IN THE SUPREME COURT OF MISSISSIPPI
NO. 2021-CA-00666-SCT
KAREN REES McGEE
v.
COMPREHENSIVE RADIOLOGY SERVICES, PLLC
DATE OF JUDGMENT: 05/18/2021 TRIAL JUDGE: HON. RHEA HUDSON SHELDON TRIAL COURT ATTORNEYS: WILLIAM V. WESTBROOK, III LES W. SMITH JOHN BURLEY HOWELL, III ANDREW ROBERTS NORWOOD J. ROBERT RAMSAY WILLIAM J. LITTLE, JR. ORVIS A. SHIYOU, JR. COURT FROM WHICH APPEALED: FORREST COUNTY CHANCERY COURT ATTORNEYS FOR APPELLANT: WILLIAM J. LITTLE, JR. WILLIAM JARRETT LITTLE ATTORNEY FOR APPELLEE: J. ROBERT RAMSAY NATURE OF THE CASE: CIVIL - TORTS-OTHER THAN PERSONAL INJURY & PROPERTY DAMAGE DISPOSITION: AFFIRMED - 06/09/2022 MOTION FOR REHEARING FILED: MANDATE ISSUED:
BEFORE KING, P.J., MAXWELL AND GRIFFIS, JJ.
MAXWELL, JUSTICE, FOR THE COURT:
¶1. Karen McGee was the president of a collections agency. When her company ran into
financial trouble, she directed her business administrator to delay remitting the money it had
collected for Comprehensive Radiology Services, PLLC. Meanwhile, the agency still billed for—and received commissions on—the money collected. When McGee’s scheme was
finally discovered, her company had withheld almost $800,000 of Comprehensive
Radiology’s money. McGee was sued for conversion and fraud. And the chancellor found
her individually and personally liable to the radiology group for $785,549.71.
¶2. Because the record supports the chancellor’s finding McGee converted $785,549.71
of Comprehensive Radiology’s funds, we affirm. On appeal, McGee argues she could not
have committed conversion because, as a matter of Mississippi law, funds collected and
deposited into a bank account cannot be the subject of conversion. But this is not so. While
the tort of conversion cannot be used to recover a mere debt, it can be used to recover
identifiable money belonging to the plaintiff. And that is what happened in this case. The
money McGee’s company collected for Comprehensive Radiology was identifiable and
undeniably belonged to the radiology group. So Comprehesive Radiology’s funds were the
proper subject of a conversion claim. McGee’s company had no right to keep this money to
cover its own expenses but instead was obligated to remit it at the end of the month in which
it was collected. By directing her employee to delay remittance of Comprehensive
Radiology’s money, McGee committed conversion and is thus liable to Comprehensive
Radiology for $785,549.71.
Background Facts & Procedural History
I. Service Contract
2 ¶3. McGee was the president of Network Services, Inc. Network Services collected
accounts receivable for third parties in exchange for a commission. One of their larger
clients was Comprehensive Radiology, a radiology group in Hattiesburg, Mississippi.
¶4. While McGee testified that Network Services would simply deduct its commission
from the funds collected for many of its clients, that was not the agreement between Network
Services and Comprehensive Radiology. Instead, according to the contract between Network
Services and Comprehensive Radiology, Network Services was obligated to remit to
Comprehensive Radiology at the end of each month all money collected for the radiology
group that month. And based on the amount collected, Comprehensive Radiology was, in
turn, to pay Network Services a commission within ten days.1
¶5. What this looked like practically is as follows: Network Services would deposit any
money it collected for Comprehensive Radiology—as well as its other clients—into a bank
account at Trustmark Bank, which the company referred to as the “escrow” account.2
Network Services’ long-time business administrator, Lakesia Carter, testified3 that each
month she would issue a check from the Trustmark escrow account to Comprehensive
1 Specifically, Section 1.1 of the service agreement between Network Services and Comprehensive Radiology provided: “Monies collected will be remitted to CLIENT MONTHLY with commission payment due ten (10) days after receipt of the end of the month statement.” 2 There was no record evidence that the account was set up at Trustmark as an actual escrow account. But McGee herself referred to it as an escrow account, and Network Services treated it as such, keeping the money collected on behalf of clients in this account while keeping its own operating funds in a separate account at a separate bank. 3 At the time of trial, Carter was too ill to testify in person, so her deposition transcript was admitted.
3 Radiology for the exact amount collected. This check was delivered to Comprehensive
Radiology in Hattiesburg.
¶6. Each month, Network Services also prepared a separate commission statement for
Comprehensive Radiology. This statement, essentially a bill, was emailed to Comprehensive
Radiology’s business manager, Mike Villonga, who worked remotely from Florida. Based
on this statement, Villonga would write Network Services a commission check, which
Network Services would deposit into its separate operating account at BancorpSouth.
II. Network Services’ Late Payments
¶7. According to Carter, in the early 2010s, Network Services’ expenses began to exceed
its income. These expenses included payroll for McGee and her daughter. They also
included thousands of dollars in monthly rent for a commercial building that McGee and her
sister owned individually.
¶8. When Carter brought the company’s shortfall to McGee’s attention, McGee directed
Carter to delay remitting to Comprehensive Radiology the money Network Services
collected on its behalf. McGee also directed Carter to transfer money from the Trustmark
escrow account to the BancorpSouth operating account.
¶9. In both February and March 2011, Network Services did not remit the money it
collected for Comprehensive Radiology. But Network Services still sent Villonga a monthly
collection report and received commissions on the amounts it represented it had collected on
behalf of the radiology group. Network Services finally remitted February’s collections in
April 2011 and the March collections in May 2011. Network Services continued to fall
4 further and further behind in payments. By 2014, Network Services was more than a year
behind in remitting the collections to the radiology group. In other words, instead of
remitting the money collected at the end of each month—as the contract required—Network
Services was remitting each month the amount collected thirteen months earlier. Network
Services persisted in these late payments for several years. For example, in May 2017,
Network Services remitted to Comprehensive Radiology the amount collected in April 2016.
¶10. All the while, Network Services sent monthly collections reports. But these reports
were based on the real-time collections, and Network Services continued to receive
commissions tied to the amounts collected—and not the amounts untimely remitted. During
this same time period, Network Services continued to pay McGee, her daughter, and her
sister.
¶11. By the time Comprehensive Radiology discovered the discrepancies between
collections and remittances in May 2018, Network Services was behind in turning over
approximately $800,000 in Comprehensive Radiology collections. When Comprehensive
Radiology confronted McGee, she immediately acknowledged what happened. In a letter
from McGee to Comprehensive Radiology, McGee apologized “for having failed your trust
in my company and for the major delinquency in remitting your payments.” McGee proposed
a payment plan. According to her plan, Network Services would pay Comprehensive
Radiology its money over the course of four years.
III. Comprehensive Radiology’s Lawsuit
5 ¶12. In July 2018, Comprehensive Radiology sued Network Services and McGee
individually to recover the alleged $811,140.53 Network Services collected between April
2017 through March 2018 but did not remit to Comprehensive Radiology. The action was
filed in the Chancery Court of Forrest County. The complaint sought injunctive relief and
breach of contract damages against Network Services. It also alleged tort claims of
conversion and fraud against Network Services and McGee. Network Services filed for
bankruptcy, staying the case against it. But Comprehensive Radiology proceeded with its
conversion and fraud claims against McGee individually.
¶13. A bench trial was held in November 2020. At the conclusion, the chancellor ruled that
McGee was individually liable to Comprehensive Radiology for $785,549.71. Specifically,
the chancellor found McGee had committed both conversion and fraud.
¶14. Regarding conversion, McGee had admitted Network Services owed Comprehensive
Radiology approximately $811,000, which had been deposited into the Trustmark
account—an account McGee described as an escrow account. But these funds were never
the property of Network Services. The contract between Network Services and
Comprehensive Radiology specified that Network Services would remit all collections to
Comprehensive Radiology monthly. Yet, at McGee’s direction, Carter did not remit these
funds. Instead, she transferred them to Network Services’ operating account at
BancorpSouth. In turn, these funds were used to pay McGee, her daughter, and her sister.
The chancellor concluded McGee’s actions constituted conversion—that is, “an intent to
exercise dominion or control over goods, which is inconsistent with the true owner’s right.”
6 Walker v. Brown, 501 So. 2d 358, 361 (Miss. 1987) (citing Miss. Motor Fin., Inc. v.
Thomas, 246 Miss. 14, 149 So. 2d 20 (1963)).
¶15. Regarding fraud, the chancellor found McGee made false representations to
Comprehensive Radiology—namely, the monthly collection reports—on which
Comprehensive Radiology relied to pay commissions to its detriment. At the same time
Network Services was reporting to Comprehensive Radiology the amount it had collected
that month, McGee was directing Carter not to remit that amount to Comprehensive
Radiology. She directed Carter instead to divert those funds to Network Services’ operating
account. For example, in January 2017, Network Services reported that it had collected
$88,227.81 for Comprehensive Radiology, for which the radiology group promptly paid
Network Services a $23,265.02 commission. But Network Services only remitted
$54,546.31—the amount Network Services had collected for Comprehensive Radiology
thirteen months earlier in December 2015. The chancellor found this to be fraud.
IV. McGee’s Appeal
¶16. McGee timely appealed the final judgment against her, asserting three claims:
(1) This case is nothing more than a breach of contract, for which McGee, as corporate officer, cannot be held individually liable.
(2) No false representations were made—both the collection reports and delayed remittance reports were accurate. So there was no fraud.
(3) Money cannot be the subject of conversion.
¶17. To the extent McGee challenges the chancellor’s factual findings, this Court will not
disturb those findings “unless manifestly wrong or clearly erroneous.” Consol. Pipe &
7 Supply Co. v. Colter, 735 So. 2d 958, 961 (Miss. 1999) (citing Denson v. George, 642 So.
2d 909, 913 (Miss. 1994)). But we review the questions of law she raises de novo. Id.
Discussion
I. Can McGee be held personally liable?
¶18. McGee asserts she cannot be held personally liable for Network Services’ debts. And,
indeed, McGee is correct to the extent she cannot be held individually liable to Network
Services’ creditors merely because she is the company president. See, e.g., Turner v. Wilson,
620 So. 2d 545, 548 (Miss. 1993) (“[I]ndividual liability of corporate officers or directors
may not be predicated merely on their connection to the corporation . . . .”).
¶19. But she can be held liable for her own wrongdoing. Id. In Mississippi, “the general
rule is well established that when a corporate officer directly participates in or authorizes the
commission of a tort, even on behalf of the corporation, [s]he may be held personally liable.”
Miss. Printing Co. v. Maris, West & Baker, Inc., 492 So. 2d 977, 978 (Miss. 1986) (citing
First Mobile Home Corp. v. Little, 298 So. 2d 676 (Miss. 1974); Grapico Bottling Co. v.
Ennis, 140 Miss. 502, 106 So. 97 (1925)). This rule applies to the tort of conversion, “as
where money or property of a third person is in the hands of the corporation and the officers
in control knowingly and intentionally convert it by refusing to give up possession, or by
applying it to the uses of the corporation.” Wilson v. S. Cent. Miss. Farmers, Inc., 494 So.
2d 358, 361 (Miss. 1986) (quoting 19 C.J.S. Corporations § 849). This rule also applies to
fraud. Little, 298 So. 2d at 679 (holding that a corporate officer “is individually liable for
8 fraudulent acts of h[er] own or in which [s]he participates” (quoting 19 Am. Jur. 2d
Corporations § 1384 (1965))).
¶20. Here, the chancellor did not simply hold McGee personally liable for the money
Network Services owed Comprehensive Radiology.4 Instead, the chancellor determined that
McGee herself acted tortiously, injuring Comprehensive Radiology. So the controlling
question on appeal is whether the law and record support the chancellor’s conclusions.
II. Can money be converted?
¶21. In addressing this question, we need not go any further than analyzing the chancellor’s
finding of conversion, or civil theft. While the chancellor determined McGee committed two
torts—conversion and fraud—a finding of conversion alone is sufficient to make McGee
liable to Comprehensive Radiology for the entire $785,549.71 judgment, without having to
delve into the question of fraud.
¶22. Conversion, or civil theft, “requires an intent to exercise dominion or control over
goods which is inconsistent with the true owner’s right.” Walker, 501 So. 2d at 361. McGee
argues that, as a matter of law, conversion is not actionable as to funds deposited in a bank
account.5 McGee relies on Mossler Acceptance Co. v. Moore, 218 Miss. 757, 67 So. 2d 868,
4 We note that this is not a case in which Comprehensive Radiology sought to “pierce the corporate veil”—i.e., it did not ask the court to ignore the legal separateness of Network Services due to some abuse on McGee’s part of the corporate form. See Canadian Nat’l Ry. Co. v. Waltman, 94 So. 3d 1111, 1116 (Miss. 2012) (listing elements of a corporate-veil- piercing claim). 5 Comprehensive Radiology insists that McGee waived this legal argument by failing to raise it in the trial court. But the record shows McGee did bring this issue to the chancellor’s attention, asserting in her proposed findings of fact and conclusions of law that “conversion applies to tangible property or cash, not funds in a bank account.” While
9 873 (1953), which quotes hornbook law that “[c]onversion lies only for personal property
which is tangible.” Id. (quoting 53 Am. Jur. Trover and Conversion, § 4). McGee then relies
on a non-conversion case, Cartwright v. Deposit Guaranty National Bank, 675 So. 2d 847,
848 (Miss. 1996), for the proposition that money deposited in a bank account is intangible
personal property. Splicing these two cases together, McGee contends conversion cannot
apply to money because it is intangible personal property. She insists the only way this Court
can affirm the chancellor’s finding that she converted Comprehensive Radiology’s money
is by overulling both Mossler and Cartwright.
¶23. We disagree.
¶24. Cartwright is inapposite. The question in that case was whether funds deposited in
an account met the statutory definition of exempt personal property under Mississippi Code
Section 85-3-1 (1972)—a statute wholly inapplicable to this case. Cartwright, 675 So. 2d
at 847. Mossler, by contrast, was a conversion case. Mossler, 67 So. 2d at 872-73. But as
Comprehensive Radiology points out, since Mossler, this Court has affirmed judgments
based on the proceeds of a sale of land, LaBarre v. Gold, 520 So. 2d 1327, 1331 (Miss.
1987), and based on the conversion of a ward’s funds by a conservator, Bryan v. Holzer, 589
So. 2d 648, 659 (Miss. 1991). Neither Labarre or Bryan overruled Mossler, strongly
indicating that Mossler did not hold that money can never be the subject of conversion. In
fact, in Mossler, we explained that “[a]n action will not lie for the conversion of a mere debt
McGee may not have made the precise argument she makes in her brief—namely, that to hold her liable for conversion would require this Court overrule precedent—she did sufficiently bring this issue to the trial court’s attention to warrant appellate review of her claim.
10 or chose in action.” Mossler, 67 So. 2d at 873 (emphasis added) (quoting 53 Am. Jur.
Trover and Conversion, § 5). In Mossler, a creditor failed to timely probate its claim against
the debtor’s estate. Id. at 871. So it tried to dodge the time bar by trying to recover the debt
through a conversion claim. Id. at 872. But according to the Mossler Court, “where there
is no obligation to return identical money, but only a relationship of debtor and creditor, an
action for conversion of the funds representing the indebtedness will not lie against the
debtor.” Id. at 873 (emphasis added) (quoting 53 Am. Jur. Trover and Conversion § 5). So
Mossler did not hold that money can never be the subject of conversion, as McGee contends.
Rather, Mossler held that a conversion action cannot be used to recover a mere debt.
¶25. Here, Network Services was not merely Comprehensive Radiology’s debtor. Instead,
under the contract’s terms, all the money Network Services collected for Comprehensive
Radiology belonged to Comprehensive Radiology. And Carter testified that she knew, as
business administrator, that the funds collected belonged to the radiology group, not Network
Services. This is why the funds were deposited into the escrow account, which was separate
from the Network Services operating account. While other clients’ funds were also deposited
into the Trustmark escrow account, the money collected for Comprehensive Radiology was
easily identifiable. In fact, McGee singled out Comprehensive Radiology’s funds. As Carter
testified, McGee specifically directed Carter not to remit Comprehensive Radiology’s
collections. Yet other clients continued to receive their money.
¶26. These facts are similar to those confronted by the Court of Appeals of Arizona in Case
Corp. v. Gehrke, 91 P.3d 362 (Ariz. Ct. App. 2004). There, the plaintiff, Case Corporation,
11 had entered an agreement with a company, of which the Gehrkes were officers. Id. at 363-
64. Per the agreement, Case provided the Gehrkes’ company with heavy machinery to sell
in exchange for a security interest in the equipment. Id. If the Gehrkes’ company sold any
Case equipment, it had to remit to Case its share of the proceeds within seven days. Id. at
364. The Gehrkes sold Case machinery, commingling the proceeds from the sale of Case
Corporation’s inventory with proceeds from non-Case sales. Id. But the Gehrkes never paid
Case its share of the proceeds within seven days. Instead, their company defaulted and filed
for bankruptcy. Id.
¶27. Case sued the Gehrkes personally for conversion. Id. at 364. The Gehrkes moved for
summary judgment, arguing—like McGee does—“that non-specified and unsegregated funds
could not be the subject of a conversion claim.” Id. The trial court agreed and granted the
Gehrkes summary judgment. Id. But the Arizona Court of Appeals reversed. Id. at 365-68.
While Case conceded that it never required the proceeds from the sale of its equipment be
placed into a separate bank account and not be commingled with non-Case proceeds, Case
did have a security interest in the proceeds. Id. at 367. And this security interest “allow[ed]
the proceeds to be identified even when they are commingled with other funds . . . .” Id. at
368. Thus, the appellate court held that Case had “assert[ed] a viable claim for conversion
of its secured proceeds of the inventory.” Id.
¶28. Again, the money Network Services collected for Comprehensive Radiology, though
placed in the Trustmark escrow account with other clients’ funds, was identifiable. So it
could certainly be the subject of conversion, just like the ward’s funds in Bryan, 589 So. 2d
12 at 659, and the land-sale proceeds in LaBarre, 520 So. 2d at 1331. As we have said,
conversion involves the defendant’s “unlawful assumption of dominion over the personal
property involved, in defiance or exclusion of the plaintiff’s rights, or else a withholding of
the possession under a claim of right or title inconsistent with that of plaintiff.” Thomas, 149
So. 2d at 23. And there is record support for the chancellor’s determination that McGee
directed Carter to withhold remitting funds to which Comprehensive Radiology had a right
under the service agreement. We affirm the $785,549.71 judgment based on the chancellor’s
finding McGee committed conversion.
¶29. AFFIRMED.
RANDOLPH, C.J., KITCHENS AND KING, P.JJ., COLEMAN, BEAM, CHAMBERLIN, ISHEE AND GRIFFIS, JJ., CONCUR.