Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of San Diego County, John S. Meyer, Judge. Super. Ct. No. GIC 822803
AARON, J.
I.
INTRODUCTION
Plaintiff Douglas Evans, Sr., appeals from a judgment of the trial court in which the court found in favor of defendant Jestine Dixon on Evans's cause of action for conversion. Dixon is the mother-in-law of Clinton Foster, a loan broker whose assistance Evans enlisted to refinance his house and purchase a new house. Foster was supposed to deposit into an escrow account in Evans's name a $128,000 cashier's check Evans had obtained with funds withdrawn from his bank account. Instead, Foster deposited Evans's cashier's check into an escrow account that had been opened in Dixon's name. Dixon had agreed to help Foster and Dixon's daughter by obtaining a loan and purchasing a house for them, because the Fosters had bad credit and were not able to purchase a house on their own.
Dixon signed all of the loan documents and purchased a house using Evans's $128,000 that had been deposited into the escrow account in Dixon's name. Dixon testified that she was not aware that Foster had taken the money from Evans, nor was she aware that there had been $128,000 in the escrow account that was used to purchase the house for Foster and her daughter. Dixon stated that she did not read the loan documents because she trusted Foster.
The trial court determined that because Dixon lacked actual knowledge of the $128,000 in the escrow account, she could not have intentionally interfered with Evans's property, and thus could not be held liable for conversion.
On appeal, Evans argues that the trial court misapplied the law of conversion by requiring that Dixon have had actual knowledge that she possessed Evans's property before she could be found to have intentionally interfered with his property. We agree that the trial court misconstrued the law. Although Dixon is a sympathetic party and appears to be innocent of any intentional wrongdoing, the trial court erred in concluding that Dixon could avoid liability for conversion if she did not have actual knowledge of the existence of the $128,000 that was deposited into the escrow account that was used to finance the property she purchased. Rather, Dixon may be liable for conversion if she had constructive knowledge of the $128,000 that was deposited into the escrow account in her name.
The evidence demonstrates that Dixon had constructive knowledge of the $128,000 because she knowingly and intentionally signed all of the documents by which she purchased the house, including escrow instructions and loan documents. By signing the documents, Dixon intentionally purchased the house with the constructive knowledge that she was exercising dominion over money used as the down payment. We therefore reverse the judgment of the trial court and direct the court to enter judgment in favor of Evans on his cause of action for conversion.
II.
FACTUAL AND PROCEDURAL BACKGROUND
A. Factual background
In early 2003, Evans refinanced his house using the services of Foster, a loan broker. Evans refinanced the house in order to obtain funds to purchase a new house for himself and his fiancée. After he received $151,000 from the refinancing, Evans deposited the money into his bank account at San Diego Metropolitan Credit Union.
Evans and his fiancée also enlisted Foster's help in finding a house to purchase in the South Bay. After the couple identified a house they were interested in purchasing, Evans obtained a cashier's check from his bank in the amount of $128,000. The cashier's check was made payable to Evans or to Chicago Title. Evans gave the cashier's check to Foster, who was supposed to deposit the check into an escrow account that had already been opened on Evans's behalf. The funds were never deposited into Evans's escrow account.
Evans eventually hired a private investigator to determine what happened to the money. The investigator discovered that the $128,000 cashier's check had been deposited into an escrow account in Jestine Dixon's name, and that Dixon is Foster's mother-in-law.
Dixon had agreed to help Foster and his wife, Cassandra, Dixon's daughter, buy a house. Dixon was going to purchase the house based on her good credit. After one year, she would transfer title to the property to the Fosters. Foster admitted that he deposited the $128,000 cashier's check into Dixon's escrow account, and Dixon acknowledged that she financed and purchased a house for the Fosters, using loan documents that Foster asked her to sign. The loan documents demonstrate that Evans's $128,000 was used toward the purchase of this house.
Foster claimed that Evans had loaned Foster the money so that Foster could purchase a house. Evans denied that he ever loaned Foster any money. The trial court clearly did not believe Foster's account, and indicated multiple times on the record that Foster appeared to have stolen the money from Evans.
Dixon stated that she never asked any questions about the financing for the house because she trusted Foster to handle the transaction. However, she admitted that she signed the loan documents, and that she was the borrower on the loan that was used to purchase a house for the Fosters. She also testified that she knew she was signing loan documents to purchase a house for the Fosters, and that she intentionally held title to the property that was purchased with the funds in the escrow account. Dixon maintained that she did not know about the $128,000 in the escrow account, nor that these funds were used in the purchase of the house.
B. Procedural background
Evans originally filed a complaint against the Fosters, Cousins Realty, and Dixon on December 16, 2003, in which he alleged causes of action for fraud and deceit, and conversion, and sought imposition of a constructive trust. The trial court entered an order on May 13, 2005 that stated that, pursuant to a settlement, the defendants, being held jointly and severally liable, "shall pay to the Plaintiff the amount of $108,514.00." The court also awarded Evans attorney fees in the amount of $1,200 and costs in the amount of $72.60.
Although a judgment had been entered in the case, Evans filed an amended complaint on July 15, 2005, that named Dixon as the only defendant and alleged a cause of action for conversion. Evans sought damages in the amount of $128,000 against Dixon. It appears that Dixon had not agreed to the settlement, and did not want to be liable for the settlement amount. On August 12, 2005, the trial court entered an order vacating the original judgment as to Dixon only. That order stated in pertinent part, "The dismissal of the entire action was entered based upon plaintiff's mistaken belief that Defendant Jestine Dixon consented to the Settlement Agreement entered into by her codefendants in November 2004. The subsequent judgment entered against Defendant Jestine Dixon was also based upon the same mistaken belief."
The trial court conducted a bench trial on November 21, 2006 on Evans's amended complaint. The court heard testimony from Evans, his fiancée Crystal Reese, Dixon, and Foster. On November 28, 2005, the court issued a statement of decision in which the court concluded that Dixon could not be held liable for conversion. The court stated, "The Court finds that Defendant JESTINE DIXON had no actual notice that the $128,000 belonging to Plaintiff DOUGLAS EVANS had been deposited in the escrow account opened to facilitate her purchase of real property. Accordingly, her interference with Plaintiff's property could not have been intentional. [¶] Although Defendant arguably had constructive notice that the escrow account contained $128,000, such notice is insufficient to establish an intentional interference with Plaintiff's right to this property."
The trial court entered judgment in favor of Dixon on January 9, 2006. Evans filed a timely notice of appeal on July 7, 2006. Dixon, representing herself on appeal, has not filed a brief in response to Evans's opening brief.
III.
DISCUSSION
Evans contends that the trial court erred in its application of the law of conversion to the facts at issue. Specifically, Evans asserts that the trial court erred in determining that Dixon had to have actually known that $128,000 was deposited into the escrow account in order to be liable for the tort of conversion. We conclude that the court erred in concluding that Dixon could not be liable for conversion of Evans's $128,000 because she lacked actual knowledge that these funds were in the escrow account she used to purchase the house for the Fosters.
Conversion is "the wrongful exercise of dominion over" property that belongs to someone else. (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1065 (Burlesci); see also Black's Law Dictionary (5th Ed. 1979) p. 300 [Conversion 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"].) "The elements of a conversion claim are: (1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages." (Burlesci, supra, 68 Cal.App.4th at p. 1065.) Money can be the subject of a conversion action where "a specific sum capable of identification is involved." (Software Design & Application v. Hoefer & Arnett (1996) 49 Cal.App.4th 472, 485.)
"[C]onversion is a strict liability tort." (Moore v. Regents of Univ. of Cal. (1990) 51 Cal.3d 120, 144.) Thus, the act of conversion must be knowingly or intentionally done, but a wrongful intent is not necessary. (Taylor v. Forte Hotels Int'l (1991) 235 Cal.App.3d 1119, 1124, citing Poggi v. Scott (1914) 167 Cal. 372, 375.) "The foundation of the action rests neither in the knowledge nor the intent of the defendant. . . . [Q]uestions of the defendant's good faith, lack of knowledge, and motive are ordinarily immaterial. [Citations.]" (Burlesci, supra, 68 Cal.App.4th at p. 1065; see also Poggi v. Scott, supra, 167 Cal. at p. 375 ["The foundation for the action of conversion rests neither in the knowledge nor the intent of the defendant. It rests upon the unwarranted interference by defendant with the dominion over the property of the plaintiff from which injury to the latter results. Therefore, neither good nor bad faith, neither care nor negligence, neither knowledge nor ignorance, are the gist of the action"].) Even an innocent good faith purchaser who buys property from a seller who does not have a right to that property may be liable for conversion if the purchaser has knowledge of facts and circumstances that would have put a prudent purchaser on inquiry that the property had been fraudulently secured. (State Farm Mut. Auto. Ins. Co. v. Department of Motor Vehicles (1997) 53 Cal.App.4th 1076, 1081.)
In Varela v. Wells Fargo Bank (1971) 15 Cal.App.3d 741 (Varela), the appellate court concluded that a bank that repossessed the plaintiff's vehicle was liable for conversion of three diamond rings that were inside the car, despite the fact that the bank was unaware that the rings were in the car. In response to the bank's argument that "there was no conversion of the rings because it did not know of their presence in the auto nor did it intend to take ownership of them," the appellate court noted that "'[t]he intent required [to constitute conversion] is not necessarily a matter of conscious wrongdoing. It is rather an intent to exercise a dominion or control over the goods which is in fact inconsistent with the plaintiff's rights.' [Citation.]" (Id. at pp. 749-750.) "Here, having taken possession of the car with the rings in it . . . rings [to which ] it had no right [of possession] even temporarily, it was the bank's duty to protect the rings. Having taken them without right and having failed to return them on demand, defendant is guilty of conversion." (Id. at p. 750.) Thus, despite the fact that the bank had no actual knowledge that it possessed the rings when it took possession of the car, the bank had the intent to exercise dominion over the car and, necessarily, everything in it, and was therefore liable to the plaintiff for conversion of the rings.
As demonstrated by the holding in Varela, the lack of actual knowledge that one has interfered with dominion over property of another does not necessarily prevent one from being held liable for conversion. Rather, we can extract from the facts of Varela that one who has knowledge of facts and circumstances sufficient to put a prudent person on inquiry notice that he or she has exercised control over another person's property may be held liable for conversion. (See Varela, supra, 15 Cal.App.3d at p. 750.) Here, if Dixon had knowledge of facts and circumstances from which she should have known that she was exercising dominion over the $128,000 that belonged to Evans, she could be liable for conversion. The trial court thus erred in concluding that the finding that Dixon lacked actual notice that she possessed and used $128,000 that did not belong to her precluded liability for conversion.
We next consider whether the error requires reversal. In reviewing the record in this case, we conclude that reversal is required because the evidence demonstrates that Dixon was on notice that she exercised dominion over the $128,000 when she signed the papers to purchase the property. No reasonable person could find otherwise.
Dixon's acts are similar to those of the defendant bank that intentionally repossessed the vehicle and thereby unknowingly possessed other property belonging to the plaintiff in Varela, in that in intentionally completing the purchase of the house, Dixon took possession of $128,000 and converted it during the purchase, despite being unaware that the money was in the escrow account. The evidence demonstrates that Dixon intended to purchase the property and intended to secure a loan on the property; the evidence also establishes that she ultimately obtained a loan and purchased the property, as intended. Dixon admitted that she knowingly and intentionally signed the documents ─ documents that no one disputes indicated that the balance in the escrow account was being used to purchase the property. Dixon acknowledged that she was aware that she was signing loan documents in order to secure financing to purchase the property. The fact that Dixon may not have adequately read the documents and for this reason may not have actually known that she possessed and was using money that had been fraudulently obtained, does not insulate her from liability, just as in Varela, where the bank's failure to adequately examine the car and make itself aware of the fact that it was taking the rings did not insulate it from liability. By signing the escrow instructions and loan documents, Dixon was on notice that she was exercising dominion over whatever funds were being used to purchase the property, even if she kept herself in the dark as to the specifics of the transaction.
During the trial, the court identified this issue, commenting, "Maybe [Dixon] had constructive notice. You make a good point, I grant you that. You can't hide behind not reading documents, so I think that is a good argument. I – I hadn't really thought of it that way. Can she stick her head in the sand and avoid liability by just saying I didn't read the documents. I'm not sure of that." The court nevertheless erroneously concluded that "[constructive] notice is insufficient to establish an intentional interference with Plaintiff's right to this property." The trial court did not make a finding regarding whether Dixon knew sufficient facts that would have put a reasonable person on inquiry as to the existence of the $128,000, stating only that Dixon "arguably had constructive notice that the escrow account contained $128,000." It is apparent from the record, however, that no reasonable person could find that Dixon was not aware of sufficient facts to put a reasonable person on inquiry as to the existence of the $128,000 in the escrow account. Dixon had every reason to know that she was exercising dominion over $128,000 that was not hers; she acted unreasonably in failing to adequately read the documents and make herself aware of the fact that she was exercising control over the funds in the escrow account.
Although it appears that Foster took advantage of a number of innocent individuals, including Dixon, Dixon's lack of wrong-doing or bad faith is not a sufficient basis for finding in her favor against another innocent party. The trial court erred in concluding that because Dixon did not have actual knowledge of the $128,000 in the escrow account, she could not be liable for conversion. In using funds from the escrow account to purchase the house for the Fosters, Dixon "'exercise[d] a dominion or control over [the money]'" that was "'inconsistent with the plaintiff's rights.' [Citation.]" (Varela, supra, 15 Cal.App.3d at p. 750.) Dixon intentionally signed the documents effectuating the use of this money to buy the house, and in signing those documents, she was on notice that she exercised dominion over the money, even if she purposefully remained without actual knowledge of her exercise of control over the money.
See Civil Code section 3543, which provides "Where one of two innocent persons must suffer by the act of a third, he, by whose negligence it happened, must be the sufferer."
V.
DISPOSITION
The judgment is reversed and the matter is remanded to the trial court with directions to enter judgment in favor of Evans.
WE CONCUR: HUFFMAN, Acting P. J., O'ROURKE, J.