Case Name: Hinkle Iron Company, Respondent, v. Otto M. Kohn, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1918-07-11
Citations: 184 A.D. 181
Docket Number: 
Parties: Hinkle Iron Company, Respondent, v. Otto M. Kohn, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 184
Pages: 181–187

Head Matter:
Hinkle Iron Company, Respondent, v. Otto M. Kohn, Appellant.
First Department,
July 11, 1918.
Conversion — pleading — equitable assignment — assignment by municipal contractor of moneys to become due.
A complaint, which alleges that a contracting corporation assigned to the plaintiff a specified sum out of a payment to become due under its contract with a city; that said assignment was withheld from record at the request of the defendant, the president of the corporation, and in reliance upon his promise that the amount specified would be paid to the plaintiff assignee, and that the corporation received said payment, the warrant for which was indorsed by the defendant and the money applied to the use of the corporation, does not state a cause of action in conversion but merely an action in contract for breach of the agreement between the plaintiff and the defendant.
Had the assignment been filed with the proper oficiáis it would have operated as an equitable assignment to so much of the fund as was specified therein and an appropriation of that portion in the hands of the city to the payment of the plaintiff’s debt, and if the city comptroller thereafter paid the money to the contractor he could have been compelled by mandamus to pay the amount to the plaintiff.
Conversion at law is an unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another to the alteration of their condition or the exclusion of the owner’s rights.
In order to maintain an action for conversion the plaintiff must show a legal ownership of the particular thing alleged to-have been converted. The action cannot be predicated upon an equitable interest or a mere breach of contract obligation.
Smith, J., dissented, with opinion.
Appeal by the defendant, Otto M. Kohn, from an order of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 13th day of February, 1918, denying his motion for judgment on the pleadings consisting of an amended complaint and the demurrer thereto.
C. Bertram Plante of counsel [Harry Edwards, attorney], for the appellant.
James W. McElhinney, for the respondent.

Opinion:
Page, J.:
The amended complaint is framed on the theory of the conversion by the defendant of the sum of $2,000, a part of the eighth payment upon a contract between the Midtown Contracting Company, of which the defendant was president and treasurer, and the city of New York, for the erection of a school building. The said corporation assigned to the plaintiff the sum of $4,500 out of the eighth payment to become due under said contract, by a written assignment, a copy of which is annexed to and made a part of the complaint. This assignment was not filed in the office of the board of education or of the comptroller of the city of New York by reason of the request of the defendant and relying upon his promise that he would see that the amount so assigned would be paid to plaintiff as soon as said corporation received the said eighth payment. The corporation received the said eighth payment, amounting to more than $33,000. The warrant for such payment was received by the defendant personally and indorsed and deposited to the credit of the corporation in the Colonial Bank, and $2,500 only was paid to the plaintiff, and the remainder thereof was paid out by checks of the corporation signed by the defendant and applied to the use of the corporation and the defendant. The bankruptcy of the corporation is alleged, and that by the act of the defendant and of the said corporation in drawing and signing the said checks did wrongfully, fraudulently and unlawfully appropriate for their own use and benefit $2,000 of the said eighth payment, which in law and equity belonged to the plaintiff. Demand and failure to pay is alleged.
The complaint has been sustained as stating facts sufficient to constitute a cause of action in conversion.
Conversion at law is defined to be an unauthorized assumption and exercise of the right of ownership over goods, or personal chattels, belonging to another, to the alteration of their condition, or the exclusion of the owner's rights. (Industrial & General Trust v. Tod, 170 N. Y. 233, 245.) There was no conversion in the receiving of the warrant for the eighth payment and depositing the same in the bank to the credit of the Midtown Contracting Company, for under the facts alleged in the complaint the warrant was not the property of the plaintiff, but of the Midtown Contracting Company. The agreement was to pay to plaintiff out of this payment. Therefore, it was contemplated that the warrant was to be collected by that company. When the warrant was paid, it of necessity was mingled with the money of the Midtown Contracting Company. Hence up to this point there was no unauthorized assumption and exercise of the right of ownership. Nor was there any title or right of ownership in this particular fund. When the assignment was made it was in a fund to become due. It dealt not with an existing thing, but with something which might or might not come into existence. If and when the eighth payment was earned and received, the plaintiff was to be paid, this gave the plaintiff no present legal title. Had the assignment been filed with the proper officials, it would have operated as an equitable assignment to so much of the fund as was specified in it, and an appropriation of so much of the fund, in the hands of the city, to the payment of the plaintiff's debt, and if the comptroller thereafter paid the money to the Midtown Contracting Company he could nevertheless have been compelled by mandamus to pay the amount to the plaintiff. (People ex rel. Dannat v. Comptroller, 77 N. Y. 45, 48.) But this was not done. The plaintiff agreed not to file it with the comptroller,' relying upon the agreement of the defendant to pay the money out of the fund. There was, therefore, no appropriation of the fund pro tanto, in such a manner that the custodian of the fund was authorized to pay the amount to the creditor without the further intervention of the debtor. (Trist v. Child, 88 U. S. 441, 447.) The most that can be said is that the defendant promised to pay this money out of a particular fund and the sole right would be an action in contract for breach of the agreement. The defendant had the right, acting on behalf of the Midtown Contracting Company, to draw the entire fund from the city treasury and to deposit the entire fund to the credit of the company; the plaintiff's rights either legal or equitable were not violated thereby. The failure to pay it over was simply a breach of contract, and the plaintiff cannot, by changing the form of the action, change the nature of the defendant's obligation and convert into a tort that which the law deems a simple breach of an agreement. (Walter v. Bennett, 16 N. Y. 250, 252.) It is elementary that to maintain an action for conversion the plaintiff must show a legal ownership to the particular thing alleged to have been converted. The action cannot be predicated upon an equitable interest or a mere breach of contract obligation. The complaint does not state a cause of action in conversion.
The order should be reversed, with ten dollars costs and disbursements, and the motion granted, with ten dollars costs, with leave to the plaintiff to pay the said costs and serve an amended complaint if he is so advised, within ten days after service of a copy of the order herein with notice of entry thereof, and in default thereof judgment may be entered for the defendant dismissing the complaint, with costs.
Clarke, P. J., Laughlin and Shearn, JJ., concurred; Smith, J., dissented.