Fireman's Fund Insurance v. Wagner Fur, Inc.
760 F. Supp. 1101, 1991 WL 57899 (1991)
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Rule of Law:
A bailee's unauthorized delivery of bailed property to the wrong person constitutes conversion, regardless of whether the misdelivery was a good-faith mistake or the bailee received any benefit from it.
Facts:
- In the spring of 1987, Lewis and Dorothy Cullman sent three valuable furs to Wagner Fur, Inc. ('Wagner') for storage.
- Wagner provided the Cullmans with a storage receipt that limited its liability to an assigned value of $100 per fur, which the Cullmans signed.
- In November 1987, Wagner arranged for United Parcel Service, Inc. ('UPS') to return the furs to the Cullmans.
- UPS delivered the furs not to the Cullmans' residence at 784 Park Avenue, but to the neighboring building at 785 Park Avenue.
- A porter at 785 Park Avenue accepted the package and placed it in a service elevator.
- The furs subsequently vanished from the service elevator and were never recovered.
- The Cullmans' insurer, Fireman's Fund Insurance Co. ('Fireman's Fund'), paid the Cullmans for their loss.
Procedural Posture:
- Fireman's Fund Insurance Co., as the subrogee for the Cullmans, filed suit against Wagner, UPS, and Owners in the United States District Court for the Southern District of New York, alleging negligence and conversion.
- Each defendant cross-claimed against the others under the same theories.
- All three defendants filed motions for summary judgment to have the claims and cross-claims against them dismissed.
- The case was referred to a U.S. Magistrate Judge, who issued a Report and Recommendation.
- The Magistrate recommended granting summary judgment for Wagner and UPS on the conversion claims but denying it on the negligence claims.
- Fireman's Fund, Wagner, and UPS all filed objections to the Magistrate's Report, bringing the matter before the District Court for review.
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Issue:
Does a bailee's mistaken misdelivery of property to the wrong address, without any intent to benefit from the mistake, constitute the tort of conversion?
Opinions:
Majority - Lowe, District Judge.
Yes, a bailee's mistaken misdelivery of property to the wrong address constitutes the tort of conversion. The court's reasoning is that conversion is defined as any intentional exercise of dominion or control over a chattel that seriously interferes with the owner's right of control. An unauthorized delivery of bailed property, even if resulting from a good-faith mistake, is a form of exercising dominion that seriously interferes with the owner's rights. The court clarified that the bailee's intent is irrelevant; the bailee need not intend to interfere with the owner's rights or derive any personal benefit. The act of misdelivery itself is the conversion. Citing the Restatement (Second) of Torts and New York case law like Jacobson v. Richards & Hassen Enterprises, Inc., the court held that a bailee who transfers goods in a manner inconsistent with an owner's instructions is liable for conversion.
Analysis:
This decision reaffirms the strict liability standard for conversion in the context of bailment and misdelivery. It clarifies that the tort of conversion focuses on the interference with the owner's property rights, not on the bailee's mental state or motive. By rejecting the argument that a bailee must benefit or act in bad faith, the court reinforces the principle that bailees, including common carriers and warehouses, bear the risk of ensuring property is delivered only to an authorized person. This holding serves as a strong incentive for commercial bailees to maintain rigorous delivery and verification procedures, as even an innocent mistake can result in full liability for the value of the misdelivered goods.
