Valley Proteins, Inc. v. Eco-Collection Sys.s

• Court: Court of Appeals of North Carolina
• Decided: December 31, 2014
• Docket: 14-717
• Status: Unpublished

Opinion

An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.

NO. COA14-717 NORTH CAROLINA COURT OF APPEALS

Filed: 31 December 2014

VALLEY PROTEINS, INC.,

Plaintiff,

v. Cumberland County No. 12 CVS 2387 ECO-COLLECTION SYSTEMS, LLC AND ACE WRECKER SERVICE, INC.,

Defendants.

Appeal by plaintiff from order entered 25 November 2013 by

Judge Gary Trawick in Cumberland County Superior Court. Heard

in the Court of Appeals 17 November 2014.

Andrew M. Jackson and Stevens Martin Vaughn & Tadych, PLLC, by K. Matthew Vaughn, for plaintiff-appellant.

Burton, Sue & Anderson, L.L.P., by Gary K. Sue and Cam A. Bordman, for defendant Eco-Collection Systems, LLC.

HUNTER, Robert C., Judge.

Valley Proteins, Inc. (“plaintiff” or “VPI”) appeals from

an order granting summary judgment for defendant Eco-Collection

Systems, LLC (“ECS”)1 on: (1) plaintiff’s claims for trespass to

1 VPI’s claims against defendant Ace Wrecker Service, Inc. (“Ace”) were voluntarily dismissed on 28 October 2013. Ace is -2- chattels, conversion, unjust enrichment, and unfair and

deceptive practices; and (2) defendant’s counterclaims for

trespass to chattels, conversion, unjust enrichment, unfair and

deceptive practices, and tortious interference with contract.

On appeal, plaintiff argues that genuine issues of material fact

exist to preclude summary judgment for defendant, or in the

alternative, that plaintiff is entitled to judgment as a matter

of law.

After careful review, we reverse the trial court’s order

granting summary judgment for ECS, vacate the remaining judgment

and order, and remand this matter for trial.

Background

VPI and ECS are competitors in the restaurant grease

recycling industry. VPI has been in business since 1948 and

currently serves customers throughout the United States. VPI

contracts orally and in writing with restaurants to purchase

waste grease and oil to recycle these substances for useful

purposes, such as bio-diesel fuel. After entering into an

exclusive removal agreement, VPI will furnish a container to its

customer to store the grease. The containers are marked with

serial numbers and a sticker indicating that the container and

not a party to this appeal. -3- its contents are the property of VPI, consistent with industry

custom. VPI employees then check on the customer every two to

four weeks to empty the containers of grease.

In 2007, VPI began noticing that its grease and containers

were being stolen. James Katsias (“Katsias”), Assistant

Director of Procurement for VPI, testified in deposition that

VPI began receiving letters from unknown sources asserting that

VPI’s customers were using another vendor and that VPI had five

or ten days to remove their grease containers before they would

be considered “abandoned.” He further testified that the date

on the letter was typically “post-dated,” such that the five or

ten day period would have already passed by the time VPI

actually received the letter; oftentimes VPI received the

letters after its containers had already been removed.

Around this time, ECS began soliciting business from VPI’s

customers. Cameron Calhoun (“Calhoun”), founder and co-owner of

ECS, testified in deposition that ECS hired independent

contractors to conduct the company’s sales. According to

Calhoun, it was ECS’s policy to ask potential new customers

whether they were under contract with any other grease removal

service providers; if they indicated that they were under

contract, ECS would not pursue their business. However, Calhoun -4- also acknowledged that many of the customers ECS solicited had

VPI containers outside their building. When ECS would convince

one of VPI’s prior customers to switch service providers, ECS

would send VPI cancellation letters indicating that the customer

no longer wanted VPI’s business. Calhoun testified to this

arrangement as follows: “[W]e came up and actually decided that

we were going to try to come up with a method to notify the

competitor properly, and if the competitor didn’t comply with

that notification letter, the container could be removed[.]”

According to Calhoun, ECS would wait 60 days after sending the

initial cancellation letters before arranging for VPI’s

containers to be removed. If VPI had taken no action to remove

their containers, ECS would then send each customer a Consent to

Tow form, executed between the restaurant owner and Ace,

authorizing Ace to tow VPI’s containers away. ECS coordinated

with Ace to pump any grease out of VPI’s containers before Ace

would remove them.

Felton Hairr, an employee of VPI, testified that he

received the letters and Consents to Tow at VPI’s Rose Hill

office. Hairr testified that he was given authority from his

superior at VPI to handle the letters at Hairr’s discretion. -5- Hairr generally filed the letters away, but sometimes threw them

into the garbage.

Benjamin Sylvester, an employee of ECS, testified in

deposition that in May 2011, ECS contacted Ace to tow one of

VPI’s containers from Nashville Diner. According to Sylvester,

ECS had mailed a cancellation letter signed by the restaurant

owner to VPI and waited either 30 or 60 days before having

forwarded the Consent to Tow form to Ace to have them retrieve

VPI’s container. When the Ace employee arrived at Nashville

Diner, the restaurant owner “went ballistic,” denying that it

was his signature on ECS’s forms and claiming that he did not

want VPI’s container to be towed. The restaurant owner then

called Hairr to report the issue, who contacted his superiors at

VPI. According to Katsias, another customer reported that an

individual showed up at a restaurant representing himself as a

VPI employee to swap out containers. However, when the

restaurant owner read the form purporting to be from VPI, he

discovered that it was actually a contract with ECS.

VPI’s President and CEO J.J. Smith (“Smith”) met with ECS

representatives in mid-2011 and informed them that VPI intended

to reclaim any of its containers that ECS had taken. ECS

claimed that the containers had become property of ECS by virtue -6- of paying a “junk price” to Ace. In June 2011, VPI instructed

its field workers to be on the lookout for any of VPI’s

containers that may have been missing. A procurement

representative for VPI filed an affidavit in which he claimed

that three 300-gallon containers belonging to VPI had been

recovered; the containers had been repainted and relabeled as

property of ECS, but VPI’s company labels could still be seen

underneath.

VPI filed a complaint in Cumberland County Superior Court

against ECS, alleging claims for trespass to chattels,

conversion, unjust enrichment, and unfair and deceptive

practices. ECS filed counterclaims for the same causes of

action in addition to tortious interference with contract. Both

parties moved for summary judgment, and those motions were heard

on 14 October 2013. On 25 November 2013, the trial court

entered an order denying VPI’s motion for summary judgment and

granting summary judgment for ECS on both VPI’s claims and ECS’s

counterclaims. The case then proceeded to trial on the issue of

damages. The trial court entered judgment on 5 February 2014,

finding damages in the amount of $1,491.85 on ECS’s

counterclaims of conversion and trespass to chattels, which were

trebled to $4,475.55. ECS was also awarded $2,423.00 in costs -7- and $15,095.00 in attorneys’ fees. VPI filed timely notice of

appeal.

Discussion

I. Summary Judgment

VPI argues that the trial court erred by denying its motion

for summary judgment and granting summary judgment for ECS on

all claims. We conclude that genuine issues of material fact

exist to preclude summary judgment for either party.

“This Court reviews orders granting summary judgment de

novo.” Foster v. Crandell, 181 N.C. App. 152, 164, 638 S.E.2d

526, 535 (2007). Summary judgment is appropriate “only when the

record shows that there is no genuine issue as to any material

fact and that any party is entitled to a judgment as a matter of

law.” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572,

576 (2008) (internal quotation marks omitted). The burden of

proof rests with the movant to show that summary judgment is

appropriate. Development Corp. v. James, 300 N.C. 631, 637, 268

S.E.2d 205, 209 (1980). We review the record in the light most

favorable to the non-moving party. Caldwell v. Deese, 288 N.C.

375, 378, 218 S.E.2d 379, 381 (1975).

“The tort of conversion is well defined as an unauthorized

assumption and exercise of the right of ownership over goods or -8- personal chattels belonging to another, to the alteration of

their condition or the exclusion of an owner’s rights.” Peed v.

Burleson’s, Inc., 244 N.C. 437, 439, 94 S.E.2d 351, 353 (1956)

(internal quotation marks omitted). The two essential elements

of a conversion claim are ownership of the property by the

plaintiff and a wrongful possession or conversion by the

defendant. Gadson v. Toney, 69 N.C. App. 244, 246, 316 S.E.2d

320, 321–22 (1984). Similarly, “[a] successful action for

trespass to chattel requires the party bringing the action to

demonstrate that she had either actual or constructive

possession of the personalty or goods in question at the time of

the trespass, and that there was an unauthorized, unlawful

interference or dispossession of the property.” Fordham v.

Eason, 351 N.C. 151, 155, 521 S.E.2d 701, 704 (1999) (citation

omitted). Acts of conversion may constitute unfair or deceptive

practices under N.C. Gen. Stat. § 75-1.1 (2013), so long as the

required additional “egregious, immoral, oppressive,

unscrupulous, or substantially injurious acts” are established

and proven to the satisfaction of the judge or jury, Bartlett

Milling Co., L.P. v. Walnut Grove Auction & Realty Co., Inc.,

192 N.C. App. 74, 83, 665 S.E.2d 478, 487 (2008). -9- Here, ECS relies on the affirmative defense of abandonment

to support its contentions that not only do VPI’s claims fail,

but VPI is liable to ECS for reclaiming the containers ECS

refurbished.2 “[T]he owner of articles of personal property may

terminate his ownership by abandoning it and, in that event,

title passes to the first person who thereafter takes

possession.” State v. West, 293 N.C. 18, 30, 235 S.E.2d 150,

157 (1977).

The word “abandonment” has a well defined meaning in the law which does not embrace a sale or conveyance of the property. It is

2 VPI argues that ECS waived the affirmative defense of abandonment and denied in its answer that it would pursue the defense of abandonment. Because VPI failed to raise these arguments at the trial level, they are deemed abandoned on appeal. See Piraino Bros., LLC v. Atl. Fin. Grp., Inc., 211 N.C. App. 343, 348, 712 S.E.2d 328, 332 (2011). Assuming arguendo that these contentions were preserved for appellate review, we remain unpersuaded. This Court has held that, absent prejudice to the plaintiff, “an affirmative defense may be raised by a motion for summary judgment regardless of whether it was pleaded in the answer or not.” County of Rutherford ex rel. Hedrick v. Whitener, 100 N.C. App. 70, 74, 394 S.E.2d 263, 265 (1990) (internal quotation marks omitted). Because ECS raised the defense of abandonment at the hearing on the motions for summary judgment, we conclude that it has not waived this argument and plaintiff has suffered no prejudice. Additionally, ECS’s denial of Paragraph 20 in the amended complaint does not equate to a judicial admission that ECS would not pursue the defense of abandonment. Paragraph 20 referred to the defense of abandonment as a “fabricated rationale to justify its conversion and theft of the property of another.” We find that ECS’s denial of this characterization is consistent with its intent to pursue the defense of abandonment at the hearing for summary judgment and on appeal. -10- the giving up of a thing absolutely, without reference to any particular person or purpose, and includes both the intention to relinquish all claim to and dominion over the property and the external act by which this intention is executed, and that is, the actual relinquishment of it, so that it may be appropriated by the next comer.

Id. at 29-30, 235 S.E.2d at 156-57 (quoting Church v. Bragaw,

144 N.C. 126, 56 S.E. 688 (1907)).

Consistent with the idea that “the question of abandonment

is almost always a fact question for the jury,” Kitchen v.

Wachovia Bank & Trust Co., N.A., 44 N.C. App. 332, 334, 260

S.E.2d 772, 773 (1979), we find that there are genuine issues of

material fact regarding whether VPI had the intention to

“relinquish all claim to and dominion over” its containers that

precludes summary judgment for either party, West, 293 N.C. at

30, 235 S.E.2d at 157. The amount of time that VPI waited

before taking action to reclaim its containers is in dispute.

Calhoun alleged in his affidavit that ECS would not send a

Consent to Tow to Ace until approximately 60 days had passed

after sending VPI a cancellation letter. However, Katsias

testified that VPI’s containers were often missing before VPI

even received a corresponding cancellation letter. He also

testified that when VPI would receive the letters purporting to

inform them that they had abandoned their containers, VPI would -11- try to call the customer to ask about the letters and ensure

that they still maintained a relationship with VPI. Hairr

testified that VPI serviced all of its containers on either a

two- or four-week cycle in order to empty the grease. All of

this evidence serves to refute the contention by ECS that VPI

“did nothing” to the containers during the alleged 60-day

interim between receiving the cancellation letters and having

the containers towed.

Because these facts are in genuine dispute, defendant’s

reliance on National Advertising Co. v. North Carolina Dept. of

Transp., 124 N.C. App. 620, 478 S.E.2d 248 (1996), is misplaced.

In National Advertising Co., the issue was whether the North

Carolina Department of Transportation (“DOT”) was liable for

reverse condemnation where it removed an advertising sign owned

by the plaintiff from land that the DOT had recently purchased.

Id. at 622-23, 478 S.E.2d at 249. Citing 51C C.J.S. Landlord

and Tenant § 317(b) (1968), the Court held that where the

plaintiff did not have a leasehold interest in the land from

which the sign was removed and it was given 90 days’ notice to

remove the sign but failed to do so, “it effectively abandoned

its sign.” Id. at 625, 478 S.E.2d at 250. Here, unlike in

National Advertising Co., there are no issues regarding any -12- potential landlord-tenant relationships, VPI asserts that it had

exclusive oral and written agreements with the restaurants, and

the timing regarding VPI’s receipt of the purported cancellation

notices and the containers’ removal is in dispute.3 Thus, we

find National Advertising Co. inapposite.

Furthermore, although Hairr testified in deposition that he

generally ignored the cancellation letters, going as far as to

throw them away in some circumstances, we do not believe that

this fact alone settles the issue of whether VPI unequivocally

intended to abandon the containers it uses to conduct its

business, as ECS contends. VPI presented evidence that it

called the restaurant owners after receiving the cancellation

letters and put forth efforts to stop what it perceived to be an

increase in the theft of their containers and grease.

3 Additionally, the authenticity of the purported cancellation letters and Consents to Tow are in genuine dispute. ECS claims that it had duly executed cancellation notices and Consent to Tow forms for every grease container that was towed from the restaurants’ premises. However, undisputed evidence was presented that when ECS attempted to have Ace remove VPI’s container from Nashville Diner, the owner of the restaurant refuted that it was his signature on the contract. Additionally, Katsias testified that on at least one occasion, an individual arrived at a restaurant purporting to be a representative of VPI, but in fact attempted to have the restaurant owner sign a contract with ECS. Given these factual discrepancies, we reject ECS’s argument that summary judgment was appropriate for the restaurant owners to enjoy the use of their private property. -13- Specifically, Smith testified in deposition that VPI hired an

in-house attorney to help VPI fight grease and container theft,

as that problem had increased in the last five years.

Additionally, Smith testified that he told Calhoun that VPI did

not intend to relinquish ownership over its missing containers,

and VPI presented evidence that it searched for and reclaimed

three containers that ECS had towed and refurbished for its own

use.

In sum, VPI and ECS presented conflicting evidence on

almost every relevant aspect of ECS’s defense of abandonment.

“An abandonment must be made to appear affirmatively by the

party relying thereon and the burden is upon him who sets up

abandonment to prove it by clear, unequivocal, and decisive

evidence.” West, 293 N.C. at 30, 235 S.E.2d at 157 (emphasis

added) (quotation marks omitted). Because there are genuine

issues of material fact regarding whether VPI had the intention

to abandon its containers, we hold that summary judgment for ECS

was improper. See Kitchen, 44 N.C. App. at 334, 260 S.E.2d at

773; see also Hyde Ins. Agency, Inc. v. Dixie Leasing Corp., 26

N.C. App. 138, 142, 215 S.E.2d 162, 164-65 (1975) (“Summary

judgment should be entered only where there is no genuine issue

as to any material fact.”). -14- Conclusion

Because genuine issues of material fact exist as to VPI’s

claims and ECS’s counterclaims, we reverse the trial court’s

order granting summary judgment for ECS, vacate the judgment and

order awarding damages, costs, and attorneys’ fees, and remand

this matter for further proceedings.

REVERSED, VACATED, AND REMANDED.

Chief Judge McGEE and Judge BELL concur.

Report per Rule 30(e).