Ingram River Equipment, Inc. v. Pott Industries, Inc., 84-1371
| Decision Date | 01 June 1987 |
| Docket Number | No. 84-1371,84-1371 |
| Citation | 816 F.2d 1231 |
| Parties | , 3 UCC Rep.Serv.2d 977, Prod.Liab.Rep.(CCH)P 11,359 INGRAM RIVER EQUIPMENT, INC., Appellee, v. POTT INDUSTRIES, INC., Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
W. Stanley Walch, St. Louis, Mo., for appellant.
Elmer Price, St. Louis, Mo., for appellee.
Before ARNOLD, JOHN R. GIBSON, and MAGILL, Circuit Judges.
This case, which is before us on remand from the Supreme Court, concerns damage claims for defective design and construction of four tank barges that defendant Pott Industries, Inc., built for plaintiff Ingram River Equipment, Inc. The District Court 1 found Pott liable for negligence under federal maritime law and for breach of the implied warranty of fitness for a particular purpose under Mo.Ann.Stat. Sec. 400.2-315. 573 F.Supp. 896 (E.D.Mo.1983). On appeal, we affirmed the District Court's judgment on the negligence theory, rejecting Pott's argument that no recovery is available in an admiralty tort action for "economic loss," that is, for damages to a defective product itself, rather than to persons or other property. 756 F.2d 649, 652-53 (8th Cir.1985). However, the Supreme Court decided in East River Steamship Corp. v. Transamerica Delaval, Inc., --- U.S. ----, 106 S.Ct. 2295, 2302, 90 L.Ed.2d 865 (1986), that there is no negligence or strict products liability in admiralty where the defective product of a manufacturer in a commercial relationship injures only itself. The Court consequently vacated our decision in this case, remanding it to us for further consideration. --- U.S. ----, 106 S.Ct. 3269, 91 L.Ed.2d 360 (1986). We must now evaluate the District Court's alternative, breach-of-warranty theory of liability, a holding that we found unnecessary to address in our first opinion. 756 F.2d at 653 n. 7. We again affirm the judgment of the District Court, except that we disallow its award of prejudgment interest.
Ingram, a barge operator, contracted with Pott, a builder of boats and barges, to purchase four barges and specified that they be equipped with steam-coil systems for heating heavy petroleum products and other heavy liquid cargo; heating makes unloading such cargo easier. Pott submitted plans for the steam-coil systems to Ingram, which approved them. Pott then installed the systems, using furnace-weld pipe as specified in the plans, and delivered the barges to Ingram. Eventually, numerous leaks developed in the steam coils in all four barges. This was caused by water that remained in the coils after steaming and froze. Ingram had repairs made on the coils, but ultimately, in the face of continued leakage problems, had the systems replaced. The replacement systems used seamless pipe, which is stronger than furnace-weld pipe, and were redesigned to facilitate removal of condensed water. Pott refused to pay for the replacements, and Ingram brought this suit.
On Ingram's breach-of-warranty claim, the District Court held that Pott broke its implied warranty of fitness by using pipe so weak that the barges could not serve their particular purpose of carrying heavy oil. The Court awarded damages of $361,757 for repair and replacement of the coils, and prejudgment interest at a rate of 9 per cent.
Ingram's warranty claim is predicated upon Mo.Ann.Stat. Sec. 400.2-315, which adopts Uniform Commercial Code (UCC) Sec. 2-315 as the law of Missouri. This statute states:
Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is ... an implied warranty that the goods shall be fit for such purpose.
The District Court held that Ingram could not recover from Pott on implied-warranty-of-merchantability or express-warranty theories, 573 F.Supp. at 903, and Ingram has not appealed these rulings. An implied warranty of merchantability--a warranty that the goods were fit for their ordinary uses--would have arisen pursuant to Mo.Ann.Stat. Sec. 400.2-314, but was displaced here, the District Court concluded, by the express warranties embodied in the specifications approved by Ingram. See Mo.Ann.Stat. Secs. 400.2-316 Comment 9, and 400.2-317(c). Since the furnace-weld pipe and the coil design Pott employed were called for by the approved specifications, there was no breach of these express warranties. On the other hand, where the course of dealing between the parties establishes the requirements for a warranty of fitness, an exclusion or modification of that warranty must be written and conspicuous, Mo.Ann.Stat. Sec. 400.2-316, and there is no such provision in the agreements between Pott and Ingram.
Pott's position is that several prerequisites to the creation of an implied warranty of fitness for a particular purpose were not met here. First, Pott argues that Ingram's purpose for the goods here was an ordinary rather than a particular purpose. The definition of what constitutes a particular purpose is discussed in Comment 2 to Sec. 400.2-315, which states in pertinent part:
A "particular purpose" differs from the ordinary purpose for which the goods are used in that it envisages a specific use by the buyer which is peculiar to the nature of his business whereas the ordinary purposes for which goods are used are those envisaged in the concept of merchantability and go to uses which are customarily made of the goods in question. For example, shoes are generally used for the purpose of walking upon ordinary ground, but a seller may know that a particular pair was selected to be used for climbing mountains.
However, taking the Comment's illustration a step further, where shoes are sold as mountain-climbing shoes, by, e.g., a store specializing in mountain-climbing gear, use of the shoes to climb mountains is not use for a particular purpose. R. Anderson, 3 Anderson on the Uniform Commercial Code, Sec. 2-315:37 (3d ed. 1983). See generally Id. at Secs. 2-315:36-40; A. Squillante & J. Fonseca, 3 Williston on Sales Sec. 19-5 (4th ed. 1974).
Ingram's purpose for the goods it purchased from Pott was to use them to carry heavy petroleum products on the Mississippi and its tributaries and to heat those products to facilitate their discharge in cold climates. Pott characterizes the goods at issue as heating-coil-equipped tank barges, and argues that carrying and heating heavy petroleum products is the customary use of such products. Pott maintains that Ingram's use of the barges and the heating coils is not unique or peculiar to Ingram's business, since others use heating-coil-equipped tank barges in precisely the same manner; Pott itself had constructed over thirty such barges for use in the same manner before it built these four for Ingram.
Ingram, however, rejoins that Pott errs in suggesting that its use of the goods must be unique to fall within the fitness-for-a-particular-purpose warranty, arguing instead that the question is one of degree. According to Ingram, the proper characterization of the goods here is tank barges, rather than heating-coil-equipped tank barges. Tank barges, Ingram continues, are used to carry a multitude of cargoes, including a variety of chemicals, molasses, and oils and fuel oils of many kinds. The barges here were equipped with steam coils to enable Ingram to carry a particular kind of cargo--cargo that sometimes requires heating to aid discharge. Further, neither Pott nor Ingram deals solely or predominantly in barges that have steam coils; Pott builds and Ingram operates all sorts of barges. In these circumstances, Ingram concludes, the particular-purpose requirement is met.
We agree with Ingram that its use of the goods need not be one-of-a-kind to meet the requirements of Sec. 400.2-315. It is doubtful that even the Comment's example of using a shoe to climb mountains would qualify as a unique use of the shoe. Instead, as we read Comment 2, the key inquiry is not whether anyone else can be found who puts the goods to the same use, but whether the buyer's use is sufficiently different from the customary use of the goods to make it not an ordinary use of the goods; that a buyer's use is not entirely idiosyncratic does not mean that it is ordinary. See R. Anderson, 3 Anderson on Sales, supra, Sec. 2-315:37. Therefore, that others put tank barges to the same use as Ingram does not preclude finding that a warranty of fitness exists.
Whether Ingram's purpose diverges sufficiently from the customary purposes of other buyers to be considered particular turns to a great extent on whether one accepts Pott's characterization of the goods as heating-coil-equipped tank barges, or instead accepts Ingram's portrayal of them as tank barges, which have been equipped with heating coils to serve a particular purpose. And this in turn hinges upon how the factual context in which Ingram and Pott struck their bargain is interpreted. To return to the Comment's shoe illustration,...
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