Karat Gold Imports, Inc. v. United Parcel Service, Inc.

• Decision Date: 05 September 1989
• Docket Number: No. 55827,55827
• Citation: 577 N.E.2d 115,62 Ohio App.3d 604
• Parties: KARAT GOLD IMPORTS, INC., Appellant, v. UNITED PARCEL SERVICE, INC., et al., Appellees.
• Court: Ohio Court of Appeals

Page 604

62 Ohio App.3d 604

577 N.E.2d 115

KARAT GOLD IMPORTS, INC., Appellant, v. UNITED PARCEL SERVICE, INC., et al., Appellees.

No. 55827.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Decided Sept. 5, 1989.

Carr, Feneli & Carbone Co., L.P.A., Leonard F. Carr and Mark R. Wagner, Mayfield Heights, for appellant.

Squire, Sanders & Dempsey and Kimberly Oreh, Cleveland; Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., and Stephen D. Brown, for appellees.

SAUL G. STILLMAN, Judge.

Karat Gold Imports, Inc. ("Karat Gold") appeals from the judgment of the trial court which directed a verdict for defendants United Parcel Services, Inc. and United Parcel Service General Services Company (collectively "U.P.S.") in Karat Gold's suit for breach of contract and other causes of action. Karat Gold assigns five errors for our review, but, for the reasons set forth below, these assignments of error are overruled and the judgment of the trial court is affirmed.

I

Karat Gold is a jewelry wholesaler which sells to retail jewelry stores across the country. Sometime in early 1986, Karat Gold began to ship merchandise to its retail customers via U.P.S. carrier services. As part of this carrier's service presentation to Karat Gold, Karat Gold's owner, Cindy Valerino, and then national sales manager, Sandra Kuzma, were informed of a collect-on-delivery ("C.O.D.") shipment option, and were further informed that they could instruct U.P.S. to accept "cash only" on such deliveries.

In July 1986, some months after the U.P.S. presentation, Karat Gold received a telephone order for jewelry totalling $23,025.39 from an individual who identified himself as Paul Ryan of Van Nuys, California, who explained that he needed the jewelry as soon as possible for the opening of his new jewelry store. As Karat Gold had never done business with Ryan before, Kuzma asked him for business references. Ryan explained that he had none, as he was beginning a new venture. Rather than check Ryan's personal credit references, Karat Gold opted to ship the merchandise to Ryan using the C.O.D., "cash only" shipment option.

U.P.S. subsequently delivered the jewelry to Ryan in exchange for Ryan's cashier's check in the amount of $23,025.39, purportedly drawn on First Interstate Bank of California. U.P.S. subsequently remitted the cashier's check to Karat Gold, and Karat Gold in turn deposited it into its account at National City Bank in Cleveland. Karat Gold's account was then credited with the amount of the cashier's check, but, approximately one week later, National City Bank learned that the instrument was counterfeit and $23,025.39 was then debited from the account.

Thereafter, on December 22, 1986, Karat Gold filed a five-count complaint against U.P.S. alleging, essentially, that U.P.S. breached its obligation to collect "cash only" on the delivery to Ryan by collecting the counterfeit cashier's check. U.P.S. filed an answer denying that it had breached any duty owed to Karat Gold in this transaction, and the matter proceeded to trial on April 27, 1988.

For its key evidence, Karat Gold presented the testimony of Daneen Maderas, the U.P.S. customer service representative who gave the service presentation to Karat Gold in 1986, Valerino and Kuzma, Karat Gold employee Jill Varga, and David Pavia and Steve Hrezik, both U.P.S. employees.

Maderas, who was called by Karat Gold upon cross-examination, testified that during her presentation to Karat Gold, she explained basic shipping instructions, insurance, and packaging. With respect to her instructions regarding the C.O.D. shipments at issue here, Maderas testified that in her typical presentation, she explains that U.P.S. will collect payment for a C.O.D order in any form including personal checks. If, however, the shipping customer indicates that U.P.S. is to collect "cash only" on a C.O.D. order, U.P.S. will collect the amount due in currency, a certified check, a cashier's check, or a money order.

However, Maderas could not recall whether she specifically informed Valerino and Kuzma that U.P.S. deemed these instruments to be cash, and she further acknowledged that none of the documents left with Karat Gold indicated that U.P.S. defined these instruments as cash. Nonetheless, Maderas testified that in the shipping industry as a whole, cash includes cashier's checks, certified checks, and money orders, as well as currency.

Maderas next authenticated several pages from the U.P.S. Customer Service Information Guide which U.P.S. provides to its customer service personnel to assist them in dealing with specific problems. Passages B-38 to B-40 of this document provide:

"Should we accept certified checks, cashier's checks or money orders in payment of 'cash only' C.O.D.'s?

"Yes. It is general practice in the transportation industry that certified checks, cashier's checks and money orders are accepted in lieu of cash and we will follow this practice.

"Are we responsible to our customers for bad checks returned to them as uncollectible?

"No. We are not responsible except when a C.O.D. tag has been marked 'Cash Only.' We will, however, assist the customer in trying to collect on these checks.

"If a regular check is collected in error by UPS on a C.O.D. package marked 'Cash Only' or 'Certified Check Only,' and the shipper deposits that check without protesting the form of the payment, is UPS liable if the check is uncollectible?

"No. We are not liable once the shipper deposits the check because, legally, he has ratified our acceptance of that check. However, we should consider that our error caused the shipper not to receive proper payment. If the shipper has used reasonable prudence in bringing an insufficient funds check to our attention promptly, we should make him whole. First by attempting to collect the proper payment from the consignee, and if not successful, by paying the shipper with our check." (Emphasis added.)

Valerino and Kuzma next established that Ryan contacted Karat Gold on July 2, 1986, seeking overnight delivery of a large jewelry order. As Ryan had no business references, the following precautions were taken in connection with shipping the order. First, Valerino asked the Van Nuys police to check the address Ryan had given, in order to confirm that a jewelry store was at that location. They refused to do so, however. Next, Valerino decided to ship the jewelry using the C.O.D., "cash only" instruction. Finally, after the package had been mailed, Kuzma called U.P.S. and instructed it to collect only currency for the delivery. Kuzma testified that in response to this additional instruction, she was told that the "cash only" indication would ensure this result. Valerino and Kuzma further testified that they expected U.P.S. to collect currency from Ryan and to then remit the amount collected to Karat Gold with a check drawn on U.P.S.'s own account as this procedure was outlined in the service explanation Maderas left with them.

Cross-examination of these witnesses revealed that Karat Gold could have checked Ryan's personal credit references and could have required prepayment before shipping the jewelry, but did not do so as it feared it would lose the sale if it did not ship overnight as requested. Cross-examination further revealed that approximately one month before the shipment at issue, Karat Gold had accepted a check drawn on a credit union in collection of a C.O.D., "cash only" shipment, and did not protest U.P.S.'s collection of this instrument or complain that it had deviated from the "cash only" instruction.

Jill Varga testified that after U.P.S. remitted Ryan's check to Karat Gold, she stamped it "for deposit only," and that she probably did so at the instruction of one of Karat Gold's co-owners.

Finally, Pavia, an auditor of U.P.S. drivers who has been with the carrier for fourteen years, testified that to him, "cash" means currency or federal reserve notes. Hrezik, an employee in the delivery information-loss prevention department of U.P.S. with twenty-four years of experience with the carrier, likewise admitted that he had testified to the same effect when his deposition was taken earlier in the proceedings.

At the close of its evidence, Karat Gold moved to amend its complaint to include a sixth cause of action for fraud. U.P.S. in turn moved for a directed verdict, arguing that even if U.P.S. had breached the "cash only" instruction, Karat Gold ratified the breach by depositing the cashier's check into its account without protest. Both motions were denied and U.P.S. proceeded with its case.

Gregory McDonald, a customer service manager for U.P.S., provided the key defense testimony. McDonald testified that the "cash only" designation authorizes U.P.S. to collect currency, cashier's checks, certified checks and money orders. Essentially, this designation prohibits collection of only personal checks and business checks. McDonald further testified that the service explanation given to shipping customers which informs the customers that they will receive a check drawn on a U.P.S. account for amounts U.P.S collects in "cash," applies only when U.P.S. collects currency on a delivery. If, however, a cashier's check, certified check or money order is collected on a "cash only" delivery, then the instrument itself is transmitted directly to the shipping customer.

At the close of all of the evidence, both parties moved for a directed verdict. After considering all of the evidence, and the law as set forth in the parties' trial briefs, the court directed a verdict for U.P.S. as it determined that "cash" includes cashier's checks. Thus, the court concluded that the "cash only" instruction was not breached by collection of a cashier's check in this instance. The court further concluded that even if the "cash only" instruction were breached, Karat Gold had ratified this breach by depositing the cashier's check into its account without protesting the...