Herbert L. Eggert v. Robert Weisz, David Blair and Mary Anne Foran

Citations: 839 F.2d 1261; 1988 U.S. App. LEXIS 2262; 1988 WL 13281Docket: 87-1062

Court: Court of Appeals for the Seventh Circuit; February 17, 1988; Federal Appellate Court

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Herbert L. Eggert filed a lawsuit in federal court against Robert Weisz, David Blair, and Mary Anne Foran, seeking recovery of proceeds from the sale of his stamp collection by Bob Weisz Stamps, which is now defunct. The court's jurisdiction was based on diversity of citizenship and the amount in controversy exceeding $10,000 under 28 U.S.C. Sec. 1332. At trial, the district court directed verdicts in favor of defendants Blair and Foran, while the jury found Weisz liable for conversion. However, the judge later granted Weisz a judgment notwithstanding the verdict, prompting Eggert's appeal regarding all three defendants.

Eggert's stamp collection, built over fifty years, was consigned to Bob Weisz Stamps between 1975 and 1977. The company sold the collection at auctions and deposited proceeds into a general corporate account without segregation from other funds, a standard practice in the auction business. A key conversation occurred in early 1977, where Eggert claimed he asked Weisz multiple times to hold the proceeds in trust, while Weisz contended Eggert had loaned the money to the company without mentioning a trust. On April 26, 1977, Weisz sent Eggert a letter confirming a deposit of $14,060.80, stating it was accruing interest and could be requested with 60 days' notice. The differing accounts of their conversation are central to the case.

Weisz and Eggert both assert that a letter related to a financial transaction aligns with their respective interpretations. Eggert interprets the letter's mention of money "on deposit" as indicating that funds would be kept separate from corporate assets and that Weisz's company would have enough liquidity to fulfill Eggert's payment requests within sixty days. Conversely, Weisz views the letter as establishing a debtor-creditor dynamic akin to a bank deposit. Despite these differing interpretations, neither party sought to clarify their relationship afterward.

In July 1977, Weisz sold 50% of Bob Weisz Stamps to David Blair, later selling the remaining shares in January 1978. Blair renamed the company "Continental Auctions, Inc." and served as an officer alongside Foran. Weisz characterized the transaction with Eggert as a loan. By June 1978, Blair struggled to ascertain Continental's debt to Eggert, eventually agreeing that it owed $20,327.60, which increased due to additional sales of Eggert's collection. Although Blair referred to the transaction as a loan, Eggert disputed this account.

Before and after the company sale, Continental treated Eggert's funds as a loan, depositing the money into its general account for corporate expenses. Eggert made multiple payment requests starting in early 1978, but Continental could not fulfill all of them. In February 1979, Blair proposed a payment plan of $500 per month, of which only two payments were made. The Illinois Secretary of State dissolved Continental in December 1979 due to unpaid franchise taxes, and by August 1980, the company ceased operations.

The standard of review for a directed verdict aligns with that for a judgment notwithstanding the verdict. In diversity cases, the forum state's standard applies, requiring substantial evidence for a decision, without reweighing evidence or assessing witness credibility. Under Illinois law, a directed verdict is appropriate only when the evidence overwhelmingly favors one party, rendering any contrary verdict untenable.

Eggert seeks to reverse the district court's judgments, claiming that Weisz, on behalf of Bob Weisz Stamps, wrongfully assumed control over the proceeds from Eggert’s stamp collection, constituting conversion under Illinois law. To prove conversion, a plaintiff must demonstrate an unauthorized assumption of control, a right to the property, a right to immediate possession, and a demand for possession. Eggert contends that Blair and Foran are liable for conversion due to their use of the proceeds for corporate debts.

A consignee who fails to return proceeds from the sale of consigned goods may be sued by the consignor for conversion. Corporate officers and directors can also be held liable for conversions committed by their corporation if they actively participated in the act. However, under Illinois law, a plaintiff cannot establish a conversion claim for money unless it is identifiable as a specific chattel. Although money can be subject to conversion, it cannot be claimed merely to satisfy an obligation to pay. In this case, Eggert fails to identify the money owed as a specific chattel, as he attempts to classify it under an unexecuted trust. Both parties agree that auction proceeds were not segregated, which aligns with industry practice, and no express trust exists.

The law may impose a resulting trust if evidence shows clear intent to create one, but Eggert does not provide sufficient evidence to demonstrate this intent. His interpretation of a letter referring to money "on deposit" as a promise to segregate funds is countered by the argument that it implies the funds were used by Bob Weisz Stamps, Inc. for its own purposes. Furthermore, Eggert does not claim that Weisz had explicitly agreed to hold the proceeds in trust. His testimony indicates uncertainty regarding the establishment of a trust.

Additionally, Eggert cannot invoke a constructive trust, which is created by law when legal title is obtained through a breach of duty, as he does not allege actual fraud. Although he suggests a fiduciary relationship existed, proving such a relationship requires showing that one party placed trust in another, which he fails to substantiate.

Eggert claimed to have trusted Weisz implicitly, but the evidence does not support that Weisz had any "influence and superiority" over Eggert. Their relationship was merely that of a consignor and consignee, lacking the basis for a constructive trust due to an alleged breach of fiduciary duty. Eggert could not specify the money owed to him, as his entitlement was to an indeterminate sum rather than a specific fund or identifiable money. Consequently, Bob Weisz Stamps is liable for a debt, not for conversion. The funds held by Weisz for Eggert were not specific or identifiable, thus no conversion occurred, and there is no ground for holding Weisz, Blair, or Foran liable for the corporate obligation. The district court's judgments favoring Weisz, Blair, and Foran are affirmed. Illinois law governs this case, and further examination of the choice-of-law question is unnecessary.