H. Sand & Co., Inc. v. Airtemp Corp.

• Decision Date: 03 June 1991
• Docket Number: D,No. 1099,1099
• Citation: 934 F.2d 450
• Parties: 14 UCC Rep.Serv.2d 1111 H. SAND & CO., INC., Plaintiff-Appellant, v. AIRTEMP CORPORATION, Defendant-Appellee. ocket 90-7879.
• Court: U.S. Court of Appeals — Second Circuit

Page 450

934 F.2d 450

14 UCC Rep.Serv.2d 1111

H. SAND & CO., INC., Plaintiff-Appellant, v. AIRTEMP CORPORATION, Defendant-Appellee.

No. 1099, Docket 90-7879.

United States Court of Appeals, Second Circuit.

Argued Feb. 25, 1991.

Decided June 3, 1991.

Stuart J. Moskovitz, (Berman, Paley, Goldstein & Berman, New York City, of counsel), for plaintiff-appellant.

John B. Sherman (Weisman, Celler, Spett & Modlin, New York City, of counsel), for defendant-appellee.

Before OAKES, Chief Judge, CARDAMONE and MAHONEY, Circuit Judges.

CARDAMONE, Circuit Judge:

This appeal centers on the date of delivery of four chillers used in the air conditioning system at the New York Port Authority Bus Terminal Building in Manhattan. Unlike beauty, the delivery of property is not in the eye of the beholder. That is a subjective notion, while the transfer of goods occurs when the facts of delivery are objectively established.

The appellant, H. Sand & Co., Inc. (Sand), ordered the chillers in 1977 from the appellee, Airtemp Corporation, in fulfillment of Sand's sub-contract with the general contractor, Carlin-Atlas Joint Venture, to install the heating, ventilation, and air conditioning in the reconstruction and expansion of the Bus Terminal at the corner of 8th Avenue and 40th Street in New York City. Sand appeals from a grant of summary judgment dismissing its suit for breach of warranty on the contract calling for delivery of the chillers, from an earlier ruling dismissing Count IV of its amended complaint, and from a denial of its motion for reargument.

Sand sued Airtemp late in 1982 alleging the chillers were defective and that it expended considerable funds repairing them. Sand amended its complaint to include Count IV, which asserts that Airtemp is liable not only in damages to Sand, but also

for damages to the Port Authority arising from problems with the defective chillers because, Sand alleged, the Port Authority may hold Sand liable for those same damages. The district court dismissed Count IV sua sponte and granted summary judgment in favor of Airtemp on the other counts in Sand's complaint, holding that they were all barred by the statute of limitations. Because we think the district court overlooked a genuine issue of material fact that precludes the grant of summary judgment, we reverse and remand the case to it for further proceedings.

FACTS

Sand asserts it entered into the 1977 contract with Airtemp for four motor driven hermetic centrifugal chillers, which constituted a cooling system, and that under the contract accessories and services were also to be provided. Sand sent its purchase order form--dated June 6, 1977 and marked job number 1208-AA--to Airtemp for the four chillers. The order was received by Airtemp a week later, as indicated by a stamp on its face. In reply, Airtemp sent Sand an invoice dated March 1, 1984 for one of the chillers, referencing Sand's purchase order number 1208-AA. This is the only document acknowledging Sand's order.

All four chillers were shipped by Airtemp to Sand's agent, Associated Rigging & Hauling Corp., between January and March, 1978. One of them (chiller # 4) was not tested prior to being shipped because by the time it was ready to be tested Airtemp was in the process of relocating its testing facilities from Kentucky to Edison, New Jersey. In November 1978 chiller # 4 was sent--at Airtemp's expense and direction--from Associated Rigging & Hauling to Airtemp's Edison plant for a test run. After testing the chiller, Airtemp shipped it back to Associated Rigging & Hauling in January, 1979.

The general contractor, Carlin-Atlas, did not start up any of the chillers until the middle of 1980. Sand states that shortly after being started the chillers exhibited defects. When it contacted Airtemp regarding these problems, Airtemp refused to perform any repair work without additional payment. As a result, Sand made its own repairs and withheld $10,000 of the purchase price. The Port Authority officially accepted the equipment on May 23, 1981.

PRIOR PROCEEDINGS

On December 16, 1982 Sand sued Airtemp's parent corporation, Fedders Corp., in the Supreme Court of New York County for damages arising out of the defects in the chillers. The parties agreed to dismiss the action without prejudice to allow Sand to bring its suit in federal court, and further stipulated that the action be deemed to have been commenced on December 16, 1982 for statute of limitations purposes. After Sand brought its suit in the United States District Court for the Southern District of New York (Cooper, J.), Airtemp asserted the limitations bar and counterclaimed for the withheld $10,000.

In December 1983 the Port Authority told Carlin-Atlas it was liable for approximately $650,000 in expenses incurred as a result of the defective chillers. On December 16, 1984 Carlin-Atlas and the Port Authority signed an agreement of settlement and general release under which the Port Authority agreed to limit its claim against Carlin-Atlas for damages to the amount:

if any, finally and unappealably awarded and received by [Carlin-Atlas'] subcontractor, H. Sand & Company, in their pending lawsuit against the centrifugal chiller manufacturer for damages, but only insofar as the award is ... exclusively based upon the claim or potential claim of the Contractor for damages against H. Sand either under a theory of indemnity to the Contractor or otherwise ... minus 25% of the amount of said damages, representing the attorney's fees of H. Sand & Co. [or 40% of the amount of a settlement in the same suit after 25% for attorney's fees].

A copy of the same contract, signed by Sand's Senior Vice President, bears an additional paragraph stating at the end Acknowledged, agreed and accepted this 18 day of January 1985 and further agreed that, except as aforesaid, no other right of [Carlin-Atlas] or H. Sand under their applicable subcontract shall be deemed to be waived or released hereunder and it is further agreed that, as between the Contractor and H. Sand, all of the terms and provisions of this agreement shall be binding upon and shall enure to the benefit of H. Sand.

On January 25, 1984 Sand amended its complaint against Airtemp to add a Count IV for the amount of the Port Authority's damages.

In late 1985, the district court requested legal memoranda setting forth the parties' legal positions regarding the viability of Sand's claim on behalf of the Port Authority for damages. Both parties submitted memoranda, and on April 18, 1986 Judge Cooper filed an order dismissing sua sponte Count IV of the complaint. On October 21, 1986 the court denied Sand's motion for reconsideration.

Airtemp thereafter filed a motion for summary judgment. The district court granted the motion and dismissed Sand's action as time-barred under the New York Uniform Commercial Code's (U.C.C.) four-year statute of limitations. 738 F.Supp. 760 (S.D.N.Y.1990). On August 30, 1990 it denied plaintiff's motion for reargument, which alleged that summary judgment had improperly been granted without regard for a genuine issue of material fact--whether the shipment of chiller # 4 in 1978 was a "tender of delivery" sufficient to trigger the statute of limitations. 743 F.Supp. 279 (S.D.N.Y.1990). From these several orders, Sand appeals.

DISCUSSION

I Tender of Delivery

We first consider whether the district court properly granted summary judgment dismissing Sand's action as time-barred under the applicable statute of limitations, viewing the evidence, as we must, in the light most favorable to Sand, the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). The contract must be construed under applicable state law including the state statute of limitations. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The parties agree that New York law governs the contract and that New York's U.C.C. provides the substantive law governing this sale of goods.

The applicable statute of limitations is set forth in N.Y.U.C.C. Sec. 2-725:

(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.

(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered. (emphasis added).

The district court found that--for purposes of Sec. 2-725(2)--tender of delivery of the chillers took place between January and March 1978 when chiller # 4 was first delivered to Associated, so that the statute of limitations expired, at the latest, in March 1982, nearly nine months before Sand filed suit in December 1982. 738 F.Supp. at 771. Sand contends that tender of delivery did not take place until January, 1979 when the same chiller was redelivered to Associated--after Airtemp had tested it--so that the statute of limitations did not expire until January, 1983 one month after it filed suit. There is no question that the resolution of the date of tender of delivery is material, for Sand's ability to bring its claim turns on the resolution of this issue of fact. The only question, therefore, is whether the issue of fact is genuine, that is, whether there is sufficient evidence to allow a jury to find that tender of delivery

occurred within four years of the time Sand filed suit. See U.C.C. Sec. 2-725(1).

A. Appellant's Contention

Tender of delivery takes place under the U.C.C. when the seller puts and holds "conforming goods at the buyer's disposition." N.Y.U.C.C. Sec....