Opinion
22508
January 17, 2002.
APPEAL from a judgment of the Civil Court of the City of New York, New York County (George Postel, J.H.O.), entered February 16, 2000, which dismissed the complaint against respondent after a nonjury trial.
Lazarus Lazarus, P.C. New York City (Harlan M. Lazarus of counsel), for appellant.
Irving Anolik, New York City (Jonathan B. Strauss of counsel), for respondent.
HON. WILLIAM P. McCOOE, J.P., HON. WILLIAM J. DAVIS, HON. LUCINDO SUAREZ, Justices.
OPINION OF THE COURT
Judgment entered February 16, 2000 (George Postel, J.H.O.) affirmed, with $25 costs.
In this action by plaintiff, a textile converter, for the January 1995 conversion of certain unfinished fabric stored in defendant's warehouse since late 1990, the trial court dismissed the complaint at the close of the evidence based upon defendant's enforcement of a warehouseman's lien. Plaintiff contends that defendant's documents were insufficient to constitute a valid warehouse receipt (a condition precedent to obtaining a warehouseman's lien) and that defendant failed to comply with the warehouseman's lien foreclosure procedures set forth in UCC 7-210(2), resulting in defendant's conversion of plaintiffs bailed goods. We affirm.
Defendant's billing statement, invoice and correspondence to plaintiff were sufficient to qualify as a warehouse receipt (UCC 1-201; 7-202) although not denominated as such a document. A warehouse receipt "need not be in any particular form" (UCC 7-202). Such a receipt "must conform substantially to the statutory requirements, but it need not list all items listed in the statute" (93 CJS, Warehousemen and Safe Depositories, § 27; Evergreen Intl. Servs. Corp. v. Wallant Intl. Trade, 228 N.J. Super. 477, 480-481; 550 A.2d 175, 177-178; Smithers v. Tru-Pak Moving Sys., 121 N.C. App. 542, 468 S.E.2d 410, review denied 343 N.C. 514, 472 S.E.2d 20). While UCC 7-202 states that the omission of certain essential terms in the warehouse receipt exposes the warehouseman to liability for damages to an injured person, the statute does not specifically provide that receipts not conforming fully with its requirements are invalid.
Nuclear Facilities v. Advance Relocation Stor., 173 A.D.2d 802, relied upon by plaintiff, is inapposite and does not warrant a contrary result. The document of title involved there, unlike the collective documents here, omitted several essential terms, including the "rate of storage" (UCC 7-202[e] and the "signature of the warehouseman" (UCC 7-202[g] and was issued solely in connection with the transportation of goods, rather than the business of storing goods for hire. Contrasted with the bill of lading in Nuclear Facilities, supra, defendant's documents here included the rate of storage and handling charges, the signature of the warehouseman, the location of the warehouse where the goods were stored, the date of issue of the receipt, the consecutive number of the receipt, a description of the goods or of the packages containing them and a statement of the amount of advances made and of liabilities incurred. The only missing term was "a statement whether the goods received will be delivered to the bearer, or to a specified person, or to a specified person or his order" (UCC 7-202[d]).
Since the goods in question involved warehoused merchandise of a merchant-bailor, rather than noncommercial storage of household goods, this case is governed by the simplified foreclosure procedures set forth in UCC 7-210, rather than the more detailed and stricter requirements of UCC 7-210 (Shimamoto v. SF Warehouses, 257 A.D.2d 334, appeal dismissed in part, lv denied in part, 94 N.Y.2d 837; Ellison v. Midtown Moving Stor., 188 Misc.2d 703, [App Term, 1st Dept]; 3 White and Summers, Uniform Commercial Code § 28-6, at 314 [Practitioner's 4th ed]). Applying that simplified standard, defendant sold the goods at public auction in a "commercially reasonable" manner, following notice to plaintiff of the amount due and the nature, time and place of the proposed sale (UCC 7-210).
Although defendant's notice of sale did not contain the requisite statement that any person claiming an interest in the goods was entitled to bring a special proceeding under UCC 7-211 to challenge the validity of the lien or the amount claimed (UCC 7-210), defendant's oversight does not necessarily constitute a "willful violation" of the statute (Shimamoto v. SF Warehouses, supra, 257 A.D.2d at 339), warranting reinstatement of plaintiffs claim of conversion. Significantly, plaintiff did not dispute the amount of storage and handling charges due, acknowledged at the January 1999 trial that the fabric had deteriorated after several years of storage, conceded that it never demanded return of the fabric after the retitling of the fabric to plaintiff following a certain arbitration award dated August 24, 1994 and did not want the fabric back from defendant, essentially abandoning it.
Plaintiff knew long ago that defendant dyer's work was never completed and that the fabric had been left at defendant's facility "for [plaintiffs] disposition" since 1990 based upon a chargeback from another textile converter which claimed that the fabric was defective. Although that related billing dispute was the subject of the aforementioned 1992 arbitration proceeding, plaintiff failed to raise the storage fee issue at the arbitration hearing.
Finally, we note that even where a warehouseman does not establish the validity of the lien, the goods may still be sold pursuant to the warehouseman's option to terminate the storage and demand payment (UCC 7-206), since the warehouseman's "lien remedy under UCC 7-209 and 7-210 is not exclusive" (Dupont v. Joedon Co., 107 A.D.2d 369, 372; 44A N.Y. Jur2d, Documents of Title, §§ 124, 161).
We have considered plaintiffs remaining arguments and find them to be without merit.
DISSENTING MEMORANDUM
I respectfully dissent. The defendant was concededly in the business of dyeing and finishing textile goods and it offered the goods of the plaintiff for sale at auction for unpaid storage charges in alleged compliance with Article 7 of the UCC. Plaintiff contends that the defendant did not comply with the procedural requirements for a sale under Article 7.
The parties have charted their own course and while the initial discussion concerns issues not raised at the trial it partially explains why the defendant did not follow the Article 7 procedural requirements.
The initial question should have been whether the defendant was a warehouseman. Both parties proceeded upon the erroneous basis that it was. A warehouseman is a person in the business of storing goods for hire (UCC § 7-102(1)(h)). The defendant (Renco Finishing Corp.) was not in the business of storing goods. The unfinished goods were sold by the plaintiff to a third party who directed that they be shipped to the defendant. The goods were delivered to the defendant to be processed and not for storage. They remained on its premises because of a dispute between the plaintiff and this third party over alleged defects in the goods and title to the goods was awarded to the plaintiff in arbitration four years later.
The defendant testified at the trial that he didn't know "what a receipt means." He further testified that the third party who sent him the goods for processing was not charged for storage unless the goods were there for six months. He clearly was not in "the business of storing goods for hire" but of processing. The fact that an auto repair shop charges storage fees for cars not picked up shortly after the repairs are completed would not make it a parking lot.
The Trial Court's "Findings of Fact" state that the defendant never entered into any contractual agreement with the plaintiff, that the third party had been the owner of the goods before the arbitration award and that the defendant had been submitting storage bills to the third party before the award.
National Res. Trad. v. Trans Freight Line [Maher Terminals, Inc.], 766 F.2d 65 (2d Cir. 1985) is factually distinguishable and is dicta for the point cited. The issue in that case was whether a stevedore firm was a gratuitous bailee in a conversion action and whether or not it was a warehouseman had no bearing on its liability. A warehouse receipt was never discussed since there was no issue as to a lien. Furthermore, since the plaintiff was a Rhode Island corporation, the defendant a New Jersey corporation and the storage and sale took place in New Jersey, the law of New Jersey should have been applied.
Addressing the issues raised at the trial and assuming that the plaintiff was a warehouseman, the grounds for reversal are that the plaintiff never agreed to pay storage charges and that there was no valid warehouseman's receipt issued, which is a condition precedent to a lien attaching. The documents offered to establish a warehouse receipt were bills sent four years after the delivery. It is not the content of the documents but the timing of the sending of them that disqualifies them as constituting a warehouse receipt.
A receipt is commonly understood and authoritatively defined as a writing acknowledging the receipt of goods or money. It is issued simultaneously or shortly after the transfer. This alleged receipt was issued and dated four years later.
UCC sec; 7-202 lists the essential terms of a warehouse receipt and states that, unless "each of the following" is embodied therein the warehouseman is liable for damages. The essential terms include the date of issue of the receipt and the rate of storage and handling charges. The purpose of this term is so that the party liable would know at the time of delivery what the rate was; not four years later. The date on the receipt should show the date of delivery and when the charges begin.
In summary, the plaintiff was not liable for storage charges it never agreed to. It never received a "warehouse receipt" from the defendant until four years after the delivery when it received bills stating in substance that he should pay for storage charges. Since there was no valid warehouse receipt, there was no lien. The subsequent actions of the defendant in selling the goods to itself at the auction, without an auctioneer, was self help without any statutory or judicial authorization. The liability of the third party for the storage fees is not an issue and therefore it will not be discussed.
Dupont v. Joedon Co., 107 A.D.2d 369 (1St Dept 1985) cited by the majority is not relevant since the public sale was by a judgment creditor and not a warehouseman. In any event, this ground was never raised at the trial or in the briefs.