Clark v. DeLaval Separator Corp.

• Decision Date: 19 March 1981
• Docket Number: No. 79-1753,79-1753
• Citation: Clark v. DeLaval Separator Corp., 639 F.2d 1320 (5th Cir. 1981)
• Parties: 30 UCC Rep.Serv. 1542 Rodney CLARK, Plaintiff-Appellee, v. DeLAVAL SEPARATOR CORPORATION, Defendant-Appellant. . Unit A
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1320

639 F.2d 1320

30 UCC Rep.Serv. 1542

Rodney CLARK, Plaintiff-Appellee, v.DeLAVAL SEPARATOR CORPORATION, Defendant-Appellant.

No. 79-1753.

United States Court of Appeals, Fifth Circuit.

Unit A

March 19, 1981.

Leonard E. Davis, John H. Minton, Jr., Tyler, Tex., for defendant-appellant.

Harkness, Friedman & Kusin, Texarkana, Tex., Cahill Hitt, Houston, Tex., Harry B. Friedman, Texarkana, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Eastern District of Texas.

Before COLEMAN, RUBIN and WILLIAMS, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

In this diversity suit, appellantDeLaval Separator Corp.(DeLaval) appeals a judgment on a jury verdict finding DeLaval liable for breach of an implied warranty of merchantability under Texas law in the sale of a milking system that appelleeRodney Clark purchased and used in his dairy business.

On January 26, 1973, Clark, a dairy operator, entered into a written sales contract with Sulphur Springs Farm Store for the purchase of four Model 200 milking machines and an automatic wash system to be used in Clark's dairy business.This equipment had been manufactured by appellant DeLaval, and was sold and installed by Sulphur Springs Farm Store.Sulphur Springs Farm Store did not sell the milking machines as agent for DeLaval and is not a party to this suit.The equipment was delivered and installed in February, 1973, was used by Clark for approximately three years.

In 1976, Clark purchased two more Model 200 milking machines.These two additional machines were also purchased pursuant to a written sales contract, and were installed by Sulphur Springs Farm Store in March of that year.

Later in 1976, Clark's cattle herd suffered a severe epidemic of mastitis, an udder infection.Clark attributed the epidemic to the milking equipment he purchased in 1973 and 1976.Clark removed the milking equipment from his dairy operation in March of 1977.

On March 11, 1977, Clark filed this suit against DeLaval in the United States District Court for the Eastern District of Texas, seeking recovery for economic losses incurred by his dairy business during 1976 and the early part of 1977.The suit was based on two legal claims, one for an alleged breach of an implied warranty of merchantability, Tex.Bus. & Comm.Code Ann. § 2.314(Vernon 1968), and one for the alleged violation of the Texas Deceptive Trade Practices-Consumer Protection Act, Tex.Bus. & Comm.Code Ann. § 17.41 et seq.(Vernon Supp.1980).Clark sought $206,000.00 in damages, treble damages under the Texas Deceptive Trade Practices Act, and attorney's fees.

The jury verdict found liability for breach of an implied warranty of merchantability, but rejected Clark's claim under the Texas Deceptive Trade Practices Act.Damages were assessed at $46,000.50, and the district court entered judgment for that amount.

After making unsuccessful motions for judgment notwithstanding the verdict and a new trial, DeLaval now appeals that judgment.Since the jury rejected Clark's claim under the Texas Deceptive Trade Practices Act and based its award on Clark's claim for breach of an implied warranty of merchantability, the present appeal involves only the warranty claim.DeLaval's appeal presents four issues for our determination: (1) whether a warranty of merchantability from DeLaval to Clark was implied in the contracts between Clark and Sulphur Springs Farm Store for the two sales of the milking equipment; (2) whether Clark's action for breach of an implied warranty as to the 1973 equipment was barred by the four-year limitations period in § 2.725(a) of the Texas Business & Commerce Code,Tex.Bus. & Comm.Code Ann. § 2.725(a)(Vernon 1968);(3) whether there was sufficient evidence to sustain the jury's verdict of breach of warranty of merchantability; and (4) whether the jury verdict was fatally tainted by the introduction into the jury room by a juror of extraneous matter not in evidence.Since we agree with appellant DeLaval on the third issue, that involving the sufficiency of the evidence, we reverse the judgment below and render for DeLaval.

I.Implied Warranty of Merchantability

Under Texas law, a warranty of merchantability is implied in a contract for the sale of goods by a merchant unless the warranty is excluded or modified in accordance with statutory requirements.Tex.Bus. & Comm.Code Ann. § 2.314(a)(Vernon 1968).Under Texas law, a manufacturer of a product may be held liable to an ultimate purchaser of that product for economic loss which results from the manufacturer's breach of the implied warranty of merchantability of § 2.314, without regard to privity of contract between the parties.Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77, 81(Tex.1977).Therefore, an implied warranty of merchantability under § 2.314 arose between Clark, the purchaser, and DeLaval, the manufacturer, as a result of the purchase of the equipment from the retailer, Sulphur Springs Farm Store, despite the absence of privity of contract between Clark and DeLaval.

An implied warranty of merchantability arising under § 2.314 may be disclaimed by the seller under § 2.316 of the Texas Business & Commerce Code,Tex.Bus. & Comm.Code Ann. § 2.316(Vernon 1968).Section 2.316 provides, in pertinent part:

(b) Subject to Subsection (c), 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.

(c) Notwithstanding Subsection (b)

(1) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is,""with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty.

Tex.Bus. & Comm.Code Ann. § 2.316(Vernon 1968).

The contracts of sale between Clark and Sulphur Springs Farm Store contained expressed disclaimers of any and all implied warranties on the part of Sulphur Springs Farm Store.They did not, however, expressly disclaim any warranties on the part of DeLaval, nor did DeLaval itself make any implied warranty disclaimers.DeLaval argues, though, that the implied warranty disclaimers in the contracts between Clark and Sulphur Springs Farm Store served to disclaim not only any implied warranties between Clark and Sulphur Springs Farm Store, but also any implied warranties which otherwise may have arisen between Clark and itself, the remote manufacturer.

We disagree.The disclaimers in the Clark-Sulphur Springs Farm Store contracts of any implied warranties certainly satisfied the requirements of § 2.316, and therefore would have insulated Sulphur Springs Farm Store from any liability for breach of an implied warranty had Sulphur Springs Farm Store been a party to this suit.Contrary to DeLaval's contention, however, these disclaimers did not similarly insulate DeLaval from liability.

Section 2.316 does not expressly indicate whether a manufacturer may rely on a subsequent retailer's disclaimer of implied warranties to avoid liability for the sale of unmerchantable goods, or whether he must instead make his own disclaimer or have one made expressly for him.It appears, though, that in order for a manufacturer to disclaim under Texas law the two implied warranties created by the Texas version of the Uniform Commercial Code, i. e., that of merchantability (§ 2.314) and of fitness for a particular purpose (§ 2.315), the manufacturer's implied warranties must be expressly excluded as such.In dispelling the concern that the lack of a privity requirement in a warranty action would lead to unlimited liability for manufacturers, the Texas Supreme Court in Nobility Homes, supra, noted that § 2.316"allows manufacturers to restrict their liability by the exclusion or modification of both implied and expressed warranties."557 S.W.2d at 82.This statement implies that § 2.316 contemplates that a seller, whether a manufacturer or retailer, seeking to rely on the protection of that provision for himself must have made a disclaimer which satisfies that provision, or that at least the disclaimer must explicitly name the manufacturer as a disclaiming party.See alsoGriffin v. H.L. Peterson Co., 427 S.W.2d 140, 144(Tex.Civ.App. Dallas 1968, no writ)(manufacturer's warranty deemed unimportant in breach of warranty action against retailer, in part because warranty "(was) stated to be the warranty of manufacturer only").

This conclusion is further supported by a consideration of the policy underlying § 2.316, which, through its requirement that any disclaimer language be clear and conspicuous, seeks to protect a buyer from surprise caused by unexpected and unbargained-for language of disclaimer.Tex.Bus. & Comm.Code Ann. § 2.316, Comment 1 (Vernon 1968).A disclaimer is "conspicuous""when it is so written that a reasonable person against whom it is to operate ought to have noticed it."Tex.Bus. & Comm.Code Ann. § 1-201(10)(Vernon 1968).A retailer's disclaimer for his own benefit would not, and ought not be deemed to, give a reasonable person (buyer) notice that the manufacturer was also disclaiming any implied warranties.To the contrary, a manufacturer's attempted use of a retailer's disclaimer to insulate himself from liability might very well surprise a remote buyer.SeeRehurek v. Chrysler Corp., 262 So.2d 452(Fla.Dist.Ct.App.1972)("average purchaser should not be called upon to equate the warranties made to him by the seller with warranties made by (the manufacturer)").

DeLaval cites Henderson v. Ford Motor Co., 547 S.W.2d 663(Tex.Civ.App. Amarillo 1977, no writ), Lankford v. Rogers Ford Sales, 478 S.W.2d 248(Tex.Civ.App. El Paso1972, writ ref'd n. r. e.), andBoyd v. Thompson-Hayward Chemical Co., 450 S.W.2d 937(...