Cleveland Lumber Company v. Proctor & Schwartz, Inc.

• Decision Date: 06 May 1975
• Docket Number: Civ. A. No. C 74-1511 A.
• Citation: 397 F. Supp. 1088
• Parties: CLEVELAND LUMBER COMPANY, Plaintiff, v. PROCTOR & SCHWARTZ, INC., Defendant.
• Court: U.S. District Court — Northern District of Georgia

397 F. Supp. 1088

CLEVELAND LUMBER COMPANY, Plaintiff, v. PROCTOR & SCHWARTZ, INC., Defendant.

Civ. A. No. C 74-1511 A.

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

January 31, 1975.

On Motion to Reconsider May 6, 1975.

COPYRIGHT MATERIAL OMITTED

Ben F. Johnson, III, Alston, Miller & Gaines, Atlanta, Ga., for plaintiff.

James H. Bratton, Jr., Gambrell, Russell, Killorin, Wade & Forbes, Atlanta, Carson, Proctor & Schwartz, and Drinker, Biddle & Reath, Philadelphia, Pa., for defendant.

ORDER

JAMES C. HILL, District Judge.

This diversity action is before the Court on defendant's motion to dismiss, or in the alternative, to stay the action pending the outcome of litigation in the Court of Common Pleas, Philadelphia, Pennsylvania. On the motion to dismiss, defendant asserts that the complaint does not set forth a claim upon which relief can be granted as the claim is outside the applicable statute of limitations. See Freund v. Insurance Company of North America, 370 F.2d 924 (5th Cir. 1967). Since both parties rely on material outside of the pleadings, this motion shall be treated as a motion for summary judgment pursuant to Rule 56, Fed.R.Civ.P. Rule 12(b), Fed.R.Civ. P.

I. MOTION TO DISMISS.

A. Statute of Limitations.

Plaintiff's first contention is that the action is not barred by any statute of limitations. The contract in question states that it is to be read in light of Pennsylvania law, but "under the Erie-Klaxon doctrine, a federal court sitting as a diversity court must apply the conflict of law rules of the forum state." Whitaker v. Harvell-Kilgore Corp., 418 F.2d 1010, 1015 (5th Cir. 1969). Therefore, the Court must look to Georgia law to ascertain what law to apply and, as statutes of limitations are generally regarded as procedural, Thomas v. Clarkson, 125 Ga. 72, 54 S.E. 77 (1906), this Court must apply the Georgia statute of limitations. Fimian v. Guy F. Atkinson Co., 209 Ga. 113, 70 S. E.2d 762 (1952).

Using Georgia law, the defendant asserts that the four year limitation of 109A Ga.Code Ann. § 2-725 (hereinafter 109A-2-725) should apply, while plaintiff claims that the six year limitation of 3 Ga.Code Ann. § 705 (hereinafter 3-705) is applicable.

It is plaintiff's position that the contract under consideration was not a contract for the sale of goods as defined in 109A Ga.Code Ann. § 2-105(1), and therefore the Georgia enactment of the Uniform Commercial Code (UCC) cannot apply. Plaintiff says, rather, that the general limitations of 3-705 which attaches to simple contracts, other than for sale of goods, must be used.

In support of this contention, plaintiff cites the Court to Meyn v. Ross, 9 UCC Reporting Service 1357 (Pa.Ct. of Common Pleas, Northumberland Cty.1971). In that case the parties entered into a contract whereby defendant agreed to construct a home for plaintiffs. Plaintiffs sued, alleging that the defective installation of copper tubing in the plumbing system caused extensive damage to the home. The Court held that the UCC statute of limitations did not apply because:

"The transfer of property in the copper tubing and plumbing system was but incidental to the main purpose of the contract, which was the furnishing of labor and assembly of materials in the erection and construction of a plumbing system as part of the home being constructed by defendant for plaintiffs." 9 UCC Reporting Service at 1359.

The Court went on to hold that the contract was in no sense a contract of sale, but rather, a construction contract.

The facts of the Meyn case, however, are inapposite to the situation sub judice. Whereas there the sale of goods was incidental to the basic purpose of the contract, here, the services involved were incidental to the basic purpose of this contract; the sale of a drying kiln to plaintiff.

It is difficult to conceive of a contract, in the proportions of the instant contract, that would not provide for incidental services in connection with the purchase. The Eighth Circuit Court of Appeals stated in a similar situation, in deciding whether or not a contract fell within the UCC's definition of a sale of goods:

"The applicability of the UCC to the April contract is clear from and within its four corners. The `things' sold are all items of tangible property, normally within the flow of commerce, portable at the time of contract. They are not the less `goods' within the definition of the act because service may play a role in their ultimate use. The UCC contains no such exception. `Services,' continues Nordstrom, . . . at 47 R. Nordstrom, Handbook of the Law of Sales, `always play an important role in the use of goods, whether it is the service of transforming the raw material into some usable product or the service of distributing the usable product to a point where it can easily be obtained by the consumer. The 109A Ga.Code Ann. § 2-105(1) definition should not be used to deny UCC application simply because an added service is required to inject or apply the product.' In short, the fact that the contract `involved substantial amounts of labor' does not remove it from inclusion under the UCC . . .." Bonebrake v. Cox, 499 F.2d 951, 958-59 (8th Cir. 1974).

The Court finds here that the essence of this contract was the sale of goods movable at the time of identification to the contract for sale. Other clauses in the contract which may amount to services are merely incidental to the main purpose of the contract and do not take it out of the sales provisions of the UCC. Cf. Aluminum Company of America v. Electro Flo Corp., 451 F. 2d 1115 (10th Cir. 1971); Sperry Rand Corp. v. Industrial Supply Corp., 337 F. 2d 363 (5th Cir. 1964). Accordingly, the UCC statute of limitations appears to apply rather than the general Georgia statute of limitations on contracts.

Plaintiff, however, asserts that 109A Ga.Code Ann. § 10-103, as originally enacted, specifically stated that 3-705 would not apply to contracts of sale covered by Article 2 of the UCC, but that this provision was eliminated in the 1963 amendment to 109A-10-103. Plaintiff then reasons that it is arguable that 3-705 applies to all written contracts of sale.

The Court finds no merit in this argument. The general repealer provision of 109A Ga.Code Ann. § 10-104 still stands. It provides that, "All other laws, or parts of laws, in conflict with this Act are hereby repealed." The Court does not feel that there was any implicit repeal of 109A-2-725 by the deletion of the specific repealer, especially in light of 109A Ga.Code Ann. § 1-104 which states that implicit repeal of a UCC provision by subsequent legislation should not be implied if reasonably avoidable.

It is clear to the Court that the specific provisions of 109A-2-725 applies to sales contracts, and that 3-705 applies to all other simple contracts in writing. To hold otherwise would frustrate the purpose of the UCC which is to establish a uniform law of commercial transactions, whereby the maze of conflicting state limitations would be made uniform and predictable. 109A-2-725 has been held to apply in sales contracts even after the repeal of the specific repealer. Moody v. Sears, Roebuck & Co., 324 F.Supp. 844 (S.D.Ga.1971); Everhart v. Rich's, Inc., 128 Ga.App. 319, 196 S.E.2d 475 (1973).

B. New Promise.

Plaintiff's second objection to defendant's motion to dismiss is that even if the limitations of 109A-2-725 were to apply to the instant case, the statute did not start running until August 18, 1970, when defendant allegedly gave a "new promise" to pay.

3 Ga.Code Ann. § 901 states that a "new promise" can renew a right of action that is already barred by the statute of limitations, and 3 Ga.Code Ann. § 903 reads:

"A payment entered upon a written evidence of debt by the debtor, or any other written acknowledgement of the existing liability, shall be equivalent to a new promise to pay."

Defendant's letter of August 18, 1970, from R. Burton, Customer Service Manager of defendant, to Cliff Blalock of plaintiff, upon which plaintiff relies, does not appear sufficient to constitute a new promise. This letter, on the contrary, while stating that defendant would stand behind its warranty, specifically denies liability on most of plaintiff's claim¹ when it says:

"A review of your letter, however, indicates that few, if any, of the items presented will constitute charges directly attributable to incorrect parts or to misinformation on the part of Proctor & Schwartz. The charges include contingent liabilities for which we can accept no responsibility, transportation charges (shipments made FOB our plant), trips to pick up material apparently required by the piping contractors, etc."

In order to constitute a "new promise" the acknowledgement must refer to a particular debt as an existing liability. Duke v. Lynch, 56 Ga.App. 331, 192 S.E. 535 (1937). There must be an express promise to pay the claim or "such an absolute and unqualified admission of it as an existing indebtedness that the law would imply a promise to pay the same." Lambert v. Doyle, 117 Ga. 81, 43 S.E. 416 (1902). The letter upon which plaintiff relies clearly does not meet this criteria, and even if the statement that defendant would stand behind its warranty could be construed as an admission of a debt, it is not definite enough to constitute a "new promise." Morgan Hardware Co. v. American Carriage Co., 22 Ga.App. 168, 95 S.E. 721 (1918).

C. Tort Claim.

Plaintiff's third contention is that Count II of its complaint is based in tort, and therefore, the statute of limitations of 3 Ga.Code Ann. § 1002 (hereinafter 3-1002) applies and not 109A-2-725. Defendant replies that plaintiff has no claim based in tort.

Since the Court is treating defendant's motion as one for summary judgment, it must construe all pleadings most strongly in favor of plaintiff, Gross v. Southern Railway, 414 F.2d 292 (5th Cir. 1969), and all inferences must be drawn in favor of the party opposing the...