties in its forty-nine-page ruling. We conclude substantial
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evidence supports each of the court’s factual findings and no error at law
occurred. The district court’s decision is affirmed.
AFFIRMED.
Vaitheswaran, J., concurs; McDonald, J., dissents.
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MCDONALD, Judge. (dissenting)
I concur in the majority’s resolution of Sheeder’s cross appeal regarding
the conversion of grain, but I respectfully dissent from the majority’s resolution of
Jamison’s appeal regarding the conversion of grain proceeds and assessment of
punitive damages.
“Conversion is the wrongful control or dominion over another's property
contrary to that person's possessory right to the property. In order to establish a
conversion claim, the plaintiff must establish a possessory interest in the
property.” Blackford v. Prairie Meadows Racetrack & Casino, Inc., 778 N.W.2d
184, 188 (Iowa 2010) (citations omitted). Although the issue is never directly
addressed, our recent cases implicitly conclude money can be property subject
to conversion. See, e.g., id. at 188 (analyzing claim for conversion of gaming
winnings); Condon Auto Sales & Service, Inc. v. Crick, 604 N.W.2d 587, 594
(Iowa 1999) (affirming award for conversion of money held in contravention to the
plaintiff’s possessory interest in the same); Whitfield & Eddy, P.L.C. v. Mitchell,
No. 04-1721, 2005 WL 3115769, at *4 (Iowa Ct. App. Nov. 23, 2005) (reversing
grant of motion to dismiss where farmer pleaded conversion of grain proceeds).
To the extent money can be subject to conversion, the claim is cognizable only
where the money at issue is a specific chattel, specifically identifiable, or
segregated. See Lee v. Coon Rapids Nat’l Bank, 144 N.W. 630, 634 (Iowa 1913)
(stating there can be no conversion of money without “distinguishing earmarks”);
see also In re Thebus, 483 N.E.2d 1258, 1260–61 (Ill. 1985) (holding failure to
remit funds owed was not conversion because the funds were not in a separate,
identifiable fund); Allied Inv. Corp. v. Jasen, 731 A.2d 957, 966 (Md. 1999) (“The
16
general rule is that monies are intangible and, therefore, not subject to a claim for
conversion. An exception exists, however, when a plaintiff can allege that the
defendant converted specific segregated or identifiable funds.” (citations
omitted)); 18 Am. Jur. 2d Conversion § 7 (“[M]oney 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 is required and intended to be segregated, either
substantially in the form in which it was received or as an intact fund.”)
Even when viewing the record in the light most favorable to the district
court, the money at issue was not a specific chattel, specifically identifiable, or
segregated into a separate account. Sheeder failed to present any evidence
establishing the grain proceeds were specifically identifiable or placed into a
segregated account. To the extent the flow of funds can be determined from this
record, the evidence shows the proceeds were deposited into and transferred
among several general accounts and commingled with other funds. For
example, Poet Energy’s payment for the grain was a multi-party check made
payable to Sheeder, Jamison, Agriland, and John Wepler. The Poet check was
deposited by Agriland into its general account and payment was applied to
Sheeder’s line of credit. Agriland paid the balance of the proceeds from its
general account to Jamison. Jamison made payment to Sheeder from Jamison’s
personal account. Cargill paid for grain after delivery in twenty separate checks
mailed to Sheeder, most of which were made payable to Sheeder and Jamison.
Sheeder presented the checks to Jamison, and Jamison deposited the checks
into his personal checking account or made the checks payable to Agriland. The
17
record is not exactly clear, but either Jamison wrote a check to Sheeder out of
his personal checking account for payment pursuant to the parties’ contact or
Agriland made a check payable to Sheeder and adjusted Jamison’s account with
Agriland. What is clear is Sheeder failed to prove the money was specifically
identifiable or held in a segregated account.
Sheeder’s failure to prove the funds at issue were a specific chattel,
specifically identifiable, or held in a segregated account defeats his conversion
claim. See Delmore v. Gonzales, 903 So. 2d 140, 145 (Ala. Civ. App. 2004)
(affirming dismissal of conversion claim where funds were commingled); Warm
Springs Props., Inc. v. Andora Villa, Inc., 526 P.2d 1106, 1108 (Idaho 1974)
(holding party was “foreclosed from maintaining this action on the theory of
conversion because once the funds were received . . . they went into [a] general
checking account and lost any specific identity”); Allied Inv. Corp., 731 A.2d at
967 (“[I]f a defendant maintains possession of the proceeds in question, but
commingles it with other monies, the cash loses its specific identity.”); John B.
Parsons Home, LLC v. John B. Parsons Found., 90 A.3d 534, 547 (Md. Ct. Spec.
App. 2014) (affirming dismissal of conversion action where funds were
commingled in general account); Moore Equip. Co. v. Callen Constr. Co., Inc.,
299 S.W.3d 678, 681 (Mo. Ct. App. 2009) (“[I]n general, an action for conversion
does not lie for the wrongful taking of money. The reason behind this rule is that
an ordinary debt or money cannot be described or identified as specific chattel.”
(citations omitted)); Auguston v. Spry, 723 N.Y.S.2d 103, 106 (N.Y. App. Div.
2001) (“As commingled money, his money was incapable of being converted.”);
Austin v. Indep. Life & Acc. Ins. Co., 370 S.E.2d 918, 921 (S.C. Ct. App. 1988)
18
(holding claim would not lie where money was deposited into general account
and commingled with other funds).
Jamison argues that Sheeder’s claim sounds in contract and not tort. I
agree. As a general rule, an action for conversion should not lie where the
dispute arises solely out of contractual obligations. See, e.g., The Cuneo Law
Group, P.C. v. Joseph, 669 F. Supp. 2d 99, 123 (D.D.C. 2009) (“However, a
claim for conversion of money may not be maintained to enforce a contractual
obligation for payment of money.”); James T. Scatuorchio Racing Stable, LLC v.
Walmac Stud Mgmt., LLC, 941 F. Supp. 2d 807, 826–27 (E.D. Ky. 2013) (stating
a conversion action could be maintained for the recovery of money physically
taken from a person’s possession, but a conversion claim could not be brought
where the property right alleged to have been converted arose entirely from
contractual rights); Wang Labs., Inc. v. Burts, 612 F. Supp. 441, 446 (D. Md.
1984) (“As a general rule . . . failure to pay a contractual debt is not the
equivalent of conversion.”); Sullivan v. Thorndike, 934 A.2d 827, 836 (Conn. App.
Ct. 2007) (“A mere obligation to pay money may not be enforced by a conversion
action . . . and an action in tort is inappropriate where the basis of the suit is a
contract, either express or implied.”); Spanish Broad. Sys., Inc. v. Alfonso, 689
So. 2d 1092, 1094–95 (Fla. Dist. Ct. App. 1997) (“[The] mere obligation to pay
money may not be enforced by a conversion action. An action in tort is
inappropriate where the basis of the suit is contract, either express or implied.”);
Van Sickle v. Hallmark & Assocs., Inc., 744 N.W.2d 532, 539–40 (N.D. 2008)
(affirming dismissal of conversion claims arising over retention of oil proceeds on
the ground the claim originated in contract); Welty v. Martinaire of Oklahoma,
19
Inc., 867 P.2d 1273, 1275 (Okla. 1994) (“If Martinaire did not pay Welty all she
had coming when it was due, then a debt came into existence under the contract.
One may not maintain a tort action in conversion to satisfy a debt. This is not a
conversion case.” (citations omitted)); Pittsburgh Constr. Co. v. Griffith, 834 A.2d
572, 584 (Pa. Super. Ct. 2003) (applying gist-of-the-action doctrine and
disallowing a party “to interject a claim for tortious conversion into an action that
is decidedly contractual”); Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618
(Tex. 1986) (“When the injury is only the economic loss to the subject of a
contract itself, the action sounds in contract alone.”); Exxon Mobil Corp. v. Kinder
Morgan Operating L.P. “A”, 192 S.W.3d 120, 126–27 (Tex. App. 2006) (stating
under the independent injury rule “if the defendant’s conduct would give rise to
liability independent of the fact that a contract exists between the parties, the
plaintiff’s claim may sound in both tort and contract, but if the defendant’s
conduct would give rise to liability only because it breaches the parties’
agreement, the plaintiff’s claim ordinarily sounds only in contract”). Here,
Sheeder admits his conversion claim is congruent with his contract claim. In
other words, he cannot prove conversion without first proving breach of contract.
This concession is reflected in the district court’s findings; the district court found
the acts constituting a breach of contract were the same acts constituting
conversion. There is no reason to blur the line between contract and tort and
allow a party to sue in tort when the duty to pay arises solely in contract.
For the foregoing reasons, I would affirm the judgment of the district court
with respect to Sheeder’s claim for breach of contract, I would affirm the
judgment of the district court with respect to Sheeder’s claim for conversion of
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grain, and I would reverse the judgment of the district court with respect to
Sheeder’s claim for conversion of grain proceeds. Because I conclude that the
conversion claim fails as a matter of law, I would also reverse the award of
punitive damages.