South Carolina Elec. and Gas Co. v. Combustion Engineering, Inc.

• Decision Date: 27 March 1984
• Docket Number: No. 0243,0243
• Citation: 322 S.E.2d 453,283 S.C. 182
• Court: South Carolina Court of Appeals
• Parties: , 40 UCC Rep.Serv. 1257 SOUTH CAROLINA ELECTRIC AND GAS COMPANY, Appellant, v. COMBUSTION ENGINEERING, INC. and Daniel International Corporation, Respondents. . Heard

Page 453

322 S.E.2d 453

283 S.C. 182, 40 UCC Rep.Serv. 1257

SOUTH CAROLINA ELECTRIC AND GAS COMPANY, Appellant, v. COMBUSTION ENGINEERING, INC. and Daniel International

Corporation, Respondents.

No. 0243.

Court of Appeals of South Carolina.

Heard March 27, 1984.

Decided Aug. 29, 1984.

Stephen G. Morrison and Rhett P. Dove, III, of Nelson, Mullins, Grier & Scarborough, Columbia, for appellant.

Jay Bender, of Belser, Baker, Barwick, Toal & Bender, Belser Ravenel & Smith, and Thomas Kemmerlin, Jr., Columbia, and V.M. Manning Smith, III, Beaufort, for respondents.

GOOLSBY, Judge:

The appellant South Carolina Electric and Gas Company (SCE&G) seeks to recover damages in excess of $350,000 that SCE&G alleges it sustained as a result of a fire that occurred when a flexible metal hose ruptured and sprayed heated fuel oil across the surface of a steam generating boiler at the Arthur Williams Station, a power generating plant owned by SCE&G. The circuit court granted summary judgment in favor of the respondent Combustion Engineering, Inc. (Combustion), which manufactured and sold the boiler and its ancillary equipment to SCE&G, and the respondent Daniel International Corporation (Daniel), which constructed the power plant and installed the boiler as well as the pipes and hoses that connected to it.

SCE&G appeals the grant of summary judgment in favor of Combustion on causes of action for (1) breach of an implied warranty that the boiler unit was fit for a particular purpose, (2) breach of an implied warranty that the boiler unit was merchantable, and (3) negligence in the design of the fuel piping. It also appeals the grant of summary judgment in favor of Daniel on causes of action for (1) negligent installation of the boiler unit and (2) breach of a warranty of workmanship. We affirm in part, reverse in part, and remand the case for trial.

In considering the overall issue of whether the circuit court was correct in granting the defendants' motions for summary judgment, we must construe all ambiguities, conclusions, and inferences arising from the evidence most strongly against the defendants. Piedmont Engineers, Architects and Planners, Inc. v. First Hartford Realty Corp., 278 S.C. 195, 293 S.E.2d 706 (1982). Summary judgment can be granted only where it is perfectly clear that no genuine issue of material fact is involved and inquiry into the facts is not desirable to clarify application of the law. Hudson v. Zenith Engraving Co. Inc., 273 S.C. 766, 259 S.E.2d 812 (1979).

I. Case Against Combustion

A. Implied Warranties

SCE&G entered into the contract with Combustion for the sale of the boiler unit in early 1970. The sales contract contains an item labeled "WARRANTY," that expressly warrants the equipment to be free "from defects in material and workmanship for a period of one year." Because the boiler became operational on March 18, 1973, and the fire that brought on this litigation occurred over two years later on May 19, 1975, the one-year warranty provision had expired at the time of the fire.

The warranty item also contains a disclaimer of warranties provision. It states that "[t]here are no other warranties, whether expressed or implied, other than title."

The circuit court, in granting Combustion summary judgment on each cause of action alleging a breach of an implied warranty, ruled that the disclaimer excludes an implied warranty of merchantability as well as an implied warranty of fitness for a particular purpose.

SCE&G, however, maintains that Combustion was not entitled to summary judgment. It argues that the disclaimer, as a matter of law, does not exclude the implied warranties alleged in its complaint because the disclaimer does not meet the requirements of Subsection (2) of Section 36-2-316 of the South Carolina Code of Laws (1976) and that a question of fact exists as to whether the disclaimer can come within the exceptions to Subsection (2) permitted by Subsection (3) of that statute. ¹

We agree with SCE&G that the disclaimer does not satisfy the requirements of Subsection (2). First of all, the disclaimer nowhere mentions the word "merchantability," as it must do under Subsection (2) to exclude an implied warranty of merchantability.

Further, the written language of disclaimer, as a matter of law, is not "conspicuous," as Subsection (2) requires it to be to exclude an implied warranty of fitness for a particular purpose as well as an implied warranty of merchantability. Indeed, the written agreement is twenty-two typewritten pages in length and is mostly single-spaced. The disclaimer itself appears on page 17 of the agreement in the last sentence of a two-paragraph item. It is indistinctive both as to color and as to type. See S.C.Code of Laws § 36-1-210(10) (1976) ("A ... clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it.... Language in the body of a form is 'conspicuous' if it is in larger or other contrasting type or color"); Billings v. Joseph Harris Company, Inc., 27 N.C.App. 689, 220 S.E.2d 361 (1975); Chrysler Corp. v. Wilson Plumbing Company, Inc., 132 Ga.App. 435, 208 S.E.2d 321 (1974).

Moreover, the item containing the disclaimer is misleading in that it is suggestive of "a grant of a warranty rather than a disclaimer" because the heading of the item, printed in underlined capital letters, simply reads "WARRANTY." Hartman v. Jensen's Inc., 277 S.C. 501, 503, 289 S.E.2d 648 (1982).

But the question remains concerning whether a genuine issue of material fact exists as to whether the disclaimer, as the circuit court found, falls within the exception prescribed by Subsection (3)(a). Subsection (3)(a) permits, as do Subsections (3)(b) and (c), the exclusion of implied warranties when "the circumstances surrounding the transaction are in themselves sufficient to call the buyer's attention to the fact that no implied warranties are made or that a certain implied warranty is excluded." S.C.Code of Laws § 36-2-316 official comment 6 (1976).

In support of its motion for summary judgment, Combustion submitted the affidavit of Kurt W. Johnson that identified several documents exchanged between Combustion and SCE&G relative to the purchase by SCE&G of the boiler from Combustion. The first document, dated August 15, 1968 and entitled "Proposal No. 16268-E," originated with Combustion. It included the disclaimer at issue here. Five months later on January 31, 1969, SCE&G wrote Combustion stating that its August 1968 proposal was unacceptable in certain respects. SCE&G advised Combustion that it required that any purchase order filled by Combustion be subject to certain prescribed conditions. One condition was that Combustion agree "to be bound in relation to [its] equipment by the ... warranties implied by the laws of the State of South Carolina."

Combustion responded to SCE&G's letter on February 19, 1969, and informed SCE&G that it could not accept the condition relating to implied warranties. Combustion insisted that it "have a limitation on the warranty period and a limitation on the remedy for breach of any warranty, expressed or implied." On February 21, 1969, SCE&G replied to Combustion's letter of two days before and advised Combustion that it agreed that the "warranties implied by [the] laws of the State of South Carolina shall be limited" to the warranty item included in the original proposal.

The parties differ concerning whether the correspondence mentioned above forms part of the contract and whether it constitutes evidence extrinsic to the contract. SCE&G maintains that the correspondence is not part of the contract and that consideration of it by the circuit court to determine whether the disclaimer is effective demonstrates conclusively that the disclaimer is ambiguous. SCE&G relies on the settled rule that the intention of the parties to an ambiguous contract is a question of fact for the jury to determine and is not a question that a court should decide on summary judgment. See Wheeler v. Globe & Rutgers Fire Insurance Co., 125 S.C. 320, 325, 118 S.E. 609 (1923) ("where a contract is not clear, or is ambiguous and capable of one or more constructions, what the parties really intended, as a matter of fact, should be submitted to a jury").

We need not decide whether the correspondence forms part of the contract because we think that the language of the disclaimer itself is unambiguous. In plain language, the disclaimer excludes all warranties other than the express one-year warranty and the warranty of title.

Although we do not use the correspondence to resolve an ambiguity in the language employed by the disclaimer, we do consider the correspondence to determine whether the language of disclaimer was unbargained for and unexpected by SCE&G, the buyer. If the evidentiary material presented in connection with Combustion's motion for summary judgment shows that no genuine issue of fact exists as to whether the language of disclaimer was unbargained for and unexpected and that, as a matter of fact, the language was bargained for and expected, SCE&G could not rightly claim, irrespective of the requirements of Subsection (2), that the language does not exclude the two implied warranties asserted by Combustion. See S.C.Code of Laws § 36-2-316 official comment 1 (1976) (Subsections (2) and (3) designed to protect the buyer from "unexpected and unbargained language of disclaimer"). In such a case, summary judgment for Combustion would be entirely proper.

As we view the record, Combustion was entitled to summary judgment as a matter of law on the causes of action alleging breaches of implied warranties of merchantability and fitness for a particular purpose.

Circuit Court Rule 44(d) provides in part as follows:

When a motion for summary judgment is made and supported as provided in this Rule, an adverse party may not rest upon the mere allegations or denials of his pleadings, but his...