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Sweet Water Seafood Corp. v. Accem Warehouse, Inc.

A-4074-02T2 (N.J. Super. App. Div. 2004) (Unpublished)

WAREHOUSES; RECEIPTS—A non-negotiable warehouse receipt may contain a limitation on the time within which a storage customer can make an initial claim, such as sixty days, and also limit the time thereafter within which suit can be filed.

A food company delivered cases of food to another company for cold storage. The storage company issued a non-negotiable receipt for the shipment. The receipt included a sixty day limit for claims against the warehouse. After a month, the food company realized that many cases were not being stored at the temperature needed to prevent spoilage. On the day that these conditions were discovered, the food company notified the storage company about the problem. In addition, the storage company was found to have violated FDA regulations. Eleven months later, the food company sent a second notice to the storage company stating that it had sent food samples to a lab and that the lab confirmed that it was unfit for human consumption. It then sued for the cost of the lost food.

The lower court found that putting a claims limitation period in a non-negotiable warehouse receipt was permissible, and that the food company failed to file its complaint within the time limit. The lower court also rejected the argument that the provisions about the time limit for bringing a lawsuit were ambiguous. It held that the first notice to the storage company, not the second, triggered the beginning of the limitations period. Furthermore, the lower court also rejected the argument that the agreement to store the food was void because the storage company had violated FDA regulations. It noted that the inspection took place six months after the contract had been signed. The inspection that took place before the agreement was signed showed that the storage company conformed with regulations. Therefore, there was no basis to claim that the storage company was in violation at the time of the contract.

On appeal, the food company alleged that it gave timely notice of the claim; that the storage company’s warehouse receipt constituted an illegal contract and was invalid as a matter of law; and the agreement was void based on the storage company’s fraudulent claim that it could lawfully store food. Specifically, the company claimed that since the spoiled food was discarded and not “shipped” from the warehouse, there was no event triggering the sixty day “no suit” period. Alternately, it claimed that the second notice should be treated as the one to trigger the “no suit” period because it contained a more detailed statement of the damages. It argued that without such information, the parties could not have entered into settlement negotiations and that would have frustrated the purpose of the “no suit” provision.

The Appellate Division held that N.J.S.A. 12A:7-204 allows limitations as to time and manner for making claims and instituting actions in warehouse receipts. The warehouse receipt had a sixty day claim period, but gave the customer one year to file suit from the end of that sixty-day period. To the Court, the terms of the contract were clear. Furthermore, it held that even in the absence of a “date of shipment,” pursuant to the statute, the company still made a claim. Once a claim is made, the time limit is triggered. The warehouse receipt did not limit what could be considered a claim. The plain meaning of the words simply stated that a claim must be made. The Court held that it could not grant extensions to storage customers who repeated similar claims because the purpose of having reasonable provisions as to the time and manner of presenting the claims would be nullified.

In response to the company’s claim that the warehouse receipt was illegal because of the storage company’s violations of the FDA, the Court affirmed the decision of the lower court that stated that there was no evidence that the storage company was in violation of health standards at the time the warehouse receipt was issued.

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