United States Fidelity & Guaranty Co. v. Slifkin

• Decision Date: 08 December 1961
• Docket Number: Civ. A. No. 9575.
• Citation: 200 F. Supp. 563
• Court: U.S. District Court — Northern District of Alabama
• Parties: UNITED STATES FIDELITY & GUARANTY CO., a corporation and Boston Insurance Company, a corporation, Plaintiffs, v. Irving T. SLIFKIN et al., Defendant.

200 F. Supp. 563

UNITED STATES FIDELITY & GUARANTY CO., a corporation and Boston Insurance Company, a corporation, Plaintiffs, v. Irving T. SLIFKIN et al., Defendant.

Civ. A. No. 9575.

United States District Court N. D. Alabama, S. D.

December 8, 1961.

COPYRIGHT MATERIAL OMITTED

Spain, Gillon & Young, Birmingham, Ala., for U. S. Fidelity & Guaranty Co.

Huie, Fernambucq & Stewart, Birmingham, Ala., for Boston Ins. Co.

Mudd, Baker & McDaniel and Schuyler A. Baker, Birmingham, Ala., for Irving T. Slifkin.

Bowers, Dixon, Dunn & McDowell, and Thomas F. McDowell, Birmingham, Ala., for Nathansohn-Lipschutz Co.

White, Bradley, Arant, All & Rose, and Frank H. McFadden and Charlotte R. Kieffer, Birmingham, Ala., for Burkley Corp.

Martin, Vogtle, Balch & Bingham, Birmingham, Ala., for Maurice Kornreich Co. and Georges Ullmann.

LYNNE, Chief Judge.

Irving T. Slifkin was a diamond merchant with his place of business in Birmingham, Alabama. In the course of his business he received from time to time diamonds on consignment accompanied by memoranda, describing the stones and reciting certain conditions of the deliveries. On May 18, 1959, on his premises, he was robbed at gunpoint of merchandise owned by him and of consigned diamonds owned by Nathansohn-Lipschutz Company, Burkley Corporation, Maurice Kornreich Company, and Georges Ullmann, all of New York.

At that time Slifkin was insured against loss by robbery of property in the premises of his establishment separately by United States Fidelity and Guaranty Company and by Boston Insurance Company. Each of these policies contains a form of the so-called "in-trust-and-on-commission" clause and an "other insurance" clause. Each of the consignors at the time of the robbery had insurance effectively covering its respective losses of consigned properties. These policies also contain "other insurance" clauses. The consignors were compensated for their losses by their insurers under so-called "loan receipts", each of which recited in varying form substantially that the payment constituted a loan, repayable only to the extent of any net recovery by the consignor from Slifkin.

This action was instituted by Slifkin's insurers, by a bill of interpleader, naming as defendants Slifkin and each of the consignors and depositing in court the total proceeds ($20,000.00) of their policies with Slifkin. Each of the consignors has crossclaimed against Slifkin personally for any portion of their losses not recoverable out of such deposited proceeds.

The Applicable Law

To determine the applicable law, the conflict of laws rules of Alabama must be followed. Klaxon Co. v. Stentor Electric Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The Alabama cases have recited repeatedly the precept stated in J. R. Watkins Co. v. Hill, 214 Ala. 507, 509, 108 So. 244, 245 (1926), that,

"The nature, obligation, validity and interpretation of a contract are according to the laws of the state where made, or where performance begins, unless it is apparent that the parties manifest a mutual intention to the contrary, or unless it is to be performed in some other place, in which case the law of the other place and of performance will govern."

An insurance contract is made where the final act is performed which is necessary to its completion and to make it binding; and where the policy is countersigned and delivered by an agent with authority to do so is considered to be the place of making. 2 Couch, Insurance 2d §§ 16:3-16:6 (1959). Since the policies both of United States Fidelity and Guaranty Co. and of Boston Insurance Co. were not valid until countersigned by their agent in Birmingham, Wallace Cohen, both contracts are held to have been made in Alabama. There is no indication that performance was to be elsewhere. Consequently, Alabama law governs.

Slifkin's Personal Liability

Each of the consignors has crossclaimed against Slifkin to recover from him personally compensation for any losses to the consigned properties not recoverable by them directly from the proceeds of Slifkin's insurance policies with the United States Fidelity and Guaranty and the Boston Insurance companies. Since the court holds that the loss of the consigned property was not due to his negligence, Slifkin's personal liability therefor must be based on a contractual enlargement of his common-law liability. If there was an enlargement of liability, it existed only by virtue of clauses in each of the consignment memoranda which substantially conform to the following clause from Burkley Corporation's memorandum No. 5004: "Risks of loss or damage from all hazards of any kind, with or without negligence on your Slifkin's part is yours." This statement appears on the face of each memorandum, accompanying delivery of the jewelry, in a short paragraph which is the only printed matter thereon. If it can be concluded that Slifkin agreed expressly or impliedly to these terms, they undoubtedly would enlarge his liability to that of insurer. See Constantian v. Mercedes-Benz Co., 5 Cal.2d 631, 55 P.2d 841 (1936); Allemania Fire Ins. Co. of Pittsburgh v. Keller Diamond Corp., Sup., 101 N.Y.S.2d 9 (Trial Term 1950), rev'd on other grounds, 278 App.Div. 899, 104 N.Y.S.2d 875 (1951); United States v. Seaboard Machinery Corp., 270 F.2d 817 (5th Cir., 1959); 6 Am.Jur., Bailments § 183 (1950). Cf. Reconstruction Finance Corp. v. Peterson Bros., 160 F. 2d 124 (5th Cir., 1947).

The memoranda terms are binding on Slifkin if either (1) he had actual knowledge thereof, or (2) he is chargeable with constructive notice thereof. Kravitz v. Parking Service Co., 29 Ala. App. 523, 526, 199 So. 727, cert. denied with opinion, 240 Ala. 467, 199 So. 731 (1940); Western Union Tel. Co. v. Prevatt, 149 Ala. 617, 43 So. 106 (1907); Martin v. Smith, 116 Ala. 639, 22 So. 917 (1897); 1 Williston, Contracts § 90A, at 292-93 (3d ed. 1957); Restatement Contracts § 70 (1932).

Slifkin's testimony on cross-examination at trial strongly suggests that he did have actual knowledge of the pertinent memoranda terms:

"Q. Were you ever a consignor of diamonds when you were on the road? Didn't you testify this morning you were on the road? What did you do? A. Travelling and selling diamonds and jewels.

* * * * * *

"Q. You worked for what house at that time? A. Harry Weinstein.

* * * * * *

"Q. Did you consign diamonds to retail merchants in their behalf? A. Yes, sir.

"Q. On memos? A. Yes, sir.

"Q. When you consigned diamonds, were the memos on which they were consigned similar to these? A. Yes, sir. All memos are similar.

"Q. Did they have similar language? A. Similar. Some of them worded a little differently, but essentially the same.

"Q. Did they all contain the risk of loss clause? A. I suppose they did." Record, pp. 66-67

Irrespective of Slifkin's actual knowledge, however, it would be difficult indeed to conclude that this is not a situation to which the doctrine of constructive notice is applicable. In Alabama and elsewhere knowledge of and assent to special contract terms have been implied in respect to a variety of transactions. See 1 Williston, Contracts §§ 90A-90D (3d ed. 1957); Western Union Tel. Co. v. Prevatt, 149 Ala. 617, 43 So. 106 (1907) (limitation of liability printed on reverse of telegraphic message blank); American Ry. Express Co. v. Henderson, 214 Ala. 268, 107 So. 746 (1926) (limitation of liability on bill of lading); Hartford Fire Ins. Co. v. Shapiro, 270 Ala. 149, 117 So.2d 348 (1960) (terms of liability insurance policy). Several cases of other jurisdictions are especially pertinent here. In Constantian v. Mercedes-Benz Co., supra, when the plaintiff rented furniture to the defendant, his so-called "delivery sheets" contained a printed statement that "renters are responsible for loss or damage of goods while in their possession." 5 Cal.2d 631, 55 P.2d 842. Although the rented property was destroyed by a fire not caused by the lessee's negligence, he was held liable on the basis of the printed terms, the court stating in 55 P.2d at 843:

"We think it cannot be denied that `the person receiving the * * * delivery sheet should as a reasonable man understand that it contained terms of the contract which he must read at his peril, and regard as part of the proposed agreement.' * * *

"`It the condition was printed plainly on the face of the receipt. The whole paper is extremely brief. It was the duty of respondents to take note of its contents, if they had the opportunity, and their opportunity was ample. The presumption, therefore, is, that they did read it. Against this presumption there is no evidence, and none, we think, would have been admissible to show that the respondents had failed to do what their duty required them to do.'"

Allemania Fire Ins. Co. of Pittsburgh v. Keller Diamond Corp., supra, is even more in point. There a jeweler was held to be liable without negligence for the loss by theft of a bailed ring on the basis of printed terms on a memorandum receipt substantially identical to those in the present case.

It is chiefly in respect to baggage, parcel room, and parking lot checks that the courts have been most reluctant to charge the recipient of the document with notice of its terms. See 1 Williston, Contracts § 90B, at 301-02; Kravitz v. Parking Service Co., supra; Goldstein v. Harris, 24 Ala.App. 3, 130 So. 313 (1930), cert. denied, 221 Ala. 612, 130 So. 315. The usual reasoning in these cases is that neither the nature of the transaction nor the appearance of the identification check warrant an assumption that a reasonable man would expect the document to contain special contract terms. The parking-lot type of case clearly is not in point here. Consignment of jewelry on memorandum was a serious business transaction to both the cross-claimants and Slifkin, and one with which Slifkin had had long and continuous experience. As in Constantian, the printed terms are very brief and quite prominently displayed on the face of...