Beal v. General Motors Corporation, Civ. A. No. 4288.

• Citation: 354 F. Supp. 423
• Decision Date: 22 January 1973
• Docket Number: Civ. A. No. 4288.
• Parties: Bruce S. BEAL, Plaintiff, v. GENERAL MOTORS CORPORATION, a corporation of the State of Delaware, and Watkins System, Inc. t/a Watkins Truck Sales & Service, a corporation of the State of Delaware, Defendants.
• Court: United States District Courts. 3th Circuit. United States District Court (Delaware)

354 F. Supp. 423

Bruce S. BEAL, Plaintiff, v. GENERAL MOTORS CORPORATION, a corporation of the State of Delaware, and Watkins System, Inc. t/a Watkins Truck Sales & Service, a corporation of the State of Delaware, Defendants.

Civ. A. No. 4288.

United States District Court, D. Delaware.

January 22, 1973.

L. Vincent Ramunno, Wilmington, Del., for plaintiff.

Robert H. Richards, III, of Richards, Layton & Finger, Wilmington, Del., for defendant General Motors Corporation.

George Tyler Coulson, of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for defendant Watkins System, Inc.

MEMORANDUM OPINION

STAPLETON, District Judge:

In this diversity action Bruce Beal, a Maryland resident, seeks damages from General Motors Corporation, a Delaware corporation, and Watkins System, Inc., also a Delaware corporation, for breach of contract and, in the alternative, for negligence. Jurisdiction is proper under 28 U.S.C. § 1332.

The matter is now before the Court on a motion by General Motors to strike various allegations of the amended complaint as immaterial, F.R.Civ.P. 12(f), to dismiss certain allegations for failure to state a claim, F.R.Civ.P. 12(b)(6), and for a more definite statement, F.R. Civ.P. 12(e). Defendant Watkins has moved to dismiss the amended complaint for failure to state a claim upon which relief can be granted.

The facts, as set out in the amended complaint, need only be briefly outlined here. In August 1968, Mr. Beal purchased a GMC extra-heavy tonnage diesel tractor through Watkins, an authorized General Motors' dealer. The "Retail Order Form" pursuant to which the purchase was consummated provided in part:

10. There are no warranties, expressed or implied, made by either the Dealer or the Manufacturer on new GMC motor vehicles, chassis or parts furnished under this Order except the Manufacturer's Warranty against defects in material and workmanship set out below:

GMC Trucks & Coach Division of General Motors Corporation, as Manufacturer, warrants each new motor vehicle and chassis including all equipment and accessories thereon (except tires and tubes) manufactured or supplied by GMC Truck & Coach Division and delivered to the original retail purchaser by an authorized GMC Truck Dealer, to be free from defects in material and workmanship under normal use and service; GMC Truck & Coach Division's obligation under this warranty being limited to repairing or replacing at its option any part or parts thereof which shall, within twenty-four (24) months after delivery of such vehicle or chassis to the original retail purchaser or before such vehicle or chassis has been driven twenty-four thousand (24,000) miles, whichever event shall first occur, be returned to an authorized GMC Truck Dealer at such Dealer's place of business and which examination shall disclose to Manufacturer's satisfaction to have been thus defective. The repair or replacement of defective parts under this warranty will be made by such Dealer without charge for parts, and if made at such Dealer's place of business, without charge for labor." . . .

In its Opinion of July 20, 1972, this Court held that the contract between the parties excluded all express or implied warranties except the warranty set out above.

In his amended complaint plaintiff alleges that this warranty was breached, specifies a host of defects, and asserts that General Motors was unable or unwilling to repair or replace the offending parts in such a way as to make the vehicle operable. His claim for damages includes a claim for profits lost as a result of his inability to utilize the truck in his business.

FAILURE OF THE LIMITED REMEDY

The major legal issue presented by defendant General Motors' motion to strike is whether consequential damages may be recovered upon proof of a breach of the express warranty relied upon. If as a matter of law they may not, defendant argues, then allegations in the amended complaint which relate only to that claim should be stricken as immaterial.

The Delaware version of the Uniform Commercial Code clearly permits the type of limitation of remedy contemplated by this contract. Section 2-719 of Title 5A of the Delaware Code provides:

(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 title.

(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 commercial is not.

It, therefore, appears that the limitation of remedy contained in the contract is valid, and consequential damages are not recoverable unless the limitation is unconscionable or, on these facts, fails of its essential purpose. If either situation is found "remedy may be had as provided in this title," § 2-719(2), including, a proper case, consequential damages. §§ 2-714, 2-715.¹

The purpose of an exclusive remedy of replacement or repair of defective parts, whose presence constitute a breach of an express warranty, is to give the seller an opportunity to make the goods conforming while limiting the risks to which he is subject by excluding direct and consequential damages that might otherwise arise. From the point of view of the buyer the purpose of the exclusive remedy is to give him goods that conform to the contract within a reasonable time after a defective part is discovered. When the warrantor fails to correct the defect as promised within a reasonable time he is liable for a breach of that warranty. Steele v. J. I. Case Co., 197 Kan. 554, 419 P.2d 902 (Kan. 1966); Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (Cal.1965). The limited, exclusive remedy fails of its purpose and is thus avoided under § 2-719(2), whenever the warrantor fails to correct the defect within a reasonable period.

The situation here is like that which confronted the court in Jones & McKnight Corp. v. Birdsboro Corporation, 320 F.Supp. 39 (N.D.Ill.1970). There Judge Will analyzed the problem in terms of repudiation of the seller's duties under the warranty which resulted in a failure of the exclusive remedy to achieve its purpose:

. . . Although the plaintiff-buyer purchased and accepted the machinery and equipment with the apparent knowledge that the seller had properly limited its liability to repair or replacement, and although the plaintiff does not allege any form of unconscionability in the transactions which led to the purchase, plaintiff also was entitled to assume that defendants would not be unreasonable or wilfully dilatory in making good their warranty in the event of defects in the machinery and equipment. It is the specific breach of the warranty to repair that plaintiff alleges caused the bulk of its damages. This Court would be in an untenable position if it allowed the defendant to shelter itself behind one segment of the warranty when it has allegedly repudiated and ignored its very limited obligations under another segment of the same warranty, which alleged repudiation has caused the very need for relief which the defendant is attempting to avoid. If the plaintiff is capable of sustaining its burden of proof as to the allegations it has made, the defendant will be deemed to have repudiated the warranty agreement so far as restricting plaintiff's remedies, and the exclusive remedy provision of the contract will be deemed under the circumstances to have failed of its essential purpose, thus allowing plaintiff the general array of remedies under the Code.²

General Motors here argues that there is no failure in essential purpose because recovery by the buyer of the difference in market value of a truck free of defects and the truck actually delivered will give the buyer everything he had a right to expect under the contract. The logic urged in support of this argument is flawed, however.

Defendant concedes that plaintiff is entitled to direct damages measured by market values. What is it, however, that gives him this remedy? It is clearly not the contract, for it purports to substitute a right of replacement and repair for any right to damages. Rather, the right to direct damages arises from § 2-714(2) of the Uniform Commercial Code. But where the parties expressly provide for an exclusive remedy "in substitution for" the "measure of damages recoverable under" the Code, that remedy is the buyer's sole recourse. § 2-719. The direct damage remedy of § 2-714(2), therefore, is applicable only when the exclusive remedy provided in the contract fails of its essential purpose within the meaning of § 2-719(2). Under that section when such a failure occurs recourse may be had to all the remedial provisions of the Code. There is no discernible reason for limiting that recourse to selected remedial provisions as defendant apparently attempts to do. The direct damages section, § 2-714(2), has no greater claims to application here than does the consequential damages section, § 2-714(3), assuming, of course, that this is otherwise "a proper case" for consequential damages.

While this Court is unable to hold that consequential damages are not recoverable in this case, neither may it be determined at this preliminary stage whether such damages...