Purcell Tire & Rubber Co. v. Executive Beechcraft

Decision Date20 November 2001
Docket NumberSC83383
Citation59 S.W.3d 505
PartiesPurcell Tire & Rubber Company, Inc., Appellant v. Executive Beechcraft, Inc., Respondent. SC83383 Supreme Court of Missouri
CourtMissouri Supreme Court

Appeal From: Circuit Court of Clay County, Hon. Larry D. Harman

Counsel for Appellant: Morry S. Cole and Maurice B. Graham

Counsel for Respondent: Robert W. Cotter, Kent M. Bevan and Patrick J. Kaine

Opinion Summary:

Purcell Tire & Rubber Company, Inc., contracted with Executive Beechcraft, Inc., to inspect a light twin turbo jet it was considering buying. The contract that Purcell Tire's president signed contained a paragraph that limited Executive Beechcraft's liability to the cost of the inspection, which was $1,250, for any damages or expenses associated with the inspection. After Executive Beechcraft surveyed the plane and submitted its findings, Purcell Tire purchased the plane for nearly $2.1 million. A few months later, Purcell Tire's mechanics discovered an oil leak, which grew progressively worse. The inspection did not mention any oil leak. After repairing the engine, Purcell Tire sued Executive Beechcraft for $372,458 in damages. The court enforced the liability limitation and granted summary judgment to Executive Beechcraft for any damages beyond the $1,250 as provided in the contract. Purcell Tire appealed.

Court en banc holds: Purcell Tire and Executive Beechcraft are sophisticated businesses that contracted at arm's length. Sophisticated parties may contract to limit future remedies and, under this Court's ruling in Alack v. Vic Tanny Int'l of Mo., Inc., 923 S.W.2d 330 (Mo. banc 1996), future negligence claims can be waived by contract. The liability limitation here is clear, unambiguous, unmistakable and conspicuously located directly above the signature. It also is supported by consideration because the inspection agreement, which included the liability limitation, was in exchange for Purcell Tire's $1,250 payment. To the extent the court of appeals' opinions in Schaffer v. Property Evaluations, Inc., 854 S.W.2d 493 (Mo. App. 1993), and Weindel v. DeSoto Rural Fire Prot. Ass'n, 765 S.W.2d 712 (Mo. App. 1989), imply that parties agree only to negotiated-over terms, they no longer should be followed. Further, to the extent Schaffer and Weindel suggest that a damages claim only can be waived if a controversy exists at the time of the contract, they are superseded by Alack.

Concurring opinion by Judge White:

This author agrees that the trial court's opinion should be affirmed but notes differences between this case and Alack and stresses that the majority's ruling is limited to the facts presented here. This writer notes that Purcell Tire is a textbook example of a sophisticated contractor, this case involves only economic damages and no personal injury damages, and that the negligence complained of by Purcell Tire is based on negligence performance of a contract, not negligence in the traditional tort sense.

Limbaugh, C.J., Holstein, Wolff and Price, JJ., and Simon, Sp. J., concur; White, J., concurs in separate opinion filed; Wolff, J., concurs in opinion of White, J. Stith, J., not participating.

Duane Benton, Judge

The circuit court enforced a commercial contract that limited liability to the contract price. After opinion by the Court of Appeals, this Court granted transfer. Mo. Const. art. V, sec. 10. Affirmed.I.

This Court reviews the record in the light most favorable to Purcell Tire & Rubber Company, Inc. (against whom judgment was effectively entered), according it the benefit of all reasonable inferences from the record. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993).

Purcell Tire decided to buy a used Beechjet 400 airplane. Before the closing, its president, Robert G. Purcell, asked Executive Beechcraft, Inc. about inspecting the plane. Beechcraft faxed a three-page contract to Purcell. The contract has print only on the front of each page, in 11-point type. The contract begins:

AIRCRAFT PRE-PURCHASE SURVEYThe following is a list of items that will be checked in order to complete an Aircraft Pre-Purchase Survey. This survey is a statement of aircraft condition at that time. It is NOT however, a statement of airworthiness.

Executive Beechcraft makes no guarantee or warranty, either express or implied, concerning the condition or the remaining useful life of the aircraft, it's [sic] systems, avionics or other installed equipment.

If the items listed below do not meet your needs for a pre-purchase survey, Executive Beechcraft, Inc. will be happy to perform an inspection in accordance with the manufacturers inspection programs or Federal Aviation Administration FAR's.

The contract then lists -for two pages -the 45 items to be surveyed. The contract next addresses payment:

Pricing for the Pre-Purchase Survey is as follows:

Single engine, non-retractable $400.00

Single engine, retractable, non-pressurized 550.00

Twin engine, retractable, non-pressurized 650.00

Twin engine, retractable, pressurized 900.00

Light twin turbo jet 1,250.00

We the buyers/sellers agree to the above survey on aircraft N 25 B.N.

Serial number RJ.7.

We agree to pay in full at the completion of the Pre-Purchase survey.

Because the plane was a twin turbo, the price was $1,250. The next (and last) paragraph of the contract, directly above the signature, says:

It is expressly agreed that the liability, if any, of Executive Beechcraft, Inc. under this agreement shall be limited to the cost of services performed hereunder. All parties to this agreement expressly agree to indemnify and hold harmless Executive Beechcraft, Inc. from any damages or expenses claimed by any part [sic] to this agreement beyond the cost of the services performed hereunder.

Purcell read, signed, and faxed the contract back to Beechcraft. Purcell did not request any changes in the contract.

Beechcraft surveyed the plane, wrote a report, discussed the findings with Purcell, but never mentioned any oil leak. In July 1997, Purcell Tire purchased the plane for $2,080,000. In fall 1997, its mechanics discovered an oil leak, which grew progressively worse. In December 1997, Purcell Tire had an engine repaired.

Purcell Tire sued Beechcraft for breach of contract and negligence, claiming $372,458 in damages. Beechcraft moved for summary judgment, citing the affirmative defense that the contract limited liability to the $1,250 price.

The circuit court enforced the limitation of liability. Beechcraft then confessed judgment for $1,250. Purcell Tire appeals.II.

If there is no genuine dispute about the facts supporting Beechcraft's affirmative defense and Beechcraft is entitled to judgment as a matter of law, summary judgment was appropriate. Rule 74.04(c)(3); ITT, 854 S.W.2d at 376. Appellate review of summary judgment is de novo. Id. at 376. The validity of a liability limitation is a question of law for the court. Warren v. Paragon Techs. Group, Inc., 950 S.W.2d 844, 845 (Mo. banc 1997).III.

Purcell Tire and Beechcraft are sophisticated businesses that contracted at arm's length. Purcell Tire -the 16th or 17th largest retail tire chain in America -ranks in the top four among commercial tire dealers and retread providers in the country. Its president, a former pilot, has been involved in 15 plane purchases, and 14 pre-purchase inspections.

Beechcraft, a general aviation business, performs pre-purchase surveys for plane buyers. Beechcraft also performs more stringent inspections (at additional cost) consistent with manufacturers' or Federal Aviation Administration standards.

Sophisticated parties have freedom of contract -even to make a bad bargain, or to relinquish fundamental rights. See Malan Realty Investors, Inc. v. Harris, 953 S.W.2d 624, 626 (Mo. banc 1997); High Life Sales Co. v. Brown-Forman Corp., 823 S.W.2d 493, 497 (Mo. banc 1992). See generally Warren, 950 S.W.2d at 846; Sanger v. Yellow Cab Co., 486 S.W.2d 477, 481-82 (Mo. banc 1972). Sophisticated parties may contractually limit future remedies. See Malan, 953 S.W.2d at 627-28; High Life Sales, 823 S.W.2d at 497; Warner v. Southwestern Bell Tel. Co., 428 S.W.2d 596, 601, 602 (Mo. 1968); Liberty Fin. Mgmt. Corp. v. Beneficial Data Processing Corp., 670 S.W.2d 40, 49 (Mo. App. 1984). For example, commercial entities at arm's length may waive the right to a jury trial, or agree to forum selection (unless unfair or unreasonable). Malan, 953 S.W.2d at 627-28; High Life Sales, 823 S.W.2d at 497.

Purcell Tire emphasizes that courts closely scrutinize tort-liability limitations, because "[o]ur traditional notions of justice are so fault-based that most people might not expect" them to be altered. Alack v. Vic Tanny Int'l of Mo., Inc., 923 S.W.2d 330, 337 (Mo. banc 1996). Clear, unambiguous, unmistakable, and conspicuous limitations of negligence liability do not violate public policy. Id. The contract "must effectively notify a party that he or she is releasing the other party from" its own negligence. Id.

The contract in this case limits Beechcraft's liability: "It is expressly agreed that the liability, if any, of Executive Beechcraft, Inc. under this agreement shall be limited to the cost of services performed hereunder." Sophisticated businesses that negotiate at arm's length may limit liability without specifically mentioning "negligence," "fault," or an equivalent. Id. at 338 n.4. The liability limitation here does not violate public policy, because it is clear, unambiguous, unmistakable, and conspicuously located directly above the signature.IV.

A.

According to Purcell Tire, the liability limitation is enforceable only if "bargained for," that is, supported by separate consideration. See Schaffer v. Property Evaluations, Inc., 854 S.W.2d 493, 495 (Mo. App. 1993); Weindel v. DeSoto Rural Fire Prot. Ass'n, 765 S.W.2d 712, 715-16 (Mo. App. 1989). Purcell Tire claims that because the parties did not specifically negotiate the liability limitation, it was not "bargained...

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