Continental Metals Corp. v. Municipal Warehouse Co., Inc.
| Decision Date | 26 February 1982 |
| Parties | , 33 UCC Rep.Serv. 660 CONTINENTAL METALS CORPORATION, Plaintiff, v. MUNICIPAL WAREHOUSE COMPANY, INC., Defendant. |
| Court | New York Supreme Court |
Gates, Singer, Deitsch, Weintraub & Fass, New York City, for plaintiff.
Tell, Cheser, Breitbart & Lefkowitz, New York City, for defendant.
The motions before the court raise the issue, on which there is no direct authority, of whether a short contractual period of limitation in which to bring suit contained in a warehouse receipt bars a claim for conversion instituted against the warehouse after the expiration of such period.
On September 1, 1978 plaintiff delivered to the defendant warehouse 5 drums of cobalt cathodes weighing 2,845 pounds with an alleged value on that date of $151,567. On October 26, 1978 plaintiff demanded the return of the drums. Shortly thereafter defendant informed plaintiff that the drums could not be located. To date defendant has been unable to explain the disappearance other than the supposition offered by its vice-president that the loss was caused by a "criminal act on the part of one of my employees."
The warehouse receipt and storage contract issued to plaintiff by defendant when the goods were placed into storage on September 1, 1978 contained the following provision:
"No action at law or in equity shall be brought in connection with any loss or damage prior to the expiration of sixty (60) days after presentation of claim therefor; nor shall such action be brought at all unless brought within one year from the expiration of the sixty day period last mentioned."
Plaintiff sent written notice of the loss to defendant on November 1, 1978, but did not commence this action until March 24, 1980, more than one year and 60 days after the sending of the notice.
The complaint contains six causes of action. However, in apparent recognition that any claim in contract or for negligence would be barred by the above contractual provision, plaintiff has moved for summary judgment only on the second cause of action which alleges a conversion of the property. Defendant has cross-moved to dismiss the entire complaint based on said provision.
A shortened contractual period of limitations is permitted by UCC § 7-204(3) which provides as follows:
"Reasonable provisions as to the time and manner of presenting claims and instituting actions based on the bailment may be included in the warehouse receipt or tariff."
A period of one year and 60 days is a reasonable time period for a valid limitation. See: J. Aron & Co., Inc. v. Panama Railroad Co., 255 N.Y. 513, 175 N.E. 273 (1931).
Plaintiff, however, contends that since defendant converted the missing property it may not take advantage of the short contractual period of limitations and that for such wrong the three year period of CPLR 214 is applicable. In support of its position plaintiff cites I.C.C. Metals, Inc. v. Municipal Warehouse Co., 50 N.Y.2d 657, 431 N.Y.S.2d 372, 409 N.E.2d 849 (1980) where the facts are very similar to the case at bar and coincidentally the same warehouse was involved.
There the plaintiff delivered goods to the warehouse which were not returned, the defendant offering no explanation other than speculation that they were stolen. The defense offered was that the warehouse receipt limited liability to $50 unless a higher value was placed on the merchandise, which the plaintiff had failed to do. The court found that the limitation of liability provision was unenforceable in light of its conclusion that (p. 660, 431 N.Y.S.2d 372, 409 N.E.2d 849):
"... proof of delivery of the stored property to the warehouse and its failure to return that property upon proper demand suffices to establish a prima facie case of conversion and thereby renders inapplicable the liability-limiting provision, unless the warehouse comes forward with evidence sufficient to prove that its failure to return the property is not the result of its conversion of that property to its own use."
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