Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

FOODTOWN v. SIGMA MKTG. SYS.

UNITED STATES DISTRICT COURT, DISTRICT OF NEW JERSEY


November 18, 1980

FOODTOWN, a New Jersey Corporation, Plaintiff,
v.
SIGMA MARKETING SYSTEMS, INC. and ARA Services, Defendants

The opinion of the court was delivered by: FISHER

This case is before me on defendants' motion to dismiss the complaint on the ground that the entire action is barred by the four-year statute of limitations for the sale of goods set forth in N.J.S.A. 12A:2-725. Plaintiff's five-count complaint seeks damages on the bases of (1) breach of contract (Counts I and II), (2) fraud (Count III), (3) tortious misrepresentation (Count IV) and (4) unjust enrichment (Count V). For the following reasons, I find that defendants' motion to dismiss the complaint is, for the time being, denied.

Plaintiff, Foodtown, filed the complaint herein against Sigma Marketing Systems, Inc. (Sigma) and ARA Services on June 20, 1980, seeking damages based upon alleged overcharges by Sigma on Foodtown's purchase of certain dinnerware under a contract (Agreement) executed by the parties on February 26, 1975. Plaintiff contends that the cost to Foodtown for the merchandise was to be Sigma's actual cost which is referred to in paragraph 1 of the Agreement as the landed cost. The merchandise was delivered to Foodtown during August and September 1975. Upon delivery of the merchandise, Foodtown paid the amounts demanded on the invoices, believing that these sums included only defendants' actual landed costs.

 Foodtown contends that in February 1980 it learned for the first time that defendants had charged Foodtown at a rate in excess of their actual landed costs for the dinnerware. Specifically, Foodtown argues that the United States Customs' duty rate which defendants charged was 50% more than the duty rate actually paid by them upon importation of the merchandise. Upon repeated demand for a refund of the alleged overpayments, Foodtown commenced this action against defendants on June 20, 1980 to recover these amounts.

 Defendants contend that the four-year statute of limitations for contracts for the sale of goods pursuant to N.J.S.A. 12A:2-725 bars any cause of action asserted by plaintiff. Plaintiff contends that the motion must be considered one directed solely to the First and Second Counts of the complaint because the four-year statute of limitations upon which defendants rely is only applicable to an action for the "breach of any contract for sale." N.J.S.A. 12A:2-725. Consequently, it is plaintiff's contention that the remaining counts of the complaint which charge fraud, misrepresentation and unjust enrichment are not the subject of, nor are they affected by, the motion presently before me. With regard to the breach-of-contract claims set forth in Counts One and Two, plaintiff argues that the applicable statute of limitations is the six-year period contained in N.J.S.A. 2A:14-1. In the alternative, plaintiff contends that even if the four-year statute of limitations set forth in N.J.S.A. 12A:2-725 is applicable to the breach-of-contract claims, (1) the First and Second Counts were timely filed because the cause of action alleged therein did not accrue until February 1980 upon Foodtown's discovery of the facts upon which this action is based; or (2) even if it is assumed that the cause of action accrued in 1975, the First and Second Counts were timely filed because the statute of limitations has been tolled by defendants' fraudulent concealment.

 There can be no doubt that the instant case involves a contract for the sale of goods within the meaning of the Uniform Commercial Code. Accordingly, plaintiff's breach-of-contract claims are governed by the four-year-limitations period set forth in N.J.S.A. 12A:2-725. In pertinent part, the statute provides:

 

(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued...

 

(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered...

 

....

 

(4) This section does not alter the law on tolling of the statute of limitations...

 Plaintiff's contention that the six-year statute of limitations pursuant to N.J.S.A. 2A:14-1 is applicable to the breach-of-contract claims is clearly without merit. An amendment to N.J.S.A. 2A:14-1 provides that "(t)his section shall not apply to any action for breach of any contract for sale governed by section 12A:2-725 of the New Jersey Statutes." L. 1961, c. 121, p. 723, ยง 1.

 I do not find plaintiff's allegations set forth in Counts One and Two to be collateral or ancillary to the contract for sale. See N.J.S.A. 12A:2-701. N.J.S.A. 12A:1-201 defines contract as the "total legal obligation which results from the parties' agreement as affected by this Act and any other applicable rules of law." The alleged overcharges on the contract price are not so distinct from the actual contract for the sale of goods as to make the four-year statute of limitations inapplicable by virtue of N.J.S.A. 12A:2-701.

 Plaintiff's contention that the discovery principle is applicable to the instant case is likewise without merit. I have found no New Jersey cases which apply the discovery principle to a breach-of-contract claim governed by the Uniform Commercial Code. To the contrary, the plain language of the statute and the applicable case law make clear that in a contract dispute such as this one the cause of action accrues when tender of delivery is made, regardless of the aggrieved party's lack of knowledge of the breach, except where the warranty explicitly extends to future performance. See N.J.S.A. 12A:2-725(2); Plumb v. Cottle, 492 F. Supp. 1330, 1336 (D.Del.1980) (cause of action accrues when tender of delivery is made); Raymond v. Eli Lilly and Company, 412 F. Supp. 1392, 1403 (D.N.H.1976) (breach of warranty occurs when the tender of delivery is made regardless of the aggrieved party's knowledge of the breach). In Gates Rubber Co. v. USM Corp., 508 F.2d 603, 613 (7th Cir. 1975), the court specifically refused to apply the discovery rule to toll the statute of limitations in a breach-of-contract case covered by the Uniform Commercial Code. Plaintiff does not dispute that the goods were delivered during August and September of 1975, more than four years ago. This is not a case where a warranty explicitly extends to future performance of the goods. As the causes of action set forth in Counts One and Two accrued when tender of delivery was made in 1975, the limitations period expired, at the latest, in September 1979. These causes of action are therefore time-barred, absent effective application of some tolling provision.

 N.J.S.A. 12A:2-725(4) makes it clear that the limitations provisions set forth in that section were not intended to alter the common-law principles regarding the tolling of the statute of limitations. It is well established in New Jersey that where there is fraudulent concealment of a cause of action the period of limitation will not commence until discovery of wrong or of facts which reasonably put one on notice. Roberts v. Magnetic Metals Co., 463 F. Supp. 934, 943 (D.N.J.1978); Osadchy v. Gans, 436 F. Supp. 677, 681 (D.N.J.1977); Kohler v. Barnes, 123 N.J.Super. 69, 79, 301 A.2d 474 (Law Div. 1973); Zimmerman v. Cherivtch, 5 N.J.Super. 590, 593-94, 68 A.2d 577 (Law Div. 1949). Cases interpreting Section 2-725 of the Uniform Commercial Code have held that fraud will suspend the running of the statute of limitations. United States v. Pall Corporation, 367 F. Supp. 976, 979 (E.D.N.Y.1973); Hoeflich v. William S. Merrell Co., 288 F. Supp. 659, 661 (E.D.Pa.1968).

 In order to take advantage of the doctrine of fraudulent concealment,

 

plaintiffs must show sufficient evidence to warrant the conclusion that defendants concealed the basic facts disclosing the existence of the cause of action and that plaintiffs remained in ignorance of those facts through no fault of their own. Holmberg v. Armbrecht, supra, 327 U.S. 392 at 397, 66 S. Ct. 582, at 585, 90 L. Ed. 743; Bailey v. Glover, 88 U.S. (21 Wall.) 342, 348, 22 L. Ed. 636 (1875); Schaefer v. First National Bank of Lincolnwood, 509 F.2d 1287, 1297 (7th Cir. 1975), cert. denied, 425 U.S. 943, 96 S. Ct. 1682, 48 L. Ed. 2d 186 (1976); Carpenter v. Hall, 311 F. Supp. 1099, 1107 (S.D.Tex.1970). As the court stated in Hupp v. Gray, 500 F.2d 993, 996 (7th Cir. 1974), "(it) is well established that a plaintiff may not rely on his own unawareness of the facts or law to toll the statute. Morgan v. Koch, 419 F.2d 993, 997 (7th Cir. 1969)".

 Osadchy v. Gans, 436 F. Supp. at 681. Fed.R.Civ.P. 9(b) specifically requires that "(in) all averments of fraud or mistake, circumstances constituting fraud or mistake shall be stated with particularity."

 In Roberts v. Magnetic Metals Co., supra, plaintiff sought to avoid the impact of the New Jersey Uniform Securities Law through application of the doctrine of fraudulent concealment. The court agreed with defendants that the conclusory allegations in plaintiff's complaint failed to satisfy the pleading requirements of fraudulent concealment and Fed.R.Civ.P. 9(b). In the court's words:

 

Plaintiff has failed to assert what actions by the defendants constituted the alleged suppression of facts. He has failed to elaborate why such facts were not discoverable within the two-year statute and has failed to allege with particularity why it took him so long to consult with his attorney and why they needed so much time to prepare a complaint.

 Roberts v. Magnetic Metals Co., 463 F. Supp. at 943. The court granted plaintiff twenty days to amend his complaint to meet the particularity requirements of Fed.R.Civ.P. 9(b). Plaintiff amended his complaint, and defendants renewed their summary judgment motions. In consideration of these renewed motions, the court stated:

 

(A) complaint is insufficient if it merely states in conclusory fashion that due diligence was exercised; plaintiff must specifically allege what steps he took prior to the running of the limitations period to discover the facts constituting fraud. Brick v. Dominion Mortg. & Realty Trust, supra 442 F. Supp. 283 at 292; Kroungold v. Triester, 407 F. Supp. 414, 419 (E.D.Pa.1975); Dayco Corp. v. Goodyear Tire & Rubber Co., supra, 523 F.2d 389 at 394; Hupp v. Gray, supra 500 F.2d 993 at 996.

 Roberts v. Magnetic Metals Co., 463 F. Supp. at 945.

 Count Three of plaintiff's complaint contains allegations of fraud and misrepresentation in that Foodtown was induced to pay for the merchandise at a price in excess of that stated in the contract. Plaintiff has failed to assert in the complaint what actions by defendants constituted active concealment of the alleged fraud, and why such facts were not discoverable within the four-year-limitations period. Further, plaintiff has not, even in a conclusory allegation, specifically alleged the exercise of due diligence and reasonable care in seeking the facts that demonstrate fraudulent concealment. Despite the failure of plaintiff to comply with Fed.R.Civ.P. 9(b), I am not inclined to dismiss the complaint at this time. Plaintiff is granted ten days to amend the complaint to meet the particularity requirements of Fed.R.Civ.P. 9(b) and the fraudulent concealment doctrine. When this tolling issue has been properly elucidated through amendment of the pleadings and discovery, upon motion of defendants, the court will entertain objections to the applicability of the fraudulent concealment doctrine to the instant case.

 Counts Three and Four of plaintiff's complaint are based on fraud and tortious misrepresentation. Plaintiff contends that these actions must be considered separate and apart from the breach of contract claims and that therefore the six-year-limitations period contained in the catch-all provision of N.J.S.A. 2A:14-1 is applicable to these counts. While it is possible that a breach of contract also gives rise to an actionable tort, I find that plaintiff's allegations in these counts are an attempt to dress up a contract claim in a fraud suit-of-clothes and consequently these counts must be dismissed inasmuch as they seek to establish a separate tort cause of action.

 In Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737 (2d Cir. 1979), plaintiff-appellant sought to recover damages for the alleged failure of performance of a computer system sold by appellees. The complaint alleged causes of action sounding in fraud, breach of contract and negligence. The district court dismissed the complaint on the basis that all claims asserted were time-barred. On appeal, the Second Circuit reversed dismissal of one of the fraud counts and affirmed dismissal of the other counts. Allegations of fraud appeared in Counts One, Two and Nine of the complaint. Count One alleged fraud in the inducement; Counts Two and Nine referred to alleged misrepresentations and concealments made after the parties had entered into a contractual relationship with each other.

 The court stressed the distinctions between the allegations contained in Count One and those in Counts Two and Nine. Central to the court's reasoning was that Count One involved a claim of fraud in the inducement, which is a fraud "extraneous to the contract," Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d at 747, rather than a claim of fraud after the parties had entered into a contract. The court stated:

 

The fraud Triangle alleges in Count I consisted of independent false representations, made before there ever was a contract between the parties, which led Triangle to enter into it. In other words, Triangle clearly alleges fraud that was extraneous to the contract, rather than a fraudulent non-performance of the contract itself....

 

This analysis does not apply to the allegations of fraud in Counts II and IX, since they refer to alleged misrepresentations and concealments made after the parties had entered into a contractual relationship with each other. Under the rule in Brick, these allegations do not state separate claims for the purposes of the statute of limitations.

 Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d at 747-48. See Closed Circuit Corporation of America v. Jerrold Electronics, 426 F. Supp. 361, 364-65 (E.D.Pa.1977) (transactions cannot be removed from the ambit of the Commercial Code to the area of tortious conduct simply by making general allegations of fraud otherwise there would be no effective way of preventing almost every contract case from being converted to a tort for jurisdictional purposes). See also Holdridge v. Heyer-Schulte Corp. of Santa Barbara, 440 F. Supp. 1088, 1095 (N.D.N.Y.1977) (cause of action for fraudulent misrepresentation should not be treated as separate cause of action for statute-of-limitations purposes in determining what period of limitations applies, the essence or gravamen of the action controls, rather than the form in which it is pleaded.

 In the case at bar, Foodtown alleges fraud and false representation commencing in August 1975, six months after the parties had entered into a written agreement. Paragraph 16 of plaintiff's complaint clearly states that the alleged misrepresentations "were made with intent to deceive Foodtown and to induce Foodtown to pay for the merchandise at a price in excess of that stated in the Agreement...." (emphasis added). The fraud contemplated by plaintiff here does not seem to be extraneous to the contract, but rather a "fraudulent non-performance of the contract itself," Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d at 747. Since Counts Three and Four refer to alleged misrepresentations and concealments made after the parties had entered into a contractual relationship, I find that these allegations do not state separate tort claims for the purposes of applying the six-year statute of limitations. Accordingly, for statute-of-limitations purposes, Counts Three and Four of the complaint are governed by N.J.S.A. 12A:2-725, and when the tolling issue has been clarified, the court will rule on defendants' renewed motions to dismiss these counts.

 I now turn to Foodtown's contention that the four-year statute of limitations does not apply to Count Five in the complaint based upon "unjust enrichment." It is well established that when an action arises in which the court has concurrent jurisdiction to grant either equitable or legal relief, "equity will withhold its relief where the applicable statute of limitations would bar the concurrent legal remedy." Cope v. Anderson, 331 U.S. 461, 464, 67 S. Ct. 1340, 1341, 91 L. Ed. 1602 (1947). I am mindful of decisions in the Third Circuit assessing concurrency, not on the basis of availability of a legal remedy for the asserted violation, but according to whether equitable relief is needed to make the plaintiff whole. If so, an applicable statute of limitations bars the legal remedy but the propriety of equitable relief is a matter of laches. Churma v. United States Steel Corp., 514 F.2d 589, 590 n.2 (3d Cir. 1975); Gruca v. United States Steel Corp., 495 F.2d 1252, 1256 (3d Cir. 1974). See also Winslow, Cohu & Stetson, Inc. v. Skowronek, 136 N.J.Super. 97, 105, 344 A.2d 350 (Law Div. 1975). Since equitable relief may be granted only when the remedy at law is inadequate, when the tolling issue has been properly elucidated through amendment of the pleadings, thereby determining the adequacy of the legal remedy here, I will consider whether plaintiff's claims for equitable relief are barred by the statute of limitations. I express no view here as to whether the propriety of equitable relief is a matter of laches, or whether it is the availability rather than the adequacy of legal redress that harmonizes with the Supreme Court's interpretation of concurrency.

 Defendants' motion to dismiss the complaint is, for the time being, denied. Plaintiff is granted ten days from the date of receipt of this opinion to file and serve an amended complaint to meet the particularity requirements of Fed.R.Civ.P. 9(b) and the fraudulent concealment doctrine. Defendants shall respond to the amended pleading within ten days after service, whereupon the court shall allow the parties thirty days to take discovery, limited to the tolling or fraudulent concealment issue. Furthermore, the court will rehear defendants' renewed motions to dismiss the complaint on the first motion day in the month of January 1981.

19801118

© 1992-2004 VersusLaw Inc.



Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.