RALEY v. ROYAL INS. CO. LTD.

FAULKNER, Justice.

The Raleys appeal from a summary judgment in a suit brought by them against Royal Insurance, and Royal Globe for conversion. We reverse.

May 21, 1975, the Raleys executed a mortgage to the Covington County Bank on Lot 20, Conecuh Subdivision, that secured a promissory note for $11,859.12. Meanwhile, on April 14, 1975, Mr. Raley executed an installment note to the Bank of $1,247.40, secured by a 1974 Chevrolet pick-up truck. On or about August 24, a fire destroyed the Raley dwelling situated on the mortgaged property. The dwelling and its contents were insured, as required by the terms of the mortgage, with Royal Globe Insurance Company. The loss payee under the policy was the Bank. Royal Globe investigated the fire loss, and took the position that it was not liable. The Raleys' suit filed on January 15, 1976, against Royal Globe in the Circuit Court of Covington County was transferred to the United States District Court, Middle District of Alabama, where the case was tried on October 14. A jury awarded the Raleys the whole amount sued for less living expenses. However, the jury, on direction of the trial judge, deducted $9,143.23 from the verdict. This deduction resulted from Royal Globe's representation that it had paid the Bank as mortgagee, and was therefore entitled to a credit against the award to the Raleys.

The record shows that, instead of Royal Globe paying off the Raleys' mortgage, it had the Bank transfer the mortgage to Royal Globe by giving the Bank a check dated August 23, 1976, for $9,143.23. The mortgage transfer, signed by the Bank's Vice-President, J. T. Kirkland was dated August 23. The mortgage was not satisfied of record until May 3, 1978.

Now, as far as the pick-up truck is concerned, it does not appear that it was involved in the Federal Court suit, yet Mrs. Raley stated by affidavit that the amount due on the truck was also deducted from their jury verdict. A former agent of Royal Globe stated by affidavit, that his Company did not receive the truck note. But, Mr. Raley testified that Royal Globe, the insurer of the truck, took possession of it. As an aside, it appears that the pick-up had been involved in a wreck, and was a total loss. We are not shown whether any insurance proceeds were paid to the Raleys for loss of the truck.

The Raleys allege in their complaint that Royal Globe converted to its own use $9,143.23—property belonging to them. Royal Globe answers, in effect, that it paid off the mortgage to the Bank, therefore, there has been no conversion. But, Royal Globe did not pay off the mortgage, and extinguish the debt before the Federal Court suit. On the contrary, it had the mortgage transferred to it. Therefore, at the time of the suit, Royal Globe had not paid any loss resulting from the fire. It had merely placed itself in the Bank's position as mortgagee. For aught that appears, Royal Globe could have demanded mortgage payments from the Raleys. Even though it did not demand payments on the mortgage, Royal Globe still had the legal title to the Raleys' property.

In Ott v. Fox, 362 So.2d 836 (Ala.1978), this Court stated that a wrongful conversion constituted a wrongful taking, wrongful detention or interference, or illegal assumption of ownership, or illegal use or misuse. See also Webb v. Dickson, 276 Ala. 553, 165 So.2d 103 (1964). In our opinion, when Royal Globe had possession of the mortgage, and failed to have it satisfied for almost two years, it was interfering with Raley's right of possession of his property, and was thereby guilty of conversion. Raley either had a right to the full amount of the jury award or the right to have the mortgage satisfied. The fact that the mortgage was eventually satisfied does not correct the evil done.

We hold that summary judgment was improper here. Our cases, since the adoption of the Rules of Civil Procedure, are legion that summary judgment is only appropriate where it appears that the non-moving party could not prevail under any set of discernible circumstances. Whitehead v. Danison Oil Co., Inc., 352 So.2d 1339 (Ala.1977). Folmar v. Montgomery Fair Co., Inc., 293 Ala. 686, 309 So.2d 818 (1975).

REVERSED and REMANDED.

JONES, ALMON and EMBRY, JJ., concur.

TORBERT, C. J., concurs specially.

TORBERT, Chief Justice (concurring specially).

Plaintiffs below claim defendants converted $9143.23, the property of plaintiffs, and further claim punitive damages on the basis that defendants "knowingly and fraudulently" converted plaintiffs' money. The underlying facts of this case are unusual, and the cause of action for conversion of money upon such facts is novel.

The case law of Alabama establishing the essential requisites for the maintenance of a cause of action in conversion has long been firmly established. There are four different actions which constitute conversion: (1) A wrongful taking; (2) an illegal assumption of ownership; (3) an illegal use or misuse; and (4) a wrongful detention. Only the fourth action requires proof that the plaintiff demanded the return of the converted property and that the defendant refused that return.

Glaze v. M'million, 7 Port. 279, 281-82 (1838) (emphasis added). See also, Claybrooke Warehouse and Gin Company v. Farmers Cooperative Warehouse and Gin Company, 260 Ala. 518, 71 So.2d 88 (1954).

The building insured by defendant, Royal Globe, burned, and Royal Globe paid the mortgagee bank, as loss payee under the plaintiffs' fire insurance policy, the sum of $9143.23, representing the balance of the indebtedness owed by plaintiffs to the bank. In turn, Royal Globe took an assignment of the bank's note and mortgage, apparently for the reason that Royal Globe denied liability to plaintiffs under the insurance contract. The bank did not satisfy the mortgage of record, having transferred ownership to Royal Globe.

In the federal court action by plaintiffs against defendants on the insurance contract, plaintiffs recovered for their fire loss, and the $9143.23 paid by Royal Globe to mortgagee bank was deducted from the jury verdict against Royal Globe. Until the jury determined that the insurance company's defense on the policy was without merit, the insurance company was entitled to take an assignment of the mortgage from the mortgagee bank, on the theory that if the jury determined Royal Globe was not liable on its policy, Royal Globe would be entitled to some security for the money which it paid on behalf of the plaintiffs to the bank. Therefore, because the "taking" of an assignment of the mortgage by Royal Globe was not wrongful, the only possible category of conversion into which Royal Globe's actions could fall is the fourth category listed above, i. e., wrongful detention.

In the recent case of Tenneco Oil Company v. Clevenger, 363 So.2d 316 (Ala.Civ.App. 1978), the Court of Civil Appeals recognized that the statutory penalty for failure of a mortgagee to satisfy a mortgage (Code 1975, § 35-10-30) is penal in nature and therefore not the exclusive remedy to recover damages against a mortgagee. The Court of Civil Appeals held there is a field of operation for a civil cause of action for damages on behalf of a mortgagor based upon the wrongful failure of the mortgagee to satisfy his mortgage.

Tenneco Oil Company v. Clevenger, 363 So.2d 316, 318 (Ala.Civ.App.1978).

Although the remedy provided by § 35-10-30 is not exclusive, in order to maintain a cause of action in conversion for detention, plaintiffs must prove that they demanded the return of the converted property. See, Glaze v. M'million, supra, Claybrooke Warehouse, supra. There is evidence in the record to the effect that Mr. Raley made several trips to the bank to obtain information on whether his mortgage had been exonerated or assigned and, if assigned, to whom. "[However,] a demand, to be effective, must be made on the person who has the actual possession or control of the property claimed, who is obligated to surrender it, and who has the power to deliver it up, if he would." 89 C.J.S. Trover and Conversion § 58 (1955). In the instant case, though the Covington County Bank was the mortgagee of record, evidence in the record shows that the mortgage was transferred to Royal Globe, which, as the assignee of the mortgagee, became the true owner of the mortgage. The question determinative of this appeal is whether a sufficient demand was made on Royal Globe for the return of the $9143.23 which the Company took as a credit against the Raleys' judgment, or whether a sufficient demand was made for the return of the mortgage marked "paid."

It is necessary to distinguish the type of demand contemplated in Code 1975, § 35-10-30, the statutory penalty for a mortgagee's wrongful failure to exonerate, from that type of demand essential for the maintenance of a compensatory common law action in conversion for wrongful detention. In order for a mortgagee to be subject to the imposition of the statutory penalty for wrongful failure to exonerate, the mortgagor must have requested in writing the satisfaction of his mortgage. Code 1975, § 35-10-29. The legislature chose the stringent requirement of a written request as a precondition to imposing the statutory penalty, but conversion is not dependent upon statute. "[C]onversion had its real genesis in the old common law action of trover." W. Prosser, Handbook on The Law of Torts § 15 (4th ed. 1971). A demand need not be in writing to give rise to a compensatory common law cause of action for wrongful detention.

18 Am.Jur.2d Conversion § 64 (1965).

"No formal words are required to constitute a demand, whether it is oral or in writing, but it should be a request for present delivery of the property, and must be clothed in absolute unequivocal terms." 89 C.J.S. Trover and Conversion § 58 (1955).

The record is replete with evidence, including letters and depositions, which raises a genuine issue of fact whether the Raleys demanded from Royal Globe the return of their mortgage and note marked "paid." It was error for the trial court to enter summary judgment for the defendants when a genuine issue of material fact was raised as to whether or not a sufficient demand was made upon the Royal Globe Insurance Company for surrender of the mortgage marked "paid."

If the factfinder determines that the Raleys did demand that Royal Globe surrender their mortgage marked "paid," then the question of damages arises.

. . . . .

Ewing v. Blount, 20 Ala. 694 (1852) (emphasis added) (citations omitted). See also, Mitchell v. Corbin, 91 Ala. 599, 8 So. 810 (1890); Roebuck Auto Sales, Inc. v. Wallace, 293 Ala. 231, 301 So.2d 546 (1974).

Plaintiffs' complaint also seeks punitive damages based on their allegation that Royal Globe "knowingly and fraudulently" converted the $9143.23. "[I]f evidence is presented to the jury which shows that a party has converted property in known violation of the owner's rights and in violation of the law, punitive damages may be assessed." Gunite Contracting Co. Inc. v. Mize, 341 So.2d 694 (Ala.1977); Roy Hughes Chevrolet, Inc. v. Gordon, 294 Ala. 638, 320 So.2d 652 (1975).

If the plaintiffs can prove no actual losses resulting directly from the mortgagee's wrongful failure to exonerate their mortgage and the plaintiffs can prove no conduct of such a nature which would give rise to exemplary damages, then any award the plaintiffs receive should be limited to nominal damages.