Citizens Utilities Co. v. American Locomotive Co.
Citizens Utilities Co. v. American Locomotive Co.
Opinion of the Court
As this appeal comes to us we must determine the correctness of decisions below which dismissed on the pleadings causes of action numbered 1, 2, 4, 7 and 8 and granted summary judgment in favor of defendant on a Statute of Limitations ground as to cause of action numbered 9. All of these counts except number 9 derive from the manufacture and sale by defendant for and to plaintiff under a 1948 contract for a price of $292,480 of four generating sets for plaintiff’s electric generating plant in Nogales, Arizona. The ninth cause of action is alleged as having arisen out of a similar manufacture and sale at a price of $254,356 of four generating units for use at plaintiff’s plant at Newport, Vermont.
Leaving the ninth (Newport) count until later, we will deal first with the Nogales causes of action. The Nogales contract was made in September, 1948 through the acceptance by plaintiff of defendant’s written proposal containing this language :
“ The rating of this equipment at an elevation of 4000 feet will be 1200 H.P., 842 KW. We believe, however, that the units equipped in accordance with the proposal specifications will be capable of delivering continuously 1287 H.P., 900 KW at 4000 feet elevation above sea*413 level with a short time rating of 10% additional capacity for two hours continuous out of every twenty-four but cannot guarantee such performance at this time due to insufficient actual experience.”
It is not contended that the above warranties were breached but it is alleged that in selling this equipment defendant, by oral representations and impliedly, warranted that the generating sets would be capable of continuous operation at full capacity for a normal machine life span of 30 years or more and that they would be suitable and dependable for plaintiff’s purposes and would meet the requirements of plaintiff’s Nogales plant. However, as both courts below held, plaintiff is met by an impassable obstacle in the form of a settlement agreement concluded in May, 1950 between the parties. The Nogales sets were installed and began operating in June, 1949 and soon afterward disputes arose as to their performance. In November, 1949 Citizens sued American in the United States District Court for the Southern District of New York for damages alleging that the Nogales sets were unmerchantable and defective, that they did not correspond to the description by which they were sold and purchased, that there were various listed defects, and, specifically, that they were incapable of generating more than 3,200 EW together or 800 EW apiece. While the Federal court action was pending negotiations arose for an adjustment of the dispute and each party appointed two engineers to conduct joint operating tests. The four engineers went to Nogales in early 1950 and later made a joint report to the parties in which they described comprehensive tests and reported generally that the engines were producing up to the levels stated in the contract. Based on this report and with the report attached and made part thereof, a settlement agreement was made and the Federal court action discontinued. The settlement agreement recited the sale and installation of the Nogales equipment and that disputes had arisen and that the engineers for the parties had made a joint report. It was stipulated as fact that each of the sets had a capacity for continuing operation of 842 KW plus an overload for two hours a day and that such capacity had been demonstrated by the tests described in the annexed engineers’ report and had been satisfactorily proven by ordinary operation. The treaty contained a flat statement
The May, 1950 agreement just above summarized not only appears on its face to be a complete settlement, entered into after investigation and report by experts by both sides of all conceivable complaints about these generating sets, but it goes further than that and says that the present plaintiff “ accepts ” the sets as meeting certain prescribed standards of efficiency and performance. Even beyond that, plaintiff not only discontinued a suit which it had brought for damages for these alleged defects but accepted a substantial reduction in price to cover any deficiency in the sets. If this agreement were not so sweeping in terms and if it did not involve an acceptance of the sets as they were found to be and to operate, some cause of action might possibly have survived. But if this agreement was not intended to prevent any future claim of any kind then such a result could not be obtained by the use of language. Plaintiff does plead that at the time of the tests defendant falsely and fraudulently represented that the equipment would last for 30 years, etc. But any survival of such a claim would be entirely inconsistent with the language and purpose of the agreement whereby plaintiff “ accepts ” the generators after elaborate tests and in consideration of a large reduction in price.
What plaintiff is really arguing as to the Nogales causes of action is that an alleged implied warranty of suitability for 30 years of operation was breached long after the making of the 1950 agreement because, according to plaintiff, the unsuitability of these sets purchased for 30 years of operation did not and
For reasons similar to those just above given there is no need here to make an analysis in depth as to the effect of “ no-warranty ” and “no-reliance” clauses in contracts (see Danann Realty Corp. v. Harris, 5 N Y 2d 317, and Crowell-Collier Pub. Co. v. Josefowitz, 5 N Y 2d 998).
The discussion just concluded disposes of all the causes of action except number 9 which, as we have said, arose out of the sale by defendant to plaintiff of four generating sets for use at Newport, Vermont. The pleading of this cause of action describes the Newport sale and installation, recites warranties expressed in the agreement and alleges implied warranties of suitability for plaintiff’s purposes and of capability for continuous operation. Suit for alleged breach was not begun until February 14, 1955, when the ninth cause of action was for the first time asserted in an amended complaint. Concededly, this
Plaintiff, it is fair to say, does not dispute the standard rule of law just above set forth. This, says plaintiff, is a different sort of case where the alleged implied warranty was not only as to present suitability but that the sets 6‘would be and would continue to be capable of continuous operation at full rated capacity for a full normal machine life span of at least 30 years ” (amended complaint). A close inspection of this pleading makes it clear that what plaintiff is alleging is: first, that defendant expressly represented that the sets were so designed and constructed that with normal operation they would last 30 years, and, second, that there was an implied warranty that the sets would be capable of continuous operation at full rated capacity for the usual life span of 30 years. In other words,
The judgment should be affirmed, with costs.
Dissenting Opinion
Concluding as I do that the Statute of Limitations does not bar suit, upon the lapse of six years from the date of the sale, on the ninth cause of action — which relies on a warranty that the generating sets had a life span of 30 years and would continue to operate for that length of time—I would reverse so much of the judgment as dismisses that count.
In the ninth cause of action, the plaintiff alleges that, in connection with its purchase of generating sets from the defendant in 1946, the defendant “ expressly represented ” that those sets ‘ ‘ were capable of continuous operation * * * [for] at least 30 years ’ ’ and, in addition, ‘ ‘ impliedly warranted ’ ’ that they “ would be and would continue to be capable of continuous operation at full rated capacity for a full normal machine life of at least 30 years ’ ’. Then, after reciting that the sets worked well for six and a half years, the complaint goes on to declare that they then “ ceased to be suitable and dependable * * * and failed to have a full normal machine life span of at least 30 years when operated continuously at full rated capacity.” And, the complaint continues, the defects and deficiencies in the sets were not ascertainable upon inspection or test and were, on the contrary, “ discoverable only after several years of operation ” and were not discovered until August of 1954.
The defendant interposed, as a separate defense, the six-year Statute of Limitations (Civ. Prac. Act, § 48, subd. 1), urging that the warranty — that the sets had a 30-year life — was breached at the latest when the goods were delivered to the plaintiff for its use and that, since the machinery was put in
If, as the plaintiff alleges, there was a warranty that the machinery had a life of 30 years — or, indeed, any period in excess of six years — a holding that the statute begins to run from the date of sale has the necessary effect of reducing that warranty to six years, the period of limitations. I see no reason or warrant for so unreasonable and unjust a result.
As Williston observes, although a representation that ‘ ‘ a machine will work well for five years is a representation as to its present condition * * * [it] carries with it also perhaps an implied promise ” (1 Williston, Sales [rev. ed., 1948], § 212, p. 549, n. 5). And, then, addressing himself to the subject which concerns us, the Statute of Limitations, Williston goes on to differentiate between the typical warranty of quality and one which is prospective in character. Thus, he writes, while “ The typical warranty ” of quality relating to the quality of goods at the time of sale is broken, if ever, at that time, ‘1 On the other hand, if the seller promises that something shall happen or shall not happen to the goods within a specified future time, the promise though it may be called a warranty cannot be broken until that time has elapsed and until then the statute will not begin to run ” (1 Williston, Sales, op. cit., § 212a, p. 550).
In the case before us, the warranties alleged in the complaint, both the express warranty—that the generating sets were capable of continuous operation for at least 30 years — and the implied warranty—that they “ would be and would continue to be capable of continuous operation * * * for * * * at least 30 years ”—relate to more than a present condition, i.e., a condition of suitability and operability at the time of sale. They are necessarily prospective in nature, looking toward the future and, since this is so, the warranties would not be breached until the machinery failed to function or gave evidence of not operating properly, and until that time the Statute of Limitations would not begin to run. (See, e.g., Woodworth v. Rice Bros. Co., 110 Misc. 158, affd. 193 App. Div. 971, affd. 233 N. Y. 577; John Sills & Sons v. Bridgeton Condensed Milk Co., 43 F.
The California case of Southern Cal. Enterprises v. Walter é Co. (78 Cal. App. 2d 750, supra) is illustrative. There, the defendant sold the plaintiff a carpet, representing and warranting that it would ‘ ‘ last for a period of six to eight years following its installation ’ ’. The carpet was installed in September of 1943. It opened at its seams in January, 1944, and became so frayed and ragged that it constituted a hazard to plaintiff’s customers from that time on. The applicable Statute of Limitations was two years. The plaintiff commenced his action for breach of warranty in December, 1945, more than two years after the purchase, but less than two years after the appearance of the defects about which complaint was made. Concluding that the warranty was “ prospective ”, looking toward the future, rather than “ present ”, the court decided that the suit was not barred. “ To adopt the theory advanced by respondent and accepted by the trial court relative to the purpose of the statute of limitations ”, declared the court, “would be to ordain the statute as an instrument for the protection of fraud instead of for its prevention. * * * If it should be held that the statute began to run at the date of the sale of the carpet and not when it had been ascertained and established as a fact that the warranty had been breached, not only would appellant be deprived of its right to present its cause of action on the merits but respondent would be invited to continue the making of similar warranties to others secure in the knowledge that it would not be required to answer in damages for their breach. * * * The cause of action is on a warranty of a future happening and it did not arise and the statute of limitations did not begin to run at the date of sale but was postponed until the future event failed to materialize ” (78 Cal. App. 2d, at pp. 752, 754).
The written contract entered into between the parties contains no reference to a representation or a warranty that the
It is true that most of the cases in which warranties have been held to be prospective in nature have involved express warranties. (See 2 Prumer & Friedman, Products Liability, § 40.01 [2], p. 513.) But no basis exists for treating implied warranties any differently from those which are express when they relate to, or are contingent upon, a future event, and courts in other jurisdictions have so held. (See, e.g., Aced v. Hobbs-Sesack Plumbing Co., 55 Cal. 2d 573, 584, supra; Kennard & Sons Carpet Co. v. Dornan, 64 Mo. App. 17, 25, supra.) Indeed, the court, faced in the Aced case with a question very like the one now before us, reached the conclusion for which I speak. The
“ We are satisfied * * * that this is a case which could properly be found to come within the operation of the principle that, if a warranty relates to a future event before which the defect cannot be discovered by the exercise of reasonable diligence, the warranty, though accompanied by a representation as to the present condition, is prospective in character and the statute of limitations begins to run as of the time of that event. This principle, while not always stated in identical language, has been applied in a variety of factual situations. * * * the principle in question has been followed with respect to implied as well as express warranties, and it has long been recognized in this state that the time when the statute of limitations begins to run is the same whether a warranty is express or implied. ’ ’
And the court then went on to note that 11 A warranty that the tubing was of a quality reasonably permitting its use in a radiant heating system would include a prospective warranty that the tubing would not, within a reasonable period of time, corrode and leak. It obviously could be determined that a reasonable time had not expired when the leaks were first noticed about a year after the heating system had been installed ” (p. 584).
Concerning the point made in Judge Feoessel’s concurring opinion, that the defendant could not rely upon the implied warranty asserted because of the merger and no modification clause of the contract or its further provision that the defendant seller was not to be liable “ upon warranties express or implied with respect to workmanship or material other than as here provided ”, I would merely say that neither the one nor the other encompasses or bars proof of the warranty of merchantability or of fitness implied by the Sales Act. (Cf. Stryker v. Rusch, 8 AD 2d 244, 246; Henningsen v. Bloomfield Motors, 32 N. J. 358, 378; Knapp v. Willys-Ardmore, Inc., 174 Pa. Super. Ct. 90.) It is entirely conceivable that, even if there was nothing wrong with the workmanship or the material that went into the generators, they would still not be merchantable qua generators or fit for the particular purpose for which they were sold.
Opinion by Chief Judge Desmond in which Judges Dye and Van Voobhis concur; Judge Fboessel concurs in a separate opinion in which Chief Judge Desmond and Judges Dye and Van Voobhis concur; Judge Fuld dissents in part and votes to reverse so much of the judgment as dismisses the ninth cause of action in an opinion in which Judges Bubke and Foster concur.
Judgment affirmed.
Concurring Opinion
We concur with Chief Judge Desmond for affirmance, but as to the ninth cause of action would place our affirmance upon the ground that plaintiff expressly agreed that the defendant “ shall have no liability upon warranties express or implied with respect to workmanship
Reference
- Full Case Name
- Citizens Utilities Company, Appellant, v. American Locomotive Company, Respondent
- Cited By
- 15 cases
- Status
- Published