Gary M. Temple, Appellant-Defendant v. Robert M. Smith, Appellee-Plaintiff (2026)

MEMORANDUM DECISION

Case Summary

[1] Robert Smith sued Gary Temple to recover the unpaid balance of a $27,589.26 loan. After a bench trial, the trial court concluded Temple's failure to pay the debt constituted “civil conversion” and awarded Smith treble damages totaling $82,767.78. Appellant's Appendix Vol. 2 at 53. On appeal, Temple acknowledges he owes the unpaid debt but challenges the treble damages award. He argues the Crime Victims Relief Act (CVRA) authorizes treble damages for criminal conversion, not a mere failure to pay debt. We agree and hold the trial court clearly erred in awarding treble damages without finding that Temple engaged in criminal conduct. We therefore partially affirm the court's judgment in the amount of $27,589.26, reverse the treble damages award, and remand for the court to amend its judgment.

Facts and Procedural History

[2] In 2014, Temple began working as an independent contractor for Smith's timbering business. In 2017, Caterpillar Financial Services obtained a judgment against Temple after he defaulted on an installment loan. In November 2019, Temple approached Smith asking to borrow money from him to satisfy the Caterpillar judgment. Smith wired Temple $27,589.26 for that purpose on November 27, and the parties orally agreed Temple would pay it back the following April. In February 2020, Temple asked Smith if he could borrow another $20,000.00 to pay off an outstanding tax obligation. Smith gave Temple another $20,000.00, and again the parties orally agreed Temple would “take care of” both loans in April. Transcript at 4.

[3] When Temple failed to repay either loan on time, the parties agreed he could perform additional work for Smith to satisfy at least some of the debt in lieu of payment. According to Smith, Temple performed that additional work in September 2020, which satisfied the $20,000.00 loan but left the loan from November 2019 unpaid. Temple believed, however, that the work fully satisfied his debt to Smith.

[4] Temple continued to work for Smith as an independent contractor through 2023, and Smith never refused to pay Temple for his work despite Temple's outstanding debt. Smith issued 1099s reflecting he paid Temple $19,000.00 in 2020, $25,650.00 in 2021, and $16,000.00 in 2022. Temple last worked for Smith in April 2023, and the parties have not spoken to each other since. Smith tried to contact Temple a handful of times about the outstanding $27,589.26 loan, but Temple did not respond.

[5] In May 2024, Smith filed a complaint alleging that by failing to repay the debt, Temple had “committed the act[ ] of [c]ivil [c]onversion.” Appellant's App. Vol. 2 at 11. He also alleged he was entitled to treble damages.

[6] The parties appeared for a two-day bench trial on February 12 and March 31, 2026. Temple's defense was that the $20,000.00 payment in February 2020 was not a loan but rather compensation for timbering work done in late 2019 and early 2020. And while Temple agreed the November 2019 wire transfer was intended to be a loan, he claimed the work done in September 2020 satisfied that debt in full. Smith disagreed on both fronts and testified that Temple still owed him a balance of $27,589.26.

[7] On April 16, 2026, the trial court entered an order finding and concluding, in part, that:

[Temple] owes [Smith] a debt in the sum of [$27,589.26].

․ [B]y retaining the funds, despite the demands of [Smith], [Temple] has committed the action of civil conversion.

As such, [Smith] shall be entitled to treble damages.

Appellant's App. Vol. 2 at 53. The court entered an $82,767.78 judgment in Smith's favor, and Temple now appeals.

Discussion and Decision

[8] Following a bench trial, we generally apply a deferential standard of review, considering “only the evidence favorable to the judgment and all reasonable inferences flowing therefrom.” Est. of Henry v. Woods, 77 N.E.3d 1200, 1204 (Ind. Ct. App. 2017). Here, however, Temple does not challenge any of the trial court's findings and instead contends the court committed legal error by awarding treble damages. A trial court's legal conclusions are subject to de novo review. AgReliant Genetics, LLC v. Gary Hamstra Farms, Inc., 213 N.E.3d 1087, 1094 (Ind. Ct. App. 2023).

[9] A claim for civil conversion does not entitle the plaintiff to treble damages, as the common law restricts “damages ․ to actual losses sustained as a proximate result of the conversion.” Coffel v. Perry, 452 N.E.2d 1066, 1069 (Ind. Ct. App. 1983). However, the CVRA creates a statutory mechanism through which “a person who ‘suffers a pecuniary loss as a result of’ certain crimes” may recover up to three times his actual damages. Harper v. S&H Leasing, LLC, 277 N.E.3d 87, 93 (Ind. 2026) (quoting Ind. Code § 34-24-3-1(1)(A)). While criminal conversion falls under the CVRA's ambit, there are key differences between the tort of conversion and the crime of conversion, which our Supreme Court recently explained as follows:

The tort of conversion is the “appropriation of personal property of another to the tortfeasor's own use and benefit, to the exclusion of and in defiance of the owner's rights, under an inconsistent claim of title.” Ind. & Mich. Elec. Co. v. Terre Haute Indus., Inc., 507 N.E.2d 588, 610 (Ind. Ct. App. 1987), trans. denied. Mens rea is not an essential element of the tort of conversion, so “even if the tortfeasor acted in good faith in assuming dominion over the property, such is no defense.” Ibid. For criminal conversion, then, good faith is a defense because the offense requires criminal intent: “It is this mens rea requirement that differentiates criminal conversion from the more innocent breach of contract or failure to pay a debt—situations the criminal conversion statute was not intended to cover.” Larson v. Karagan, 979 N.E.2d 655, 661 (Ind. Ct. App. 2012).

Criminal conversion occurs when a person “knowingly or intentionally exerts unauthorized control over property of another person.” I.C. § 35-43-4-3(a)․ Generally, this mens rea requirement will serve as a bar to finding criminal conversion in ordinary breaches of contract, as the plaintiff will be unable to show that the defendant's conduct was to exert unauthorized control over the plaintiff's property intentionally or knowingly.

Harper, 277 N.E.3d at 96-97.

[10] It is well-settled that “[t]he failure to pay a debt ‘does not constitute criminal conversion as a matter of law.’ ” Id. at 97 (quoting Tobin v. Ruman, 819 N.E.2d 78, 89 (Ind. Ct. App. 2004), reh'g denied, trans. denied.) As the Court reaffirmed in Harper:

Unlike most property crimes, commercial transactions generally involve the transfer of property voluntarily․ In such cases, the creditor does not own the property; it merely possesses a legal right to repayment. Thus, the debtor's failure to pay the debt is not “unauthorized control over [the creditor's] property.” I.C. § 35-43-4-3(a). “An assertion that a debtor knowingly failed to pay what he owed, without more, is insufficient as a matter of law to prove conversion.” CT102 LLC v. Auto. Fin. Corp., 175 N.E.3d 869, 874 (Ind. Ct. App. 2021). Thus, a creditor's right to recover from the debtor does not arise from the debtor's conversion of the creditor's property but from the debtor's breach of the parties’ agreement.

Harper, 277 N.E.3d at 97 (alteration in original).

[11] Here, Smith voluntarily loaned Temple money to satisfy the Caterpillar judgment. Under the parties’ oral agreement, Smith had a contractual right to repayment. While the trial court found Temple's failure to repay the debt constituted civil conversion,¹ it entered no finding that Temple committed a criminal act justifying treble damages under the CVRA. Indeed, the only evidence to which Smith can point to justify the treble damages award is that Temple ignored his demands for repayment after April 2023 and defended himself at trial. But merely ignoring a creditor's demands and presenting a reasonable (albeit unsuccessful) defense does not transform an ordinary breach of contract into criminal behavior. See id. at 96 (“[T]he ‘legislature did not intend to criminalize bona fide contract disputes.’ ” (quoting French-Tex Cleaners, Inc. v. Cafaro Co., 893 N.E.2d 1156, 1168 (Ind. Ct. App. 2008)). To hold otherwise would make treble damages available in nearly every debt collection case, a result not supported by the CVRA.

Conclusion

[12] For these reasons, we partially affirm the trial court's judgment in the amount of the unpaid debt ($27,589.26), reverse the treble damages award, and remand with instructions for the trial court to amend its judgment accordingly.

[13] Affirmed in part, reversed in part, and remanded.

FOOTNOTES

1.   While Temple has not asked us to reverse this finding, under Harper his failure to repay the debt is better characterized as a breach of the parties’ contract.

DeBoer, Judge.

Foley, J., and Felix, J., concur.