The court's decision arose from a dispute between former business partners in a used vehicle dealership, where Keith Harper allegedly took $273,787 in business funds and transferred them to his personal line of credit to pay off gambling debts and other obligations. Harper had been sole manager of S&H Leasing, LLC and K&K Real Estate Holdings, LLC until his business partners voted to remove him after he became 'more and more volatile' and came to work intoxicated, according to trial court findings.
Justice Slaughter rejected the longstanding 'special chattel' requirement that had required plaintiffs to prove converted money was 'a determinate sum entrusted to the defendant for a certain purpose' and typically segregated from other accounts. 'By its terms, the criminal-conversion statute extends to money that is not a determinate sum entrusted to the defendant for a certain purpose, and there is no requirement that the funds be segregated from other monies,' Slaughter wrote. The court found this judicial requirement 'conflicts with the plain text of both the criminal-conversion statute and the CVRA.'
The court delivered sharp criticism of the special chattel rule, noting it created perverse incentives. 'Such a rule gives the alleged converter control over whether certain funds are subject to conversion because, depending on the type of account he chooses to place the funds, the funds may or may not be subject to conversion,' Slaughter wrote, adding that the rule punished 'the punctilious thief, who separates his ill-gotten gains from his legitimate ones, while letting an individual less concerned about bookkeeping off the hook.'
The case reached the Supreme Court after the Indiana Court of Appeals split in a 2-1 decision. The majority held Harper did not commit conversion because he commingled the funds with his own money, but found he committed theft, another CVRA-eligible offense. Judge Vaidik concurred with the judgment but disagreed on the conversion analysis, arguing the segregation requirement should be eliminated and noting the majority's conclusion that Harper committed theft but not conversion was 'suspect because conversion is a lesser-included offense of theft.'
Harper argued he had used the cash transfer to restructure business debt and pay off a line of credit used for business expenses, but the trial court rejected this claim. 'The evidence introduced at trial did not support this allegation,' the trial court found, noting that the LLCs' balance sheets showed no indebtedness to Harper and his personal line-of-credit balance was nearly identical to the amount he borrowed from RBS Properties before transferring the proceeds to himself.
The Supreme Court emphasized that eliminating the special chattel requirement does not expand the CVRA to ordinary contract disputes. Instead, the limiting principle is criminal intent—the mens rea requirement that distinguishes criminal conversion from innocent breaches of contract. 'It is this mens rea requirement that differentiates criminal conversion from the more innocent breach of contract or failure to pay a debt,' Slaughter wrote, noting that good faith remains a defense to criminal conversion charges.
The court affirmed the trial court's treble damages award under the CVRA but remanded for one modification: the damages should go to K&K Real Estate Holdings rather than S&H Leasing, since K&K was the actual victim that borrowed the converted funds. The ruling also summarily affirmed the Court of Appeals on breach of fiduciary duty claims while reversing on unjust enrichment. The decision clarifies that CVRA plaintiffs need only prove the statutory elements of the underlying crime, not additional judicial requirements that had evolved over decades of case law.