Midwestern Helicopter, LLC v. Coolbaugh
2013 WI App 126, 839 N.W.2d 167, 351 Wis. 2d 211 (2013)
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Rule of Law:
An employee or agent commits the tort of conversion by authorizing a third party to use a chattel in a manner that exceeds the owner's express limitations, if that unauthorized use results in serious damage or interference with the owner's possessory rights.
Facts:
- John Parrish, the sole member of Midwestern Helicopters, LLC, established a policy to stop doing 'commercial event work' because it was unprofitable.
- Parrish communicated a new policy that there would be 'No commercial events without written permission from Midwestern Helicopter,' both online and directly to William Coolbaugh.
- Coolbaugh was a manager at Midwestern responsible for maintenance, flight instruction, and commercial work.
- Coolbaugh gave Jon Orlos, a contract pilot, permission to take a Midwestern helicopter to Skydive Chicago for a commercial skydiving event, which was a use prohibited by Parrish's policy.
- On July 4, 2008, while operating the helicopter for the unauthorized event, Orlos hit power lines and crashed, severely damaging the helicopter.
Procedural Posture:
- Midwestern Helicopters, LLC sued its employee, William Coolbaugh, and a pilot, Jon Orlos, in a state trial court for conversion and negligence.
- A default judgment was entered against Orlos after he failed to answer the complaint.
- The case between Midwestern and Coolbaugh was tried to the court in a bench trial.
- The trial court found Coolbaugh liable for conversion but not for negligence and entered a judgment in favor of Midwestern.
- Coolbaugh, as the appellant, appealed the trial court's judgment to the intermediate court of appeals; Midwestern is the appellee.
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Issue:
Does a managerial employee commit conversion by authorizing a third party to use company property for a purpose expressly prohibited by the owner, when that unauthorized use results in the property's destruction?
Opinions:
Majority - Neubauer, C.J.
Yes, an employee commits conversion under these circumstances. Conversion occurs when a person intentionally controls another's property without consent, resulting in serious interference with the owner's rights. The court found that Coolbaugh intentionally exercised control over the helicopter by giving Orlos permission to use it. This control was without the owner's consent because it directly violated Parrish's explicit policy against commercial events without written permission. The resulting destruction of the helicopter constituted a serious interference with Midwestern's possessory rights. The court adopted the principle from the Restatement (Second) of Torts, § 228, which holds that using a chattel in a manner that exceeds authorization can constitute conversion if it seriously violates the owner's right to control the property.
Analysis:
This decision clarifies that the tort of conversion is not limited to theft but extends to situations where an agent or employee knowingly exceeds their authority over a principal's property. It establishes that an agent can be held strictly liable for the full value of property damaged during an unauthorized use, even if the agent was not directly negligent in causing the damage. This holding reinforces the importance of an agent's duty to obey the principal's instructions, making clear that granting unauthorized permission to a third party can be treated as an act of conversion if serious harm results. Future cases involving bailments or agency relationships will look to this standard for determining liability when instructions regarding property use are violated.
