The plaintiff in Peco Pallet, Inc. v. Northwest Pallet Supply Co., 2016 WL 5405107 sued a recycling company under various theories after their once harmonious business relationship imploded.
The plaintiff, a wooden pallet manufacturer, instituted a program where it offered to pay pallet recyclers like defendant a specific amount per returned pallet. When the plaintiff announced it was going to cut the per-pallet payment rate, the defendant recycler balked and refused to return several thousand of plaintiff’s pallets. The plaintiff sued and the defendant filed counterclaims.
In partially dismissing and sustaining the parties’ various claims, the Court offers a useful refresher on both some common and uncommon legal theories that apply to personal property.
Replevin and Detinue
The Illinois replevin statute, 735 ILCS 5/19-101, allows a plaintiff to try to recover goods wrongfully detained by a defendant. The statute employs a two-step process involving an initial hearing and a subsequent trial.
Once a replevin suit is filed, the court holds a hearing to determine whether to issue a replevin order. If at the hearing the plaintiff shows he most likely has a superior right to possession of the disputed property and is likely to prevail at trial, the court enters an order of replevin which requires the defendant release the plaintiff’s property pending the trial. If the plaintiff later wins at trial, he can recover money damages attributable to the defendant’s wrongful detention of the property.
Closely related to replevin, a detinue claim also seeks the recovery of personal property and damages for its wrongful detention. Unlike replevin however, there is no preliminary hearing in a detinue case pending final judgment. Possession remains with the defendant until final judgment.
Since the purpose of the replevin and detinue remedies is the return of personal property, where a defendant returns plaintiff its property, the claims are moot. Here, since the defendant returned the 17,000 pallets that were subjects of the replevin suit, the Court found that the replevin and detinue claims pertaining to the returned pallets were moot.
The court did allow, however, plaintiff to go forward on its detinue claim for damages related to defendant’s failure to account for some 30,000 pallets.
A conversion plaintiff must prove (1) a right to property at issue, (2) an absolute and unconditional right to immediate possession of the property, (3) a demand for possession, and (4) that defendant wrongfully and without authorization, assumed control, dominion or ownership over the property.
The essence of conversion is wrongful deprivation, not wrongful acquisition. This means that even where a defendant initially possesses property lawfully, if that possession later becomes unauthorized, the plaintiff will have a conversion claim.
Here, the plaintiff alleged that it owned the pallets, that it demanded their return and defendant’s refusal to return them. These allegations were sufficient to plead a cause of action for conversion.
The Court also sustained the plaintiff’s negligence claim against the motion to dismiss. In Illinois, a negligence action arising from a bailment requires allegations of (1) an express or implied agreement to create a bailment, (2) delivery of property to the bailee in good condition, (3) bailee’s acceptance of the property, and (4) bailee’s failure to return the property or its returning the property in damaged condition.
The plaintiff sufficiently alleged an implied bailment – that defendant accepted the pallets and failed to return some of the pallets while returning others in a compromised state. These allegations were enough for the negligence count to survive.
The Court found that the defendant sufficiently pled an alternative promissory estoppel counterclaim. Promissory estoppel applies where defendant makes a promise that the plaintiff relies on to its detriment. The pleading elements of promissory estoppel are (1) an unambiguous promise, (2) plaintiff’s reliance on the promise, (3) plaintiff’s reliance was expected and foreseeable by defendant, (4) plaintiff relied on the promise to its detriment.
A promissory estoppel claim can’t co-exist with a breach of express contract claim: it only applies where there is no contractual consideration. Here, the defendant/counter-plaintiff alleged there was no express contract. Instead, it claimed that plaintiff’s promise to pay anyone who returned the pallets motivated defendant to return thousands of them. The court viewed these allegations as factual enough for a colorable promissory estoppel claim.
Tortious Interference with Contract and Business Expectancy
The court dismissed the defendant’s tortious interference counterclaims. Each tort requires a plaintiff to point to defendant’s conduct directed at a third party that results in a breach of a contract. Here, the defendant’s counterclaim focused on plaintiff’s own actions in unilaterally raising prices and altering terms of its earlier pallet return program. Since defendant didn’t allege any conduct by the plaintiff aimed at a third party (someone other than counter-claimant, e.g.), the tortious interference claims failed.
1/ Conversion action can be based on defendant’s possession that was initially lawful but that later becomes wrongful;
2/ A Promissory estoppel claim can provide a viable fall-back remedy when there is no express contract;
3/ Tortious interference claim must allege defendant’s conduct directed toward a third party (someone other than plaintiff);
4/Where personal property is wrongfully detained and ultimately returned, the property owner can still have valid detinue claim for damages.