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Posted: October 24, 2019

Conversion Claim Cannot be Based on Unpaid Debt

On February 6, 2019, Judge Wilson of the Bergen County Superior Court (Law Division) issued a decision in Booth Movers Ltd. v. Sleepable Sofas Ltd., Docket No. BER L-4341-17, holding that a conversion claim could not be based on an unpaid debt, explaining:

Booth Movers’ claim for conversion is rooted in the allegation that the defendants failed to return the security deposit to Booth Movers, and retained the security deposit for their own use and/or for a use other than that which the parties agreed to under the Sublease Agreement.

In New Jersey, conversion is defined as the wrongful exercise of dominion and control over property owned by another in a manner inconsistent with the owner’s rights. In some instances, a claim for conversion can involve monetary funds. However, an action for conversion will not lie in the context of a mere debt where there is no obligation to return the identical money, but instead, an ordinary debtor and creditor relationship exists. Furthermore, a party is liable only for breach of contract if it allegedly fails to honor its obligations under a contract, and is not additionally liable for a conversion of property of the other party to the contract.

In this instance, assuming that Booth Movers would be entitled to a return of its security deposit, it would only have a claim for breach of contract and not a claim for conversion against Sleepable Sofas. This is due to the fact that DFH was never a party to the Sublease Agreement with Booth Movers or assumed it pursuant to the APA. Furthermore, DFH did not receive or retain the security deposit in which Booth Movers’ conversion claim is rooted, and cannot be held to account to Booth Movers for that security deposit. Therefore, the claim for conversion must be dismissed as to DFH for the reasons stated above.

(Internal quotations and citations omitted).

Complex business litigation often involves conversion claims. As this decision shows, conversion can involve much more than physical objects. It can involve money (in certain circumstances) as well as intangible property. As this decision shows, there are limits to the law of conversion. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding one person depriving another of her property, whether that property is tangible or intangible, or even involves a discrete fund of money.

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