Figgie International v. Serralles

• Decision Date: 07 May 1999
• Docket Number: No. 98-1739,CA-96-330-1-2,98-1739
• Citation: 190 F.3d 252
• Parties: (4th Cir. 1999) FIGGIE INTERNATIONAL, INCORPORATED, Plaintiff-Appellee, v. DESTILERIA SERRALLES, INCORPORATED, Defendant-Appellant. () Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 252

190 F.3d 252 (4th Cir. 1999)

FIGGIE INTERNATIONAL, INCORPORATED, Plaintiff-Appellee, v. DESTILERIA SERRALLES, INCORPORATED, Defendant-Appellant.

No. 98-1739 (CA-96-330-1-2)

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Argued: May 7, 1999

Decided: August 20, 1999

Appeal from the United States District Court for the District of South Carolina, at Charleston. Falcon B. Hawkins, Senior District Judge.

COUNSEL ARGUED: Harold Alan Oberman, OBERMAN & OBERMAN, Charleston, South Carolina, for Appellant. James Earle Reeves, BARNWELL, WHALEY, PATTERSON & HELMS, L.L.C., Charleston, South Carolina, for Appellee. ON BRIEF: Marvin I. Oberman, OBERMAN & OBERMAN, Charleston, South Carolina; A. Arthur Rosenblum, Charleston, South Carolina, for Appellant. B. Craig Killough, BARNWELL, WHALEY, PATTERSON & HELMS, L.L.C., Charleston, South Carolina, for Appellee.

Before WIDENER, MOTZ, and TRAXLER, Circuit Judges.

Affirmed by published opinion. Judge Traxler wrote the opinion, in which Judge Widener and Judge Motz joined.

OPINION

TRAXLER, Circuit Judge:

This action arises out of a sales agreement between Destileria Serralles, Inc. ("Serralles"), a bottler of rum, and Figgie International, Inc. ("Figgie"), a manufacturer of bottle-labeling equipment. Following Figgie's unsuccessful attempts to provide satisfactory bottlelabeling equipment to Serralles under the agreement, Serralles returned the equipment and received a refund of the purchase price. When a dispute arose as to whether Serralles was entitled to damages for breach of the agreement, Figgie instituted this declaratory judgment action, seeking a determination that Serralles is limited under the agreement to the exclusive remedy of repair, replacement, or return of the equipment. See S.C. Code Ann. § 36-2-719 (Law. Coop. 1976). Serralles, on the other hand, contends that it is entitled to the full array of remedies provided by the South Carolina Uniform Commercial Code (the "UCC" or "Code"). See S.C. Code Ann. §§ 362-712, -714, and -715 (Law. Co-op. 1976). The district court granted Figgie's motion for summary judgment and denied Serralles' motion for partial summary judgment. Finding no error in the district court's judgment, we affirm.

I.

Serralles, a distributor of rum and other products, operates a rum bottling plant in Puerto Rico. In June 1993, Serralles and Figgie entered into a written agreement under which Figgie was to provide bottle-labeling equipment capable of placing a clear label on a clear bottle of "Cristal" rum within a raised glass oval. When the bottlelabeling equipment was installed in the Serralles plant in April 1994, however, problems arose immediately. Over the course of the next several months, Figgie attempted to repair the equipment to achieve satisfactory performance. However, by November 1994, the equipment still did not work properly, prompting Figgie to refund the purchase price and Serralles to return the equipment.

Additionally, Serralles requested that Figgie pay for alleged losses caused by the failure of the equipment to perform as expected and by the delay in obtaining alternative equipment. Unable to reach a compromise, Figgie instituted this declaratory judgment action, asserting that it owed no further obligations to Serralles under the agreement because Serralles' remedy for breach was limited to repair, replacement, or refund -both under the written terms and conditions of the sales agreement and pursuant to usage of trade in the bottle-labeling industry.

With regard to the alleged limitation of remedy in the sales agreement, Figgie asserts that standard terms and conditions accompanying the sales agreement contained the following language:

Buyer's exclusive remedies for all claims arising out of this agreement and the transaction to which it pertains shall be the right to return the product at buyer's expense, and, at seller's option, receive repayment of the purchase price plus reasonable depreciation for the repair and/or replacement of the product. . . . Seller shall not be subject to any other obligations or liabilities whatsoever with respect to this transaction, and shall under no circumstances be liable for delays, or for any consequential, contingent or incidental damages.

J.A. 13. Figgie, however, has been unable to produce the original sales agreement, asserting that it was lost during a business reorganization. Hence, Figgie is forced to rely upon standard terms and conditions that purportedly accompanied every sales agreement entered into during the time that the Serralles agreement was executed. Serralles, on the other hand, has produced its copy of the agreement, the last page of which stated that "[t]his quotation is made subject to the additional general terms and conditions of sale printed on the reverse hereof," but the reverse side of the page is blank. Figgie asserts that the absence of the general terms and conditions on Serralles' copy is most certainly a copying mistake, whereas Serralles asserts that they were never part of the agreement.

Although conceding at oral argument that a factual dispute exists as to whether the written standards and conditions accompanied the original sales agreement, Figgie asserts that it is nevertheless entitled to summary judgment because, under the UCC, usage of trade in the bottle-labeling industry would supplement the sales agreement with the identical limited remedy of repair, replacement, or refund. See S.C. Code Ann. § 36-1-205(3) (Law. Co-op. 1976). Serralles, of course, disputes that usage of trade imposes this limitation and, alternatively, asserts that because the limited remedy has "fail[ed] of its essential purpose," S.C. Code Ann. § 36-2-719(2), it is entitled to the full array of remedies provided by the UCC.

II.

We review the district court's judgment below de novo. See Halperin v. Abacus Tech. Corp., 128 F.3d 191, 196 (4th Cir. 1997). Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The rule requires that the court enter summary judgment against a party who, "after adequate time for discovery . . . fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In determining whether there is a genuine issue of material fact, we view the facts in the light most favorable to the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

III.

We first address Serralles' contention that the district court erred in granting Figgie's motion for summary judgment. Specifically, the district court concluded that usage of trade in the bottle-labeling industry supplemented the agreement between Figgie and Serralles with the limited remedy of repair, replacement, or return in the event of a breach. Serralles disputes that usage of trade supplies such a limited remedy and, in any event, contends that the limited remedy failed of its essential purpose.

Because the crux of this appeal centers on whether the agreement between the parties limited Serralles' remedy for breach to repair, replacement, or refund of the purchase price, we begin with the language of S.C. Code Ann. § 36-2-719, which governs modifications or limitations to the remedies otherwise provided by the UCC for the breach of a sales agreement. Section 36-2-719 provides that:

(1) Subject to the provisions of subsections (2) and (3) of this section and of the preceding section (§ 36-2-318) on liquidation of damages,

(a) the agreement may provide for remedies in addition to or in substitution for those provided in this chapter and may limit or alter the measure of damages recoverable under this chapter, 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; and

(b) resort to a remedy as provided is 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.

Under these provisions, parties to a commercial sales agreement may provide for remedies in addition to those provided by the UCC, or limit themselves to specified remedies in lieu of those provided by the UCC. An "[a]greement" for purposes of the UCC is defined as "the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade. . . ." S.C. Code Ann.§ 36-1-201(3) (Law. Co-op. 1976) (emphasis added). In turn, the Code provides that"[a] course of dealing between parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement." S.C. Code Ann. § 36-1-205(3); see also Weisz Graphics v. Peck Indus. Inc., 403 S.E.2d 146, 150 (S.C. Ct. App. 1991) (holding that industry standard supplemented the express provisions of a written contract).

"Usage of trade" is defined as "any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in...