The opinion of the court was delivered by: BUCKLO
Eugene Horbach, the owner of a 93% interest in the now-dissolved Illinois corporation TyrRee Corp. ("TyrRee"), has brought this suit against Shred Pax, Corp. ("Shred Pax"),
also an Illinois corporation, and its president, Alvis Kaczmarek, for breach of contract, fraud, and conversion. The defendants have moved to dismiss several counts of the complaint. For the reasons stated below, their motion is granted.
In September of 1989, TyrRee and Shred Pax signed a purchase order through which Shred Pax agreed to design, manufacture, install, and test certain tire pyrolysis and shredding equipment for TyrRee ("the Purchase Order"). The Purchase Order provided that Shred Pax would supply the equipment to TyrRee by February 1, 1990. When Shred Pax informed TyrRee that the equipment was ready in February of 1990, TyrRee negotiated and signed a written agreement with Shred Pax to store the equipment. TyrRee agreed to pay Shred Pax $ 16,200 per month to store the equipment until it could be installed and tested at a site of TyrRee's choosing. Ultimately, TyrRee paid Shred Pax $ 1,703,583 for the equipment as well as an additional $ 56,800 for storage.
In Count I of his complaint, Mr. Horbach alleges that Shred Pax breached both the Purchase Order and the separate contract for storage. In Count III, Mr. Horbach alleges that both defendants committed fraud. With Counts IV and V, Mr. Horbach seeks the equitable remedies of rescission and constructive trust. Finally, in Count VIII, Mr. Horbach alleges that Shred Pax is liable for conversion of the payments for the equipment and its storage.
In Count I, Mr. Horbach states a claim for breach of contract. In my earlier ruling, I found Mr. Horbach's claim for breach of the Purchase Order to be barred by the statute of limitations. Mr. Horbach now attempts to state a claim for breach of contract, based on a separate contract for the storage of the equipment.
The new separate contract would not be barred by the statute of limitations because it would be a contract for services and therefore subject to a ten year statute of limitations. See 735 ILCS 5/13-206 (Smith-Hurd 1992).
The defendants argue that the storage agreement represented a mere modification of the Purchase Order, rather than a distinct contract. They note that the Purchase Order explicitly provided for subsequent written modifications.
Under the Purchase Order, Shred Pax was responsible for delivering the equipment to a site designated by TyrRee no later than February 1, 1990. By February 14, 1990, when TyrRee had not yet procured a site, the parties executed the storage agreement. This agreement merely supplemented the contract by requiring TyrRee to pay Shred Pax if Shred Pax stored the equipment beyond April, 1990. Consequently, I agree with the defendants that the storage agreement represents a modification to the Purchase Order.
Because I find that the storage agreement is properly viewed as a modification to the Purchase Order rather than a separate contract, I must determine whether the modified Purchase Order, now incorporating both goods and services, still comes within the scope of the Illinois codification of the Uniform Commercial Code, which has a four year statute of limitations. See 810 ILCS 5/2-725(1) (Smith-Hurd 1992). To determine if the UCC applies, I must ask whether the contract "was predominantly one for the sale of goods with services incidentally involved, or was one for the rendition of services with the sale of goods incidentally involved." Republic Steel Corp. v. Penn. Engineering Corp., 785 F.2d 174, 181 (7th Cir. 1986) (applying Illinois law). TyrRee entered the contract to obtain tire pyrolysis and shredding equipment which Shred Pax was to manufacture. The services Shred Pax agreed to perform, including installation, testing, and storage, were all important elements of the contract, but the Purchase Order was predominantly a contract for the sale of goods. See Republic Steel Corp., 785 F.2d 174 (holding that a contract for the design, manufacture, and installation of two furnaces was predominantly a contract for the sale of goods and therefore subject to the UCC's four-year statute of limitations); Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor Water Co., 532 F.2d 572 (7th Cir. 1976) (holding that a contract for the design, construction, and installation of a water tank was predominantly a contract for the sale of goods under the UCC).
In Count III, Mr. Horbach alleges fraud. Initially, I dismissed this claim because I concluded that it was barred by the statute of limitations. The parties agree that in Illinois, the statute of limitations for fraud is five years. See 735 ILCS 5/13-205 (Smith-Hurd 1992). Under the "discovery rule," a plaintiff has five years to file suit from the point that he "'knows or reasonably should know that he has been injured and that his injury was wrongfully caused.'" Hermitage Corp. v. Contractors Adjustment Co., 166 Ill. 2d 72, 651 N.E.2d 1132, 1135, 209 Ill. Dec. 684 (1995) (quoting Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 158 Ill. 2d 240, 633 N.E.2d 627, 630-631, 198 Ill. Dec. 786 (1994)). This complaint was filed on September 11, 1995, and because I concluded in my decision on the first motion to dismiss that Mr. Horbach reasonably should have discovered the alleged fraud before September of 1990, I found his fraud claim to be time barred.
Mr. Horbach has provided additional allegations in his Second Amended Complaint, and he contends that these allegations demonstrate that he could not reasonably have known of the fraud before September of 1990 and that, therefore, his claim is timely. For example, Mr. Horbach alleges that he was without the "technical knowledge and skill" to assess the quality of the equipment. He also alleges that he requested Shred Pax to modify the equipment after the February, 1990 delivery date. The ...