Facts
- John A. Artukovich & Sons, Inc. (Artukovich) leased a crane to the Ashton Company for construction work in Tucson, Arizona.
- The written lease (dated July 1, 1975) provided a nine-month term beginning September 1, 1975, or the first day the crane was actually used (whichever came first), with delivery to Ashton “F.O.B., Tempe, Arizona” on or about July 26, 1975.
- Ashton hired Reliance Truck Co. (Reliance) to dismantle and transport the crane from Tempe to Tucson by August 1, 1975.
- On Wednesday, July 23, 1975, Reliance dismantled and loaded the crane in Tempe for the trip to Tucson.
- Reliance had a separate, preexisting contract with Arizona Public Service to place a 246,000-pound transformer at a West Phoenix substation, and Reliance wanted to use Artukovich’s crane to perform that job before delivering it to Tucson.
- Reliance contacted Ashton to request permission. Ashton ultimately told Reliance that any arrangement “would have to be made with John Artukovich.”
- Reliance attempted to contact Artukovich but failed to obtain permission to use the crane.
- Without Artukovich’s consent, Reliance moved the crane to West Phoenix, reassembled it, and used it to place the transformer, for which Reliance was paid $6,000.
- After finishing the West Phoenix work, Reliance delivered the crane to Tucson for Ashton’s project.
- Artukovich sued Reliance asserting conversion and implied contract for the unauthorized use of the crane. Following a bench trial, the court awarded Artukovich $6,956.59 in compensatory damages and $6,000 in punitive damages.
- The court of appeals set aside the conversion judgment and reduced compensatory damages to $1,456.59 (Artukovich’s out-of-pocket expenses). The Arizona Supreme Court granted review.
Issues
- Whether Reliance’s intentional use of the crane for its own paying job, without the owner’s consent and while holding the crane for the limited purpose of transport to Tucson, constituted conversion.
- If conversion occurred, whether compensatory damages could include the reasonable value of the crane’s use during the unauthorized period (rather than being limited to the owner’s out-of-pocket expenses).
- Whether the evidence supported an award of punitive damages for Reliance’s conduct.
Decision
- The Arizona Supreme Court held that Reliance’s unauthorized, profit-motivated use of the crane constituted conversion.
- The court vacated the court of appeals’ opinion that limited recovery to out-of-pocket expenses.
- The court reinstated the trial court’s judgment awarding $6,956.59 in compensatory damages and $6,000 in punitive damages.
Legal Principles
- A party who has possession of another’s chattel for a limited purpose commits conversion by intentionally exercising dominion over it in a way that is inconsistent with the owner’s rights, including substantial unauthorized use for the possessor’s own commercial benefit, even if the chattel is later returned.
- In a conversion action, compensatory damages may include the reasonable value of the use of the property during the period of wrongful control and are not confined to the owner’s incidental or out-of-pocket losses.
- Punitive damages may be awarded for conversion when the defendant’s conduct shows a conscious disregard of the owner’s rights, such as proceeding with a known unauthorized use to obtain a profit.
Conclusion
Reliance was entrusted to transport Artukovich’s crane to Tucson, but instead used it for its own separate transformer job after being told that any permission had to come from Artukovich and without obtaining that consent; this intentional, profit-seeking misuse was conversion, supporting damages based on the value of the wrongful use and an additional punitive award.