New England Power Co. v. Riley Stoker Corp.

• Decision Date: 26 June 1985
• Citation: 20 Mass.App.Ct. 25,477 N.E.2d 1054
• Parties: , 40 UCC Rep.Serv. 1735 NEW ENGLAND POWER COMPANY et al. 1 v. RILEY STOKER CORPORATION.
• Court: Appeals Court of Massachusetts

Page 1054

477 N.E.2d 1054

20 Mass.App.Ct. 25, 40 UCC Rep.Serv. 1735

NEW ENGLAND POWER COMPANY et al. ¹ v. RILEY STOKER CORPORATION.

Appeals Court of Massachusetts Essex.

Argued Nov. 15, 1984.

Decided May 14, 1985.

Further Appellate Review Denied

June 26, 1985.

Arnold P. Messing (Leonard M. Singer, Mark S. Swartz, Boston, and John F. Sherman, III, with him), for plaintiffs.

Thomas R. Murtagh, Boston (Kenneth J. Gumbiner, Worcester, with him), for defendant.

Before PERRETTA, DREBEN and KASS, JJ.

PERRETTA, Justice.

In 1969, the plaintiffs (referred to herein, in the singular, as NEP) entered into two contracts with the defendant (Riley) for the design, manufacture, and installation of two boilers for NEP's facilities at Salem and Brayton Point (Fall River). A detailed description of the boilers is unnecessary. It is sufficient to state, as did NEP in its amended complaint, ² that "[b]oilers such as these are technologically complex and sophisticated and ... are entirely dissimilar from the small, residential or commercial units with which the public is generally familiar." Almost as soon as the boilers were put into use, it became apparent that they suffered from serious defects. Then began an extended period, from 1972 through 1976, during which Riley, working along with independent consultants and engineers retained by NEP, made repeated but unsuccessful attempts to repair the boilers. By 1978, Riley was no longer participating in any repair attempts. On March 11, 1980, NEP brought this action, alleging breaches of warranties and of promises to repair, as well as negligence. Riley affirmatively pleaded that the action was time-barred under G.L. c. 106, § 2-725(1), and c. 260, § 2A, and moved for summary judgment. NEP appeals from the judgment entered on Riley's motion and argues that its action was not commenced beyond the time allowed by those statutes and, in the alternative, that Riley is estopped by its conduct from asserting that defense. We affirm.

I. BREACHES OF WARRANTIES. ³

If NEP were to commence timely its action for breaches of warranties under the contract, it was required by G.L. c. 106, § 2-725(1), as appearing in St.1957, c. 765, § 1, to bring its action "within four years after the cause of action has accrued." Paragraph (2) of § 2-725 provides, in full:

"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." ⁴

When Riley tendered delivery of the boilers is the issue in dispute. By way of definition, G.L. c. 106, § 2-503(1), as appearing in St.1957, c. 765, § 1, provides that tender of delivery "requires that the seller put and hold conforming goods at the buyer's disposition...." The judge found that the Salem and Brayton Point boilers were put into "commercial use" on August 24, 1972, and December 18, 1974, respectively, and concluded that delivery had to have been completed prior to March, 1976. ⁵ Suit was commenced on March 11, 1980.

NEP argues that there was no tender of delivery prior to March of 1976 and that, in fact, delivery has never been tendered. As support for this contention, NEP extracts two sentences from the first paragraph of the official comment to G.L. c. 106, § 2-503: "The term 'tender' is used in this Article in two different senses. In one sense it refers to 'due tender' which contemplates an offer coupled with a present ability to fulfil all the conditions resting on the tendering party and must be followed by actual performance if the other party shows himself ready to proceed." ⁶ Uniform Laws Comment, G.L. c. 106, § 2-503, Ann.Laws of Mass., at 69. Defining tender as "due tender," NEP argues that there was no tender of delivery within the meaning of § 2-725(2), because when the boilers were "delivered," both Riley and NEP knew that they were defective and had to be repaired. Extending this theory, NEP takes the position that since the boilers are still defective, there has been no tender of delivery.

A similar, if not identical, argument was unsuccessfully made in Standard Alliance Indus. v. Black Clawson Co., 587 F.2d 813, 819 (6th Cir.1978), ⁷ i.e., that "tender" of new, highly complex machinery should not be held to have occurred until the machine is made to operate properly. We also do not accept this claim, for to do so would "extend the statute of limitations indefinitely into the future since a defect at the time of delivery would prevent proper 'due tender' from taking place until it was corrected." Id. See also Ontario Hydro v. Zallea Sys., Inc., 569 F.Supp. 1261, 1267 (D.Del.1983) ("If the court were to apply the phrase ['due tender'] as [the plaintiff] suggests, then until the seller tenders conforming goods, the limitation period provided in § 2-725 would never apply. This would circumvent the very purpose of § 2-725, which ... is to provide a finite period in time when the seller knows that he is relieved from liability for a possible breach of contract for sale or breach of warranty"). We conclude that the definition of tender of delivery urged by NEP is inconsistent with the purpose of § 2-725(2), as well as with the final sentence of the first paragraph of the official code comment to § 2-503. See note 6, supra.

We are not dissuaded from our conclusion by NEP's argument that acceptance of "due tender" as the controlling definition is compelling where the seller and buyer acknowledge at the time of delivery that the goods are defective. We see no reason to apply a more rigorous rule to an unwitting buyer than to a fully informed one. Simply put, although knowledge may be relevant to a buyer's acceptance of goods, see G.L. c. 106, § 2-607, it is irrelevant to the running of the time period set out in § 2-725, except where, unlike here, there is a warranty as to future performance. See Raymond-Dravo-Langenfelder v. Microdot, Inc., 425 F.Supp. 614, 617 (D.Del.1977). ⁸

II. PROMISES TO REPAIR. ⁹

Both contracts entered into in 1969 contain the following clause:

"Notwithstanding the other continuing obligations of the Contractor under this Agreement, the Contractor shall repair and make good, without cost to the Purchaser, any damages, defects or faults resulting from imperfect or defective work done or unsound or improper materials furnished by the Contractor which develop during the period of one year (or during a longer period if so stipulated in the specifications) from date of the certification by the Engineer that the work has been completed."

NEP argues that language constitutes "a promise rather than a warranty," and that this cause of action could not have accrued until Riley, in 1978, refused or failed to repair the boilers. However, promises to repair or to replace are generally viewed as specifications of a remedy rather than as an independent or separate warranty. See Standard Alliance Indus. v. Black Clawson Co., 587 F.2d at 818 n. 10; Ontario Hydro v. Zallea Sys., Inc., 569 F.Supp. at 1266-1267; Centennial Ins. Co. v. General Elec. Co., 74 Mich.App. 169, 171-172, 253 N.W.2d 696 (1977); Commissioners of Fire Dist. No. 9 v. American La France, 176 N.J.Super. 566, 573, 424 A.2d 441 (1980); Owens v. Patent Scaffolding Co., 77 Misc.2d 992, 998-999, 354 N.Y.S.2d 778 (1974), rev'd on other grounds, 50 A.D.2d 866, 376 N.Y.S.2d 948 (N.Y.1975). Those cases instruct that when there are a warranty and a promise to repair, the remedy of first resort is the promise to repair. If that promise is not fulfilled, then the cause of action is the underlying breach of warranty.

The reasoning is sound and particularly pertinent here, where NEP's argument seems structured to avoid the consequences of its failure timely to commence suit. As pointed out in Centennial Ins. Co. v. General Elec. Co., 77 Mich.App. at 172, 253 N.W.2d 696: "Plaintiff's argument is in essence that by failing to remedy its first breach, the defendant committed a second breach, giving rise to a brand new cause of action and starting anew the limitations period. The fallacy of this approach is apparent. If we adopted plaintiff's position, limitations periods could be extended for virtually infinite time. We doubt that the Legislature intended such a result." ¹⁰ It follows from this that what we have stated in part one of this opinion is applicable to NEP's claims of breaches of the promises to repair.

III. TOLLING AND ESTOPPEL.

NEP next contends that Riley's repeated efforts to repair and assurances that the boilers would be fixed either tolled the running of § 2-725(1) or estopped Riley from relying upon it as a defense.

a. Tolling. Whether repeated repair efforts toll the running of § 2-725(1) depends upon our tolling statutes, as found in G.L. c. 260, §§ 7 through 12, since § 2-725 "does not alter the law on tolling of the statute of limitations...." G.L. c. 106, § 2-725(4), as appearing in St.1957, c. 765, § 1. See Bedford v. James Leffel & Co., 558 F.2d 216, 217 (4th Cir.1977). There is nothing in our tolling statutes which would allow NEP to commence suit as late as sometime in 1982, in other words, four years after Riley ceased its efforts to repair the boilers. Nor is it open to us to enlarge upon those statutes. ¹¹ See Del Grosso v. Board of Appeal of Revere, 330 Mass. 29, 32, 110 N.E.2d 836 (1953), and cases therein cited.

b. Estoppel. If NEP is to escape the consequence of its lack of diligence in bringing its action, it must be by way of proof that Riley wrongfully lulled NEP into the delay. See White v. Peabody Constr. Co., 386 Mass. 121, 134, 434 N.E.2d 1015 (1982) ("[E]stoppel would require proof that the defendants made representations they knew or should have known would induce the plaintiffs to...