Opinion ID: 1712387
Heading Depth: 2
Heading Rank: 2

Heading: Conversion Claims

Text: To establish conversion, one must present proof of a wrongful taking, an illegal assumption of ownership, an illegal use or misuse of another's property, or a wrongful detention or interference with another's property. It is well settled that money may be subject to a conversion claim, where there is an obligation to keep that money intact or to deliver it. Generally, an action for conversion of money will not lie unless the money is specific and capable of identification.  Crown Life Ins. Co. v. Smith, 657 So.2d 821, 823 (Ala.1994) (citations omitted; emphasis added). See also Waddell & Reed, Inc. v. United Investors Life Ins. Co., 875 So.2d 1143 (Ala.2003). The conversion claims of both Albrecht and the Trust are based on the theory that they each owned, as of July 28, 2000, the date the Rule 64 application was filed, an equal share of the merger consideration, namely, $4,860,566.40 ($2,430,283.20 × 2), each one's share being the product of the 790,336 shares held by each of them before the merger and the exchange value of $3.075 per share. Their complaint alleged that Riscorp wrongfully detained their funds from July 28, 2000, to July 25, 2001  the date on which the $2,560,566.40 that Riscorp had paid into the Montgomery Circuit Court was disbursed in compliance with the judgment of this Court in Norman II. In addition, the Trust  but not Albrecht  contends that Riscorp wrongfully withheld $1,150,000, which it obtained from First Union on August 7, 2000, and used as a set-off against the amount due on Norman's promissory note. Albrecht does not object to the set-off. The Trust and Albrecht contend that these funds were subject to conversion, because, they insist, they were segregated or singled out by Riscorp for benefit of Plaintiffs and other shareholders [in a special bank account] and [were] thus [sufficiently] identifiable. The Trust and Albrecht's brief, at 47. Thus, they argue, the elements of conversion are satisfied. Riscorp, however, contends that Albrecht and the Trust failed to prove that Riscorp intended `to assert control over the property of [the] plaintiff[s] as required to support a conversion claim. Riscorp's brief, at 37 (emphasis added). It insists that [t]hese funds did not belong to the [ Plaintiffs ] and could not be converted. Id. at 50 (emphasis added). Thus, assuming, without deciding, that the merger consideration was sufficiently identifiable to support an action for conversion, the issue is whether Albrecht and the Trust, in the absence of a valid breach-of-contract claim, have demonstrated a sufficient interest in the contested portions of the merger consideration. The gist of the action [for conversion] is the wrongful exercise of dominion over property to the exclusion of or in defiance of a plaintiff's rights, where the plaintiff has a general or special title to the property or the immediate right to possession.  Greene County Bd. of Educ. v. Bailey, 586 So.2d 893, 898 (Ala.1991) (citing Ex parte SouthTrust Bank of Alabama, N.A., 523 So.2d 407 (Ala.1988) (emphasis added)). See also Ex parte Anderson, 867 So.2d 1125, 1129-31 (Ala.2003). As to the $1,280,283.20 of the merger consideration claimed by both Albrecht and the Trust, they must show that they had an immediate right to possession that was thwarted by Riscorp. They cannot make such a showing. The right of the former Riscorp shareholders to receive cash for their shares of stock arose directly out of the Merger Agreement. In that connection, the Merger Agreement states, in pertinent part: 1.4 Payment of Cash for Class A Common Stock. (a) At the Effective Time, RISCORP shall irrevocably deposit or cause to be deposited with a bank or trust company to be designated by RISCORP and reasonably satisfactory to [Griffin Acquisitions] which is organized and doing business under the laws of the United States or any state thereof and has a combined capital and surplus of at least $100,000,000 (the `Disbursing Agent'), as agent for the holders of the shares of the Class A Common Stock, cash in the estimated aggregate amount required to effect conversion of shares of Class A Common Stock into the Merger Consideration at the Effective Time pursuant to Section 1.2 hereof. . . . . . . . (b) After surrender to the Disbursing Agent of any certificate which . . . represented Class A Common Stock . . ., the Disbursing Agent shall promptly distribute to the person in whose name such certificate shall have been registered a check in an amount equal to the Merger Consideration multiplied by the number of Surrendered Shares. . . . Not less than ten (10) business days prior to the Closing Date, [Griffin Acquisitions] shall submit to RISCORP, letters of transmittal and other documents and materials to be mailed to the holders of Class A Common Stock to facilitate the surrender of such Class A Common Stock. [Riscorp] shall immediately following the Effective Time cause to be distributed to such holders such letters of transmittal and other documents and materials approved by Riscorp to facilitate such surrender.  (Emphasis added.) Riscorp began mailing the letters of transmittal to the shareholders on July 28, 2000. Albrecht's letter of transmittal was sent to him on July 28, 2000, and the Trust's letter was sent to it on August 4, 2000. Albrecht returned his letter on August 1, 2000, and contends that August 1 is the day his share of the merger consideration was due. The Trust returned its letter of transmittal on August 11, 2000. It is unclear why the Trust and Albrecht alleged that the wrongful detention began on July 28, 2000, that being merely the date that Riscorp began mailing letters of transmittal. Nevertheless, the obligation to mail the letters of transmittal, as well as the timing of the mailing, was expressly set forth in the Merger Agreement. It was the Merger Agreement that stated the shareholders' rights to receive merger consideration in the first place. It also defined the exchange value, as well as the timing and the mechanics of distribution, of the merger consideration. Although the Merger Agreement required Riscorp to distribute the letters of transmittal immediately following the Effective Time, the shareholders  being neither parties nor third-party beneficiaries of the Merger Agreement  could not enforce § 1.4, or any other provision of the Merger Agreement. Possessing no right to sue on the Merger Agreement, Albrecht and the Trust never had an immediate right to possession of their putative portion of the merger consideration. Otherwise stated, without a right in Albrecht and the Trust to control the time and manner of disposition of the merger consideration, there is no basis for a conversion claim. This is equally true as to the Trust's unique argument regarding the $1,150,000 Riscorp took in set-off from the merger consideration to satisfy the loan it had made to Norman. All actions taken by Riscorp affected funds that were never due and owing to Albrecht or the Trust under any agreement or arrangement enforceable by either of them of which this Court has been apprised. [4] For these reasons, the trial court erred in denying Riscorp's JML motions as to the conversion claims.