Miller v. Badgley

Decision Date04 May 1988
Docket NumberNos. 19647-2-,20508-1-I,s. 19647-2-
Citation51 Wn.App. 285,753 P.2d 530
CourtWashington Court of Appeals
Parties, 6 UCC Rep.Serv.2d 1082 Earl MILLER & Linda Miller, husband and wife, Appellants, v. Carole BADGLEY, Respondent.

Gary H. Sexton, Sexton & Bratt, Bremerton, for appellants Earl L. and Linda A. Miller.

Robert W. Thomas, Carla Tachau Lane, Powell, Moss & Miller, Seattle, for respondent Carole Badgley.

SWANSON, Judge.

Earl and Linda Miller appeal from a judgment awarding damages to Carole Badgley in connection with the sale of a boat. The Millers contend the trial court erred in determining that they breached an implied warranty of merchantability by selling a sailboat with a structural defect in the hull-to-keel connection. In a consolidated appeal, Badgley challenges the trial court's denial of her motion for an award of attorney's fees, costs, and sanctions on a supersedeas matter.

In 1978 the Millers purchased the "BONNIE," a 44-foot fiberglass sailboat, from Miller Marine, Inc. on Bainbridge Island. Earl Miller was the president and principal stockholder of the company, which specialized in custom-built sailboats. 1 Miller had been in the boat building business before forming Miller Marine in 1977 and is a well-known builder, sailor, and boat racer. According to one expert witness, Earl Miller "built the biggest, fanciest fiberglass boats that have ever been built in Seattle ..."

The BONNIE is a relatively lightweight, high-performance racing sailboat, with a deep draft, high rigging, and flush deck, but she is also suitable for cruising. For three years, the Millers raced the BONNIE in approximately 25 races per year, including the Swiftsure competition out of Victoria, B.C.

In 1981 Carole Badgley, who was interested in a "Miller 44," saw an advertisement from a boat brokerage company for the BONNIE. After viewing the BONNIE on Bainbridge Island, Badgley began negotiations with Earl Miller. Badgley told Miller that she planned to live on the BONNIE and use it for ocean cruising. Miller advised her that the boat was suitable and safe for these purposes and that the BONNIE was in fact "beefier" in its construction to ensure safety because his family was often on board. Miller also informed Badgley that the BONNIE was designed by Peter Hatfield, a noted Canadian designer, but did not tell her that he himself had modified the original plans and that the BONNIE "was not a standard Miller 44, by a long shot."

Miller's design modifications included the hull-to-keel connection, an area known as the "tuck," where the hull bends down to meet the top of the keel. This area is subject to substantial stress as a sailboat heels over. Miller, who is not an engineer, did not have the modification analyzed for structural sufficiency, but relied on his "common sense and ... experience."

On April 6, 1981, the parties executed a sales agreement for the BONNIE; the purchase price was $135,200, payable in installments. The agreement, which was drafted by a mutually chosen attorney, provided that Badgley accepted the BONNIE "in its present condition." The sale was also subject to a marine survey to be performed at Badgley's option. The survey was performed, the BONNIE was pronounced "seaworthy," and Badgley took possession in June 1981. Within several months, Badgley and her son began to race the BONNIE regularly. During the next four years, Badgley raced the BONNIE some 35 times.

Because of a minor but persistent leak, Badgley hired Daniel Mahler, a licensed naval architect and engineer, to analyze the problem. Mahler concluded that the hull-to-keel connection was structurally weak, a deficiency that in his opinion caused excessive flexing and permitted the water to work its way through the hull. Mahler recommended that fiberglass reinforcement be added in the outer tuck area and that additional "floors," rib-like cross-pieces, be placed inside the hull at the connection. These repairs were carried out in two stages in 1983 and 1985. Badgley continued to pay the monthly installments pursuant to the sales contract and eventually paid off all but $6000 of the purchase price, which she withheld for the structural repairs.

On May 23, 1984, Miller filed the instant lawsuit, seeking to collect the $6000 due on the underlying promissory note. Badgley counterclaimed, alleging, inter alia, that Miller had breached an implied warranty of merchantability. Trial began on September 15, 1986, and focused on Badgley's counterclaim. Mahler testified that engineering calculations--including the "section modulus"--based primarily on standards developed by Lloyd's of London, indicated that the BONNIE was built with one-third of the required strength at the hull-to-keel connection. Mahler described the defect as major:

[T]his is a very high area of stress. The problem typically occurs in an effort to keep weight down and so forth ... There is a squeeze, and this area becomes weakened. If this continues to flex excessively, it will form a fatigue crack in these areas.

These leaks were in the process of, I believe, much more serious consequences that would have occurred had this vessel gone to sea and been exposed to 24 hour type of sea loadings, tacking, broaching, so forth than can occur when one cruises a boat, and so I view this as a failure as either--the keel literally could fall off the boat, but more likely it would open up in this corner and leak water very heavily, to the point that the vessel would sink.

That's the danger you are trying to prevent when you design and engineer these joints in sailboats.

In response, Miller presented testimony from several experts, including Robert Perry, a noted yacht designer and technical editor for sailing publications. Perry stated that the BONNIE complied with ABS (American Bureau of Shipping) standards in the number of floors and that she was structurally safe as designed. Perry acknowledged, however, that his analysis did not involve the "section modulus" of the stiffeners. None of Miller's witnesses was a licensed engineer or naval architect qualified to do the analysis performed by Mahler.

The trial court found that the BONNIE'S hull-to-keel connection was defectively designed and inadequate for its intended uses. The court also determined that Miller was a "merchant" within the meaning of the Uniform Commercial Code (UCC) and that he had therefore breached the implied warranty of merchantability. Badgley was awarded about $20,000 in damages for the repairs, $3000 for loss of use while the boat was being repaired, $8500 in attorney's fees, and $1600 in costs. Findings of fact, conclusions of law, and a judgment to this effect were entered on November 13, 1986.

When, as here, the trial court has weighed the evidence, our review is limited to determining whether the trial court's findings are supported by substantial evidence and, if so, whether the findings, in turn, support the conclusions of law and judgment. Holland v. Boeing Co., 90 Wash.2d 384, 390, 583 P.2d 621 (1978). Even where the evidence is conflicting, we need determine only whether the evidence most favorable to the respondent supports the challenged findings. Thomas v. Ruddell Lease-Sales, Inc., 43 Wash.App. 208, 212, 716 P.2d 911 (1986).

Miller initially challenges the trial court's conclusion that he was a "merchant." For purposes of the UCC, a "merchant" is defined as a person

who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction ...

RCW 62A.2-104(1). The general definition of "merchant," however, does not control all situations. Under RCW 62A.2-314, an implied warranty of merchantability arises only "if the seller is a merchant with respect to goods of that kind." (Italics ours.) The definition of merchant is more limited for purposes of RCW 62A.2-314 and requires that one deal regularly in goods of the kind involved in the transaction or otherwise have a professional status such that he or she could be expected to have specialized knowledge or skills peculiar to those goods. Cropper v. Rego Distrib. Ctr. Co., 542 F.Supp. 1142, 1154 (D.Del.1982); see also Official Comment 2, RCWA 62A.2-104; Fred J. Moore, Inc. v. Schinmann, 40 Wash.App. 705, 709, 700 P.2d 754 (1985). The requirements of RCW 62A.2-314 serve to exclude from liability for a breach of an implied warranty of merchantability those merchants who have "only a general knowledge of industry practices." Cropper v. Rego, supra.

Whether a person is a merchant for purposes of the UCC is generally "a question of law for the courts to decide by applying the UCC definition of merchant to the facts in the case." 1 R. Anderson, Uniform Commercial Code § 2-104:12, at 530 (3d ed. 1981) (quoting Milwaukee v. Northrop Data Sys., Inc., 602 F.2d 767 (7th Cir.1979)). The trial court's finding that Earl Miller, both individually and on behalf of Miller Marine, dealt in goods such as the BONNIE and held himself out to Badgley as having professional knowledge and skill regarding sailboats is unchallenged. Earl Miller testified about his extensive skill and experience in the design, construction, and selling of sailboats. Miller was president of Miller Marine, the company that built the BONNIE and more than 100 other sailboats in a variety of classes. The evidence was thus overwhelming that Miller had a professional status with regard to the particular goods at issue in the transaction; he was therefore a merchant within the more limited definition of RCW 62A.2-314.

Miller argues that because he and his wife had never personally sold another boat, the sale to Badgley was an "isolated transaction" and thus not subject to the requirements of RCW 62A.2-314. See Official Comment 3, RCWA 62A.2-314. 2 The number of transactions alone, however, is not controlling. See, e.g., Joyce v. Combank/Longwood, 405 So.2d 1358 (Fla.Dist.Ct.App....

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