Procter & Gamble Distributing Co. v. Lawrence Am. Field Warehousing Corp.

• Decision Date: 30 December 1965
• Parties: , 213 N.E.2d 873, 21 A.L.R.3d 1320, 3 UCC Rep.Serv. 157 PROCTER & GAMBLE DISTRIBUTING COMPANY, Respondent-Appellant, v. LAWRENCE AMERICAN FIELD WAREHOUSING CORP., Formerly Known as American Express Field Warehousing Corporation, Appellant-Respondent and Third-Party Plaintiff. Brooks BANKER, as Treasurer of American Express Company, Appellant-Respondent and Third-Party Defendant.
• Court: New York Court of Appeals Court of Appeals

Page 785

266 N.Y.S.2d 785

16 N.Y.2d 344, 213 N.E.2d 873, 21

A.L.R.3d 1320,

3 UCC Rep.Serv. 157

PROCTER & GAMBLE DISTRIBUTING COMPANY, Respondent-Appellant, v. LAWRENCE AMERICAN FIELD WAREHOUSING CORP., Formerly Known as American Express Field Warehousing Corporation Appellant-Respondent and Third-Party Plaintiff. Brooks BANKER, as Treasurer of American Express Company Appellant-Respondent and Third-Party Defendant.

Court of Appeals of New York.

Dec. 30, 1965.

Peter H. Kaminer, Patrick J. Hughes and Edwin J. Wesely, New York City, for appellants-respondents.

William W. Owens and Peter J. O'Shea, Jr., New York City, for respondent-appellant.

VAN VOORHIS, Judge.

This is an action against a warehouse corporation based upon the nondelivery of the merchandise for which it issued its warehouse receipts. The theory of action is conversion. Plaintiff (hereafter called P & G) asserts that in the absence of any explanation of the disappearance of these goods, the defendant (hereafter called Field) is liable for the market value of this merchandise at the times when it was delivered to the warehouse. Plaintiff is correct in these contentions, we have concluded, and is entitled to summary judgment in this amount. We agree with the Appellate Division that no triable issue is presented concerning the liability of defendant, but consider that the Appellate Division erred in directing an assessment of damages and in not awarding to plaintiff the undisputed market value of the merchandise delivered to defendant at the times of its delivery, which was as high as at any subsequent time or times prior to notification to plaintiff of its disappearance. The basic issue is simple, but it has been encrusted with a complex of fact and legal argument which makes it necessary to discuss the case in more detail.

Allied Crude Vegetable Oil Refining Corp. (hereafter called Allied) is not a party to this action, but this cause of action against defendant arose through a course of dealings between plaintiff and Allied, which traded in vegetable oils manufactured by various producers including plaintiff. Originally plaintiff sold such merchandise outright on sight draft with bill of lading attached. In the early Fall of 1962, however, in order more fully to utilize its working capital, Allied persuaded plaintiff to engage in a practice known as field warehousing. Allied had leased oil storage tanks at Bayonne, New Jersey, formerly owned by Tidewater Associated Oil Company. These were sublet to Field, a wholly owned subsidiary of American Express Company (hereafter called Amexco), which thereupon operated as an independent warehouse company. When Allied purchase vegetable oils from plaintiff, and other producers, as it did f. o. b. seller's plant or warehouse, Bayonne, New Jersey, the oil would be shipped to Bayonne to the seller's order, and stored for the seller's account in Field's warehouses. Down payments were made, described in the contract as 'Margin Requirements on Consigned Shipments', amounting to about 20% of the purchase price, at the time of receipt of the oil at Field's warehouse, and the balance by sight draft with bill of lading attached, or cash in advance of shipment to buyer, as Allied disposed of the oil.

In accordance with this procedure, plaintiff shipped 9,206,740 pounds of fully refined soybean oil under bills of lading to plaintiff itself as consignee at Bayonne, New Jersey, which was delivered for storage and safe keeping to Field at said warehouse for plaintiff's account. Field, the defendant, issued five warehouse receipts for this oil dated March 22, April 1 and April 9, 1963. Each warehouse receipt recited the number of the bill of lading for the tank car in which it had been contained, amounting in total to 151 tank carloads. Not only was the presence of this oil in defendant's tanks attested by these nonnegotiable receipts issued in plaintiff's name, but also by a series of month-end statements issued by defendant indicating that the oil was in the warehouse. Both the warehouse receipts and these month-end statements, based on defendant's books, are evidence that the oil was received by defendant at its tank warehouse in Bayonne, New Jersey. In the absence of any evidentiary facts showing that defendant did not receive the oil in suit, its warehouse receipts, month-end statements and books of account are conclusive against defendant on this point. Mere suspicion that the oil was stolen before reaching defendant's tanks is not sufficient to overcome this documentary evidence.

Neither is there any triable issue concerning the market value of edible oil of this quality at the times when it was received by defendant during March and April, 1963. It is undisputed that the market price of this commodity is fixed by frequent transactions between processors and their customers, and that on these delivery dates it was never less than the prices shown in the warehouse receipts which represented the $1,013,075.12 selling price agreed upon between plaintiff and Allied. Defendant could easily have controverted this statement of market value contained in the moving affidavit of plaintiff's sales assistant, but did not do so. Instead, defendant contends that the damage to plaintiff should be diminished by the market value of the oil at a later date, after the market had broken when the disappearance of this and other oil had come to public attention. The usual measure of damage, in event of nondelivery of goods by a bailee, is the market value on the date of the conversion (McIntyre v. Whitney, 139 App.Div. 557, 124 N.Y.S. 234, affd. 201 N.Y. 526, 94 N.E. 1096; Corn Exch. Bank v. Peabody, 111 App.Div. 553, 98 N.Y.S. 78), not the date when the bailor learns of the loss or presents his warehouse receipt and demands his merchandise. Where, as here, the date of the conversion has not been identified, the Appellate Division has held that the value should be fixed as of the date when the bailor received notice of the loss. This, we think, was error. The circumstances regarding the loss of bailed property are more likely to be known by the bailee than by the bailor, and, where the time and manner of the loss is unknown, it ought not to lie in the power of the bailee to choose the date for determining market value by electing when to notify the bailor that the goods have disappeared and cannot be accounted for. The rule that the loss is to be measured as of the time of the conversion, when the conversion date is known, should not be reshaped to designate the date when the bailor is notified of the conversion if the conversion date is unknown. That would place the bailee in a better legal position by pleading ignorance of the circumstances of the loss than if he knew or revealed the circumstances.

This rule should not be applied to the advantage of the warehouseman and the detriment of the bailor if the warehouseman pleads ignorance of the date on which the property disappeared. In order that a bailee may not be permitted to take advantage of his own wrong where the subject of the bailment has been negligently lost or misappropriated, it follows that the bailor should be awarded damages measured by the highest value of the property between the date when the bailment commenced and the date when the bailor has received notice that the property has been lost (Lamb v. O'Reilly, 13 Misc. 212, 34 N.Y.S. 235). There appears to be no New Jersey statute directly upon the point, nor is there anything to indicate that the New Jersey case law differs from our own (Gaines v. Jacobsen, 308 N.Y. 218, 124 N.E.2d 290, 48 A.L.R.2d 312). The affidavits show that the market value of this vegetable oil fluctuated little until soon before Allied went into bankruptcy. No contention is made that its market value went substantially higher after the dates of plaintiff's warehouse receipts, and its market value is claimed as of those dates. Consequently there is no need for an assessment of damages inasmuch at the market value of the merchandise entrusted by plaintiff to defendant has been established on the crucial date without contradiction.

Defendant has been credited by the Appellate Division with $217,279.66 on plaintiff's claim of $1,013,075.12 by reason of the down payments (called margin requirements) in the contracts made by Allied to plaintiff at the times when the oil was deposited in defendant's tank warehouse. This sum was to have been applied on the purchase price to have been paid by Allied in full at the time of delivery of the oil to it or its order by plaintiff. Allied defaulted in its performance of these contracts by reason of its intervening bankruptcy. Whoever owns this $217,279.66 down payment, it does not belong to Field. It belongs either to plaintiff or to Allied or parts of it to each. Consequently Field is not entitled to be credited with this sum in reduction of its liability to plaintiff for nondelivery of the oil to which plaintiff was entitled under its warehouse receipts. Allied is not a party to this action, therefore it cannot be decided in this action how much of the $217,279.66 belongs to the trustee in bankruptcy of Allied or to the plaintiff. Title to this oil did not pass from plaintiff to Allied, nor did Allied have a lien thereon. Even if plaintiff had defaulted in performing these contracts, instead of Allied, no lien could have attached under subdivision 5 of former section 150 of the Personal Property Law, Consol.Laws, c. 41 (in effect in New Jersey as part of the Uniform Commercial Code at the time of these transactions) unless the buyer, although free from fault, has the goods in his possession or control. In Railroad Waterproofing Corp. v. Memphis Supply (303 N.Y. 849, 851, 104 N.E.2d 486, 487) we said that even if the buyer 'had a lien, it was lost upon its surrendering possession' of the goods. Here it could not be contended that this vegetable oil was ever in the possession of Allied....