Korellis Roofing Inc. v. North Cross Roofing & Waterproofing Inc.

Filing 30

OPINION AND ORDER: For the reasons set forth in the Opinion and Order, North Cross Roofing & Waterproofing, Inc.'s 20 Motion to Dismiss Counts II and III of the First Amended Complaint Under Fed. R. Civ. P. 12(b)(6) is GRANTED and Counts II and III of the First Amended Complaint are DISMISSED WITH PREJUDICE. Count I remains pending. Signed by Judge Rudy Lozano on 10/4/2017. (jss)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
KORELLIS ROOFING, INC.,
Plaintiff,
vs.
NORTH CROSS ROOFING &
WATERPROOFING, INC.,
Defendant.

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Cause No. 2:17-CV-212

OPINION AND ORDER
This matter is before the Court on North Cross Roofing &
Waterproofing, Inc.’s Motion to Dismiss Counts II and III of the
First Amended Complaint Under Fed. R. Civ. P. 12(b)(6), filed by
Defendant, North Cross Roofing & Waterproofing, Inc., on August 2,
2017 (DE #20).

For the reasons stated below, the Motion (DE #20)

is GRANTED and Counts II and III of the First Amended Complaint are
DISMISSED WITH PREJUDICE.

Count I remains pending.

BACKGROUND
Plaintiff, Korellis Roofing, Inc. (“Korellis”), filed its
first amended complaint against Defendant, North Cross Roofing &
Waterproofing, Inc. (“Northcross”), on July 19, 2017 (DE #16).
Plaintiff

asserts

claims

for

breach

of

contract

(Count

I),

conversion (Count II), and treble damages (Count III).
In the instant motion to dismiss, Northcross moves to dismiss

the counts for conversion and treble damages, arguing Korellis has
failed to state a claim under Federal Rule of Civil Procedure
12(b)(6).

Specifically, Northcross contends that the claim for

conversion fails because Korellis cannot establish that Northcross
retained any of its property, that the crux of the complaint is a
breached contract, and that the related claim for treble damages
pursuant to the Indiana criminal conversion statute therefore also
fails.

(DE #21.)

In response, Korellis argues that it has

properly stated a claim for conversion because it has alleged that
Northcross accepted a specific sum on behalf of Korellis, and then
wrongfully refused to give that sum to Korellis.

(DE #24.)

This

motion is fully briefed and ready for adjudication.

DISCUSSION
Federal Rule of Civil Procedure 12(b)(6) allows a complaint to
be dismissed if it fails to “state a claim upon which relief can be
granted.”

Fed. R. Civ. P. 12(b)(6).

Allegations other than fraud

and mistake are governed by the pleading standard outlined in
Federal Rule of Civil Procedure 8(a), which requires a “short and
plain statement” that the pleader is entitled to relief. Maddox v.
Love, 655 F.3d 709, 718 (7th Cir. 2011).
In order to survive a Rule 12(b)(6) motion, the complaint
“must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face’.” Ashcroft

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v. Iqbal, 129 S. Ct. 1937, 1949 (2009)(quoting Bell Atlantic Corp.
v. Twombly, 550 U.S. 544, 570 (2007)). All well-pleaded facts must
be accepted as true, and all reasonable inferences from those facts
must be resolved in the plaintiff’s favor.
521 F.3d 686, 692 (7th Cir. 2008).

Pugh v. Tribune Co.,

However, pleadings consisting

of no more than mere conclusions are not entitled to the assumption
of truth.
conclusions

Iqbal, 556 U.S. at 678-79.
couched

as

factual

This includes legal

allegations,

as

well

as

“[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements.”

Id. at 678 (citing

Twombly, 550 U.S. at 555).

Undisputed Facts
Northcross was a contractor for a construction project at
Ruler Foods in Merrillville, Indiana. (First Am. Compl. ¶ 7.)
Northcross contracted with the owner, David S. Israel and/or Learsi
& Co. (“Israel”), for the Ruler Foods Project.

(Id. ¶¶ 8,9.)

The Ruler Foods Project included replacement of the entire
roof. (Id. ¶ 10.) Northcross could not complete the roofing work.
(Id. ¶ 11.) So, Northcross retained a portion of the roofing work,
but sought a subcontractor for approximately half of the roof.
(Id. ¶ 12.)
Northcross contacted Korellis regarding Korellis serving as a
subcontractor to complete a portion of the roofing work for the
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Ruler Foods store.

(Id. ¶ 13.)

Korellis submitted a Proposal to

Northcross for a Partial TPO Roof Replacement. (Id. ¶ 14.) Per the
Proposal,

Korellis

offered

to

provide

the

labor,

materials,

equipment and supervision necessary to complete a partial roof
replacement at Ruler Foods in exchange for payment of $84,530 to be
paid within thirty days of the invoice.
accepted Korellis’ proposal.

(Id. ¶ 15.)

Northcross

(Id. ¶ 16.)

Korellis alleges that it completed its work and all of its
obligations,

issued

an

invoice

Northcross refused to pay Korellis.

demanding

payment,

(Id. ¶¶ 17, 34-35.)

but

that

Korellis

also claims that Israel, the owner of the property, paid Korellis
for the Ruler Foods construction project for the roofing work
performed by both Korellis and Northcross. (Id. ¶ 18.)

The first

amended complaint alleges that “David S. Israel and/or Learsi & Co.
specifically entrusted the Defendant with $85,590.09 that was to be
paid to and belonged to the Plaintiff.”

(Id. ¶ 19.)

In other

words, the first amended complaint alleges that Northcross took
possession of and asserted control over the funds belonging to
Korellis, and that Northcross refused to transfer the funds to
Korellis.

(Id. ¶¶ 19, 22-23.)

Korellis

contends

that

Northcross

breached

the

parties’

contract, is guilty of conversion, and claims it is entitled to
treble damages pursuant to the Indiana criminal conversion statute.

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Conversion
The crux of Northcross’ argument is that Korellis really only
has a claim for breach of contract for failure to pay a debt, and
Korellis has improperly repackaged that claim into an attempt at a
conversion claim for the potential of treble damages. In response,
Korellis insists it has stated a plausible claim for conversion
because Northcross accepted specific funds on behalf of Korellis,
and then retained those funds for its own benefit.
Under Indiana Code § 35-43-4-3, “[a] person commits criminal
conversion when he ‘knowingly or intentionally exerts unauthorized
control over property of another person.’”

Tobin v. Ruman, 819

N.E.2d 78, 89 (Ind. Ct. App. 2004) (quoting Ind. Code § 35-43-4-3).
Money may be the subject of a conversion claim if it is “a
determinate sum for which the defendant was entrusted to apply to
a certain purpose.”

Id. (quoting Huff v. Biomet, Inc., 654 N.E.2d

830, 836 (Ind. Ct. App. 1995)).
However, Indiana law has held that “where there is simply the
refusal to pay a debt no action for conversion will lie.”

National

Fleet Supply, Inc. v. Fairchild, 450 N.E.2d 1015, 1019 (Ind. Ct.
App. 1983), overruled on other grounds; see also Huff v. Biomet,
654 N.E.2d 830, 836 (Ind. Ct. App. 1995), abrogated on other
grounds (“[t]he refusal to pay a debt will generally not support a
conversion action.”).
Moreover, Northcross is correct that Korellis cannot restyle

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a breach-of-contract claim as a tort simply to obtain additional
damages. French-Tex Cleaners, Inc. v. Cafaro Co., 893 N.E.2d 1156,
1167 (Ind. Ct. App. 2008).
“[w]here,

as

[plaintiff]
interfere.

here,
arises

.

.

from

As the Court in French-Tex reasoned,
.

the

source

contract,

then

of

[the]

tort

law

duty

toward

should

not

As we have previously noted, the Indiana legislature

did not intend to criminalize bona fide contract disputes.” Id. at
1168-69 (quotation and citations omitted).

“The question is not

whether [the plaintiffs] have, as we assume, adequately pled their
tort claims, but, rather, whether [the defendant] is alleged to
have done anything that constituted an independent tort if there
were no contract.”

JPMCC 2006-CIBC14 Eads Parkway, LLC v. DBL

Axel, LLC, 977 N.E.2d 354, 364 (Ind. Ct. App. 2012) (quoting
Koehlinger v. State Lottery Comm’n of Indiana, 933 N.E. 534, 542
(Ind. Ct. App. 2010)). “To the extent that a plaintiff’s interests
have been invaded beyond mere failure to fulfill contractual
obligations, a tort remedy should be available.”

Greg Allen

Constr. Co. v. Estelle, 798 NE.2d 171, 173 (Ind. 2003).
This case seems like a garden variety breach of contract
dispute between a contractor and a subcontractor. Korellis has not
alleged any acts independent of the underlying contract dispute
that could reasonably be construed as a separate and independent
tort of conversion. Indeed, in this case, Northcross had a contract
with the owner (First. Am. Compl. ¶ 18), and Korellis had a

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separate sub-contract with Northcross (Id. ¶¶ 12-16).
words,

the

owner

was

obligated

to

pay

Northcross

In other
under

one

contract, which was separate and distinct from the sub-contract
entered into between Northcross and Korellis. Therefore, Korellis’
attempt to re-characterize the relationship as the owner entrusting
Northcross with money owed to Korellis fails. Rather, this case is
similar to Tobin, where a law firm’s refusal to pay a lawyer his
share of retained earnings was found to be a mere failure to pay a
debt, and not actionable as conversion.

Tobin, 819 N.E.2d at 89.

Here, the facts alleged do not plausibly support a claim for
criminal

conversion

Consequently,

Counts

as
II

contoured
and

III

by

are

the

Indiana

dismissed.

courts.

See,

e.g.,

ArcAngelo, Inc. v. Directbuy, Inc., No. 3:13-cv-104-PPS/CAN, 2013
WL 6095678, at *7-8(N.D. Ind. Nov. 20, 2013) (dismissing conversion
claim where case really involved a contract dispute).

CONCLUSION
For the reasons set forth above, North Cross Roofing &
Waterproofing, Inc.’s Motion to Dismiss Counts II and III of the
First Amended Complaint Under Fed. R. Civ. P. 12(b)(6) (DE #20), is
GRANTED and Counts II and III of the First Amended Complaint are
DISMISSED WITH PREJUDICE.

Count I remains pending.

DATED: October 4, 2017

/s/ RUDY LOZANO, Judge
United States District Court

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