Opinion
88 CIV. 2564.
January 17, 1990
MEMORANDUM OPINION AND ORDER
Plaintiff Jenny Trading Corp. ("Jenny") brought this action against I.M.C. Carriers Ltd. ("I.M.C") for damages sustained as a result of the loss of eight bags of cut garments. I.M.C. had contracted with Jenny to pick up cut-work at Jenny's cutting shop, Star Cutting, and to deliver it to Jenny's sewing facility, CS W Industries. The parties have cross-moved for partial summary judgment. For the reasons discussed below, the Court grants Jenny's motion for summary judgment on the issue of liability.
The material facts of this case are not in dispute. I.M.C.'s employee Herman Antley admitted that he misdelivered the cut-work to the wrong shop in Chinatown. Defendant's Statement Pursuant to Local Rule 3(g), ¶ 15. The cut-work was never recovered. I.M.C. argues, however, that its liability should be limited to $50 pursuant to the terms of its bill of lading. Jenny argues that the $50 limitation does not apply because I.M.C. misdelivered the goods.
The legal issue before this Court is whether a misdelivery constitutes a "conversion." If defendant is guilty of conversion, rather than mere negligence, then it is barred from relying on the limitation of liability contained in the bill of lading. I.C.C. Metals, Inc. v. Municipal Warehouse Co., 50 N.Y.2d 657, 663, 409 N.E.2d 849, 852, 431 N.Y.S.2d 372, 376 (1980). In I.C.C. Metals, the New York Court of Appeals held that a warehouseman is liable for a conversion unless he comes forward with an explanation, supported by evidence, of how goods were lost. Because I.M.C. has come forward with the uncontroverted explanation that the goods were misdelivered, I.M.C. argues in this case that it is not guilty of conversion and thus can rely on the limitation of liability contained in its bill of lading. See I.C.C. Metals, 50 N.Y.2d at 655 n. 4 and 633, 409 N.E.2d at 854 n. 4 and 852, 431 N.Y.S.2d at 377 n. 4 and 376.
The problem with I.M.C.'s theory is that the explanation it offered — that it misdelivered the goods — is tantamount to an admission that it converted the goods. In Magnin v. Dinsmore, 70 N.Y. 410, 417 (1877), the New York Court of Appeals made clear that "[a] conversion implies a wrongful act, a mis-delivery, a wrongful disposition, or witholding of the property." (Emphasis added). Although the New York Court of Appeals has not recently addressed directly the issue whether a misdelivery constitutes a conversion, that court has indicated that Magnin has continuing validity. In I.C.C. Metals, the Court of Appeals specifically noted that "conversion to his own use," the term used in § 7-204 of the Uniform Commercial Code, means nothing more than "a simple conversion." 50 N.Y.2d at 663 n. 2, 409 N.E.2d at 853 n. 2, 431 N.Y.S.2d at 376 n. 2 (citing Lipman v. Petersen, 223 Kan. 483,
575 P.2d 19 (1978) (holding that warehouseman who misdelivered wrenches to a third party was guilty of conversion even though he did not personally profit from his mistake)).
In I.C.C. Metals, the Court of Appeals gave no indication whatsoever that it was abandoning the rule that a misdelivery constitutes a conversion. To the contrary, the court's interpretation of § 7-204 and its citation to Lipman indicate that the old rule stands. Accordingly, because I.M.C. is guilty of conversion, "strong policy considerations bar enforcement of of any . . . limitation of its liability." I.C.C. Metals, 50 N.Y.2d at 663, 409 N.E.2d at 852, 431 N.Y.S.2d at 376 (citations include Magnin v. Dinsmore, 70 N.Y. 410, 416). See also Lipman, 575 P.2d at 21 ("Misdelivery . . . involves an intentional parting with possesion, in violation of the terms of the receipt. . . . [T]he limitation of liability clause is inapplicable.")
Because the Court holds that I.M.C.'s misdelivery constitutes a conversion that precludes it from relying on the limitation of liability provision contained in its bill of lading, the Court does not reach the question whether I.M.C. is precluded from relying on the provision because it allegedly failed to provide Jenny with an opportunity to declare the value of the goods and pay a higher rate.
CONCLUSION
Plaintiff's motion for partial summary judgment on the issue of liability is granted; defendant's motion for partial summary judgment is denied. The only issue left for resolution in this case is the amount of damages.SO ORDERED.