Ohio Brass Company v. Allied Products Corporation

• Decision Date: 07 March 1972
• Docket Number: No. C69-989.,C69-989.
• Citation: 339 F. Supp. 417
• Parties: OHIO BRASS COMPANY, Plaintiff, v. ALLIED PRODUCTS CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of Ohio

339 F. Supp. 417

OHIO BRASS COMPANY, Plaintiff, v. ALLIED PRODUCTS CORPORATION, Defendant.

No. C69-989.

United States District Court, N. D. Ohio, E. D.

March 7, 1972.

William A. Calhoun, Calhoun, Benzin & Murphy, James Calhoun, Carl R. Murphy, Mansfield, Ohio, for plaintiff.

Smith Warder, Arter & Hadden, David G. Davies, Cleveland, Ohio, for defendant.

MEMORANDUM

BEN C. GREEN, District Judge:

Plaintiff's claim in this action, reduced to its simplest terms, is that the defendant breached a contract to supply stainless steel pins to the plaintiff by reason of some of the pins having been improperly heat-treated.

Defendant has moved for summary judgment, alleging that the action is barred by the four-year statute of limitations of Section 1302.98 of the Ohio Revised Code.

In response to that motion, plaintiff maintains that it is entitled to the fifteen-year statute of limitations of Section 2305.06 of the Ohio Revised Code, and that the running of any limitation period was tolled until January 29, 1968.

The question of law presented in this case arises from the fact that the transaction between the parties took place during the period when the law of Ohio governing sales transactions was shifting from the standards of the Uniform Sales Law to those of the Uniform Commercial Code. O.R.C. § 1302.98, which was adopted effective July 1, 1962, is responsive to Section 2-725 of the Uniform Commercial Code. Section 2305.06 of the Ohio Code relates generally to actions founded upon a written contract.

The basic facts controlling on this motion are as follows: the defendant corporation was not qualified to transact business in Ohio pursuant to Ohio statutory law until January 29, 1968; the contract in question was entered into on or about June 25, 1962; delivery of the stainless steel pins thereunder commenced on or about August 23, 1962 and concluded on or about January 4, 1963; plaintiff had notice of failure of some of the pins on or about September 11, 1965; suit was filed on or about December 11, 1969.

In the foregoing résumé of the facts no mention is made of the date upon which plaintiff was alleged to have discovered that the failure of the pins was due to alleged improper heat-treating. While such factor might possibly be relevant to a cause of action based on negligence, plaintiff has not advanced any contentions based on a theory of negligence in opposing defendant's motion, although defendant did take the position, in advancing the motion, that even an action founded on negligence would be time-barred. Consequently, for the purposes of this litigation, such fact issue is deemed irrelevant.

Section 1302.98, in pertinent part, provides that:

(A) An action for breach of warranty must be commenced within four years after the cause of action has accrued ...

(B) 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 ...

(D) This section does not alter sections 2305.15 and 2305.16 of the Revised Code on tolling of the statute of limitations, nor does it apply to causes of action which have accrued before July 1, 1962.

In this case, delivery of the goods under the contract was subsequent to July 1, 1962. Consequently, plaintiff's cause of action for breach of warranty accrued no earlier than August 23, 1962 and no later than January 4, 1963. Val Decker Packing Co. v. Corn Products Sales Co., 411 F.2d 850 (C.A.6, 1969); Wolverine Ins. Co. v. Tower Iron Works, 370 F.2d 700 (C.A.1, 1966; O.R.C. § 1302.98(B).

It would thus appear that the transaction in suit is subject to the four-year limitation period set forth in O.R.C. § 1302.98(A), and is not within the exemption provided in § 1302.98(D) for causes of action accruing prior to July 1, 1962.

Plaintiff seeks to avoid the imposition of the limitation period of § 1302.98(A) by reliance upon Section 3 of Amended Senate Bill No. 5 of the 104th General Assembly of Ohio (Amended Senate Bill No. 5 being Ohio's adoption of the Uniform Commercial Code). The textual portion of Section 3 read:

This act shall take effect on July 1, 1962. Transactions validly entered into before such date and the rights, duties and interests flowing from them remain valid thereafter and may be terminated, completed, consummated or enforced as required or permitted by any statute or other law amended or repealed by this Act as though such repeal or amendment had not occurred.

Instruments, documents, or notices filed prior to July 1, 1962, in accordance with the law at the time of such filings shall be deemed to be filed under section one of this Act as of the original date of filing and may be continued or terminated as provided in section one of this act.

Section 3 of the Amended Bill was not codified when the Act was generally adopted effective July 1, 1962. Thereafter, the statutory repealer portions of Section 3 were enacted as O.R.C. § 1301.15, omitting, however, the textual portion set forth above.

This Court does not agree with plaintiff's interpretation of the relationship of Section 3 of the Amended Senate Bill to the facts of this case. As the Court reads Section 3, the intent was that adoption of the Uniform Commercial Code should not disturb duties fixed by or rights vested under contract entered prior thereto. That was the effect given Section 3 in First National Bank of Marysville v. Bahan, 198 N.E.2d 272, 26 O.O.2d 429 (Ohio Com.Pl., 1964), relied upon by plaintiff.

The Ohio Supreme Court in Smith v. N. Y. C. Rd. Co., 122 Ohio St. 45, 170 N.E. 637 (1930) specifically adopted the language of the United States Supreme Court ruling in Terry v. Anderson, 95 U.S. 628, 24 L.Ed. 365 (1877), that:

The parties to a contract have no more a vested interest in a particular limitation which has been fixed, than they have in an unrestricted right to sue. They have no more a vested interest in the time for the commencement of an action than they have in the form of the action to be commenced; and as to the forms of action or modes of remedy, it is well settled that the legislature may change them at its discretion, provided adequate means of enforcing the right remain. 122 Ohio St. 49, 50, 170 N.E. 639.

Applying that rule to this fact situation, it was within the discretion of the Ohio legislature to reduce the limitation period for the bringing of an action for breach of warranty on a contract executed prior to July 1, 1962 as to which the breach occurred after July 1, 1962 from fifteen to four years.

The remaining question is whether the four-year limitation period of O.R.C. § 1302.98 was tolled by the operation of O.R.C. § 2305.15. That latter statute sometimes referred to as the "tolling statute" or "savings clause", in pertinent part, provides that:

When a cause of action accrues against a person, if he is out of the state ... the period of limitation for the commencement of the action as provided in ... sections 1302.98 ... of the Revised Code, does not begin to run until he comes into the state ...

Plaintiff contends that it is entitled to the benefit of O.R.C. § 2305.15 on the premise that defendant was not statutorily qualified to do business in Ohio until on or about January 29, 1968, and had no agent for service of summons until that time. It is, therefore, urged that defendant was absent from Ohio until January 29, 1968.

In support of its motion for summary judgment defendant advances two basic arguments.

Defendant contends that the alleged cause of action did not arise in Ohio, thereby precluding the application of O. R.C. § 2305.15. Wentz v. Richardson, 165 Ohio St. 558, 138 N.E.2d 675 (1956).

Alternatively, defendant argues that if the cause of action arose in Ohio the statute should not be held to apply for the reason that it had a managing agent present in the state upon whom service of summons could have been had and it was also amenable to extraterritorial service pursuant to O.R.C. § 1703.191.¹

As to defendant's first argument, that the cause of action originated in a foreign jurisdiction, the Court does not find that to be the case. Under O. R.C. § 1302.98(B) a breach of warranty occurs upon delivery. By defendant's own argument that no cause of action accrued until delivery was made in Ohio, it tacitly concedes the necessary element of an Ohio cause of action. While the action for breach of warranty has a contractual basis, it is not necessarily governed by the situs of the contract.

The next question is whether the defendant's amenability to service under O.R.C. § 1703.191 tolls the limitation provisions of O.R.C. § 1302.98. The parties have briefed this issue on the assumption that defendant was amenable to service of process pursuant to O.R.C. § 1703.191, and the Court has accepted that assumption.

In 1936 the Ohio Supreme Court decided the case of Title Guaranty & Surety Co. v. McAllister, 130 Ohio St. 537, 200 N.E. 831. In that case a foreign insurance company had initially qualified to transact business in Ohio, and some years thereafter ceased doing business, discontinued its offices and cancelled its agencies in the state. The claim asserted against the company arose after it had withdrawn from the state, but was based on a bond executed prior to that time. Service of summons was not had until after the applicable statute of limitations had run. The Supreme Court rejected the contention that the statute of limitations had been tolled by the company's withdrawal from Ohio. The court found that subsequent to such withdrawal the company (by virtue of a statutory provision) remained subject to substituted service in a suit brought upon a liability alleged to have arisen from the transacting of business while qualified to act in Ohio. The court stated:

As a fair proposition, the test of the running of the statute should be the liability of the party invoking it bar to the service of process during the whole of the

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