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FRANK MASTOLONI & SONS v. USPS

August 30, 1982

FRANK MASTOLONI & SONS, INC., Plaintiff,
v.
UNITED STATES POSTAL SERVICE, NAN DUSKIN, INC. and JEWELERS MUTUAL INSURANCE COMPANY, Defendants


Kevin Thomas Duffy, D.J.


The opinion of the court was delivered by: DUFFY

MEMORANDUM & ORDER

KEVIN THOMAS DUFFY, D.J.:

 Plaintiff Frank Mastoloni & Sons, Inc. ("Mastoloni"), a New York wholesale jeweler, brought this action against defendants United States Postal Service ("Postal Service"), Nan Duskin, Inc. ("Nan Duskin"), a specialty store located in Philadelphia, Pennsylvania, and Nan Duskin's insurer, Jewelers Mutual Insurance Company ("Jewelers Mutual") to recover $25,000 for its stolen necklace. In early December, 1979, Nan Duskin's jewelry buyer and manager, Roberta Spivak, requested that Mastoloni ship to her store a South Sea cultured pearl necklace with an approximate value of $25,000. Nan Duskin and Mastoloni had been doing business together for many years. *fn1" On December 5, 1979, plaintiff delivered to the Post Office in New York City, a parcel containing the requested necklace and a consignment memorandum, a standard printed form commonly received by Nan Duskin. Handwritten on the memo is a description of the necklace and its minimum resale price of $25,000. Plaintiff's Exhibit 1. The printed portion of the memo outlines Nan Duskin's agreement either to sell the necklace at a price of at least $25,000 or to return the goods to Mastoloni. Id. Further, Nan Duskin agreed "to keep the goods fully insured, while in its possession, against all applicable risks." Id. Acceptance of the goods was deemed an acceptance of the terms and conditions stated in the memo. Id.

 As per their usual business custom, Mastoloni sent the package, via registered mail, to the Philadelphia Post Office. Believing that the Post Office only insured packages up to $10,000, Mastoloni would never place a value above $10,000 within its firm mailing book which is the registered mail form for large scale users. Mastoloni apparently learned through its insurer, Lloyds of London, that the Post Office would pay the value of any lost or damaged item up to $10,000 and that Mastoloni's insurer would indemnify the plaintiff for any loss above this amount. Mastoloni Deposition at p.13. For unexplained reasons, therefore, Mastoloni would only place 10 percent of an article's value in its mailing book provided the value of the article was over $10,000. Id. Accordingly, the value entered for the necklace mailed to Nan Duskin was $2,500.

 Nan Duskin maintained a special post office box at the Philadelphia Post Office for all of its registered mail packages and employed several authorized messengers to pick up its registered mail. A representative of Nan Duskin accompanied Mr. Fred Margulies to the Post Office to introduce him to the registry clerk and to authorize Margulies' acceptance of packages on Nan Duskin's behalf. Defendants Nan Duskin and Jewelers Mutual's Exhibit 1, Deposition of Leroy Davis at pp. 14, 39. Fred Margulies was fired several days prior to December 6, the date the package apparently was available for pick up in Philadelphia. Nan Duskin, however, failed to notify the Post Office that Margulies was no longer authorized to receive its packages. It appears that Margulies went to the registered mail window on December 6, 1979 and took delivery of the plaintiff's necklace, along with several other packages from Nan Duskin's other suppliers. Rather than signing his own name, Margulies scribbled what appears to be "Parker." Defendants Nan Duskin and Jewelers Mutual's Exhibit 3. The registry clerk, Leroy Davis, who recognized Margulies, did not check Margulies' signature, in contravention of official postal policy. It seems that the registry clerks at this branch whenever they dealt with a familiar customer did not follow this official requirement. Defendants Nan Duskin and Jewelers Mutual's Exhibit 1 at pp. 15-16, 21-22.

 Approximately two hours after Margulies took delivery, the authorized Nan Duskin messenger arrived at the Philadelphia Post Office to pick up the same packages. The messenger learned of Margulies' activities and notified Nan Duskin. Roberta Spivak immediately phoned Mastoloni, admitted Nan Duskin's full responsibility and promised full compensation for the loss of plaintiff's necklace. Affidavit of Roberta Spivak at p.4. Spivak requested that plaintiff send a copy of the consignment memo to Nan Duskin since the original memo which accompanied the necklace was now in Margulies' possession. Plaintiff complied with this request. See Plaintiff's Exhibit 1.

 It appears that subsequent to this time, Everett Lamond, the adjuster from Jewelers Mutual who handled this Nan Duskin claim, advised Nan Duskin that the claim for the loss of this necklace would not be paid. Plaintiff's Exhibit 5 at p. 40. On September 30, 1980, Bruce Long, the treasurer of Nan Duskin, wrote plaintiff and voiced his embarassment for his company's failure to have paid Mastoloni's claim and promised that action would soon be taken to resolve the problem. Plaintiff's Exhibit 3. To date, the claim has not been paid. *fn2"

 Plaintiff filed suit against Nan Duskin alleging the defendant's absolute liability for the $25,000 necklace pursuant to the "all risk" consignment memo. Plaintiff also joined Jewelers Mutual as a co-defendant claiming that pursuant to clause 3(c) of the insurance policy it issued to Nan Duskin, Mastoloni has a direct right of action against the insurer either (i) because a bailor has a direct right of action on the bailee's policy or (ii) because plaintiff is a third-party beneficiary of the insurance contract. Affidavit of Franklin Tell at p. 4, Plaintiff's Exhibit 7, clauses 3(c), 10. The Postal Service was also sued as a co-defendant for its alleged failure to fulfill its registered mail contract. Plaintiff alleges that the indemnity contract, which concededly was voided when plaintiff entered a false value for the necklace, is separate from the registered mail contract.

 Various summary judgment motions are now before me. The Postal Service moves for summary judgment against plaintiff claiming that because plaintiff failed to disclose the true value of the package the registered mail contract was void. In further support of its motion, the Postal Service cites its own regulations which required that Nan Duskin notify the postal authorities that Margulies was no longer authorized to receive packages. Accordingly, the Postal Service argues, since it was not notified it cannot be held liable by the plaintiff. The Postal Service's motion for summary judgment is opposed by Nan Duskin, Jewelers Mutual and the plaintiff.

 Jewelers Mutual also moves for summary judgment, claiming that it cannot be found liable until such time as Mastoloni secures a judgment against Nan Duskin. Finally, Mastoloni moves for summary judgment against Nan Duskin.

 DISCUSSION

 A. Postal Service's Liability

 In support of its motion for summary judgment, the Postal Service relies on the Domestic Mail Manual ("DMM") which allows senders to insure against the risk of loss by providing for indemnification on registered mail. *fn3" Section 911.251 of the DMM, appended to the Postal Service's Answer, provides that

 
The sender must tell the postal clerk (or enter on the firm mailing bill if a firm mailer) the FULL value of mail matter presented for registration . . . . No indemnity will be paid for any matter on which the full value is not declared. ...

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