Southern Tank Equipment Co. v. Zartic, Inc., A96A0224

• Decision Date: 23 May 1996
• Docket Number: No. A96A0224,A96A0224
• Citation: 471 S.E.2d 587,221 Ga.App. 503
• Parties: , 30 UCC Rep.Serv.2d 54 SOUTHERN TANK EQUIPMENT COMPANY v. ZARTIC, INC.
• Court: Georgia Court of Appeals

Page 587

471 S.E.2d 587

221 Ga.App. 503, 30 UCC Rep.Serv.2d 54

SOUTHERN TANK EQUIPMENT COMPANY v. ZARTIC, INC.

No. A96A0224.

Court of Appeals of Georgia.

May 23, 1996.

Smith, Price & Wright, Charles G. Price, Rome, for appellant.

Shaw, Maddox, Graham, Monk & Boling, David F. Guldenschuh, Rome, for appellee.

BEASLEY, Chief Judge.

Southern appeals from the grant of Zartic's motion for summary judgment in this breach of contract case. The trial court determined that suit was filed after the time limitation in OCGA § 11-2-725 had passed.

Southern quoted a price of $77,000 to supply Zartic with a chemical mixing tank and an associated pump and sump. Southern would install it but excavation, foundation, and electrical work would be supplied by other contractors. Further discussions resulted in Southern agreeing to supply an associated "water treatment assembly" composed of a system of pipes and valves to specifications, for an additional $62,000, resulting in a total price of $139,000. Southern contends the project was substantially completed in September 1987, but Zartic claims the work was not completed. The parties agree that, for purposes of summary judgment in the context of OCGA § 11-2-725, Southern's cause of action arose in September 1987. ¹ The contract is evidenced by a variety of documents including letters and an order form signed by both parties.

The contract called for staggered payments, and Southern received $100,000 but not the final $39,000. Suit to recover that amount, plus interest, attorney fees, and costs, was filed February 12, 1993. The court held that the contract was for the sale of goods and thus suit was barred by the four-year statute of limitation found in OCGA § 11-2-725, part of the Uniform Commercial Code. Southern contends the contract was not for the sale of goods, the applicable statute of limitation is in OCGA § 9-3-24, and suit could be filed any time within six years of the contract's completion.

As the trial court noted, this contract calls for a mixed sale of goods and services, and the case of J. Lee Gregory, Inc. v. Scandinavian House, L. P., 209 Ga.App. 285, 287-288(1), 433 S.E.2d 687 (1993), provides guidance on classifying such contracts. "When the predominant element of a contract is the sale of goods, the contract is viewed as a sales contract and the UCC applies 'even though a substantial amount of service is to be rendered in installing the goods.' [Cit.] When, on the other hand, the predominant element of a contract is the furnishing of services, the contract is viewed as a service contract and the UCC does not apply. [Cit.] As it is said: ' " '(A) contract for services and labor with an incidental furnishing of equipment and materials' is not a transaction involving 'the sale of goods' and is not controlled by the (UCC). (Cits.)" [Cit.]' [Cits.]" Id. Factors to be considered in determining the predominant element of a contract include the proportion of the total contract cost allocated to the goods and whether the price of the goods are segregated from the price for services. A smaller proportion of the total price assignable to services, or a failure to state a separate price for services rendered, suggest a contract for the sale of goods with services merely incidental. Id.

Contrary to Southern's suggestion, American Aluminum Products Co. v. Binswanger Glass Co., 194 Ga.App. 703, 391 S.E.2d 688 (1990), which involved a contract for the installation of window frames, does not stand for the proposition that any contract involving a mixture of labor and materials is outside the coverage of the UCC. That opinion specifically did not decide whether the UCC applied to the contract at issue; instead, it analyzed the case under alternative assumptions that the UCC did and did not apply, reaching the same result regardless. Id. at 705-707(1), 707-708(5), 391 S.E.2d 688. The factors discussed in J. Lee Gregory, supra, are those applied to determine the predominant element of a mixed contract.

The parties agree that the contract initially called only for sale, delivery, and installation of a chemical mixing tank, which evidence showed had a quoted price of $77,000. ² Southern does not dispute that this alone would be a contract for the sale of goods. Thus over half the total contract price was allocated to this purchase, predominately for one piece of equipment, with the remaining $62,000 including both goods and services. Although Southern refers to the later incorporated sale as a "system," it is also undisputed that this portion of the contract covered not only the installation of additional pipes, valves, and associated material, but the sale of those materials as well....