Oregon Bank v. Nautilus Crane & Equipment Corp., 7908-03694

• Decision Date: 09 May 1984
• Docket Number: No. 7908-03694,7908-03694
• Citation: 683 P.2d 95,68 Or.App. 131
• Parties: , 38 UCC Rep.Serv. 1163 The OREGON BANK, an Oregon banking corporation, Respondent, v. NAUTILUS CRANE & EQUIPMENT CORPORATION, a corporation, Appellant. ; CA A24898.
• Court: Oregon Court of Appeals

Page 95

683 P.2d 95

68 Or.App. 131, 38 UCC Rep.Serv. 1163

The OREGON BANK, an Oregon banking corporation, Respondent, v. NAUTILUS CRANE & EQUIPMENT CORPORATION, a corporation, Appellant.

No. 7908-03694; CA A24898.

Court of Appeals of Oregon.

Argued and Submitted June 3, 1983.

Decided May 9, 1984.

Roger J. Leo, Portland, argued the cause, for appellant. With him on the briefs were Malcolm J. Montague and Parks, Montague, Allen & Greif, Portland.

Gordon T. Carey, Jr., Portland, argued the cause, for respondent. With him on the brief were Donald H. Marmaduke and Tonkon, Torp, Galen, Marmaduke & Booth, Portland.

Before BUTTLER, P.J., and WARREN and ROSSMAN, JJ.

BUTTLER, Presiding Judge.

In this action, The Oregon Bank, as assignee, seeks recovery of an account receivable that arose out of the sale of hydraulic cranes by the bank's assignor, NCI Corporation (NCI), to defendant, a retailer of cranes. Defendant asserts affirmative defenses by way of setoff for breach of implied warranties of merchantability and fitness for a particular purpose, and for reimbursement for repair work performed under a Sales and Service Agreement. Defendant also counterclaims for general and punitive damages resulting from the bank's alleged alter ego control of NCI and for its improper demands on defendant for payment. The trial court granted plaintiff's motion for summary judgment, rejecting all of defendant's defenses and counterclaims as a matter of law. Defendant appeals from the resulting judgment for plaintiff. We conclude that there are genuine issues of material fact as to some, but not all, of defendant's claims and reverse and remand for further proceedings.

In 1975, plaintiff financed the operations of HCI Corporation (HCI), which manufactured specialized solid boom hydraulic cranes in Bend. In June, 1977, NCI purchased the assets and assumed the liabilities of HCI and negotiated a credit arrangement with plaintiff whereby plaintiff obtained a security interest in NCI's accounts receivable. A year later, plaintiff commenced proceedings against NCI to realize on plaintiff's security, at which time a receiver was appointed and the disputed account receivable was assigned to plaintiff.

That account arose out of HCI's and NCI's sales to defendant on an open account between October, 1974 and June, 1978. Defendant sold most of the cranes it purchased to its customers for use in the offshore oil industry. With each crane sold, HCI and NCI provided a maintenance manual that included a limited express warranty and a disclaimer of implied warranties. In December, 1977, NCI and defendant also entered into a Sales and Service Agreement (Dealer Agreement), which defined the relationship between the parties and contained a limited warranty provision.

Just before the liquidation proceedings instituted by plaintiff, defendant allegedly owed approximately $225,000 on the open account. On assuming control of NCI, the receiver refused to ship nine previously ordered cranes to defendant until its account was paid. John Gordon, as president of defendant, paid $225,000 to induce NCI to ship the cranes. Plaintiff sent written notice to defendant in June, 1978, of the assignment of NCI's assets to it and made written demands for payment in October and November, 1978. In late November, 1978, Gordon responded by letter, stating that defendant would not pay the account, because the expenditures made in repairing defective cranes exceeded the amount owed to NCI. This action followed.

Defendant's several assignments of error present essentially the same legal question: whether defendant, in response to plaintiff's motion, presented genuine issues of material fact precluding the granting of plaintiff's motion for summary judgment. ORCP 47; Seeborg v. General Motors Corporation, 284 Or. 695, 699, 588 P.2d 1100 (1978). We view the record in the light most favorable to the party opposing the motion, Stanfield v. Laccoarce, 288 Or. 659, 665, 607 P.2d 177 (1980), and draw all reasonable inferences from the affidavits and depositions against the moving party, Uihlein v. Albertson's, Inc., 282 Or. 631, 634, 580 P.2d 1014 (1978); Yartzoff v. Democrat-Herald Publishing Co., 281 Or. 651, 576 P.2d 356 (1978), even as to those issues on which the opposing party would have the trial burden. Seeborg v. General Motors Corporation, supra, 284 Or. at 699, 588 P.2d 1100. We examine defendant's six assignments of error in that light.

Defendant's first assignment is that the trial court erred in granting plaintiff's motion for summary judgment on its account claim for $122,929.46, contending that material issues of fact exist as to whether the account entries were properly posted and as to whether the materials invoiced were actually shipped. Defendant further challenges NCI's failure to post repair credits, to which it claims it is entitled by way of setoff. ¹

In Gardner & Beedon Co. v. Cooke, 267 Or. 7, 10, 513 P.2d 758 (1973), the Supreme Court held that an account creditor had established a prima facie case on an account by producing the account receivable ledger cards, together with testimony that (1) the debits and credits were posted to the account card, (2) the ledger card entries were made simultaneously with the billing invoices by a business machine and (3) all materials represented by the entries had been delivered to defendant. In the present case, plaintiff presented the affidavit and deposition of Barbara LaChance, HCI and NCI's bookkeeper, who stated that she posted all invoices, charges, payments and other credits to the customer's account cards, that she mailed all prepared invoices and credit memos after posting and that the copy of the account card attached to her affidavit was accurate and was prepared in the regular course of business. Both LaChance and Colin Ackerman, the executive in charge of manufacturing and engineering for NCI, stated that both HCI and NCI prepared invoices only after goods were actually shipped. Most notably, however, defendant's president, Gordon, admitted that the figure $122,929.46 represented the balance of defendant's account with NCI, if the offsets for repairs were ignored. Having admitted the accuracy of the account, ignoring offsets, defendant's reliance on LaChance's statement that invoices "might" occasionally vary from work orders as rebutting plaintiff's prima facie case is misplaced. We conclude that plaintiff's evidence was sufficient to present a prima facie case.

The remaining question is whether defendant presented any evidence to support its defense that it was entitled to credits for repairs made on cranes. The affidavit of Gordon states that NCI repeatedly authorized defendant's on-site corrective work on defective cranes and assured Gordon that defendant's account would be credited for labor and materials. Those facts were confirmed by Ackerson, who added that when he received photocopies of defendant's account cards, they did not reflect the credits to which defendant was entitled.

Plaintiff submitted no affidavits disputing those facts, contending that it need not do so, because Gardner & Beedon v. Cooke, supra, requires only that the account creditor post those credits that have actually been issued. Although plaintiff is correct as to the requirements for a prima facie case, when a defendant interposes and presents evidence in support of an affirmative defense by way of setoff, the fact that credits were not actually issued is no response. The question is whether they should have been, ² which depends on whether, as a matter of law, defendant is entitled to assert defenses based on breaches of two implied warranties covered in the second and third assignments.

In those two assignments, defendant claims that the trial court erred in granting plaintiff's motion for summary judgment on its defenses based on breach of implied warranties of merchantability ³ and fitness for a particular purpose. ⁴ Plaintiff relied on the express warranties furnished by NCI with each crane and the substantially identical disclaimer clause contained in the Dealer Agreement to defeat defendant's claims. ⁵ Defendant acknowledges the disclaimer, but contends that: (1) NCI waived the disclaimer; (2) plaintiff, as assignee of NCI, is estopped from asserting the disclaimer; (3) the disclaimer in the Dealer Agreement is void, because the agreement was executed under duress, and (4) the disclaimer is unconscionable. We consider each of those arguments separately. ⁶

Defendant argues that a course of performance was established between it and NCI, whereby the latter waived the disclaimer provisions by continually authorizing repair work exceeding the scope of the limited warranty. Plaintiff contends that, as a matter of law, a written disclaimer of implied warranties may not be waived by a course of performance. ORS 72.2080 provides:

"(1) Where the contract for sale involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection shall be relevant to determine the meaning of the agreement.

"(2) The express terms of the agreement and any such course of performance, as well as any course of dealing and usage of trade, shall be construed whenever reasonable as consistent with each other; but when such construction is unreasonable, express terms shall control course of performance and course of performance shall control both course of dealing and usage of trade.

"(3) Subject to the provisions of ORS 72.2090 on modification and waiver, such course of performance shall be relevant to show a waiver or modification of any term inconsistent with such course of performance."

Although the language of subsection (2) that express terms shall control course of performance lends credence to plaintiff's argument, subsection (3) specifically provides that a...