Conversion is a legal term that refers to unauthorized and intentional interference with someone else’s property. It typically involves taking someone else’s property and treating it as if it were one’s own without the owner’s consent.
What Is Conversion?
In a business partnership, conversion refers to the unauthorized use of another partner’s property for one’s own personal benefit. It occurs when a partner takes property that belongs to the partnership and converts it to their own use, without the consent of the other partners. This can include using partnership funds for personal expenses, selling partnership property for personal gain, or using partnership property for a purpose unrelated to the partnership’s business.
Conversion is considered a breach of the fiduciary duty that partners owe to one another. It can result in legal action being taken against the offending partner, and can also damage the relationships between the partners. Under recent case law you may also be able to recover triple damages for civil conversion under California Penal Code §496 et al.
What Are Examples of Conversion?
In a business partnership, conversion can occur in a variety of ways. Common examples of conversion in a business partnership include:
Misappropriation of Partnership Funds:
This occurs when a partner takes partnership funds for personal use, without the consent of the other partners. For example, if a partner takes money from the partnership’s bank account to pay for personal expenses, this could be considered conversion.
Selling Partnership Property:
If a partner sells partnership property without the consent of the other partners, this could be considered conversion. For example, if a partner sells partnership property and keeps the proceeds for themselves, this would be considered conversion.
Using Partnership Property for Personal Purposes:
If a partner uses partnership property for personal purposes, without the consent of the other partners, this could be considered conversion. For example, if a partner takes partnership equipment and uses it for personal projects, this would be considered conversion.
Diversion of Business Opportunities:
If a partner takes a business opportunity that was intended for the partnership and uses it for their own personal benefit, this could be considered conversion. For example, if a partner takes a contract that was intended for the partnership and uses it to start their own business, this would be considered conversion.
It is important for partners in a business partnership to have a clear understanding of their rights and responsibilities with regard to the partnership’s property, and to have clear procedures in place for the use and management of that property. This can help to prevent disputes and ensure that the partnership operates smoothly.
What Are Remedies For Conversion?
In a business partnership, if a partner is found to have engaged in conversion, the other partners may seek remedies. Common remedies for conversion in a business partnership include:
The partners harmed by the conversion can seek damages from the offending partner. This can include compensation for the value of the property that was converted and any other losses incurred as a result of the conversion.
The partners may seek an order to return the converted partnership property. In other cases, the offending partner may be ordered to compensate the partnership for its value.
The partners may seek an injunction, which is a court order that prohibits the offending partner from engaging in further conversion. This remedy can help to prevent further harm to the partnership and its property.
Dissolution of the Partnership:
In some cases, the partners may seek to dissolve the partnership as a result of the conversion. This remedy is typically pursued when the conversion has caused significant harm to the partnership and the relationships between the partners, and it is not feasible to continue the partnership.
It is important to note that the specific remedies available in a conversion case will depend on the facts and circumstances of the case and the governing law. In general, the remedies aim to restore the parties to the position they were in before the conversion and compensate the parties for any harm caused.
Contact Chatow Law For A Free Consultation
We are a business partnership dispute law firm serving clients in Los Angeles County, Orange County and San Diego County. Call us at 949-478-8393 for a FREE consultation if you’re in a business dispute involving conversion. We can help you assess your legal rights and advise you on your best course of action.