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P.R.S. International Inc. v. Paxcorporation

October 22, 1998

P.R.S. INTERNATIONAL, INC., APPELLEE, V. SHRED PAXCORPORATION, APPELLANT.


The opinion of the court was delivered by: Justice McMORROW

Agenda 23-May 1998.

This case involves the question of whether a party's failure to respond to a request for admission pursuant to Supreme Court Rule 216 (134 Ill. 2d R. 216) results in a judicial admission even where the requested admission relates to "ultimate facts" or to "legal Conclusions." Defendant served requests for admissions on plaintiff, and plaintiff did not deny or object to the requests. Based on this failure to respond, defendant moved to have the requests be deemed admitted. The trial court granted that motion. Defendant then moved for summary judgment, and the trial court granted that motion. Plaintiff appealed, and the appellate court reversed. The appellate court found that certain of the requests were improper because they related to "ultimate facts"; that others were improper because they related to "legal Conclusions"; and that the remaining requests, even if deemed admissions, did not support an award of summary judgment. 292 Ill. App. 3d 956. We reverse.

BACKGROUND

The following facts are of record in the case at bar. On April 18, 1990, the parties to this appeal entered into a contract which provided that plaintiff, P.R.S. International, Inc. (PRS), would purchase from defendant, Shred Pax Corporation (Shred Pax), "[o]ne pyrolysis system, including shredders and conveyers as a turnkey operation." The shredders would shred rubber tires, and the pyrolysis machine would burn the shredded tires, converting them to carbon black, which is a substance used in a variety of products. The contract provided that PRS was to make a down payment of $269,460, followed by seven monthly payments of $78,592.50 each, a payment of $39,296.25 in the eighth month, and a final payment of "$39,296.25 net 30 after approval of the shredding system."

Under the terms of the contract, Shred Pax was to begin its performance by delivering a tire shredder within seven working days of its receipt of the down payment. Shred Pax was obligated to deliver the pyrolysis system "eight to ten months after receipt of down payment." The contract also provided that "[a]pproval of installation [was] to be on site at P.R.S. International" at an address in Plymouth, Florida. PRS made the down payment on April 17, 1990. It eventually made all of the payments required under the contract, except the final payment of $39,296.25, by January 1991. Shred Pax had delivered all of the equipment, except the pyrolysis machine, to the Florida site prior to January 1991.

For reasons that are unclear, PRS moved its Florida operation to Illinois. It obtained a lease for a site in South Beloit, Illinois, in May 1991, and ceased its operations in Florida during the middle of 1991. Sometime thereafter, PRS began shredding tires, soliciting to buy tires, and preparing for delivery of the pyrolysis machine at the South Beloit site. According to Winfried Kaczmarek, the president of PRS in 1990 and 1991, Shred Pax's president, Al Kaczmarek, Winfried's brother, repeatedly assured PRS that the machine would be delivered by December 1991. In November 1991, three PRS representatives, including Winfried Kaczmarek, Pat Sreenan, and Richard Goetz, went to Shred Pax's property in Wood Dale, Illinois, to check on the progress of the pyrolysis machine. They found only parts, but not an entire machine. Shred Pax claims that it had subcontracted for the construction of the machine, though PRS claims that Al Kaczmarek refused to say where the machine was being built. At that November 1991 meeting, the PRS representatives indicated to Shred Pax that they would like Shred Pax to find another buyer for the machine, and suggested that Shred Pax advertise to find a buyer.

In January 1992, Patrick Sreenan wrote to Shred Pax and inquired as to whether Shred Pax had advertised the PRS pyrolysis machine for sale, as the parties had discussed in their November 1991 meeting. Discussing the sale of the machine, Sreenan explained that "[y]ou can appreciate that I am very anxious to reduce my already considerable losses as it relates [sic] to this company ***." Within a week, Al Kaczmarek replied by letter on behalf of Shred Pax. He stated that Shred Pax was willing to ship the machine anywhere PRS desired. He also indicated that Shred Pax desired prompt payment of the remaining $39,296.25, which it claimed was due in February 1991. In a February 1992 letter, Sreenan stated that, under the terms of the contract, he believed that the final payment was not due until the pyrolysis machine was delivered. He stated that PRS could not afford to have a representative fly with Kaczmarek to see all of the parts of the machine because PRS was "broke and [had] considerable indebtedness." In Conclusion, Sreenan said that PRS had been misinformed about the number of pyrolysis systems in operation when it ordered the system, and that it would like to be reimbursed "for all monies paid in connection with the pyrolysis system, less ten percent for any inconvenience we may have caused you by way of storage." In an April 24 letter, Sreenan stated that Al Kaczmarek had been told of the move to Illinois in June 1990, and had never told PRS that a change in the eventual location of the machine would require alterations to the machine. The parties apparently continued to exchange correspondence through the remainder of 1992.

In a letter from Al Kaczmarek to Sreenan, dated January 5, 1993, Kaczmarek wrote that Shred Pax had delivered "all shredder items," that only the pyrolysis machine remained to be delivered, and that PRS had failed to make the final payment due under the contract. Kaczmarek also claimed that PRS owed Shred Pax for various storage costs and other unspecified "unpaid invoices." Sreenan responded by letter dated January 18 that the last payment was not due until delivery of the pyrolysis machine, that he was unaware of any unpaid invoices, and that there had been no agreement as to storage costs. Sreenan again stated his desire to find another buyer for the machine, because, he said, "it is my desire to be completely disassociated with anything to do with tire shredding and/or burning." Sreenan asked Kaczmarek to state the minimum amount he would pay for a mutual release from the contract. Sreenan suggested that Shred Pax pay $250,000. In a March 3 letter, Al Kaczmarek wrote to Sreenan, stating that: (1) the contract required delivery in Florida, and PRS had "broken that contract" by relocating to Illinois; (2) Shred Pax had incurred additional expenses related to the machine, had sought reimbursement from PRS, and PRS had not responded to those requests; (3) the pyrolysis machines were "sitting around and [could] not be finished in total because [Shred Pax did not] know in which state they will go, what water hook up it is and if there are cooling towers required as the information from Florida to Illinois was never answered." Kaczmarek "demanded" that PRS "put a payment in our hand and you take this pyrolysization system complete or incomplete." He expressed frustration with having to store the machine for a period of time, as well as with PRS's failure to specify a delivery site, its failure to make the final payment under the contract, and its failure to pay additional expenses incurred by Shred Pax. He stated that PRS had 30 days to pay what it owed to Shred Pax and take delivery.

The record also contains various submissions from the parties regarding the environmental requirements for a pyrolysis system. According to the affidavit of Richard Goetz, he and Sreenan obtained a permit from the City of South Beloit for the operation of a tire shredding and pyrolysis operation. According to the affidavit of Winfried Kaczmarek, PRS made "initial contact" with the Illinois Environmental Protection Agency and was told that the pyrolysis system would be tested for emissions after it was put into operation. The affidavit states that neither Shred Pax nor Al Kaczmarek ever requested a permit for the construction or installation of a pyrolysis system in South Beloit. It also states that Shred Pax never indicated that delivery and installation of the system could not or would not occur before government permits were obtained. Finally, it states that no permit is required for tire pyrolysis because it does not emit any toxic gases or pollutants. Shred Pax submitted the affidavit of John Yates, who identifies himself as a registered professional engineer experienced in the environmental field. In the affidavit, Yates states that the Illinois Administrative Code required PRS to obtain a construction permit from the Illinois Environmental Protection Agency before the pyrolysis system was installed. The interrogatories exchanged by the parties also refer to the environmental permits required for the construction and installation of a pyrolysis system. Plaintiff's response to defendant's first set of interrogatories states that, as of February 1991, PRS could legally take delivery of a pyrolysis operation without any permits.

In August 1995, PRS filed the case at bar against Shred Pax, alleging a breach of contract based on Shred Pax's failure to deliver the pyrolysis machine. In the course of discovery in the case, on April 20, 1995, Shred Pax served on PRS a set of requests for admissions, pursuant to Supreme Court Rule 216. The requested admissions included the following:

"6. Shred Pax delivered to PRS the shredding system and other equipment required by the contract other than the pyrolysis system.

7. PRS accepted, approved, and used the shredding system and other equipment delivered by Shred Pax.

8. PRS failed to pay Shred Pax $898,200.

9. Prior to February, 1991, PRS ceased doing business at the Florida location referred to in Exhibit A-2 [the contract] attached hereto.

10. As of February, 1991, PRS did not possess all of the permits required by applicable federal, state, and municipal laws for delivery, installation, or operation of the pyrolysis system at any location in the United States.

11. As of February, 1991, PRS did not have a location in the United States with the permits required to take delivery of the pyrolysis system.

12. As of February, 1991, possession of the pyrolysis system was of no benefit to PRS.

13. PRS never obtained all of the permits required by applicable federal, state, and municipal law for delivery, installation, or operation of the pyrolysis system at any location in the United States.

14. PRS never had a location in the United States with the permits required to take delivery ...


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