Ellis v Fleetpride Store No. 396

[*1] Ellis v Fleetpride Store No. 396 2009 NY Slip Op 51914(U) [24 Misc 3d 1248(A)] Decided on August 17, 2009 Watertown City Ct Harberson, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 17, 2009
Watertown City Ct

Paul Ellis, Plaintiff

against

Fleetpride Store No. 396, Defendant.



08-31567



Paul Ellis, Pro se

Kevin D. Walsh, Esq.

Law Offices of Walsh & Wilkins

37 Franklin Street

Buffalo, New York 14202

For: Fleetpride Store

James C. Harberson, J.

The plaintiff is an over-the-road trucker who needed a rebuilt transmission for his Kenworth 2600 tractor. He said he called FleetPride as being the nearest parts dealer to his home and talked to Jennifer Fargo. He explained that the full price was reduced when his old transmission was traded in at the time of the purchase for a credit. He was advised to bring his old transmission in when he came to pick up the rebuilt one on the date of the sale, 10/4/08.

He said that when he arrived at the defendant's place of business he had his old transmission in the back of his truck. He said that when he examined the rebuilt one that had been ordered for him, it was still in the shrinkwrap put on it before the manufacturer shipped it to protect it. He said he undid the shrinkwrap to check to see if it had met the specifications he requested "cooler" and noticed that the top cover was not appropriate for his model truck—the hole that the shifting tower going into was in the wrong location. At that point the sale was stalled.

He said that Jeff Biccum talked to the plaintiff's mechanic who was involved in the transmission work and they agreed to just swap the cover from the old transmission to be traded in with the new one to be installed and "you'll be fine." The plaintiff said that at that point the new transmission was put into his truck next to the old transmission he had brought for the trade-in for credit on the price and he returned home with both the old and the new so his mechanic could "swap" the covers so the old cover would be placed in the new transmission to accommodate the location of the shift tower. After this exchange was completed, the plaintiff was to leave the old transmission to be traded in at a mutually agreed upon location along with the exchanged cover to the defendant to pick up.

The plaintiff said that before the day he came to pick up the rebuilt transmission, Jenn Fargo never asked him about the speedometer gear exchange from the old transmission into the new rebuilt he was buying, whether he wanted to buy a new one rather than use the old one to be removed from the old transmission and the fact none was supplied inside the rebuilt one he was buying from the defendant.

The plaintiff said that at the time he commenced to install the rebuilt transmission from the defendant he was not aware of the speedometer part being an adjunct part of the transmission which was not included inside the rebuilt. He said that years before when the old transmission had been installed successfully, that part was not an issue. He said that while he had arranged for a truck mechanic to do the reinstallation of the rebuilt transmission, due to time constraints and that person not being available, he and another friend proceeded to install the transmission that did not have the speedometer part in it. He said that he test drove the truck before commencing a run to Ohio and it appeared to run without evidence of problems. He said that after stopping for an hour rest after completing his trip to Ohio, he noticed fluid leaking.

He then went to a truck garage, Petro-Lube, where he had all fluid levels checked and there two quarts of oil were added (see Ex-4) on 10/15/08. He was told at that time it appeared to be nothing serious was wrong and his own mechanic, who had not been able to help install the rebuilt transmission, told him on the phone that the loss of oil may be due to the yoke, so when he returned from his trip a "speedy sleeve" might need to be installed. His mechanic told him "just keep it full...you'll be fine...when you get home...put a speedy sleeve on it, you'll be ok." He said he had had a similar problem with a small amount of oil loss with his old transmission over the same amount of miles of travel. He said that he had no mechanical training so "if I can't do [*2]it, I hire it out or have somebody show me the ropes."

He said that he left on his trip and checked the oil level. He said nothing changed except seeing a "couple of drips." He said that as he traveled along the "transmission exploded...a bunch of smoke came out from underneath my truck...from gear oil." He said that he could see oil "pouring out" of the rear seal of the drive shaft. He said that he immediately pulled into a truck garage (Whiteford) where the truck was examined.

The Whiteford garage did a driveline inspection, showed essentially that the critical speedometer part had not, in fact, been included in the rebuilt transmission the Plaintiff purchased from the defendant so when the transmission was installed without that vital part incorporated, the whole system failed—see Ex-1. The Whiteford garage removed the rebuilt transmission sold to the Plaintiff by the Defendant, installed another rebuilt one refurbished by Weller Remand Center, with the vital speedometer part in place (which the Plaintiff purchased and subsequently the engine has been without problems. The bill for these parts and labor came to a total of $4,406.41.

The Plaintiff, while at Whiteford, saw the rebuilt transmission ordered for his truck from Weller Remand Center. He took pictures of tags affixed to the rebuilt transmission on which various warnings were given. A key advisory given by these tags reads as follows:

IMPORTANT NOTICE

1.This transmission contains No Speedometer gears.

Be sure to remove speedo gears from your exchange unit.

2.This transmission contains No Lubricants, fill with grease

before operating.

3.Check driveline for worn or failed components.

4.Check yokes for damage on seal areas and worn splines.

Failure to follow above steps will cause premature failure.

The other tag warns:

CAUTION!

Weller's history shows a majority of customer caused failures are from

improper tightening the yoke or flange.

Please check your yoke or flange for in and out play or up and down

play before releasing vehicle for use.

In this case the very things warned against by these tags affixed on the remand center transmission explained what had happened to the Plaintiff truck due to the "absence of speedometer gears" and "improper tightening the yoke and flange." In the case of the former, there is no question one was not installed and in the case of the latter, the Plaintiff and his helper used a torque gun when tightening the yoke and flange instead of a torque wrench set to the proper pressure of 450 pounds.

The Plaintiff testified that he and his helper merely did the same thing as he had done [*3]before when he installed an earlier transmission that included the speedometer gears—a sequence of steps that work in that case without using a torque wrench set to 450 lbs.

The Plaintiff testified that while the speedometer part was in place in his old transmission, it did not work to register the speed on the dial in the instrument panel of his truck. He said he relied upon GPS and fellow trucks' speeds to calculate his speed on the road. Because of this, even after the rebuilt transmission was installed by him, that did not contain as part of the internal package that speedometer part, he was not expecting the speedometer gage on the instrument panel to register his speed when he test drove it and later over the road before the engine failed. The lack of an operating speed gage while the truck was moving, then, would not have alerted him this key speedometer part was missing from the transmission when it was delivered to him.

Jennifer Fargo testified that she dealt with the Plaintiff when he called to order a rebuilt transmission outlined at Exhibit A. She said that she asked the Plaintiff a number of questions concerning the vehicle from which the transmission was to be removed for replacement and then conferred with her boss, Jeff Biccum, who directed her to ask whether the speedometer was "electrical or mechanical, push or bolt" while the Plaintiff was still on the phone.

She testified that she also advised the Plaintiff there was a one year warranty on the transmission to be purchased and said at the time she did not mention any limitations on it—"I would not be sure whether there's limitation or not on it."

She agreed that on 10/14/08 the Plaintiff called her concerning the problems he had encountered on the road and whether he could talk to Jeff about the transmission warranty. When she was asked whether she remembered being asked if she knew of the speedometer gear and whether it was in the rebuilt transmission he purchased, her response was twofold: (1) "I don't recall and (2) I did not know about whether the gear was in the transmission."

She went on to state she did not know if that speedometer part was to be included in the rebuilt transmission but nonetheless opined "it's something that obviously can be sold separately cause you can actually even use your old speedometer—you can reuse the one that's in your current transmission, you can take it...out of your old one and put it into your new one and reuse it."

She subsequently said she could not recall if at the time prior customers purchased a rebuilt transmission whether a new part was sold rather than using the old one from the transmission swapped in as part of the sale of the rebuilt one. She responded by saying she could not recall because of the "million different things they could buy extra...I don't know." She said that "I just assumed from what I heard here today" at the hearing that this part was not included in the rebuilt transmission because "I am not a mechanic, so I don't know."

She said that she would not ask the customer about this part being needed and/or merely removed from the transmission being traded in as part of the sale. She added that at the time of the sale we usually don't take anything in the old transmission as part of the deal.

After being asked again if she recalled being asked about this part being missing when the Plaintiff called from the road on 10/14/08, having just confirmed due to her lack of knowledge of mechanics except what she learned at the hearing—and she could not recall if such a part was discussed as part of sales of transmissions to other customers—she stated: "We carry some forms of that part on our shelf. We might not have every, every speedy, we call em speedy sleeves." [*4]

She reconfirmed, in her opinion (of one "in training, I confirm everything with my boss") that if the part was not included inside the rebuilt transmission, the one year warranty would not cover it. She also stated when a rebuilt transmission was received from the company that refurbished it in Ohio, there were no tags on it as found on the one the Plaintiff purchased from Weller Remand Center (Ex-6) when the truck was repaired by Whiteford (Ex-4).

Jeff Dickey testified he had been at FleetPride for 11 years—a heavy truck parts distributor including transmissions. He said that it was his experience that FleetPride sold about 12 transmission per year of the type in question in this case.

He said that the tags on the rebuilt transmission shipped by Weller Remand Center to Whiteford installed onto the Plaintiff's truck (Exhibits 5, 6) were, in his experience with 12 transmissions per year, not installed on those received from their supplier. He said he had access to Weller's but he never purchased a rebuilt transmission from that company. He said he currently deals with four or five other companies that sell rebuilt transmissions. He said that such tags as were found on the Weller product have never been made part of these transmissions from the other manufacturers he had done current business with while working at FleetPride.

Mr. Dickey explained the speedometer gear's function:

A.The speedometer gear is what tells the tach the exact speed of the vehicle. When it's not in place in a vehicle, the yoke can't tighten down to start with. So no matter how big of a gun you put on it to tighten down the nut, the yoke can never be tight.

Q.Let me ask you to describe for the Court the speedometer gear for the vehicle Mr. Ellis owned

He went on to state:

Q.And in your years with FleetPride in selling the approximately 12 transmission, rebuilt transmissions per year, have you ever sold a speedometer gear in addition...

A.Never.

Q....to those transmissions?

A.Never.

Q.And in your experience in the industry, is it your understanding that the transmissions generally do not come with the speedometer gear?

A.Especially in Mr. Ellis' case, because he had an electric, electro, or what they refer to as a magnetic speedometer, which looks just like a tone ring, and that's where he gets the phrase tone ring, looks just like an ABS tone ring, nothing ever comes in contact with it.

Q.So — so in your understanding of the industry in which you have your profession and your experience, rebuilt transmission have the speedometer gear taken from the old one and put into the new one, so to speak?

A.Yes. And that's why we ask the very specific questions on what type of speedometer they have. If it's — if it's electric, magentic, so that we put the right end cone on it so that when the user gets it, the cone is correct to start with so he can slide his gear right in and then assemble the rest of his driveline.

Mr. Dickey, after explaining why it was important to determine if the speedometer is a magnetic one "so that we put the right end cone on it so...when the user gets it, the cone is correct [*5]to start with so he can slide his gear right in and then assemble the rest of his driveline", goes on to explain that once "we" (FleetPride) puts the right end of the end cone on [so] the cone is correct to start with "what would happen if the remanufactured transmission was then placed into the vehicle" without the speedometer gear—that should "slide...right in...once we put the right end cone on it" allowing the "user" to "then assemble the rest of his driveline":

A.The crucial point of that speedometer gear is that, when you go to tighten everything down, that sets the preload in the bearing as well as — as doing your seal. And if you don't have that in there, your yoke could never stay in the one spot it's supposed to when you torque it to 450 foot pounds. Your yoke should be in one spot; it should never slide on the shaft. Without that ring in there, your yoke cannot fully seat, so it can never be tight where it's supposed to be. It's gonna be loose. It's gonna have torsional movement; so when you take off driving down the road, your — your drive line itself, the drive shaft and everything hook to that yoke, is gonna cause the torsional vibration, which is gonna cause premature failure of the seal.

He goes on to explain that the 450 torque pounds is to set the "preload bearing in the rear of the transmission and to prevent the seal from wearing" saying when the yoke is secured it is "important...that it is within that tolerance and use of a torque gear is not recommended at all."

Mr. Dickey, in response to a direct question by the Plaintiff "do you feel that FleetPride has no obligation to warn somebody who's spending 2800 bucks that parts should be in it or parts should not be" did not respond to the question. He instead proclaimed "I was under the reasonable belief that guy had a professional installing it."

The questioning continued about the fact whoever installed the rebuilt transmission should have had access to a manual as a reference such as the popular "Chilton Manual." Mr. Dickey agreed that the information warning on the tags attached to the rebuilt transmission purchased from Weller Remand Center by the Whitefor Dealer Group to install into the Plaintiff's truck (Exhibits 5 and 6) would have been also pointed out in a manual for the installation of the kind of transmission for this kind of truck "...it covers the importance of the speedometer gear;" "and, how to make sure it's in there when you fix it in so you won't have this wobbling...torqued with a torque wrench to 450-500 foot pounds." He agreed that these common repair manuals would refer to this [speedometer] part mentioned in this tag" (Exhibits 5, 6).

Mr. Dickey deferred the question of whether FleetPride had any obligation to warn the customer about the importance of the installation of the speedometer gear contained in the manuals and on the tags of the Weller product saying that the Plaintiff's mechanic, being experienced, would have realized the importance of the placement of the speedometer gear as well as being sure it was torqued to the correct level. He did not state an answer to whether as a standard duty to any customer such advice/warning should have been affixed to the product and/or given to the customer when the sale was made.

PJI 2:120, II, explains the separation of the issue raised by the Plaintiff and the defense to it by the defense at pps. 676-677:

II. Distinction Between Tort and Contract Theories—Recovery for

Economic Loss

[*6]The courts have drawn a sharp distinction between tort theories of liability for defective products and theories based on breach of a seller's contractual obligations, see Schiavone Const. Co. v Elgood Mayo Corp., 56 NY2d 667, 451 NYS2d 720, 436 NE2d 1322, revg for the reasons stated in the dissenting opinion, 81 AD2d 221, 439 NYS2d 933. A simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated, Clark-Fitzpatrick, Inc. v Long Island R. Co., 70 NY2d 382, 521 NYS2d 653, 516 NE2d 190; Rich v New York Central & Hudson River R.R. Co., 87 NY 382.

As a corollary matter, where plaintiff seeks recovery solely for economic loss resulting from a product's failure to function properly, the terms of the parties' contract should govern, Bocre Leasing Corp. v General Motors Corp. (Allison Gas Turbine Div.), 84 NY2d 685 [citations omitted]. Thus, economic losses, such as damage to the product itself and consequential damages, may not be recovered in an action predicated on strict products liability or negligence, unless personal injury or injury to property other than the product is alleged [citations omitted]. This rule reflects the principle that damages arising from the failure of the bargained-for consideration to meet the expectations of the parties are recoverable in contract, not tort, regardless of whether the claim is based on product nonperformance or negligent performance of services, Bristol-Myers Squibb, Indus. Div. v Delta Star, Inc., 206 AD2d 177, 620 NYS2d 196 (denying recovery in tort and limiting plaintiff to contract damages for economic loss where plaintiff's injury, consisting of loss of batch of penicillin, resulted from failure of electrical transformer to perform as intended); see Suffolk Laundry Services, Inc. v Redux Corp., 238 AD2d 577, 656 NYS2d 372.

****

When applicable, the rule bars recovery by both remove "downstream" purchasers, Bocre Leasing Corp. v General Motors Corp. (Allison Gas Turbine Div.), 84 NY2d 685, 621 NYS2d 497, 645 NE2d 1195, and those who purchased the product directly from the manufacturer or supplier [citations omitted].

Economic Loss Rule

In Bristol-Myers v Delta, 206 AD2d 177, the Court explained:

"[T]he injury allegedly suffered by plaintiff—the loss of a batch of penicillin in production—is not akin to the personal injury and casualty loss sustained by the plaintiffs in Syracuse Cablevision (supra ). In that case, the explosion of an electrical transformer caused oil, containing polychlorinated biphenyls (PCBs), to leak into the building occupied by plaintiffs, contaminating their clothing, office supplies and equipment and forcing them out of their offices for nearly a month. We characterized the manner in which the accident in Syracuse Cablevision occurred as "a sudden, accidental and cataclysmic explosion of the transformer" (supra , at 143; see also, Sommer v Federal Signal Corp., supra , at 552; Bellevue S. Assocs. v HRH Constr. Corp., supra , at 294). In the instant case, however, plaintiff's injury resulted from "a process of [*7]failure of the product to perform as anticipated under normal business conditions—a traditional breach of contract situation" (Bellevue S. Assocs. v HRH Constr. Corp., supra , at 294).

Because the damage allegedly suffered by plaintiff arises from the failure of the repaired transformer to perform as intended and not from any accidental occurrence, plaintiff is relegated to contractual remedies for economic loss (see, Arell's Fine Jewelers v Automatic Fire Alarm Co., 170 AD2d 1013, 1014; Antel Oldsmobile-Cadillac v Sirus Leasing Co., 101 AD2d 688, 689; Hemming v Certainteed Corp., 97 AD2d 976). Plaintiff may not recover for purely economic loss in tort (see, Schiavone Constr. Co. v Elgood Mayo Corp., 56 NY2d 667, revg on dissent 81 AD2d 221, 227-234; Arell's Fine Jewelers v Automatic Fire Alarm Co., supra , at 1014; Cayuga Harvester v Allis-Chalmers Corp., 95 AD2d 5, 26-27).

Plaintiff seeks to escape application of the economic loss rule on the ground that its damages did not result from product nonperformance, but from negligent performance of services. In our view, it is of no consequence whether the failure of the transformer to perform as promised was due to faulty installation or to the breakdown of the transformer itself. The economic loss rule reflects the principle that damages arising from the failure of the bargained-for consideration to meet the expectations of the parties are recoverable in contract, not tort (see, Bellevue S. Assocs. v HRH Constr. Corp., 78 NY2d, supra , at 294-25; Syracuse Cablevision v Niagara Mohawk Power Corp., 173 AD2d, supra , at 142; Hemming v Certainteed Corp., supra ). That principle extends beyond the relationship between consumers and manufacturers or suppliers of goods. The economic loss rule does not provide any basis for distinguishing between the liability of product manufacturers and product installers for damages relating to the expectations of contracting parties. Whether a product fails to perform as promised due to negligence in the manufacturing process or in the installation process, recovery in negligence is unavailable for purely economic loss. Thus, the economic loss rule serves to limit the liability of providers of services as well as providers of products (see, Key Intl. Mfg. v Morse/Diesel, Inc., 142 AD2d 448, 451-452 [architects and engineers on construction project]; Lake Placid Club Attached Lodges v Elizabethtown Bldrs., 131 AD2d 159, 162 [builder and architect of condominium development])." Id. pps. 180-187.

In Eaves Brooks v Y.B.H. Realty, 76 NY2d 220, the Court stated at p. 226,

This mode of analysis has been criticized on the ground that the line between misfeasance and nonfeasance is difficult to draw (see, Prosser and Keeton, Torts Section 56, at 374 [5th ed]; 3 Harper, James & Gray, Torts Section 18.6, at 729 [2d ed]). This is especially so in cases such as this involving contracts to inspect or maintain. An inspection that fails to uncover a defect could be labeled either misfeasance for negligent performance of the inspection or nonfeasance for failure to conduct some procedure that would have revealed the defect. There is no founded reason why liability should depend on such semantics.

In our view, the proper inquiry is simply whether the defendant has assumed a duty to exercise reasonable care to prevent foreseeable harm to the plaintiff. In the ordinary case, a [*8]contractual obligation, standing alone, will impose a duty only in favor of the promisee and intended third-party beneficiaries and mere inaction, without more, establishes only a cause of action for breach of contract (see, Prosser and Keeton, op. cit., Section 92, at 659-660). But even inaction may give rise to tort liability where no duty to act would otherwise exist if, for example, performance of contractual obligations has induced detrimental reliance on continued performance and inaction would result not "merely in withholding a benefit, but positively or actively in working an injury" (Moch Co. v Rensselaer Water Co., 247 NY 160, 167). In such a case, the defendant has undertaken not just by his promises but by his deeds a legal duty to act with due care.

In AKV Auto Transport, Inc. v Syosset Truck Sales, Inc., 2005 NY Slip Op 9152, 24 AD3d 833, the Court dealt with a similar complaint as claimed in this case and ruled in favor of the defense:

"[P]laintiff purchased a truck from defendant Ramp Chevrolet/Geo, Inc. on which Ramp had installed an optional auxiliary light bar. After the truck caught fire, apparently as a result of an electrical fault in the wiring of the truck or the light bar, it was repaired by defendant, Syosset Truck Sales, Inc. After another electrical fire caused additional damage to the truck, plaintiff commenced this action alleging that Ramp is liable for the damage to the truck due to its negligent installation of the light bar and breach of warranty, and Syosset is also liable for the later damage caused by the second fire due to its breach of the express and implied warranties of its repair. After discovery was completed, Ramp and Syosset moved for summary dismissal of the respective claims, Supreme Court denied Ramp's motion and granted Syosset's cross motion, Plaintiff and Ramp appeal.

As to Ramp's appeal, we note that plaintiff concedes that Ramp made no express warranties and disclaimed all implied warranties. In addition, we find merit in Ramp's argument that plaintiff's remaining negligence and products liability causes of action should have been dismissed as barred by the economic loss rule. Although plaintiff contended that the economic loss rule was inapplicable because Ramp manufactured neither the truck nor the light bar and Supreme Court agreed, plaintiff now correctly concedes that there is no such limitation on the rule's application (see Bristol-Myers Squibb, Indus. Div. v Delta Star, 206 AD2d 177, 181, 620 NYS2d 196 [1994]; Word Mgt. Corp. v AT & T Info. Sys., 135 AD2d 317, 318, 525 NYS2d 433 [1988]; cf. LaBarre v Mitchell, 256 AD2d 850, 681 NYS2d 653 [1998]).

The economic loss rule provides that where only economic loss with respect to a product itself is alleged and the underlying transaction is a sale of goods, the purchaser is limited to its contractual remedies and may not maintain the traditional tort causes of action of negligence or strict products liability (see Bocre Leasing Corp. v General Motors Corp. [Allison Gas Turbine Div.], 84 NY2d 685, 688-689, 621 NYS2d 497, 645 NE2d 1195 [1995]; Amin Realty v K & R Constr. Corp., 306 AD2d 230, 231, 762 NYS2d 92 [2003], lv denied 100 NY2d 515, 801 NE2d 422, 769 NYS2d 201 [2003]; McDowell v Atco Rubber Prods., 221 AD2d 876, 877-878, 634 NYS2d 554 [1995], appeal dismissed 87 NY2d 966, 664 NE2d 1255, 642 NYS2d 193 [1996]). Since plaintiff here alleges only economic loss arising out of damage to the product itself—that is, [*9]the truck and its component parts—against the retail seller of that product, the rule bars plaintiff's remaining claims and Ramp's motion for summary judgment should have been granted." Id. pps. 834-835.

In Bocre Leasing Corp. v GMC, 84 NY2d 685, the Court observed:

[A] purchaser enjoys the contractual control and choice to protect itself with insurance and UCC warranties (see, 10A Couch, Insurance 2d Sections 42:385-42:401, 42:414-42:417, at 496-508, 520-524 [rev ed 1982]; East Riv. S. S. Corp. v Transamerica Delval, 476 US 858, 872-873, supra ). The particular seller and purchaser are in the best position to allocate risk at the time of their sale and purchase, and this risk allocation is usually manifested in the selling price (id., at 873). Allowing the purchaser to recover in tort for what is, in sum and substance, a commercial contract claim, as is the case here, would grant the purchaser more than the "benefit of [the] bargain" to which the purchaser agreed (see, id., at 873 [stating that "expectation damages available in warranty for purely economic loss give a plaintiff the full benefit of its bargain by compensating for foregone business opportunities"]; see also, Rocky Mtn. Helicopter v Bell Helicopter Textron, 24 F3d 125, 129, 130 [10th Cir] [applying Texas law]). This serves no cognizable tort public policy purpose (see, Scandinavian Airlines Sys. v United Aircraft Corp., 601 F2d 425, 429).

Having foregone protecting itself with UCC warranties, plaintiff should not be permitted to "fall back on tort when it has failed to preserve its * * * remedies" (Rocky Mtn. Helicopter v Bell Helicopter Textron, 24 F3d 125, 130, supra ; see also, East Riv. S. S. Corp. v Transamerica Delaval, 476 US 858, 871-872, 874, supra [stating that "(d)amage to a product itself is most naturally understood as a warranty claim" and that "both the nature of (such an) injury and the resulting damages indicate it is more natural to think of injury to a product itself in terms of warranty"; also stating that injury to a product itself is a loss that can be insured]). Id. pps. 688-689.

Uniform Commercial Code

UCC1-201(9) defines a "buyer in ordinary course of business" as one who...buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices."

UCC2-103(1)(a) defines a buyer as "...a person who buys or contracts to buy goods."

UCC2-106 defines "contract" as "(1) relating to the present sale of goods" which "contract for sale includes both a present sale of goods and a contract to sell goods at a future time...A present sale' means a sale which is accomplished by the making of the contract;" and states at (2) "goods or conduct including any part of a performance are conforming' or conform to the contract when they are in accordance with the obligations under the contract."

UCC2-202 provides that "[t]erms...set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms...may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or [*10]supplemented by (a) by course of dealing or usage of trade [UCC1-205] or (b) by course of performance [UCC2-208]."

UCC1-205 states

Section 1—205. Course of Dealing and Usage of Trade

(1) A course of dealing is a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

(2) A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage are to be proved as facts. If it is established that such a usage is embodied in a written trade code or similar writing the interpretation of the writing is for the court.

(3) A course of dealing between parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement.

(4) The express terms of an agreement and an applicable course of dealing or usage of trade shall be construed wherever reasonable as consistent with each other; but when such construction is unreasonable express terms control both course of dealing and usage of trade and course of dealing controls usage of trade.

(5) An applicable usage of trade in the place where any part of performance is to occur shall be used in interpreting the agreement as to that part of the performance.

(6) Evidence of a relevant usage of trade offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise to the latter.

UCC2-208

Section 2—208. Course of Performance or Practical Construction

(1) Where the contract for sale involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection shall be relevant to determine the meaning of the agreement.

(2) The express terms of the agreement and any such course of performance, as well as any course of dealing and usage of trade, shall be construed whenever reasonable as consistent with each other; but when such construction is unreasonable, express terms shall control course [*11]of performance and course of performance shall control both course of dealing and usage of trade (Section 1-205).

(3) Subject to the provisions of the next section on modification and waiver, such course of performance shall be relevant to show a waiver or modification of any term inconsistent with such course of performance.

UCC 2-313 states "express warranties by the seller are created by (a) any affirmation of fact...made by the seller to the buyer which relates to the goods [that] becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise;" and (b) "any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description."

UCC2-314 defines an Implied Warranty: Merchantability; Usage of Trade

Section 2—314. Implied Warranty: Merchantability; Usage of Trade

(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.

(2) Goods to be merchantable must be at least such as

(a)pass without objection in the trade under the contract description; and

(b)in the case of fungible goods, are of fair average quality within the description; and

(c)are fit for the ordinary purposes for which such goods are used; and

(d)run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and

(e)are adequately contained, packaged, and labeled as the agreement may require; and

(f)conform to the promises or affirmation of fact made on the container or label if any.

(3) Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade.

UCC 2-315 [*12]

Section 2—315. Implied Warranty: Fitness for Particular Purpose

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgement to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

UCC 2-315 defines Implied Warranty: Fitness for Particular Purpose: Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that buyer is relying on the seller's skill or judgement to select or furnish suitable goods, there is unless excluded or modified under [UCC 2-316] an implied warranty that the goods are fit for such purpose.

UCC 2-316 allows for "Exclusion or Modification of Warranties"

Section 2—316. Exclusion or Modification of Warranties

(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.

(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."

(3) Notwithstanding subsection (2)

(a)unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and

(b)when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and

(c)an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade. [*13]

(4) Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy (Sections 2-718 and 2-719).

UCC 2-715 states:

Section 2—715. Buyer's Incidental and Consequential Damages

(1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.

(2) Consequential damages resulting from the seller's breach include

(a)any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and

(b)injury to person or property proximately resulting from any breach of warranty.

UCC 2-719 provides for:

Section 2—719. Contractual Modification or Limitation of Remedy

(1) Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages,

(a)the agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this Article, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts; and

(b)resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.

(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this Act.

(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is [*14]commercial is not.

The agreement prepared by the defendant is in the form of an invoice upon which is stated "Flletpride Your Heavy Duty Expert." At the bottom of this invoice it is stated:

FleetPride makes NO WARRANTY OF MERCHANTABILITY with respect to any goods sold. There are no warranties which extend beyond the description of any goods sold on the invoice describing them. It is expressly agreed that Applicant's sole remedy for the breach of any warranty with respect to goods or work is limited to the money actually received by FleetPride for the goods or work; the remedy of consequential damages is expressly excluded.

Warranty Disclaimer

UCC1-201 (10) defines "conspicuous" as applying to a "term or clause" being...conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it, i.e. printed, capitals and "[L]anguage in the body of a form is conspicuous' if it is in larger or other contrasting type or color" and "[W]hether a term or clause is conspicuous' or not is for decision by the Court." In the Official Comments it is noted: " Conspicuous' then is intended to indicate some of the methods of making a term attention-calling. But the test is whether attention can reasonably be expected to be called to it."

UCC 2-316 allows for "Exclusion...of Warranties...(2)...to exclude...the implied warranty of merchantability...in the case of a writing must be conspicuous, and to exclude...any implied warranty of fitness the exclusion must be by a writing and conspicuous..."

In Travelers Ins. Companites v Howard E. Conrad, Inc., DBA Anchor Marine (4th Dept.), 233 AD2d 890, the Court ruled at p. 891:

With respect to the cause of action for breach of warranties, the pivotal issue is whether the waiver provision in the purchase agreement was "conspicuous" within the meaning of UCC 1-201 (10) (see, UCC 2-316 [2]; Carbo Indus. v Becker Chevrolet, 112 AD2d 336, 339, appeal dismissed 66 NY2d 1035). On th face of the agreement, directly above Levine's signature, the following statement appears in red capital letters: "I, OR WE, HEREBY ACKNOWLEDGE RECEIPT OF A COPY OF THIS ORDER AND THAT I, OR WE HAVE READ THE BACK OF THIS AGREEMENT." The front page of the agreement further provides: "Buyer certifies that he/she has read the Terms and Conditions on the back of this document and agrees that they shall be incorporated as part of this Agreement."

The waiver provision on the back of the agreement appears as follows: "EXCEPT TO THE EXTENT REQUIRED BY STATE LAW, SELLER EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE."

The type size of the waiver provision is larger than that contained elsewhere on the back of the agreement, and it stands out in capital letters. In our view, a reasonable person would notice the provisions "when its type is juxtaposed against the rest of the agreement" (Commercial Credit Corp. v CYC Realty, 102 AD2d 970, 972; see, UCC 1-201 [10]). Thus, the provision waiving all warranties, express and implied, is conspicuous and therefore enforceable. [*15]

In Skowronski v F & J Meat Packers, Inc., 210 AD2d 391 at p. 394 observed

that:

The invoice of sale contained a pre-printed disclaimer in bold print stating: "Sold in as is condition without any warranties of merchantability or fitness". The disclaimer, in bold type and readily noticeable, was conspicuous (see, UCC 1-201 [10]; Commercial Credit Corp. v CYC Realty, 102 AD2d 970, 972). Consequently, the implied warranties of merchantability and fitness were excluded (see, UCC 2-316 [2], [3], [a]; ConTel Credit Corp. v Mr. Jay Appliances & TV, 128 AD2d 668).

In Mill Printing & Lithograph Corp. v Solid Waste Mtg. Sys. Inc., 65 AD2d 590,

the Court ruled at p. 590,

That the machine was two years old and worth $4,250. On defendant's motion for summary judgment, Special Term, relying on the purchase agreement signed by the plaintiff, found specifically that the baler therein described was of the design, fitness, size and capacity selected by the plaintiff, that it was sold "as is" and, inferentially, that there was a conspicuous disclaimer warranty (see Uniform Commercial Code, Section 1-201, subd [10]). On this record we hold that the disclaimer, not being printed in different, larger or contrasting type or color was not conspicuous.

In Direct Capital v New ABI, Inc., 13 Misc 3d 1151, the Court stated at p. 1163:

The critical waiver of warranty provision here, "Disclaimer of Warranties and Claims; Limitation of Remedies," quoted above, appears on the second page of the equipment lease agreement as paragraph 2. It is essentially buried in the text of a six-page document. The typeface is identical to the surrounding provisions and is almost imperceptibly darker than other test. In examining the appearance of page 2, the court notes that the slightly darker print of paragraph 2 may be perceived to be the result of a defect in the printing rather than an intentional effort to draw the reader's attention to the provision. It does not appear adjacent to the signature lines and is separated from the critical payment details, the guaranty and the clearly highlighted, boxed and bolded "drop-dead" caveat indicating that the lease is "NONCANCELABLE/IRREVOCABLE" and "CANNOT BE CANCELLED OR TERMINATED" by being placed on a separate page contained within 32 boilerplate paragraphs.

The test to determine whether a clause is "conspicuous" so as to satisfy UCC 2-316 "is whether a reasonable person would notice the disclaimer when its type is juxtaposed against the rest of the agreement." (Commercial Credit Corp. v CYC Realty, 102 AD2d 970, 972 [3d Dept 1984], citing 1 Anderson, Uniform Commercial Code Sections 1-201:54-1201:58, at 210-212 [3d ed].) This court finds the disclaimer at issue not to be conspicuous but rather to be [*16]deliberately obscured in the single-spaced, fine print, multiple provisions of boilerplate of the agreement so as to conceal its effect rather than drawing the reader's attention to it. (Compare ConTel Credit Corp. v Mr. Jay Appliances & TV, 128 AD2d 668 [2d Dept 1987] [disclaimers in bold print on face of document directly above signatures were conspicuous]; Sky Acres Aviation Servs. v Styles Aviation, 210 AD2d 393 [2d Dept 1994] [bolded preprinted disclaimer on invoice of sale readily noticeable]; Commercial Credit Corp. v CYC Realty, supra [disclaimer in dark, bold print on front, in only four-paragraph first page of agreement and not on the back with boilerplate, would "call attention to itself"].)

In Minikes v Admiral Corp., 48 Misc 2d 1012, the Court wrote at p. 1013,

JOHN S. LOCKMAN, J. Defendant Newmark & Lewis Syosset Corp., as seller, moves for summary judgment dismissing a purchaser's complaint which alleges a breach of contract because the merchandise, a refrigerator, did not comply with the implied warranties of merchantability and fitness set forth in sections 2—314 and 2—315 of the Uniform Commercial Code.

The defendant contends that section 2—316 of the Uniform Commercial Code permits a disclaimer of implied warranties, and exhibited the "purchase order" to show that it had disclaimed. Although the prelude to the disclaimer stating: "All orders accepted are subject to the following:" was in larger type, the disclaimer was in five-point type and smaller than the type on the rest of the "purchase order".

The burden of preparing an effective disclaimer is heavy. It is one of the hazards of business. Before a merchant can disqualify for the implied warranties the public has become accustomed to, it must show that the customer was clearly placed on notice. (Morino v Maytag Atlantic Co., 141 NYS2d 432.) A reading of section 2—316 relied upon by the defendant indicates that any written disclaimer must be conspicuous. Conspicuous is defined in section 1—201 of the Uniform Commercial Code. "General Definitions. * * * (10 Conspicuous': A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous. Language in the body of a form is conspicuous' if it is in larger or other contrasting type or color. But in a telegram any stated term is conspicuous'. Whether a term or clause is conspicuous' or not is for decision by the court." (Emphasis added.)

Since the disclaimer is smaller, not larger, than the rest of the purchase order, it is not conspicuous. Accordingly, defendant's motion for summary judgment dismissing the complaint is denied.

In Victor v Mammana, 101 Misc 2d 954, the Court determined at pps. 955-956:

This is a motion by plaintiffs for an order striking the affirmative defense asserted by the defendant, Miracle Adhesive Corp., in its answer and a cross motion by defendant, Miracle [*17]Adhesive Corp., for an order directing the plaintiffs to provide medical authorizations and to produce certain other material for discovery and inspection. An understanding of the nature of the action is necessary in order to evaluate the present motions.

The home of plaintiffs, Paul and Theresa Victor, was destroyed by a flash fire on March 9, 1977. Defendant, Salvatore Mammana, was using the substance MA400, a wall tile adhesive manufactured by defendant, Miracle Adhesive Corp., in the Victor home at the time of the fire. It is alleged that this highly volatile adhesive, used negligently by defendant, Mammana, caused the fire. It is additionally claimed that MA400 is unreasonably dangerous and unsuitable for its intended purpose.

Defendant, Miracle Adhesive Corp., interposed the affirmative defense of disclaimer of warranties. The disclaimer which appeared in small print on the label of the can of adhesive, under the heading, "warranty", purported to free Miracle Adhesive Corp. from liability for breach of any warranty of express or implied merchantability, fitness or suitability.

Plaintiffs move to strike this defense, claiming that defendant's disclaimer does not meet the requirements of the Uniform Commercial Code as adopted by the New York State Legislature. Subdivision (2) of section 2-316 of the Uniform Commercial Code requires the disclaimer to be "conspicuous" and subdivision (10) of section 1-201 of the Uniform Commercial Code states that a "term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it". Capital letters, large print, contrasting type or color and black border are code and court acknowledged methods of making a message conspicuous in a form (Uniform Commercial Code, Section 1-201, subd [10]; Mill Print & Lithographing Corp. v Solid Waste Mgt. Systems, 65 AD2d 590; Architectural Aluminum Corp. v Macarr, Inc., 70 Misc 2d 495; see, generally, Ann. 73 ALR3d 248).

Defendant's disclaimer of warranty appeared, however, on the label of the can of adhesive not in a form. Courts interpreting "conspicuous" on labels have used standards similar to those that have been used for forms. A disclaimer printed in the same small size as was virtually all the other copy on the label was called "ineffective" because a reasonable person would not have noticed it (Chemco Ind. Applicators Co. v duPont de Nemours & Co., 366 F Supp 278, 285).

A Federal court interpreting the Uniform Commercial Code of New York held that even though the disclaimer on the can began: "Important — Read Carefully Before Opening", it was not conspicuous because only the first letter of each word in the heading was in capital letters (Greenspun v American Adhesives, 320 F Supp 442).

The xeroxed copy of the label before the court indicates that the reader's attention is directed to the well-marked danger warning and the highlighted product name rather than the warranty disclaimer. The disclaimer is written in small print, in lower case except for the word "warranty", and is borderless. Moreover, there is no heading at all except for the word warranty". It is clear that the disclaimer was not so written that a reasonable person against [*18]whom it is to operate ought to have noticed it.

Defendant's only response to plaintiff's arguments that the affirmative defense is insufficient as a matter of law is to assert that whether or not the disclaimer on the label of MA400 meets the requirements of the Uniform Commercial Code "is a question of fact for the jury at the time of trial". The Uniform Commercial Code, however, makes it absolutely clear that the decision on whether a disclaimer is conspicuous is to be made by the court (Uniform Commercial Code, Section 1-201, subd [10]).

The warranty exclusions located on the invoice given to the plaintiff after the sale had been completed upon payment of the balance of the bill on 10/1/08 do not meet the requirements required at UCC 2-316(2) because of its failure to be "conspicuous."

The invoice (Ex-A) is a pre-printed form with spaces for information concerning a particular sale. The size of the type used to print this sales information is at least twice that of the size of the type used to print the warranty exclusions.

UCC 1-201(1) defines a "conspicuous" "term or clause." It requires such be so written that a reasonable person...ought to have noticed it "giving as a suggested "printed capitals." It goes on to state that if the "language in the body of the form...is larger or other contrasting type or color...it is conspicuous."

UCC 2-36(4) incorporates UCC-2-718 and 2-719 dealing with "remedies for breach of warranty" being "limited" but such limitation must meet the UCC 1-201(10) conspicuous test especially in the case where such a limitation of the buyer's remedies is stated in the same "clause" as the warranty exclusions or "modifications" thereof.

The Travelers Ins. Co. and Skowronski decisions shows how the "waiver provision in the purchase agreement was conspicuous'" where "on the face of the agreement directly above [customer's] signature" it was printed "in red capital letters" an acknowledgment the warranty disclaimers and "[T]he type size of the waiver provision is larger than that contained elsewhere on...the agreement, and it stands out in capital letters..." (Traveler's, supra , p. 891); and, in Skowronski where "the invoice of sale contained a pre-printed disclaimer in bold print...readily noticeable, was conspicuous" (id. p. 394).

In contrast to the above-described waiver clauses found to be "conspicuous" in Traveler's and Skowronski, the Mill Printing & Lithograph Corp., Direct Capital, Minikes and Victor decision give examples of waiver clauses that fail the requirement of being "conspicuous" such that they were sufficiently "attention-calling" such that a "reasonable" person's attention can reasonably be expected to be called to it" (UCC1-201, official comment).

In Victor the Court gave examples of what would make a warranty clause "conspicuous", i.e., "capital letters, large print, contrasting type or color and black border are code and Court acknowledged methods of making a message conspicuous in a form [citing UCC1-201(10) and the Mill Print case]" (id. p. 956). In Mill Print, the Court ruled that because "...the disclaimer, not being printed in different, larger or contrasting type or color, was not conspicuous" (id); in Minikes "since the disclaimer is smaller, not larger, than the rest of the purchase order, it is not conspicuous" (id); and in Direct Capital the Court found the disclaimer to not be conspicuous because, among other reasons, "the typeface is identical to the surrounding provisions...obscured [*19]in single-spaced, fine print" rather than in bold print on the face of the document directly above signatures [citation omitted]" that would have made it "conspicuous" (id. p. 1163).

The pre-printed form used by the defendant included an exclusion of warranty clause that was "not printed in different, larger or contrasting type or color" (Mill) "in single spaced, fine print" (Direct Capital) "small, not larger, than the information added at the time the invoice was completed regarding the details of the sale made in type twice the size of the boilerplate print" (Minikes); and just as the Victor Court wrote "[T]he disclaimer is written in small print, in lower case except for the word warranty,' and is in borderless...there is no heading at all except for the word warranty'" making "it clear that the disclaimer was not so written that a reasonable person against whom it is to operate ought to have noticed it (id) so, too, in this case the disclaimer suffers from the same defects as outlined above in the opinion of the Court. It is the decision of the Court the disclaimer clause is not "conspicuous" as defined "by the code at 1-201(10) and the case law heretofore cited. Therefore, all the warranties and/or modifications therein are not to be excluded.

UCC 1-201(39) defines "signed" as including "any symbol executed or adopted by a party with present intention to authenticate a writing." The New York Annotations for UCC 1-201(39) states "signed", the definition is much like that contained in General Construction Law, Section 46, except that the Code definition does not expressly state that the symbol must be in writing. Comment 39 seems to state such a requirement.

In this case the invoice form on which the sale of the transmission to the plaintiff is outlined at the base of which there is a warranty exclusion clause above the signature line preceded by the phrase "received by" was never signed by the purchaser. The Court finds there is evidence none of the pre-printed information concerning this sale was considered by the plaintiff when the sales invoice was given to him after the sale had been completed; and, because of that there is further evidence the disclaimer clause above that signature line was even less conspicuous than as heretofore been decided.

The Court also finds that the oral one year warranty given to the plaintiff on the phone by Ms. Fargo when she completed the order for the rebuilt transmission was not limited by her making any disclaimers and/or limitations on it.

Contract

The strict liability doctrine based upon a "failure to warn" the plaintiff the speedometer gear was not included in this rebuilt transmission purchased from the defendant does not apply so the plaintiff as "purchaser is limited to [his] contractual remedies" (AKV Auto Transport, Inc. v Syossat Truck Sales, Inc., supra , p. 835). This relegates the plaintiff to such recovery based upon the contract made between him and the defendant due to the "economic loss" rule—"this rule reflects the principle that damages arising from the failure of the bargained-for consideration to meet the expectations of the parties are recoverable in contract..., regardless of whether the claim is based on product nonperformance or negligent performance of services." (Pattern Jury Instructions, Third Ed., Vol 1A (2009) at page 676).

The contract in this case was an oral agreement made over the phone. The plaintiff called the defendant, related certain information about the type of transmission needed based upon the make of his truck and the type of speedometer to the employee, all of which was used to order a remanufactured transmission appropriate for the plaintiff's needs. When the plaintiff completed [*20]the sale by making payment, an invoice was generated by the defendant on 10/1/08 showing full payment had been made for $3,715.96. As part of this sale the plaintiff was given credit for his old transmission he removed from his truck and transported to the defendant's location where it was to be exchanged for the rebuilt transmission as part of the sale transaction.

This sale's transaction is covered by the Uniform Commercial Code of New York. The plaintiff was a buyer in the ordinary course of business (UCC 1-201[9] and UCC 2-103[1][a]). The agreement made over the phone by the plaintiff to purchase a rebuilt transmission from the defendant was an oral contract for the sale of goods (UCC 2-106).

UCC 2-202 provides that contract terms when "set forth in writing intended by the parties as a final expression of their agreement with respect to such terms...may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement, but may be explained or supplemented by (a) course of dealing or usage of trade [UCC 1-205] or (b) by course of performance [UCC 2-208]."

UCC 1-205(2) defines "A usage of trade [as] any regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage are to be proven as facts.

UCC 1-205(5) states "An applicable usage of trade in the place where any part of performance is to occur shall be used in interpreting the agreement as to that part of the performance."

Contract Formation

The plaintiff entered into an oral contract with the defendant to purchase a rebuilt transmission over the phone with the defendant's employee, Jennifer Fargo.

She testified that as she prepared the order because she did not know enough yet about transmission...to know [if] speedometer gear [was] part of the deal she "wouldn't say either way because...my inexperience with it" and "everything on this I conferred everything with my boss [Mr. Dickey]."

She went on to state she specifically asked about the type of speedometer was in the truck among other specifications. The defendant needed to know when ordering the rebuilt transmission at the direction of her boss, Mr. Dickey. She testified she told the plaintiff there was an "oral warranty" given at the time of "the first initial phone call...for one year" that covered "the transmission" but she was "not for sure whether there's limitations or not on it...like, I'm in training...I confirm everything with my boss."

Ms. Fargo went on to agree that in "my opinion" the speedometer gear is "something that obviously can be sold separate, cause you can actually even reuse your old speedometer...the one that's in your current transmission;" and, when the "rebuilt comes...you can take it out...your old one and put it in your new one and reuse it." She agreed in "her experience" people getting a rebuilt transmission may purchase a new speedometer gear "I may have somewhere along the line" and "we carry some forms of that on our shelf. We might not have every speedy, we call em speedy sleeves."

Jeffrey Dickey testified that he had been involved in selling truck parts for many years, including rebuilt transmissions. He said that he had not seen rebuilt transmission delivered where he worked that had any warning tags alerting one to the fact no speedometer gears were included in the rebuilt transmission similar to the one in Exhibit 5. He said that [*21]"generally...transmissions do not come with the speedometer gear...especially in Mr. Ellis' case, because he had an...magnetic speedometer."

He went on to state he agreed it was his understanding of the industry in which you have your profession and your experience, rebuilt transmissions have the speedometer gear taken from the old one and put into the new one..."

He then stated "...we ask the very specific questions on what type of speedometer they have [because] of its...magnetic, so that we put the right end cone on it so that when the user gets it, the cone is correct to start with so he can slide his gear right in and then assemble the rest of the drive line."

When the plaintiff arrived at the defendant's business to make final payment as well as exchange his old transmission for credit against the price of the rebuilt one he purchased, it was discovered that the cover on the rebuilt was not appropriate to accommodate the shift in his truck. To remedy the situation, the defendant gave the plaintiff the rebuilt transmission with the defective cover to take home where the correct cover from the old transmission brought by the plaintiff to trade in could be exchanged with the one on the rebuilt transmission by the plaintiff. The plaintiff was then to leave the old transmission as well as the cover from the new rebuilt he had removed at a local location where the defendant would arrange to pick it up.

The Court finds that it was a practice of the defendant when selling a rebuilt transmission to determine the type of speedometer in the vehicle, to "put the right end cone on it so that when the user gets it, the cone is correct to start with so he can slide his [speedometer] gear right in and then assemble the rest of the drive line" (Jeff Dickey); that as a regular practice to remove the speedometer gear from the old transmission and put into the "new" rebuilt one and "when the rebuilt comes...you can take it out [speedometer gear in old transmission]..., put it in your new one..., and reuse it" (Ms. Fargo) or in some cases "in her experience" people buying a rebuilt transmission may purchase a new speedometer gear: "we carry some forms of that on our shelf...we call em speedy sleeves" (Ms. Fargo). Mr. Dickey said: "Generally...transmissions do not come with the speedometer gear...especially in Mr. Ellis' case, because he had a...magnetic speedometer."

The credible evidence shows that as part of a service contract made between the defendant and a purchaser of a rebuilt transmission the custom of the trade was to remove the old speedometer gear from the traded in transmission for reuse in the rebuilt transmission. The defendant's manager specifically noted that while "generally transmissions do not come with speedometer gear...especially in Mr. Ellis' case which involved a "magnetic speedometer." He also made it clear "we put the right end cone on it so that when the user gets it, the cone is correct to start with so he can slide his gear right in and then assemble the rest of the drive line." This "cone" installation which is done by the defendant before "the user gets it" so the speedometer gear slides right in "apparently occurs once the rebuilt transmission is received by the defendant and before the purchaser takes it to be installed elsewhere."

So as "generally" rebuilt transmissions "do not come with speedometer gears" according to Mr. Dickey, that means some rebuilt transmissions do come with speedometer gears in place in the transmission. As pointed out, when—as in Mr. Ellis' case involving a magnetic speedometer—the rebuilt transmission ordered does not contain the speedometer gear, the old gear is removed from the trade-in for reuse and/or a new one is purchased at the time of the exchange [*22]process during the time the sale transaction is culminated at the defendant's place of business—before which the defendant makes sure the cone in the rebuilt transmission ("we put the right end of the cone on").

The Court finds that these steps taken by the defendant when it is known (a) the rebuilt transmission is one of those that does not also include a speedometer gear and (b) the customary removal of the speedometer gear from the traded in transmission for potential use in the rebuilt one were part of the contract performance terms expected of the defendant in this type of sale involving the purchase of the transmission based upon past practice.

In Milau Assocs., Inc. v North Ave. Dev. Corp., 42 NY2d 482, citing Victorson v Boch Laundry Mach. Co., 37 NY2d 395, referred to as distinguished from "tort-based cases"...the liability of a manufactured [or tradesman] under familiar but different doctrines of the law of contracts for injuries sustained by a customer...for whose benefit the manufacturer previously has made a warranty or other agreement, expressed or implied" (id. p. 489).

This Court finds that the defendant's manager was fully aware of the vital role of the speedometer gear vis-a-vis the drive train's viability; that when a rebuilt transmission is sold, some contain this gear which "generally" most do not and in the case of the latter, he makes sure the "cone" into which this gear is inserted is in the correct position before the "user getrs it;" that it is a standard practice at the time the old transmission is exchanged for credit on the cost of the rebuilt transmission the old speedometer gear is removed for use in the rebuilt if one is needed—or a new gear is purchased; and that many of his customers install their own transmission (i.e. farmers). This conclusion taken together demonstrate that as part of the sales contract for rebuilt transmission, the presence (or lack of it) of the speedometer gear is addressed as part of the sales routine interaction with the customer as part of the sales warranty the rebuilt transmission will not malfunction due to the lack of a speedometer gear and/or the improper placement of the cone into which it is inserted inside the transmission cone.

The Court finds that the oral warranty for one year gives, without exceptions or limitations at the time the parties agreed over the phone for the purchase of the rebuilt transmission covering it was not replaced by the warranty limitations listed at the bottom of the invoice as heretofore discussed.

There is no evidence this change of the warranty without limitations agreed to over the phone was every discussed with the plaintiff or agreed to by him before the purchase was completed. Clear evidence of this fact is the failure to have the plaintiff sign the invoice under the warranty limitation paragraph on the invoice relied upon by the defense in this case.

The Court finds that as provided under UCC 2-314 the defendant impliedly warranted that rebuilt transmissions it sells are "fit for the ordinary purposes" for which it is to be used arising from a course of dealing or usage of trade as defined at UCC 1-205(2): The Court finds that the conduct of the defendant when selling a rebuilt transmission heretofore outlined qualifies as "any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question" (UCC 1-205[2]).

The Court further finds that there is also a warranty under UCC 2-315 "fitness for a particular purpose" because the seller at the time of contracting [had] reason to know [the] particular purpose for which the [transmission was] required and that the buyer [relied] on the [*23]seller's skill or judgment to select or furnish suitable goods." Simply stated, when the plaintiff called the defendant to order a rebuilt transmission he relied upon the "judgment" of the defendant to "furnish" a "suitable" rebuilt transmission of the type to be used in his truck.

The plaintiff as any customer for a rebuilt transmission expected the defendant to use its "judgment" not only to determine the correct rebuilt transmission to order to meet the specifications to work in his truck, but also, to use the same "judgment," based upon experience in dealing with selling rebuilt transmissions, to "furnish" (to also be sure he was provided with what was needed in ________ it) him with a properly placed "cone" so the speedometer gear would install correctly and, as part of this "judgment," upon which the plaintiff relied a discussion about removing the gear from the old transmission for reuse in the rebuilt and/or purchasing a new one so as to make the transmission "suitable" for operation.

The purchaser had the right to expect the seller to use his "judgment" to "select or furnish suitable goods." As part of this expectation when a rebuilt transmission is what is being "selected," the purchased in "furnishing" suitable goods, that just as the "cone" was furnished by the seller so, too, should the speedometer gear (being a hand-in-glove pair). The seller's judgment would be based upon experience to leave the purchaser with the old gear removed from the traded-in transmission at the time of the exchange—expected to be removed as it was not part of the trade-in credit-, thus alerting the purchaser one was needed for installation into the rebuilt transmission into "cone" which the seller had already implanted in the correct position.

This "judgment" expected of the seller "to furnish suitable goods" includes the obligation to address the absence of the speedometer gear on a rebuilt transmission without which the transmission would be "unsuitable." This is similar to the requirement "to warn against latent dangers resulting from foreseeable uses of the product" which the seller knows or should have known—a "duty to warn" (Liriano v Hobart Corp., 92 NY2d 232, at PJI, supra , p. 679). The buyer in both instances is relying on the seller's "judgment" informed by the logic of experience to advise the buyer about information vital to the operation of the transmission. This is clearly the reason why the Weller Remand Center rebuilt transmission had fixed onto it a tag warning "this transmission contains no speedometer gears."

Summary

In summary, the Court finds the "contract" for the sale of a rebuilt transmission was one for "goods or conduct including any part of a performance" that had to meet the requirement of "conforming" that is, would "conform to the contract when they are in accordance with the obligations under the contract" (UCC 2-106).

The credible evidence based solely upon the evidence in the record given by the defendant's employees shows that when a rebuilt transmission is sold EXACT information is requested about the old transmission so that the rebuilt one conforms to it creating an express warranty under uCC 2-313 that either under (b) any description...made part of the basis of the bargain creates an express warranty that the goods shall conform to the description" or (c) "any...model (the transmission, if you will) which is made part of the basis of the bargain creates any express warranty that the whole of the goods shall conform to the...model."

The inquiry into the specifications of the old transmission created an implied warranty of fitness for a particular purpose under UCC 2-315 as well because the "seller at the time of contracting [had] reason to know [the] particular purpose for which the goods are required and [*24]that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is...an implied warranty that the goods shall be fit for such purpose."

Also, based upon the specific details about the specifications of the old transmission to be replaced by the rebuilt transmission sold to the plaintiff there was an implied warranty of merchantability that this rebuilt transmission under UCC-2-314 was (2) fit for the ordinary purposes for which such goods are used.

The Court found that none of these warranties were excluded or modified as provided at UCC 2-316 either at the time the one year warranty was promised at the time the oral contract was made over the phone or by the invoice disclaimer at the base of that document as heretofore explained due to the Court's conclusion it did not meet the "conspicuous" standards set forth therein.

The Court found that based upon the combined testimony of Mr. Dickey and Ms. Fargo when a rebuilt transmission is sold, the sale price includes a credit for a turn in of the used transmission at the time the rebuilt is paid for all part of the sale's transation at which time it is a routine to be certain the old transmission's speedometer gear is removed because it is not included as part of the trade-in agreement. At that time the "cone" has already been put into the rebuilt transmission "so that when the user gets it, the cone is correct to start with so he can slide his [speedometer] gear right in" according to Mr. Dickey.

Mr. Dickey added that while generally...transmissions do not come with speedometer gear, thus implying some rebuilt ones do include it, "in Mr. Ellis' case, because he had a magnetic speedometer" one was never included within the rebuilt transmission.

The Court found that the defendant was aware that some transmissions do include this gear but generally most do not and in that case "we put the right end cone on it so that when the user gets it, the cone is correct to start with" as testified to by Mr. Dickey.

The Court has found that Mr. Dickey's steps when ordering a rebuilt transmission shows a concern of whether the one received comes with or without a speedometer gear installed and, if it does not, and if it is a "magnetic speedometer gear," then we put the right end of the cone on it [before] the user gets it." The Court has found that under UCC 2-315 these determinations and the steps based upon them as explained by Mr. Dickey show how as seller he used his "skilled judgment to select [and] furnish suitable goods." The Court has found Mr. Dickey in his judgment made sure that the "cone" needed for a magnetic speedometer gear was in the correct position to reuse the speedometer gear. In doing so he "furnished" a "suitable" rebuilt transmission. This Court has determined that as part of this obligation to use his judgment, he should have—as was the usual practice at the time the old transmission was exchanged as part of the sale's transaction—mentioned that the "cone" had been installed correctly already to reuse the magnetic speedometer gear the buyer needed for this type of rebuilt transmission.

In this case the distraction at the time the transmissions were about to be exchanged concerning the "cover" _____ resulted in no discussion about removal of the old speedometer from the trade-in. If the exchange had not been stymied by this "cover" problem, then as part of the usual practice the old transmission speedometer gear removal would have come up alerting the buyer about it not being included in the exchange and whether the buyer wanted to reuse it and/or buy a new one for installation in the rebuilt.

This notification, then, that the rebuilt transmission did not contain a speedometer gear [*25]required in the Court's opinion as part of the defendant's obligation to use its judgment under UCC 2-315, normally given imbedded in the sale's transaction at the time the transmission were exchanged—subsumed, if you will, in the inquiry at that time about the removal of the speedometer gear from the used transmission—did not occur in this case. This led to the plaintiff never realizing the speedometer gear was not already placed in the rebuilt transmission—as the "cone" had been—which resulted in his assembling the drive line without it leading to its failure in Ohio.

The Court has considered the defense claim the failure to set the torque wrench at the correct setting as a cause of the failure and finds that because the absence of the speedometer gear, it was inevitable this drive line would fail regardless of whether a torque wrench was used at the correct setting.

In conclusion, Mr. Dickey should have as part of his contract obligation to the customer, Mr. Ellis, discussed the "speedometer gear" not being included by this rebuilt transmission manufacturer in the one purchased by the customer to inform him that one had to be installed. In failing to perform this contract duty, Mr. Dickey withheld a benefit due Mr. Ellis under the contract (Eaves Brooks citing Moch Co., supra , p. 226) for which damages are appointed for this breach of the sales agreement.

Damages

This Court has concluded that the limitation of damages clause on the invoice does not apply because there is no evidence these limitations were given to the plaintiff either on the unsigned document or in the testimony on the record. That being determined as stated—PJI, supra , p. 676, "damages arising from the failure of the bargained-for consideration to meet the expectations of the parties are recoverable in contract," the Court finds the plaintiff has been damaged based upon the following losses:

10/18/08 New transmission work$ 4,406.41

10/15/08 - 10/18/08 Lodging131.41

10/15/08 - Loss of load1,403.80

This total of $5,941.62 in losses exceeds the jurisdiction of this Court, $5,000, so the award must be limited to that amount. The plaintiff is awarded judgment in the amount of $5,000 together with costs of $20.

This shall serve as the judgment and order of the Court.

Enter: 8/17/09

Date: 8/17/09

Hon. James C. Harberson, Jr.