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JAMES SHONBERGER AND HELAINE SCHONBERGER v. NATHAN OSWELL (08/18/87)

filed: August 18, 1987.

JAMES SHONBERGER AND HELAINE SCHONBERGER, TRADING AS J.S. APPAREL, APPELLANTS
v.
NATHAN OSWELL, TRADING AS OSWELL ENTERPRISES



Appeal from the Judgment entered October 8, 1986, in the Court of Common Pleas of Lehigh County, Civil Division, at No. 85-C-726.

COUNSEL

Alan M. Black, Allentown, for appellants.

Olszewski, Del Sole and Hoffman, JJ.

Author: Hoffman

[ 365 Pa. Super. Page 483]

This is an appeal from the lower court order entering judgment in favor of appellee.*fn1 Appellant contends that the lower court erred in finding that appellee had an effective

[ 365 Pa. Super. Page 484]

    defense to appellant's conversion action. We agree, and, accordingly, reverse the lower court order and remand the case for further proceedings.

Appellant, a supplier of women's clothing, entered into a consignment agreement with a corporation with appellee as sole shareholder. The terms of the agreement were that appellee would sell appellant's goods through his stores, keep a percentage of the proceeds, and then remit the remainder to appellant. For over two years both parties complied with the agreement. During the third year, appellee began to fail to remit the required proceeds to appellant. After a further two year period of negotiation during which appellee complied with the terms of the agreement and with a new agreement designed to reduce the delinquent balance, appellee ceased all payments to appellant. The delinquent balance at that time was $25,790.24. Three months after appellee's last payment, appellant filed a two-count complaint against appellee individually seeking to recover damages for the delinquent amount. Count one alleged that appellant did not realize that appellee was trading as a corporation. The lower court entered a directed verdict against appellant on this count, and that holding is not challenged on appeal. Count two alleged that appellee was individually liable for his own tortious conduct. It alleged that appellee had converted the proceeds from the sale of appellant's property for his own and the corporation's use. After a hearing, the lower court found that appellee had a proper defense to this action, and entered judgment in his favor. Appellant's timely post-trial motion was denied and this appeal followed.

Appellant contends that the lower court erred in finding that because he did not bring his action after appellee's initial breach but rather waited until appellee was in complete breach appellee had a successful defense to the conversion action. We agree.

[ 365 Pa. Super. Page 485]

Conversion is the deprivation of another's right of property in, or use or possession of, a chattel, without the owner's consent and without lawful justification. Stevenson Page 485} v. Economy Bank of Ambridge, 413 Pa. 442, 451, 197 A.2d 721, 726 (1964). Conversion can result only from an act intended to affect chattel. Prosser & Keeton, Torts, § 15 (5th ed. 1984). Specific intent is not required, however, but rather an intent to exercise dominion or control over the goods which is in fact inconsistent with the plaintiff's rights establishes the tort. Id. Money may be the subject of conversion. Pearl Assurance Co. v. National Ins. Agency, 151 Pa. Superior Ct. 146, 156, 30 A.2d 333, 337 (1943). Conversion is an action at law and is, therefore, subject to the two-year statute of limitations. 42 Pa.C.S.A. § 5524.

Under the "participation theory", an agent or officer of a corporation may be held individually liable for personal participation in tortious acts. Wicks v. Milzoco Builders, 503 Pa. 614, 621, 470 A.2d 86, 90 (1983). Such an action may exist even though the agent or officer derived no personal benefit, but acted on behalf, and in the name of, the corporation and the corporation alone was enriched by the act. McDonald v. First Nat'l Bank of McKeesport, 353 Pa. 29, 32, 44 A.2d 265, 266 (1945). Courts have sustained actions in conversion under this theory. Id. See also Pearl Assurance Co. v. National Ins. Agency, supra; Cohen v. Maus, 297 Pa. 454, 458, 147 A. 103, 105 (1929). Moreover, consignment agreements may form the basis for an action in conversion under the participation theory.

When the proceeds of a sale of goods, consigned to a corporation to be sold on commission, have been intentionally misapplied, the officers in control of the fund who have knowingly ...


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