Cash v. Armco Steel Corp., Civ. A. No. C77-176R.

• Decision Date: 11 December 1978
• Docket Number: Civ. A. No. C77-176R.
• Citation: 462 F. Supp. 272
• Parties: Edward A. CASH, Edmond A. Cash, Max G. Cash, William A. Dupre, III and Sem, Inc., Plaintiffs, v. ARMCO STEEL CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of Georgia

462 F. Supp. 272

Edward A. CASH, Edmond A. Cash, Max G. Cash, William A. Dupre, III and Sem, Inc., Plaintiffs, v. ARMCO STEEL CORPORATION, Defendant.

Civ. A. No. C77-176R.

United States District Court, N. D. Georgia, Rome Division.

December 11, 1978.

Edward Hine, Jr., Rogers, Magruder & Hoyt, Rome, Ga., for plaintiff.

Philip L. Fortune, Ronald G. Robey, Smith, Currie & Hancock, Atlanta, Ga., for defendants.

HAROLD L. MURPHY, District Judge.

ORDER

This is a products liability action arising out of the failure of a dam in DeKalb County, Alabama. Plaintiffs contend that the pipe, manufactured by the defendant, Armco Steel Corporation ("Armco"), and used by the plaintiffs in the dam, failed with the result that the dam washed out in February, 1977, for which failure plaintiffs seek compensation from the defendant. Jurisdiction is invoked under 28 U.S.C. § 1332.

Plaintiffs' complaint sets out five counts against the defendant. Count I states a claim in strict liability; Count II states a claim for breach of warranty; and Counts III, IV and V state claims of negligence. Presently before the Court is defendant's motion for summary judgment on Counts I, II, IV and V of plaintiffs' complaint and on the issue of consequential damages. The defendant's contentions are (1) that plaintiffs' claims are barred by applicable statutes of limitation and (2) that consequential damages were properly excluded by agreement between the plaintiffs and Armco and are not recoverable. The Court will consider each argument in turn.

I

Before the Court can determine whether any of the counts of plaintiffs' complaint are subject to a statute of limitations defense, the Court must ascertain the appropriate limitation on each count. The contract for the sale of the pipe was made in Georgia. The pipe was rolled and fabricated in Kentucky, warehoused in Georgia, and delivered to Alabama. The injury and damage occurred in Alabama. Thus, the Court is faced initially with a conflict of laws problems.

In diversity of citizenship cases, the federal courts, when deciding questions of conflict of laws, must follow the rules prevailing in the States in which they sit. Klaxon Company v. Stentor Electric Manufacturing Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The Court is therefore subject to the prevailing Georgia rules on conflict of laws.

In Georgia, statutes of limitation are remedial and procedural rather than substantive, Thomas v. Clarkson, 125 Ga. 72, 54 S.E. 77 (1906), so Georgia courts apply the statute of limitation of Georgia even when the substantive law of another jurisdiction controls. Indon Industries, Inc. v. Charles S. Martin Distributing Company, Inc., 234 Ga. 845, 218 S.E.2d 562 (1975); Fimian v. Guy F. Atkinson Co., 209 Ga. 113, 70 S.E.2d 762 (1952). Thus, the Court must apply the Georgia statutes of limitation which provide that the cause at issue shall be brought as an action within four years after the right of action accrues. Ga. Code Ann. §§ 3-1001, 1002.¹ However, this does not necessarily mean that the date of accrual of this action, a matter of substantive law, is determined by Georgia law as well.

"The law of the place where the tort or wrong has been committed is the law by which liability is to be determined. The place of the wrong is the place where the injury was sustained rather than where the acts were committed. It is the place where the last event necessary to make an actor liable for an alleged tort takes place." Orr v. Sassaman, 239 F.2d 182, 186 (5 C.A. 1957); Brooks v. Eastern Air Line, Inc., 253 F.Supp. 119 (N.D.Ga.1966); Whitaker v. Harrell Kilgore Corp., 418 F.2d 1010 (5 C.A. 1969).

Since the injury and damage in this action occurred in Alabama, after delivery and installation of the pipe in that state, the law of that state is the applicable substantive law of liability in this action. Hudnall v. Kelly, 388 F.Supp. 1352 (N.D.Ga. 1975); Baron Tube Company v. Transport Insurance Co., 365 F.2d 858 (5th Cir. 1966); Western & Atlantic R.R. Co. v. Strong, 52 Ga. 461 (1874). Thus, while the Georgia statute of limitations is to be applied, it is for Alabama law to determine when the cause of action accrued. Baron Tube Company v. Transport Insurance Company, supra.

It appears to be the rule in Alabama that an action in tort accrues and the time of limitation begins to run when injury happens or damage accrues, and not from the date of the act causing the injury or damage. Sanderson v. Ford Motor Company, 483 F.2d 102 (5th Cir. 1973). That is to say that a cause of action accrues as soon as the party in whose favor it arises is entitled to maintain an action thereon. Home Insurance Co. v. Stuart-McCorkle, Inc., 291 Ala. 60, 285 So.2d 468 (1973).

The pipe which is the subject of the instant action was sold by Armco to the plaintiffs in August or September of 1972. It was installed in the dam in September of 1972. After its installation the pipe improperly deflected. At that time plaintiffs' cause of action accrued. However, no evidence has been shown the Court to establish when the deflection actually occurred and plaintiffs' cause of action accrued. This is crucial in determining whether the statute of limitations has run on plaintiffs' claims in tort.

Defendant Armco relies on paragraph 17 of plaintiffs' complaint to establish that plaintiffs' cause of action accrued more than four years before suit was commenced. In paragraph 17 plaintiffs allege that within one year after the installation of the pipe September, 1972 it began to show a noticeable deflection and distortion. Defendant argues quite logically that since the deflection must have occurred either before or at the time of its discovery, and since its discovery must have occurred before or during September, 1973, then plaintiffs' cause of action must have accrued no later than September, 1973. Reasoning thusly, defendant concludes that since this action was not filed until December, 1977, it is barred by Georgia's four-year statute of limitations.

However, discovery in this action has revealed that plaintiffs did not discover the deflection until January, February or March, 1974. See Answer # 10 to Defendant's First Interrogatories; Deposition of Edward A. Cash (Second), pages 62-63; Deposition of Max Cash, page 169, lines 2-6. It is clear under Rule 15, Fed.R.Civ.P., that plaintiffs could amend their complaint to conform to these discovered facts,² and that the Court is not limited to the pleadings in determining a motion for summary judgment, Fed.R.Civ.P. 56(c). Furthermore, the burden is on the party moving for summary judgment to show the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to judgment as a matter of law. Weinberger v. Hynson, Westcott & Dunning, 412 U.S. 609, 93 S.Ct. 2469, 37 L.Ed.2d 207 (1973); Adickes v. S. H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); United States Steel Corp. v. Darby, 516 F.2d 961 (5th Cir. 1975). Having failed to establish the fact that plaintiffs' cause of action accrued more than four years before this suit was commenced, the defendant's motion for summary judgment as to Counts I, IV and V must be denied. The Court notes that plaintiffs have conceded that Count II of plaintiffs' complaint is barred by the applicable statute of limitations and summary judgment is granted defendant as to that count.

II

Defendant Armco's motion for summary judgment on the issue of consequential damages calls for an interpretation by the Court of the terms of the agreement between Armco and the plaintiffs. The Court must first determine what law would govern a Georgia court's interpretation of a contract made in Georgia but to be performed in another state. Under Georgia law, the law of the place of the making of a contract will control with respect to matters of that contract's interpretation. Float-Away Door Co. v. Continental Cas. Co., 5 Cir., 372 F.2d 701, certiorari denied 389 U.S. 823, 88 S.Ct. 58, 19 L.Ed.2d 76 (5th Cir. 1966). Thus, as a federal court sitting in diversity, this Court will apply Georgia law to the interpretation of the contract between Armco and the plaintiffs.

The transaction from which this suit has arisen involved a sale of goods. Article 2 of the Georgia Uniform Commercial Code governs "transactions in goods". Ga. Code Ann. § 109A-2-102. Article 2 allows a seller to limit its liability and to exclude certain types of damages stating specifically in Ga. Code Ann. § 109A-2-719 as follows:

(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 replace of nonconforming goods or parts; and

(b) resort to a remedy as provided in 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 commercial is not.

Armco limited its damages in accordance with the above section and excluded any liability for consequential damages in an "Acknowledgment" sent by Armco to Edward Cash to confirm his order for the plaintiffs' purchase of pipes. On the back of the "Acknowledgment" are set forth "Conditions of Sale". Paragraph 7 of the Conditions is as follows:

7. There

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