CHOICE CANNING CO., INC. v. MCST PREFERRED TRANSPORTATION, INC., et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4165-05T34165-05T3

CHOICE CANNING CO., INC.,

Plaintiff-Appellant,

v.

MCST PREFERRED TRANSPORTATION, INC.,

Defendant,

and

PREFERRED FREEZER SERVICES, INC.,

Defendant-Respondent.

_____________________________________

 
 

Submitted November 8, 2006 - Decided December 7, 2006

Before Judges R. B. Coleman and Gilroy.

On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2119-04.

Casey & Barnett, attorneys for appellant (Christopher L. Deininger, on the brief).

McElroy, Deutsch, Mulvaney & Carpenter, attorneys for respondent (George H. Parsells, III, of counsel and on the brief; Meredith A. Walling, on the brief).

PER CURIAM

Plaintiff, Choice Canning Co., Inc., appeals from an order of the Law Division entered on February 3, 2006, granting partial summary judgment dismissing plaintiff's complaint against defendant, Preferred Freezer Services, Inc. (PFS), and from the order of March 17, 2006, denying plaintiff's motion for reconsideration. We affirm.

On June 26, 2003, plaintiff purchased 1,880 cartons of frozen shrimp for $161,976. The shrimp arrived at a marine terminal on Staten Island on August 5, 2003. On August 7, 2003, plaintiff entered into an agreement with MCST Preferred Transportation, Inc. (MCST), to transport the shrimp to PFS's warehouse in Perth Amboy for storage. When the shrimp were delivered to PFS, it was discovered that "[s]ome cartons [were] ripped and torn on all lots [and] also some cartons [were] stained from condensation inside the container." The shrimp were required to be kept at a temperature of minus eighteen degrees Celsius; however, at the time when the shipment was unloaded, it had thawed to minus sixteen degrees Celsius. In lieu of selling the shrimp at a salvage bid price of $125,400, plaintiff reprocessed the shrimp at a cost of $29,217.62 and sold the shrimp for $214,157, realizing a profit of $22,963.

On August 6, 2004, plaintiff filed its complaint against MCST and PFS, sounding in negligence for breach of their respective duties as a common carrier and warehouseman, and for breach of their duties as bailees-for-hire. On October 21, 2005, PFS moved for partial summary judgment, asserting that plaintiff's claim was barred by the provisions of a warehouse receipt, which prohibited recovery of lost profits. On February 3, 2006, Judge Wilson granted the motion determining that plaintiff's claim for reprocessing costs was a claim for lost profits barred by the warehouse receipt's limitation provision. Between the time the motion had been granted on February 3, 2006, and the denial of the motion for reconsideration, plaintiff dismissed the action against MCST.

On appeal, plaintiff argues:

POINT I.

UNDER NEW JERSEY LAW, COSTS AND EXPENSES ARE NOT PROFIT AND ARE NOT PROPERLY CHARACTERIZED AS "LOST PROFIT."

POINT II.

UNDER THE NEW JERSEY LAW, DEFENDANT'S CONSTRUCTION OF ITS LIMITATION SHOULD BE REJECTED AS BEING CONTRARY TO PUBLIC POLICY.

A trial court will grant summary judgment to the moving party "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). "An issue of fact is genuine only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact." R. 4:46-2(c).

On appeal, "the propriety of the trial court's order is a legal, not a factual, question." Pressler, Current N.J. Court Rules, comment 3.2.1 on R. 2:10-2 (2006). "We employ the same standard that governs trial courts in reviewing summary judgment orders." Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).

Plaintiff argues that the trial court erred when it held that plaintiff's reprocessing costs were lost profits. We find the argument is without merit.

The parties contracted through a warehouse receipt to limit PFS's liability. The limitation provision contained in the warehouse receipt provided:

IN NO EVENT SHALL THE LIABILITY OF THE COMPANY FOR ANY DAMAGES FOR LOSS OR INJURY TO GOODS STORED EXCEED FIFTY CENTS ($.50) PER POUND OF ANY FOOD OR FOOD PRODUCT, OR TWENTY-FIVE CENTS ($.25) PER POUND OF ANY GOODS OTHER THAN FOOD OR FOOD PRODUCTS, UNLESS WITHIN A REASONABLE TIME (NOT TO EXCEED 7 DAYS) AFTER RECEIPT HEREOF, THE STORER DECLARES IN WRITING A HIGHER VALUE PER POUND ON PART OR ALL OF THE GOODS STORED HEREUNDER. IN WHICH EVENT, INCREASED RATES SHALL BE CHARGED BASED UPON SUCH INCREASED VALUATION. BUT THE COMPANY'S MAXIMUM LIABILITY SHALL IN NO EVENT EXCEED THE ACTUAL VALUE OF THE GOODS AND IN NO CASE SHALL THE LIABILITY BE EXTENDED TO INCLUDE ANY LOST PROFIT. (Emphasis added).

Rather than selling the shrimp to a salvage bidder and incurring a loss of $36,576, plaintiff chose to reprocess the shrimp at a cost of $29,217.62 and sold the shrimp for $214,157, realizing a profit of $22,963.38. We conclude that the essence of plaintiff's argument is that it could have made a larger profit had it not incurred the reprocessing cost. We are satisfied that plaintiff's claim is barred by the warehouse receipt limitation provision. Lost profits are "the difference between the gross income and the costs or expenses which had to be expended to produce the income." Cromarte v. Carteret Savings & Loan, 277 N.J. Super. 88, 103 (App. Div. 1984).

Plaintiff argues next that the trial court erred in granting summary judgment because the liability limitation in PFS's warehouse receipt is void as contrary to public policy. A court's "power to declare a contractual provision void as against public policy must be exercised with caution and only in cases that are free from doubt." Briarglen II Condo. Assn. v. Twp. of Freehold, 330 N.J. Super. 345, 355-56 (App. Div.) certif. denied, 165 N.J. 489 (2000) (quoting Saxon Constr. & Management Corp. v. Masterclean of N.C., Inc., 273 N.J. Super. 374 (Law Div. 1992), aff'd, 273 N.J. Super. 231 (App. Div.), certif. denied, 137 N.J. 314 (1994)). Courts must perform a balancing test, "weighing the legislative policy and the public interest against the enforcement of the contractual provision, to determine whether the ... provision at issue is void." Ibid.

N.J.S.A. 12A:7-204(2) allows a warehouseman to limit his liability in the following manner:

Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage, and setting forth a specific liability per article or item, or value per unit of weight, beyond which the warehouseman shall not be liable; provided, however, that such liability may on written request of the bailor . . . within reasonable time after receipt of the warehouse receipt be increased on part or all of the goods thereunder . . . but that no such increase shall be permitted contrary to a lawful limitation of liability contained in the warehouseman's tarrif, if any.

A warehouseman's liability limitation provision is binding against a bailor, provided the warehouse receipt calls attention to such provision, so as to inform the bailor of its terms. Silvestri v. South Orange Storage Corp., 14 N.J. Super. 205, 210 (App. Div. 1951). However, a warehouseman cannot completely absolve himself from liability under section 7-204(2): "[the limitation provision] must adhere to the limitations imposed by case law and is subject to the traditional contractual limitations such as unconscionability." Jasphy v. Osinsky, 364 N.J. Super. 13, 22 (App. Div. 2003). Our courts "have adhered to the generally recognized rule that a common carrier and one otherwise occupying the legal status of a bailee cannot so contract as to effectuate a complete exemption from liability for losses proximately resulting from the negligence of the carrier or bailee." Silvestri, supra, 14 N.J. Super. at 209-10.

Here, PFS's warehouse receipt did call attention to the limitation provision: "Your attention is drawn to the terms and conditions on the back of the receipt. For limitation of liability, see Section 9." The provision was printed in boldface and in capital letters, disclaiming any liability above the value of the goods, and specifically no liability for lost profits. PFS did not disclaim all liability, including any loss created by its own negligence. The provision only limited PFS's liability to the value of the goods stored in its facility.

Moreover, this is not a case where a sophisticated party is taking advantage of a lay consumer by way of an adhesion contract. Both plaintiff and PFS are commercial entities: plaintiff is an international company that imports and sells shrimp, and PFS is a corporation engaged in the operation of frozen storage facilities. Plaintiff could not be considered an unsuspecting consumer with a disparity of bargaining power in this transaction. Judge Wilson correctly concluded that PFS's liability limitation provision is a valid contract provision.

Affirmed.

 

Plaintiff also recovered $18,062.72 pursuant to a subrogation agreement between plaintiff and a third party that was not fully explained in the record.

(continued)

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A-4165-05T3

December 7, 2006