May Co. v. Trusnik

• Decision Date: 08 December 1977
• Citation: 54 Ohio App.2d 71,375 N.E.2d 72
• Parties: , 8 O.O.3d 97, 23 UCC Rep.Serv. 1210 The MAY COMPANY, Appellee, v. TRUSNIK, Appellant.
• Court: Ohio Court of Appeals

Page 71

54 Ohio App.2d 71

375 N.E.2d 72, 8 O.O.3d 97, 23 UCC Rep.Serv. 1210

The MAY COMPANY, Appellee, v. TRUSNIK, Appellant.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Dec. 8, 1977.

Syllabus by the Court

An action brought by a merchant for breach of a written installment agreement executed by a buyer of goods after defaulting on the original contract of sale is governed by the four-year statute of limitations for sales contracts, R.C. 1302.98, not by the fifteen-year statute of limitations for written contracts, R.C. 2305.06.

Alan Weinberg, Cleveland, for appellee.

Carolyn McTighe, Cleveland, for appellant.

KRUPANSKY, Judge.

In 1966 defendant Leonard Trusnik (hereinafter referred to as defendant) bought a television set and a refrigerator from plaintiff, The May Company. These purchases were charged to defendant's account at The May Company. When defendant became delinquent on his account, The May Company and defendant's attorney negotiated an "Installment Agreement." It was executed by defendant on February 13, 1968. Under the terms of the agreement, defendant was to pay to The May Company twenty-six monthly installments of Thirty Dollars each commencing on February 15, 1968. In a letter accompanying the installment agreement, The May Company's collection agent stated:

" * * * (U)pon any delinquency regarding the terms of the installment agreement, the mortgaged property should be repossessed and sold at public auction, and any resultant deficiency balance would be charged to the aforementioned debtor."

Defendant defaulted on the installment agreement some time after May 1969.

Thereupon The May Company sued defendant on the account in the Cleveland Municipal Court on June 26, 1973. Through an amended complaint, The May Company changed its cause of action and claimed defendant breached the installment agreement. Defendant answered, denied the allegations of the complaint, asserted the statute of limitations as a defense and counterclaimed for breach of warranty. Upon cross motions, the court entered summary judgment for The May Company.

Defendant appealed, but this court dismissed the appeal because counterclaims were still pending. The lower court amended its judgment entry dismissing the counterclaims. Defendant again appeals, assigning three errors:

"I. The trial court erred in entering summary judgment for the plaintiff because its claim was barred by the statute of limitations.

"II. The trial court's entry of summary judgment for the plaintiff was error contrary to Civil Rule 56 where there were genuine issues of material fact in dispute.

"III. It was error for the trial court to dismiss the defendant's counterclaims when there was no motion to dismiss before the court."

In his first assignment of error, defendant contends the lower court erred in applying the fifteen-year statute of limitations in R.C. 2305.06 rather than the four-year statute of limitations in the Uniform Commercial Code, R.C. 1302.98. R.C. 2305.06 provides:

"Except as provided in Section 1302.98 of the Revised Code, an action upon a specialty or an agreement, contract or promise in writing shall be brought within 15 years after the cause thereof accrued." (Emphasis added.)

R.C. 1302.98(A) (U.C.C. 2-725) states that an action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. ^* There is no question that the four-year statute of limitations in R.C. 1302.98 governs a written contract for the sale of goods. Miles v. N. J. Motors (1972), 32 Ohio App.2d 350, 355, 291 N.E.2d 758. The fact that the contract was in writing does not require application of the fifteen-year statute. In Val Decker Packing Co. v. Corn Products Sales Co. (C.A.6, 1969), 411 F.2d 850, 854, the court reasoned that the " * * * specific statute of limitations relating to the specific subject matter of sales in the Ohio Uniform Commercial Code controls over the general statute of limitations dealing with actions for injuries to person or property." Likewise, the U.C.C. statute of limitations specifically relating to sales should prevail over the general statute of limitations governing contracts in writing. Thus, the original contract executed by the defendant at the time the goods were purchased was governed by the four-year statute.

The novel question presented by this case is whether the installment agreement, executed two years after the original sale, is also governed by the four-year statute of the U.C.C. The May Company argues the installment agreement did not fall within the scope of Article 2 of the U.C.C. because it was not executed contemporaneously with the original contract of sale. However, under R.C. 1302.02 (U.C.C. 2-102), the provisions of Article 2, including the four-year statute of limitations, apply to "transactions in goods." A "transaction" as it is used in U.C.C. 2-102 encompasses a far wider activity than a "sale," Hertz Commercial Leasing Corp. v. Transportation Credit clearing House (1969), 59 Misc.2d 226, 298 N.Y.S.2d 392. We conclude the installment agreement was part of the transaction in goods. Consequently, breach of the agreement triggered the four-year statute of limitations.

The phrase "transactions in goods" was construed in Skinner v. Tober Foreign Motors, Inc. (1963), 345 Mass. 429, 187 N.E.2d 669, a case presenting facts very similar to those in the case at bar. The plaintiffs purchased an airplane from the defendant upon execution of an installment contract and an installment note. Plaintiffs, with the knowledge of defendant, were planning to pay the monthly installments from the profits gained by the use of the airplane. The airplane immediately developed engine trouble, necessitating a one thousand four hundred dollar repair not covered by the warranty. Due to the financial burden this placed on plaintiffs, the parties agreed to an oral reduction in the monthly payments for the first year.

The Supreme Judicial Court of Massachusetts upheld the oral modification under U.C.C. 2-209. That section (R.C. 1302.12 in Ohio) provides that an agreement modifying a contract needs no consideration to be binding. The Skinner court concluded there could be no doubt the contract modification was a transaction in goods bringing the case within the purview of Article 2. Similarly, the installment agreement executed by defendant in the case at bar was simply a modification in the payment terms of the original contract of sale. In a letter to defendant's attorney, The May Company's collection agent stated the goods should be repossessed upon any delinquency under the installment agreement, thereby demonstrating an intent to make the agreement part of the original transaction. Thus, the installment agreement, a modification of the original contract of sale, is governed by the four-year statute of limitations in R.C. 1302.98.

The May Company argues it was no longer a seller of goods in the context of the installment agreement. However, an action brought by a merchant for the price of items purchased by a customer on his or her charge account is governed by the four-year statute of limitations in U.C.C. 2-725 (R.C. 1302.98). Gimbel Bros., Inc., v. Cohen (1969) 6 U.C.C.Rep.Serv. 803. It is an action for breach of the sales contract rather than an action to collect a debt. Gimbel Bros., supra. Since the installment agreement was simply a modification of the original contract of sale, the action instituted by The May Company was, as in Gimbel Bros., an action for breach of the sales contract rather than an action to collect a debt.

It is only when the purchase money is advanced by a third party that an action to recover a balance due is removed from Article 2 of the U.C.C. In Harris Trust and Savings Bank v. McCray (1974), 21 Ill.App.3d 605, 316 N.E.2d 209, the issuer of a bank credit card sued the cardholder to recover the...