Burns Philp Food, Inc. v. Cavalea Continental Freight, Inc.

• Decision Date: 04 February 1998
• Docket Number: 97-2737,Nos. 97-2557,s. 97-2557
• Citation: 135 F.3d 526
• Parties: 28 Envtl. L. Rep. 21,038, 48 Fed. R. Evid. Serv. 1069 BURNS PHILP FOOD, INC., Plaintiff-Appellee, Cross-Appellant, v. CAVALEA CONTINENTAL FREIGHT, INC., et al., Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 526

135 F.3d 526

28 Envtl. L. Rep. 21,038, 48 Fed. R. Evid. Serv. 1069

BURNS PHILP FOOD, INC., Plaintiff-Appellee, Cross-Appellant, v. CAVALEA CONTINENTAL FREIGHT, INC., et al Defendants-Appellants, Cross-Appellees.

Nos. 97-2557, 97-2737.

United States Court of Appeals Seventh Circuit.

Argued Jan. 14, 1998.

Decided Feb. 4, 1998.

Daniel J. Voelker (argued), Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, for Burns Philip Food, Incorporated.

William D. O'Donaghue, Chicago, IL, J. Reed Millsaps (argued), Northbrook, IL, for Cavalea Continental Freight, Inc., Anthony C. Cavalea, III, and Arthur H. Cavalea.

Before FLAUM, EASTERBROOK, and DIANE P. WOOD, Circuit Judges.

EASTERBROOK, Circuit Judge.

Nabisco broke up a tract of industrial real estate in Chicago. Cavalea Continental Freight bought several parcels and Burns Philp Food the remainder. In 1986 real estate records were changed to reflect these transactions, but something went awry. Tax officials treated Burns Philp as the owner of two parcels that Cavalea had purchased, and Burns Philp paid without inquiry or protest. In mid-1993 Burns Philp finally noticed that since 1987 it had paid almost $125,000 in taxes on Cavalea's land, and it sought reimbursement. Instead of resolving matters amicably, these neighbors have acted like the Hatfields and McCoys. Cavalea refused to pay a dime, leading Burns Philp to sue. Cavalea filed a counterclaim accusing Burns Philp of building a fence that encroached onto its parcel. Burns Philp retaliated with an additional claim charging Cavalea with spilling diesel fuel that polluted Burns Philp's land. Other claims were made but have washed out. The district judge held a bench trial on the three we have mentioned and entered a judgment from which, predictably, both sides have appealed.

By paying Cavalea's taxes, Burns Philp mistakenly bestowed a benefit on Cavalea. The district court concluded that Cavalea must make restitution of the amount by which it was unjustly enriched. Cavalea no longer disputes this obligation, but it does contend that restitution should be limited to the taxes Burns Philp paid during the five years before it filed suit. Illinois law governs this diversity case. (As amended in this court under 28 U.S.C. § 1653, the complaint establishes diversity of citizenship and therefore federal jurisdiction.) Cavalea relies on 735 ILCS 5/13-205, which creates a five-year statute of limitations for "actions on unwritten contracts, expressed or implied, ... and all civil actions not otherwise provided for". As Cavalea sees things, unjust-enrichment claims in Illinois rest on unwritten contracts implied in law and therefore must be commenced within five years. Partipilo v. Hallman, 156 Ill.App.3d 806, 109 Ill.Dec. 387, 510 N.E.2d 8 (1st Dist.1987), so holds, and there is no contrary authority. Some other courts have agreed with Partipilo that unjust-enrichment claims in Illinois are "at law" for purposes of the decreasingly important (and therefore increasingly hazy) line between law and equity. Midcoast Aviation, Inc. v. General Electric Credit Corp., 907 F.2d 732, 737 (7th Cir.1990); HPI Health Care Services, Inc. v. Mt. Vernon Hospital, Inc., 172 Ill.App.3d 718, 734, 122 Ill.Dec. 725, 737, 527 N.E.2d 97, 109 (5th Dist.1988), reversed in part on other grounds, 131 Ill.2d 145, 137 Ill.Dec. 19, 545 N.E.2d 672 (1989). Again there is no contrary authority. Yet the district judge refused to apply 735 ILCS 5/13-205. His entire analysis is:

I am going to depart from the holding of the Partipilo case and apply my own previous understanding of the law, which is that statutes of limitation do not apply in equity cases, and I think of unjust enrichment as an equity claim.

The judge did not explain why he believes that unjust enrichment yields an "equity claim" even though the plaintiff seeks nothing but money, or what authority in Illinois supports that belief.

Although the decision of a state's intermediate appellate court is not a conclusive interpretation of state law in the same sense as a decision of the state's highest court, it illuminates the meaning of state law and should be followed "unless there are persuasive indications that the [state's] Supreme Court would decide the issue differently." Allen v. Transamerica Insurance Co., 115 F.3d 1305, 1309 (7th Cir.1997). Even though we indulge the assumption that claims in equity, although denominated "civil actions," are not governed by any statute of limitations in Illinois, but see Hagney v. Lopeman, 147 Ill.2d 458, 462, 168 Ill.Dec. 829, 590 N.E.2d 466, 468 (1992); Eldridge v. Eldridge, 246 Ill.App.3d 883, 892, 186 Ill.Dec. 818, 825, 617 N.E.2d 57, 64 (1st Dist.1993), we do not find persuasive indications that the Supreme Court of Illinois thinks of restitution as an action in equity rather than at law. Burns Philp has located cases saying that restitution is governed by "principles of equity", e.g., Board of Highway Commissioners v. Bloomington, 253 Ill. 164, 174, 97 N.E. 280, 284-85 (1911), but this differs from saying that a claim for restitution is not an action at law. Many wholly legal claims have equitable aspects; think of all the fiduciary duties that exist in the law of contracts or influence the resolution of tort claims, such as those for legal malpractice. Board of Highway Commissioners does more to support Cavalea than to assist Burns Philp, for the Supreme Court wrote that restitution is "governed by principles of equity, although the action is at law." And Burns Philp's claim is best characterized as one for restitution rather than constructive trust. Cavalea was not Burns Philp's fiduciary, and it neither received nor held money on Burns Philp's behalf. So the action is at law, and the statute of limitations in 735 ILCS 5/13-205 must be applied.

Burns Philp tells us that, because it did not discover the error until 1993, time started to run only then. Yet in Illinois, as in most states, the period begins not with the injury's actual discovery, but when the injury could have been discovered through the exercise of appropriate diligence. See Vector-Springfield Properties, Ltd. v. Central Illinois Light Co., 108 F.3d 806, 809 (7th Cir.1997); Knox College v. Celotex Corp., 88 Ill.2d 407, 58 Ill.Dec. 725, 430 N.E.2d 976 (1981). Since the day it bought the property from Nabisco, Burns Philp has had in its files everything needed to determine who must pay real estate taxes on which parcels. On receiving in 1987 the first tax bill for property it had not purchased, Burns Philp needed nothing except initiative to send the bill on to Cavalea (and notify the tax collector about the error). Although a corporation need not rifle corporate records unless it has reason, and therefore the presence of stray information does not automatically start the period of limitations, see Fujisawa Pharmaceutical Co. v. Kapoor, 115 F.3d 1332, 1334-37 (7th Cir.1997), one normal precaution against error (and fraud) is checking the propriety of invoices before paying. Burns Philp first recognized the erroneous payments in 1993 when a newly appointed manager of the Chicago facilities ordered an audit, which swiftly revealed the problem. A firm's delay in taking such a routine precaution is not a good reason to extend the period of limitations; the costs of a firm's carelessness are not so readily shifted. On remand the district court must limit Burns Philp's recovery to taxes paid on Cavalea's behalf within five years before filing suit.

Now for Cavalea's counterclaim. Burns Philp constructed a fence on what it thought was the border between its property and Cavalea's. Whoever surveyed the land to fix the border for the fence did a lousy job. The border is 205 feet long. One end of the fence was located several feet inside Burns Philp's lot and the other was 20 feet into Cavalea's. Burns Philp thus occupied about 2,000 square feet of land that belonged to Cavalea. After Ameritech conducted a survey in 1995, Cavalea learned that some of its land was on the other side of the fence. It did not notify Burns Philp of the problem until November 1995, when it filed the counterclaim seeking damages for trespass and an injunction requiring Burns Philp to remove the fence. Burns Philp responded by denying liability; it did not verify the accuracy of Cavalea's survey or move the fence back to the property line. In December 1996 Cavalea ripped out the fence and appurtenances without Burns Philp's leave...