Borden, Inc. v. Advent Ink Co.

• Decision Date: 30 September 1997
• Citation: 701 A.2d 255
• Parties: 33 UCC Rep.Serv.2d 975 BORDEN, INC., Appellee, v. ADVENT INK COMPANY, Appellant.
• Court: Pennsylvania Superior Court

Page 255

701 A.2d 255

33 UCC Rep.Serv.2d 975

BORDEN, INC., Appellee, v. ADVENT INK COMPANY, Appellant.

Superior Court of Pennsylvania.

Submitted June 16, 1997.

Filed Sept. 30, 1997.

Robert M. Frankhouser, Jr., Lancaster, for appellant.

Jacques H. Geisenberger, Jr., Lancaster, for appellee.

Before POPOVICH, FORD ELLIOTT, and SAYLOR, JJ.

SAYLOR, Judge.

Plaintiff/appellee, Borden, Inc. ("Borden"), sued defendant/appellant, Advent Ink Company ("Advent"), in the Court of Common Pleas of Lancaster County to recover moneys owed for goods delivered but not paid for. Advent counterclaimed for damages allegedly sustained as a result of a previous shipment of defective goods. The trial court granted Borden's motion for summary judgment on the counterclaim and declared its order to be final pursuant to Pa.R.A.P. 341(c). Concluding that Borden's limitation of damages clause was enforceable, although its disclaimer of warranties was not, we affirm.

Advent, a Pennsylvania corporation, manufactured water-based inks for printers. Among those inks was a black ink that was sold to R.R. Donnelley & Sons Company ("Donnelley") for the printing of its telephone directories. In producing this ink, Advent used a water-based black dispersion, "Aquablak," which it purchased from Borden.

In 1992, Borden sued Advent to recover the sum of $16,227.50 on a book account for merchandise sold and delivered to Advent. In response, Advent asserted that it had rejected the shipments in question because prior shipments had failed to comply with implied warranties of merchantability and fitness for a particular purpose. Specifically, Advent alleged that Borden's failure to age the Aquablak resulted in material defects which, when the Aquablak was incorporated into the black ink, caused the ink to separate and to clog Donnelley's presses. As a result, Donnelley ceased buying water-based black ink from Advent. In its counterclaim Advent argued that it was "entitled to recover from Borden the profits which [it] lost and which [it had] reasonably expected to continue from the Donnelley contract which was cancelled solely as a result of Borden's failure to provide a merchantable black dispersion for use in the black ink."

Late in 1992, Advent filed for bankruptcy under Chapter 11. A stipulation was entered lifting the automatic stay so that Advent could proceed on its counterclaim.

Following discovery, Borden filed a motion for summary judgment on the counterclaim. In its motion Borden argued that it was entitled to summary judgment on either of two bases: first, it had validly and conspicuously disclaimed the implied warranties of merchantability and of fitness for a particular purpose, as it was allowed to do under the Uniform Commercial Code ("UCC"), 13 Pa.C.S.A. § 2316(b), by means of language included in its sales invoices and in labels affixed to each drum of Aquablak that was shipped to Advent; second, by the same means it had validly excluded any liability for consequential damages such as lost profits, as it was allowed to do under section 2719 of the UCC, 13 Pa.C.S.A. § 2719.

By order entered January 2, 1997, the trial court granted Borden's motion for summary judgment and dismissed the counterclaim. In an opinion subsequently filed pursuant to Pa.R.A.P.1925(a), the trial court reasoned that Borden had conspicuously disclaimed the implied warranties of merchantability and fitness for a particular purpose. The court did not address Borden's alternative argument on the limitation of damages.

Borden asked the trial court to amend its order to include "an express determination that an immediate appeal would facilitate resolution of the entire case," Pa.R.A.P. 341(c), thereby making the order final for purposes of appeal. The trial court so amended the order on January 31, 1997, and this appeal followed.

Pursuant to Pennsylvania Rule of Civil Procedure 1035.2, which took effect on July 1, 1996, and is therefore applicable to the present case,

[a]fter the relevant pleadings are closed, but within such time as not to unreasonably delay trial, any party may move for summary judgment in whole or in part as a matter of law

(1) whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense which could be established by additional discovery or expert report, or

(2) if, after the completion of discovery relevant to the motion, including the production of expert reports, an adverse party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to a jury.

When presented with a challenge to an order granting summary judgment, we view the record in the light most favorable to the non-moving party, resolving all doubts as to the existence of a genuine issue of material fact against the moving party. Ertel v. Patriot-News Company, 544 Pa. 93, 674 A.2d 1038 (1996). Concerning questions of law, our scope of review is plenary. Id. We are not bound by a trial court's conclusions of law; instead, we may draw our own inferences and reach our own conclusions. Butterfield v. Giuntoli, 448 Pa.Super. 1, 670 A.2d 646 (1995), appeal denied, 546 Pa. 635, 683 A.2d 875 (1996).

In this appeal, Advent contends that summary judgment was not warranted on either of the two grounds advanced by Borden. As to the disclaimer of warranties on the invoices and drum labels, Advent argues that the disclaimer was inoperative because it was inconspicuous. ¹ Advent asserts that the limitation of remedies clause was also inoperative because it failed of its essential purpose and was unconscionable. Therefore, Advent argues, we should vacate the award of summary judgment and allow the case to proceed to trial. ²

I. Disclaimer of Warranties

In order to resolve Advent's first issue (namely, its challenge to the disclaimer of warranties), we turn first to the pertinent provisions of the UCC as adopted in this Commonwealth. The implied warranty of merchantability, as set forth in the UCC, is "a warranty that the goods will pass without objection in the trade and are fit for the ordinary purposes for which such goods are used." Moscatiello v. Pittsburgh Contractors Equipment Company, 407 Pa.Super. 363, 368, 595 A.2d 1190, 1193 (1991), citing 13 Pa.C.S.A. § 2314, appeal denied, 529 Pa. 650, 602 A.2d 860 (1992). Such a warranty "serves to protect buyers from loss where the goods purchased are below commercial standards." Hornberger v. General Motors Corporation, 929 F.Supp. 884 (E.D.Pa.1996). The Superior Court has observed that "this warranty is so commonly taken for granted that its exclusion from a contract is recognized as a matter threatening surprise and therefore requiring special precaution." Moscatiello, 407 Pa.Super. at 369, 595 A.2d at 1193, citing Comment 11 to 13 Pa.C.S.A. § 2314. The implied warranty that goods shall be fit for a particular purpose exists, under the UCC, where the seller at the time of contracting has reason to know of such purpose and of the buyer's reliance upon the seller's skill or judgment to select or furnish goods that are suitable for such purpose. See 13 Pa.C.S.A. § 2315.

The UCC sets forth the following requirements for excluding or modifying these implied warranties:

Subject to subsection (c) [not relevant here], 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."

13 Pa.C.S.A. § 2316(b). In the present case, the attempted exclusions of both warranties appear in writings, and, as will be shown infra, the writings mention merchantability. The question to be decided, therefore, is whether those attempted exclusions are conspicuous. This is a question of law for the court. 13 Pa.C.S.A. § 1201; Hornberger, supra; Jaskey Finance and Leasing v. Display Data Corporation, 564 F.Supp. 160 (E.D.Pa.1983); Thermo King Corporation v. Strick Corporation, 467 F.Supp. 75 (W.D.Pa.1979), aff'd, 609 F.2d 503 (3d Cir.1979).

The UCC provides the following definition of the critical term "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 ... 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.

13 Pa.C.S.A. § 1201. As explained in Comment 10 to Section 1201, the definition of "conspicuous" is "intended to indicate some of the methods of making a term attentioncalling. But the test is whether attention can reasonably be expected to be called to it."

Under Pennsylvania law, factors to be considered in determining whether a reasonable person should have noticed a warranty disclaimer include: 1) the disclaimer's placement in the document, 2) the size of the disclaimer's print, and 3) whether the disclaimer was highlighted by being printed in all capital letters or in a type style or color different from the remainder of the document. Hornberger, 929 F.Supp. at 889. The reasonableness test accords with the primary purpose of the conspicuousness requirement, which is "to avoid fine print waiver of rights by the buyer[,]" Moscatiello, 407 Pa.Super. at 369, 595 A.2d at 1193.

In the present case, the trial court concluded on the basis of the invoices and drum labels that Borden had met these waiver requirements. ³ On the front of Borden's standard invoice, in red capital letters, is the phrase "SEE REVERSE SIDE." On the reverse side is the...