courts would hold with what has certainly been the prevailing range of decision and reject Judge Gabrielli's analysis.
The Pennsylvania courts, as I have suggested, have not addressed or even come to the edges of the particular issue. The Pennsylvania cases make clear, however, that the concept of conversion which prevails in Pennsylvania is the accepted concept, a concept a long distance from negligence. Judge Aldisert has had a recent occasion to encapsulate this, speaking for the Third Circuit in Baram v. Farugia, 606 F.2d 42. At page 43 he said, "We . . . are satisfied that conversion under the common law of Pennsylvania may be conceptualized as follows: Conversion is an act of willful interference with the dominion or control over a chattel, done without lawful justification, by which any person entitled to the chattel is deprived of its use and possession."
Given that definition of a willful tort and the requirement of 7204(b) that no such limitation is effective with respect to the liability of the warehouseman for conversion to his own use, I think that the Pennsylvania courts would go slowly in attributing an inference of conversion -- which not really borders on but certainly in most instances would be criminal conduct -- to a civil defendant merely on the basis of the civil defendant's not coming forward with any explanation of the cause of a loss, where absent any such explanation the record would be nonindicative whether negligence or some advertent hostile disposition constituting conversion would be a proper explanation.
I think such reluctance would be the stronger where the UCC requirement is not merely of conversion but conversion by the warehouseman "to his own use." There might after all be numerous instances in which the loss of the bailed goods would be caused, to be sure, not by the negligence of the warehouseman but by conversion, because the conversion would be by persons other than the warehouseman, and one would, I think, be rather slow in coming to the conclusion that it was the intention of the Pennsylvania Legislature that the warehouseman would be found liable beyond the stipulated liability in the category of cases which in fact reflected neither conversion to the warehouseman's own use nor negligence, that is to say, a perfectly attentive and faithful warehouseman from whose dominion some of the bailed goods were stolen by a third party.
These observations seem to me to be strengthened insofar as they point against plaintiff's position by some further aspects of the matter. What we are dealing with is, of course, a situation in which the bailor can if he wishes stipulate to a liability higher than the liability that appears in the form warehouse receipt by paying some higher premium, that is, within limits the bailor can insure against the risk. In a setting in which the bailor has not done that, and in the event that nobody knows what happened, the question arises, should the bailee be held liable on an attributed theory of negligence which would involve liability up to the stated amount?, or should the limitation on liability be held wholly unavailing and the plaintiff entitled to recover the actual value of goods whose actual value indeed the bailee may not have known at any time until litigation arose?
The inquiry as to assigning the risk of nonpersuasion with respect to an event nobody knows the explanation of has been fairly carefully pursued by Professors White and Summers in their volume on the Uniform Commercial Code, and there is an enlightening discussion on pages 789 to 791 of the pertinent considerations. Let me say as I introduce this that the question Professors White and Summers have been asking is not the question at focus in this case: the negligence-conversion distinction. The question they are asking was the preliminary one, the answer to which seems to be well accepted: Should negligence be attributed to the warehouseman when no explanation is forthcoming? Professors White and Summers are clear that that is where the burden should lie. In many of the cases negligence cannot be readily proved. When so, the result often depends on who has the burden of producing evidence and who has the ultimate risk of nonpersuasion on the issue of negligence and causation.
Assume the plaintiff introduces credible evidence at trial that he deposited undamaged goods with the bailee, that he instructed the bailee to deliver them up, and that the bailee either failed to deliver any goods at all, delivered only a part of them, or delivered some or all of the goods in a damaged state. Assume the plaintiff then rests without offering evidence on how the loss or damage occurred and without offering evidence on whether the cause of the loss was traceable to the warehouseman's negligence. Has the plaintiff made out a prima facie case sufficient to get him to the jury, or is he subject to nonsuit or directed verdict for failure to offer credible proof of negligence and causation?
J. White & R. Summers, Handbook of the Law Under the Uniform Commercial Code § 20-3, at 789-90 (2d ed. 1980).
The editors go on to approve a process in which it then becomes incumbent on the warehouseman to assume "an initial burden of producing evidence on the issues of negligence and causation." Id. at 790. Then White and Summers go on to ask what happens if the plaintiff then introduces conflicting evidence? If the jury is in equipoise on the question of negligence and causation, then, White and Summers ask, who wins? Who, in short, bears the ultimate risk of nonpersuasion on the issues?
It is manifest that White and Summers think the answer should be that the warehouseman bears the burden of nonpersuasion on these issues, and by the same token would bear the burden of coming forward in a situation in which the plaintiff rested after simply showing the loss, and that White and Summers think that for the generally accepted reason that the warehouseman's information is expected to be the more complete. What the editors are troubled by is that some states have enlarged 7403 by what the editors regard as an inappropriate expansion. 7403 generally provides, in the pertinent part, 7403(a)(2), in Pennsylvania's formulation, that "The bailee must deliver the goods to a person entitled under the document . . . unless and to the extent that the bailee establishes any of the following: . . . damage to or delay, loss or destruction of the goods for which the bailee is not liable. . . ." That formulation, the editors clearly feel, is a formulation which properly puts the burden of showing nonliability -- nonnegligence, for the editors' purpose -- on the bailee. What White and Summers are distressed about is that a number of states, thirteen, I believe, have added to the statutory language: "but the burden of establishing negligence in such cases is on the person entitled under the document." That language, the editors tell us, is language which is wrong in policy terms, is "inconsistent with a substantial body of pre-Code case law," and in general if followed would make a hash out of any sensible construction of the Code. White & Summers, supra, at 791.
Now, it is evident that what White and Summers apprehend is that in a state which has such an appendage to its 7403(a)(2) there would be a real danger that a court properly following that language would assign the risk of nonpersuasion on the issue of negligence to the bailor or other person entitled under the document rather than to the warehouseman, and I think we can agree that that would be an inappropriate result.
Pennsylvania is one of the thirteen states that has that extra language, so it is one of the group of states which in the White and Summers view needs to be strongly cautioned against giving that language the construction which it would seem to bear. If that language were given the construction which White and Summers are concerned about, it could well mean that in a case such as we've got there would be a real question whether with no proof from either party we should wind up in nonsuiting the plaintiff; at least it would cause great doubt as to whether it would be appropriate to draw an inference of negligence on the defendant's part. I am not prepared to say that a Pennsylvania court would so read this language, but it does seem to me that given the place of that language in our Code, it makes it all the more unlikely that the Pennsylvania courts would go so far as to follow the New York Court of Appeals in ICC Metals in drawing an inference of conversion where the warehouseman came forward with no explanation.
Now, having said all that, I must for the sake of completeness and candor make the further acknowledgment that among the states which has this addition to 7403(a)(2) which White and Summers regret, New York is numbered, so that the decision in ICC Metals by the New York Court of Appeals was made in the face of -- I think "in the teeth" is the proper phrase -- in the teeth of exactly such language. In my view that fact only goes to cast some further doubt on the wisdom of the New York Court of Appeals in reaching the result it did, but that, of course, leads me to an essentially impertinent judgment, since whatever my competence may be as a trial judge to try to figure out what the law of Pennsylvania might be in a case where the Pennsylvania appellate courts have not spoken, I guess nobody has authorized me to set myself up as a critic of the New York Court of Appeals' construction of its Uniform Commercial Code. However, I think I can say that the analytic difficulties that seem to me present in ICC Metals would when considered by the Pennsylvania courts be recognized as strong reasons why the Pennsylvania courts would be unlikely to follow the New York Court of Appeals.
I point out in this connection that the Note writer in St. John's Law Review, in surveying the law of New York of 1980 -- the particular Note writer being Mr. Cubita -- while finding in the ICC Metals decision some salutary practical impact insofar as it would cause warehousemen to be even more careful than they otherwise would be, nonetheless expressed some doubts as to the merit of the decision from an analytic point of view. I refer to 55 St. John's Law Review 203, at 209-10.
All of the considerations which I have canvassed lead me to the conclusion that when the Pennsylvania courts address this issue they will come to the conclusion that where the record is silent as to the actual disposition of the bailed goods, and that silence includes not even an attempt by the bailee to offer an explanation, the permissible inference is one of negligence but not one of conversion, with the result that the stipulated-for limitation of liability will be held by the Pennsylvania courts to be effective.
With that conclusion as to the likely course of Pennsylvania law in mind, I determine that with respect to the case before me plaintiff is entitled to recover from defendants for negligence which would be measured by the stipulated liability of thirty cents per pound and nothing in addition to that.