Foodtown v. Sigma Marketing Systems, Inc.

• Decision Date: 23 July 1981
• Docket Number: Civ. A. No. 80-1859.
• Citation: 518 F. Supp. 485
• Parties: FOODTOWN, a New Jersey Corporation, Plaintiff, v. SIGMA MARKETING SYSTEMS, INC. and ARA Services, Defendants.
• Court: U.S. District Court — District of New Jersey

518 F. Supp. 485

FOODTOWN, a New Jersey Corporation, Plaintiff, v. SIGMA MARKETING SYSTEMS, INC. and ARA Services, Defendants.

Civ. A. No. 80-1859.

United States District Court, D. New Jersey.

November 18, 1980.

On Renewed Motion to Dismiss July 23, 1981.

Wilentz, Goldman & Spitzer by Christine D. Petruzzell, Woodbridge, N. J., for plaintiff.

McCarter & English by William H. Horton, Newark, N. J., for defendants.

OPINION

CLARKSON S. FISHER, Chief Judge.

This case is before me on defendants' motion to dismiss the complaint on the ground that the entire action is barred by the four-year statute of limitations for the sale of goods set forth in N.J.S.A. 12A:2-725. Plaintiff's five-count complaint seeks damages on the bases of (1) breach of contract (Counts I and II), (2) fraud (Count III), (3) tortious misrepresentation (Count IV) and (4) unjust enrichment (Count V). For the following reasons, I find that defendants' motion to dismiss the complaint is, for the time being, denied.

Plaintiff, Foodtown, filed the complaint herein against Sigma Marketing Systems, Inc. (Sigma) and ARA Services on June 20, 1980, seeking damages based upon alleged overcharges by Sigma on Foodtown's purchase of certain dinnerware under a contract (Agreement) executed by the parties on February 26, 1975. Plaintiff contends that the cost to Foodtown for the merchandise was to be Sigma's actual cost which is referred to in paragraph 1 of the Agreement as the landed cost. The merchandise was delivered to Foodtown during August and September 1975. Upon delivery of the merchandise, Foodtown paid the amounts demanded on the invoices, believing that these sums included only defendants' actual landed costs.

Foodtown contends that in February 1980 it learned for the first time that defendants had charged Foodtown at a rate in excess of their actual landed costs for the dinnerware. Specifically, Foodtown argues that the United States Customs' duty rate which defendants charged was 50% more than the duty rate actually paid by them upon importation of the merchandise. Upon repeated demand for a refund of the alleged overpayments, Foodtown commenced this action against defendants on June 20, 1980 to recover these amounts.

Defendants contend that the four-year statute of limitations for contracts for the sale of goods pursuant to N.J.S.A. 12A:2-725 bars any cause of action asserted by plaintiff. Plaintiff contends that the motion must be considered one directed solely to the First and Second Counts of the complaint because the four-year statute of limitations upon which defendants rely is only applicable to an action for the "breach of any contract for sale." N.J.S.A. 12A:2-725. Consequently, it is plaintiff's contention that the remaining counts of the complaint which charge fraud, misrepresentation and unjust enrichment are not the subject of, nor are they affected by, the motion presently before me. With regard to the breach-of-contract claims set forth in Counts One and Two, plaintiff argues that the applicable statute of limitations is the six-year period contained in N.J.S.A. 2A:14-1. In the alternative, plaintiff contends that even if the four-year statute of limitations set forth in N.J.S.A. 12A:2-725 is applicable to the breach-of-contract claims, (1) the First and Second Counts were timely filed because the cause of action alleged therein did not accrue until February 1980 upon Foodtown's discovery of the facts upon which this action is based; or (2) even if it is assumed that the cause of action accrued in 1975, the First and Second Counts were timely filed because the statute of limitations has been tolled by defendants' fraudulent concealment.

There can be no doubt that the instant case involves a contract for the sale of goods within the meaning of the Uniform Commercial Code. Accordingly, plaintiff's breach-of-contract claims are governed by the four-year-limitations period set forth in N.J.S.A. 12A:2-725. In pertinent part, the statute provides:

(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued...

(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered...

....

(4) This section does not alter the law on tolling of the statute of limitations...

Plaintiff's contention that the six-year statute of limitations pursuant to N.J.S.A. 2A:14-1 is applicable to the breach-of-contract claims is clearly without merit. An amendment to N.J.S.A. 2A:14-1 provides that "this section shall not apply to any action for breach of any contract for sale governed by section 12A:2-725 of the New Jersey Statutes." L. 1961, c. 121, p. 723, § 1.

I do not find plaintiff's allegations set forth in Counts One and Two to be collateral or ancillary to the contract for sale. See N.J.S.A. 12A:2-701. N.J.S.A. 12A:1-201 defines contract as the "total legal obligation which results from the parties' agreement as affected by this Act and any other applicable rules of law." The alleged overcharges on the contract price are not so distinct from the actual contract for the sale of goods as to make the four-year statute of limitations inapplicable by virtue of N.J.S.A. 12A:2-701.

Plaintiff's contention that the discovery principle is applicable to the instant case is likewise without merit. I have found no New Jersey cases which apply the discovery principle to a breach-of-contract claim governed by the Uniform Commercial Code. To the contrary, the plain language of the statute and the applicable case law make clear that in a contract dispute such as this one the cause of action accrues when tender of delivery is made, regardless of the aggrieved party's lack of knowledge of the breach, except where the warranty explicitly extends to future performance. See N.J. S.A. 12A:2-725(2); Plumb v. Cottle, 492 F.Supp. 1330, 1336 (D.Del.1980) (cause of action accrues when tender of delivery is made); Raymond v. Eli Lilly and Company, 412 F.Supp. 1392, 1403 (D.N.H.1976) (breach of warranty occurs when the tender of delivery is made regardless of the aggrieved party's knowledge of the breach). In Gates Rubber Co. v. USM Corp., 508 F.2d 603, 613 (7th Cir. 1975), the court specifically refused to apply the discovery rule to toll the statute of limitations in a breach-of-contract case covered by the Uniform Commercial Code. Plaintiff does not dispute that the goods were delivered during August and September of 1975, more than four years ago. This is not a case where a warranty explicitly extends to future performance of the goods. As the causes of action set forth in Counts One and Two accrued when tender of delivery was made in 1975, the limitations period expired, at the latest, in September 1979. These causes of action are therefore time-barred, absent effective application of some tolling provision.

N.J.S.A. 12A:2-725(4) makes it clear that the limitations provisions set forth in that section were not intended to alter the common-law principles regarding the tolling of the statute of limitations. It is well established in New Jersey that where there is fraudulent concealment of a cause of action the period of limitation will not commence until discovery of wrong or of facts which reasonably put one on notice. Roberts v. Magnetic Metals Co., 463 F.Supp. 934, 943 (D.N.J.1978); Osadchy v. Gans, 436 F.Supp. 677, 681 (D.N.J.1977); Kohler v. Barnes, 123 N.J.Super. 69, 79, 301 A.2d 474 (Law Div. 1973); Zimmerman v. Cherivtch, 5 N.J.Super. 590, 593-94, 68 A.2d 577 (Law Div. 1949). Cases interpreting Section 2-725 of the Uniform Commercial Code have held that fraud will suspend the running of the statute of limitations. United States v. Pall Corporation, 367 F.Supp. 976, 979 (E.D. N.Y.1973); Hoeflich v. William S. Merrell Co., 288 F.Supp. 659, 661 (E.D.Pa.1968).

In order to take advantage of the doctrine of fraudulent concealment,

plaintiffs must show sufficient evidence to warrant the conclusion that defendants concealed the basic facts disclosing the existence of the cause of action and that plaintiffs remained in ignorance of those facts through no fault of their own. Holmberg v. Armbrecht, supra, 327 U.S. 392 at 397, 66 S.Ct. 582, at 585, 90 L.Ed. 743; Bailey v. Glover, 88 U.S. (21 Wall.) 342, 348, 22 L.Ed. 636 (1875); Schaefer v. First National Bank of Lincolnwood, 509 F.2d 1287, 1297 (7th Cir. 1975), cert. denied, 425 U.S. 943, 96 S.Ct. 1682, 48 L.Ed.2d 186 (1976); Carpenter v. Hall, 311 F.Supp. 1099, 1107 (S.D.Tex.1970). As the court stated in Hupp v. Gray, 500 F.2d 993, 996 (7th Cir. 1974), "it is well established that a plaintiff may not rely on his own unawareness of the facts or law to toll the statute. Morgan v. Koch, 419 F.2d 993, 997 (7th Cir. 1969)".

Osadchy v. Gans, 436 F.Supp. at 681. Fed. R.Civ.P. 9(b) specifically requires that "in all averments of fraud or mistake, circumstances constituting fraud or mistake shall be stated with particularity."

In Roberts v. Magnetic Metals Co., supra, plaintiff sought to avoid the impact of the New Jersey Uniform Securities Law through application of the doctrine of fraudulent concealment. The court agreed with defendants that the conclusory allegations in plaintiff's complaint failed to satisfy the pleading requirements of fraudulent concealment and Fed.R.Civ.P. 9(b). In the court's words:

Plaintiff has failed to assert what actions by the defendants constituted the alleged suppression of facts. He has failed to elaborate why such facts were not discoverable within the two-year statute and has failed to allege with particularity why it took him so long to consult with his attorney and why they

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