Billings v. Joseph Harris Co., Inc., 7523SC596

• Decision Date: 17 December 1975
• Docket Number: No. 7523SC596,7523SC596
• Citation: 27 N.C.App. 689,220 S.E.2d 361
• Parties: , 18 UCC Rep.Serv. 359 Paul BILLINGS v. JOSEPH HARRIS COMPANY, INC.
• Court: North Carolina Court of Appeals

Page 361

220 S.E.2d 361

27 N.C.App. 689, 18 UCC Rep.Serv. 359

Paul BILLINGS v. JOSEPH HARRIS COMPANY, INC.

No. 7523SC596.

Court of Appeals of North Carolina.

Dec. 17, 1975.

Certiorari Denied and Appeal Dismissed by Supreme Court Feb. 3, 1976.

Arnold Young, Sparta, and John E. Hall, North Wilkesboro, for plaintiff appellant.

Hudson, Petree, Stockton, Stockton & Robinson, by Norwood Robinson and George L. Little, Jr., Winston-Salem, for defendant appellee.

BRITT, Judge.

Did the trial court err in entering partial summary judgment in favor of defendant? We hold that it did not.

While defendant argues that the order of the federal court, from which no appeal was taken, is res judicata as to the issues presented on this appeal, we do not decide that question. We affirm the judgment appealed from on the ground that defendant, by the disclaimer set forth on the order blank which plaintiff signed, limited its maximum liability to return of the purchase price of the seed.

Plaintiff entered into a contract with defendant by signing the order form described above. Construction of the contract is governed by the Uniform Commercial Code as set forth in Chapter 25 of our General Statutes. On the face of the one page order form appears, in pertinent part, the following disclaimer and limitation styled, 'NOTICE TO BUYER':

'Joseph Harris Company, Inc., . . . MAKES NO WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR PURPOSE, OR OTHERWISE, . . . AND IN ANY EVENT ITS LIABILITY FOR BREACH OF ANY WARRANTY OR CONTRACT WITH RESPECT TO SUCH SEEDS OR PLANTS IS LIMITED TO THE PURCHASE PRICE OF SUCH SEEDS OR PLANTS.'

This clause is set off from other provisions on the form and appears in bold face, all capital print. The clause also contains additional provisions for disclaimer of negligence liability as well as a merger clause rendering the form the 'entire agreement between the parties regarding warranty or any other liability'.

Disclaimers of express and implied warranties are governed by G.S. 25--2--314 and G.S. 25--2--316. Limitation or modification is subject to the provisions of G.S. 25--2--719. A disclaimer of liability serves to limit liability by reducing instances where a seller may be in breach, while a limitation or modification is a restriction on available remedies in event of breach. To be valid under G.S. 25--2--316(2), a disclaimer provision must be stated in express terms, mention 'merchantability' in order to disclaim the implied warranty of merchantability, and be conspicuously displayed. Bulliner v. General Motors Corp., 54 F.R.D. 479 (E.D.N.C.1971); See e.g., Tennessee Carolina Transportation Inc. v. Strick Corp., 16 N.C.App. 498, 192 S.E.2d 702 (1972), Rev'd other grounds, 283 N.C. 423, 196 S.E.2d 711 (1973). Compare, Zicari v. Joseph Harris Co., 33 A.D.2d 17, 304 N.Y.S.2d 918 (S.Ct.1969), appeal dismissed, 26 N.Y.2d 610, 309 N.Y.S.2d 1027, 258 N.E.2d 103 (1970), where a similar disclaimer was overturned in similar litigation over a similar fungus infestation due to absence of the critical term 'merchantability' in one of defendant's order forms. See generally, J. White and R. Summers, Uniform Commercial Code §§ 12--2, 12--5, 12--9 (1972).

G.S. 25--1--201(10) defines 'conspicuousness' as that which is 'so written that a reasonable person against whom it is to operate ought to have notice of it.' Determination of conspicuousness is a question of law for the court. Judge Wood determined that defendant's disclaimer and limitation clause were conspicuous; we think his determination was correct and, after examining the record and exhibits, we agree that the proofs establish defendant's compliance with G.S. 25--2--316(2).

Having established the validity of defendant's disclaimer, we next focus our inquiry on the limitation of remedy substituted by defendant. G.S. 25--2--719(1)(a) sanctions such contractual modification and limitation of remedy in event of breach of warranty.

'(T)he 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 nonconforming goods or parts; . . .. (Emphasis added.)

Taken together, G.S. 25--2--316(2) and G.S. 25--2--719(1)(a) provide for limitation and substitution of remedies. A merchant seller may thereby disclaim all liability under G.S. 25--2--316(2) stemming from any breach of warranties of merchantability and fitness under G.S. 25--2--314 and G.S. 25--2--315, substituting in place thereof the limitations of G.S. 25--2--719(1)(a). We feel that given the inherent element of risk present in all agricultural enterprises, such a clause, valid under G.S. 25--2--316(2) and G.S. 25--2--719, may operate to limit a buyer's remedy to a return of purchase price. U.S. Fibres Inc. v. Proctor & Schwartz Inc., 358 F.Supp. 449 (E.D.Mich.1972), aff'd, 509 F.2d 1043 (6th Cir. 1975). See e.g., 3 Bender's U.C.C. Service, Duesenberg & King, Sales and Bulk Transfers § 7.03(2) (Matthew Bender & Co. 1975). The official commentary to G.S. 25--2--719(3) is instructive:

'3. Subsection (3) recognizes the validity of clauses limiting or excluding consequential damages . . . such terms are merely an allocation of unknown or undeterminable risks. The seller in all cases is free to disclaim warranties in the manner provided in Section 2--316.' (Emphasis added.)

If a part of the contract such a clause would serve to limit plaintiff's recovery to $440.00, as determined by the trial judge and bar further recovery of any consequential damages. The viability of this provision is subject however to the unconscionability provision of G.S. 25--2--719(3):

'Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitations of consequential damages for injury to the person in case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.'

Unconscionability relates to contract terms that are oppressive. It is applicable to one-sided provisions, denying the contracting party any opportunity for meaningful choice. Collins v. Uniroyal Inc., 126 N.J.Super. 401, 315 A.2d 30 (1973), aff'd, 64 N.J. 260, 315 A.2d 16 (1974); Williams v. Walker-Thomas Furniture Co., 121 U.S.App.D.C. 315, 350 F.2d 445 (1965) (Precode decision with heavy reliance on Code provisions as analogous persuasive authority). See e.g., G.S. 25A--43(c) defining 'unconscionability' under Retail Installment Sales Act as '. . . totally unreasonable under all of the circumstances.'

This section gives injured party plaintiffs in personal injury actions a prima facie presumption of unconscionability as to any disclaimer or limitation of liability. No similar presumption is provided in cases of commercial loss, thus putting the burden on plaintiff to show otherwise. Under G.S. 25--2--302(1) determination of unconscionability is a question of law for the court. We note that G.S. 25--2--302 was not a part of the Uniform Commercial Code as originally enacted by the General Assembly in 1965. However, given the unconscionability provision of G.S. 25--2--719(3) which was originally a part of Chapter 25, we elect to treat the 1971 amendment adding G.S. 25--2--302 as persuasive authority even though by express terms the act is effective to transactions and events occurring on and after 1 October 1971. See Session Laws 1971, c. 1055, s. 3. We feel this matter was sufficiently covered at hearing on defendant's motion for summary judgment, and after a review of the record and exhibits hold that the provision in question was not unconscionable.

We agree that summary judgment is a drastic remedy, one to be approached with caution. Evidence before the trial judge may consist of pleadings, answers to interrogatories, depositions and presumptions where applicable. Under G.S. 1A--1, Rule 56(c) the trial judge does not sit as fact finder as is true under G.S. 1A--1, Rule 52. His function is to examine the materials, determine what facts are established, and conclude whether there is a genuine issue as to any material fact and if a party is entitled to judgment as a matter of law. Koontz v. Winston-Salem, 280 N.C. 513, 186 S.E.2d 897 (1972), rehearing denied, 281 N.C. 516 (1972); Kessing v. National Mortgage Corp., 278 N.C. 523, 180 S.E.2d 823 (1971). See generally, Gordon, The New Summary Judgment Rule in North Carolina, 5 Wake Forest L.Rev. 87 (1969), W. Shuford, North Carolina Civil Practice and Procedure §§ 56--3 thru 56--10 (1975).

Thus, we have treated the judge's 'findings of fact' as surplusage and conducted our own examination of the record and exhibits. We conclude that the admitted facts before the judge established defendant's compliance with the provisions of G.S. 25--2--316(2), and agree with his determination that to a legal certainty there exists no genuine issue as to any material fact, thus limiting plaintiff to recovery of purchase price of the seed.

Plaintiff contends that this case is not governed by the provisions of G.S. 25--2--316 but would rely on the decision in Gore v. George J. Ball Inc., 279 N.C. 192, 182 S.E.2d 389 (1971), and the North Carolina Seed Law, ...