Monsanto Co. v. Alden Leeds, Inc.

• Decision Date: 06 September 1974
• Citation: 326 A.2d 90,130 N.J.Super. 245
• Parties: , 15 UCC Rep.Serv. 638 MONSANTO COMPANY, Plaintiff, v. ALDEN LEEDS, INC., et al., Defendants.
• Court: New Jersey Superior Court

Page 245

130 N.J.Super. 245

326 A.2d 90, 15 UCC Rep.Serv. 638

MONSANTO COMPANY, Plaintiff, v. ALDEN LEEDS, INC., et al., Defendants.

Superior Court of New Jersey,

Law Division.

Sept. 6, 1974.

William H. Hyatt, Jr., Newark, for plaintiff (Pitney, Hardin & Nipp, Newark, attorneys).

William V. Kennedy, Bloomfield, for defendant (Kennedy & Brogan, Bloomfield, attorneys).

DREIER, J.D.C., Temporarily Assigned.

Plaintiff has moved for summary judgment on its claim for goods sold and delivered. The goods in question are large quantities of dry organic chlorine, patented and trademarked under the designation ACL--60 and ACL--85. Defendant Alden Leeds, Inc. acknowledges receipt of these goods under a written contract for the amount of $1,056,577.73, as well as goods an open account in the amount of $38,058.86. Plaintiff's claim is for these amounts, plus interest and costs of suit. Defendant Alden Leeds, Inc. and the other named defendants (who are individual and corporate guarantors of Alden Leeds, Inc.'s obligations) have counterclaimed, alleging that a portion of the goods sold and delivered were defective and that these defects caused extensive consequential damage to defendant Alden Leeds, Inc. The sales price of the allegedly defective goods is approximately $150,000.

The factual picture is relatively simple. The chemicals in question were purchased by defendant Alden Leeds, Inc. from plaintiff under a contract which provided for application of Missouri law. The goods were delivered and stored in defendant's manufacturing plant which was owned by a related corporation Leeds Terminal, Inc. Defendant alleges that moisture problems developed with the chemicals, and that from time to time chlorine gas would escape and a container of the chemicals would spontaneously ignite. On July 26, 1971 the product allegedly caused extensive property damage to 2145 McCarter Highway, Newark. On August 10, 1971 a fire occurred at a reserve location of Alden Leeds, Inc. in Kearney, N.J., causing severe damages to the building, equipment, electrical installations, raw materials and inventory; and on April 10, 1972 a third fire occurred in a building located in Kearny, N.J. (also owned by defendant), causing severe damage to building, equipment, electrical systems, raw materials, and inventory. In addition, defendant alleges that there were numerous smaller fires which were directly traceable to plaintiff's product. The property damage claims and business losses for Alden Leeds, Inc. are alleged to equal or exceed the main claim by Monsanto, and defendant Alden Leeds, Inc. asserts further that its property damage claims at 2145 McCarter Highway approximate $405,000, with its landlord, Leeds Terminal, Inc. having an independent claim for the replacement cost of the building of approximately $1,560,000.

Plaintiff has moved for summary judgment, but the real issues in the case arise under defendant's counterclaim which raises several points of first impression in New Jersey, including: (1) May a claim for strict liability in tort be maintained by either (a) a commercial processor or (b) its landlord, against a supplier of the allegedly defective material? (2) May general disclaimers in a contract for the sale of commercial materials encompass claims for strict liability in tort? and (3) Does a provision for the prohibition of incidental or consequential damages in a commercial contract encompass claims for strict liability in tort? There are also subsidiary issues in this case concerning the applicability of Missouri law to the contract or tort claims.

By cross-motion defendant Alden Leeds, Inc. has sought leave pursuant to R. 4:33 to permit Leeds Terminal, Inc., a corporation with common stockholders, and the owner of the plant or warehouse in which the chemicals were stored, to intervene in the action, so as to assert its claim against plaintiff for the destruction of the premises.

The contract for the sale of the chemicals contained the following warranty provision (defendant is referred to as the 'distributor' in the agreement):

WARRANTY--Unless otherwise provided herein, Monsanto warrants title and that all goods sold hereunder shall conform to Monsanto's standard specifications. Subject to the preceding sentence and except as otherwise explicitly stated herein, MONSANTO MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESSED OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE OR ANY OTHER MATTER WITH RESPECT TO THE GOODS, whether used alone or in combination with other substances. Monsanto shall not be liable for and Distributor assumes responsibility for all personal injury and property damage resulting from the handling possession or use of the goods by distributor. (emphasis supplied)

In addition there is a statement concerning remedies as follows Distributor's exclusive remedy and Monsanto's limit of liability for any and all losses or damages resulting from defective goods or from any other cause shall be for the purchase price of the particular delivery with respect to which losses or damages are claimed plus any transportation charges paid by distributor. In no event shall Monsanto be liable for incidental or consequential damages.

I

Initially, with respect to the cross-motion for Leeds Terminal, Inc. to intervene pursuant to R. 4:33--2 it is clear that the motion should be granted. The rule provides:

Upon timely application anyone may be permitted to intervene in an action if his claim or defense and the main action have a question of law or fact in common. When a party to an action relies for ground of claim or defense upon any statute or executive order administered by a state or federal governmental agency or officer, or upon any regulation, order, requirement or agreement issued or made pursuant to the statute or executive order, the agency or officer upon timely application may be permitted to intervene in the action. In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.

Plaintiff claims that there would be an unreasonable delay if the intervention is permitted, since the case is now approaching the pretrial conference stage. The problem with such an argument is that there are common questions here which would take far more time to try in a second case. Monsanto did not make Leeds Terminal a party to the action since it was not liable for the purchase price of the goods. But, even though the principals of the landlord and defendant are the same, the counterclaim for damages would not adjudicate perhaps the largest single item of damages caused by the fires, the value of the Leeds Terminal building. Also, if it is determined that the contract between Alden Leeds, Inc. and Monsanto precludes the imposition of consequential damages against Alden Leeds, Inc., the real issue in the case may be between Leeds Terminal, Inc. and Monsanto.

Monsanto also has asked for summary judgment for the acknowledged balance due it for the nondefective chemicals, and for immediate execution against defendant. The last-quoted rule in its final sentence shows that this court must consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties. This court is of the opinion that such execution should not be permitted, even if summary judgment is granted in accordance with this opinion (upon the taking of the testimony noted hereafter), until such time as the rights of Leeds Terminal, Inc. have been adjudicated, in order to accomplish substantial justice to the parties. Plaintiff, therefore, will not be delayed or prejudiced by having the rights of Leeds Terminal, Inc. determined in these proceedings. As to the substantive rights of the landlord, see the discussion, Infra.

II

The first issue raised with respect to the summary judgment motion is directed to defendant's counterclaim for breach of express or statutory warranties. Since the contract specifies the law to govern its interpretation, and public policy does not dictate otherwise, the contract will be interpreted under Missouri law. Shotwell v. Dairymen's League Co-op Ass'n, 22 N.J.Misc. 171, 37 A.2d 420 (D.Ct.1944).

There is no question in this case that defendant's claims are primarily for consequential damages. Therefore, § 2--719(3) of the Missouri Uniform Commercial Code, Vernon's Annotated Missouri Statutes (hereafter V.A.M.S.) § 400.2--719(3) is relevant. (See also N.J.S.A. 12A:2--719(3) for similar language.) This provision states that:

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.

Also, V.A.M.S. § 400.2--316 (and N.J.S.A. 12A:2--316) permits the exclusion or modification of express warranties (V.A.M.S. § 400.2--313) and even the statutory implied warranties (V.A.M.S. § 400.2--314). Identical provisions are set forth in the corresponding sections of the New Jersey Uniform Commercial Code.

Case law in both Missouri and New Jersey generally permits the allocation of risks. See Rock Springs Realty, Inc. v. Waid, 392 S.W.2d 270, 272 (Mo.Sup.Ct.1965); Monsanto Chemical Co. v. American Bitumuls Co., 249 S.W.2d 428, 431 (Mo.Sup.Ct.1952); Moreira Constr. Co. v. Moretrench Corp., 97 N.J.Super. 391, 394--396, 235 A.2d 211 (App.Div.1967), aff'd o.b. 51 N.J. 405, 241 A.2d 236, (1968). Also, see the further discussion of this point, Infra, as such allocation clauses relate to tort claims. In the same respect, this court must consider § 2--302 (V.A.M.S. 400.2--302; N.J.S.A. 12A: 2--302, 'Unconscionable Contract or Clause') which reads as follows:

(1) If the court as a matter of law finds the contract or any clause of the contract to have been...