Conversion Claim Cannot be Based on Money Owed By Contract

On November 22, 2017, Justice Masley of the New York County Commercial Division issued a decision in Caring Professionals, Inc. v. Catholic Health Care System, 2017 NY Slip Op. 32491(U), dismissing a claim for conversion because it sought money owed by contract, explaining:

The claim against the Agencies for conversion is dismissed. A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person's right of possession. Two key elements of conversion are (1) plaintiff's possessory right or interest in the property and (2) defendant's dominion over the property or interference with it, in derogation of plaintiff's rights. Where, as here, the conversion claim pertains to money, the funds must be specifically identifiable and be subject to an obligation to be returned or to be otherwise treated in a particular manner.

Provider alleges that the Agencies sought reimbursement from Medicaid for the services rendered by Provider, but failed to pay Provider, using the money for other purposes. However, this allegation does not establish that Provider had an immediate possessory interest in such funds or that they were segregated in a specifically identical manner for Provider's benefit. Although the complaint·notes that, under 18 NYCRR § 515(2)(b)(4), the "conversion" of funds is listed as an unacceptable practice, that language does not purport to employ the legal definition of "conversion," and even if it did, a claim for conversion has not been pled for the reasons stated above.

Furthermore, a cause of action for conversion cannot be predicated on a mere breach of contract and the conversion claim here relies upon no facts other than those underlying the contract claim, i.e., the Agencies failed to pay Provider for its services.

(Internal quotations and citations omitted).

This case illustrates a common misuse of a conversion claim. Yet there are circumstances where a claim for conversion will apply to money as well as tangible objects. We have litigated such issues many times. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions about the applicability of legal theories such as conversion and unjust enrichment to claims for money.