for the unperformed services. CCSI reimbursed the cardholders for these charges.
According to the Complaint, CCSI ceased paying South Central on December 18, 1991 for paper slips submitted by South Central. None of these sales slips were related to AEE. Although CCSI processed the slips, CCSI deposited the proceeds in a special account for the purpose of recouping money refunded to AEE customers for services not received. In other words, CCSI offset other money due to South Central for sales slips to cover its losses in the AEE deal. As of March 5, 1992, CCSI had withheld from South Central and placed in the special account $ 173,386.27 in sales slips proceeds.
South Central contends that the Agreement does not authorize CCSI to withhold money due for sales slips submitted by South Central to offset chargebacks or for any other purpose. Thus, South Central alleges that CCSI has "wrongfully and without authorization assumed control, dominion and ownership over this amount in specifically identifiable money to which South Central has the sole right of ownership and immediate, absolute and unconditional possession." CCSI has moved to dismiss Counts III and IV on grounds that South Central has failed to state a claim for conversion.
The Restatement of Torts defines "conversion" as follows:
1) Conversion is an intentional exercise of dominion and control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel.
Restatement (Second) of Torts § 222A (1965). The Supreme Court of Illinois has stated that "'[a] conversion is an unauthorized act, which deprives a man of his property permanently or for an indefinite time * * *.'" In re Thebus, 108 Ill. 2d 255, 483 N.E.2d 1258, 1260, 91 Ill. Dec. 623 (Ill. App. Ct. 1985) (quoting Union Stock Yard & Transit Co. v. Mallory, Son, & Zimmerman Co., 157 Ill. 554, 563, 41 N.E. 888 (1985)). An action for conversion only lies for personal property which is tangible, or at least represented by or connected with something tangible. Id. (citing 18 Am. Jur. 2d Conversion § 9 (1965)). Since money is a fungible good, "an action for the conversion of funds may not be maintained to satisfy a mere obligation to pay money." Id.
However, money may be the subject of conversion if it is capable of being described as a specific chattel. Id. According to Restatement (Second) of Torts § 242, "where there is conversion of a document in which intangible rights are merged, the damages include the value of such rights."
For instance, Illinois courts recognize a cause of action for conversion of commercial paper, such as a check, on the theory that the intangible right to money is merged into a specific document (i.e. the check). See In re Oxford Marketing, Ltd., 444 F. Supp. 399 (N.D. Ill. 1978). Thus, money in the form of commercial paper is a specific chattel that can be converted.
South Central argues that paper sales slips, such as the ones in question, are routinely passed between merchants, agent banks, principal banks and the Visa and Mastercard Systems in exchange for contemporaneous payments of money. Once South Central submits the slips to CCSI, South Central argues that it is entitled to immediate payment from CCSI of the amount specified on the paper slip. Consequently, South Central argues that the paper slips and the proceeds due for the slips merge together creating a tangible property right. Thus, South Central argues that the slips and the specific amount of money due to South Central for the slips, represent specific chattels that can be converted.
Although Illinois courts do recognize a cause of action for conversion of commercial paper, the paper slips are not commercial paper. The agreement expressly placed several conditions that must be met before South Central is entitled to the proceeds from the paper slips. The right to reimbursement under the Agreement is not absolute. Since the Agreement imposes restrictions on the terms of payment for the paper slips, the paper slips cannot be considered commercial paper.
Consequently, the money involved in this suit cannot be considered a specific chattel. Since South Central is unable to state a claim for conversion, CCSI's motion to dismiss Counts III and IV is granted.
For the reasons stated above, CCSI's motion to dismiss Counts I and II pursuant to Rule 12(b)(6) is denied. CCSI's motion to dismiss Counts III and IV for failure to state a claim is granted.
GEORGE M. MAROVICH
UNITED STATES DISTRICT JUDGE
DATED: Dec. 18, 1992