WASHINGTON FREIGHT v. Shantytown Pier

• Decision Date: 08 September 1998
• Docket Number: No. 38,38
• Citation: 719 A.2d 541,351 Md. 616
• Parties: WASHINGTON FREIGHTLINER, INC. v. SHANTYTOWN PIER, INC.
• Court: Maryland Court of Appeals

719 A.2d 541

351 Md. 616

WASHINGTON FREIGHTLINER, INC. v. SHANTYTOWN PIER, INC.

No. 38, September Term, 1997.

Court of Appeals of Maryland.

September 8, 1998.

Reconsideration Denied November 17, 1998.

Brian L. Wallace (Wallace & Daneman, P.A., Baltimore), on brief for MAN Roland, Inc.

John W. Geldmacher (John W. Geldmacher, P.A., Reistertown), on brief for Washington Freightliner, Inc.

Broughton M. Earnest (Ray L. Earnest, Piper & Marbury, L.L.P., Easton; Richard M. Kremen, C. Kevin Kobbe, Piper & Marbury, L.L.P., Baltimore), all on brief, for respondent.

Argued before BELL, C.J., and ELDRIDGE, RODOWSKY, CHASANOW, RAKER and WILNER, JJ., and ROBERT L. KARWACKI, Judge (retired), Specially Assigned.

RODOWSKY, Judge.

This case involves the application of the four-year statute of limitations under the Sales Article of the Uniform Commercial Code to breaches of implied warranties in the sale of marine engines. The statute is Maryland Code (1975, 1997 Repl.Vol.), § 2-725 of the Commercial Law Article.¹ In relevant part it reads:

"(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it.

"(2) 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, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance, the cause of action accrues when the breach is or should have been discovered."

(Emphasis added).

At issue is whether the statute began to run when the seller caused the engines to be delivered to the boat yard which later installed the engines in a boat that it was constructing for the buyer, or whether the running of the statute was postponed until the engines were "commissioned," that is, when the boat was subjected to a trial run at sea at various speeds.

The plaintiff, Shantytown Pier, Inc. (Shantytown), is a family business based in Ocean City, Maryland, that owns passenger boats. Shantytown sells fishing trips, nature cruises, and other boating excursions to paying passengers. On March 15, 1990, Shantytown contracted with Lydia Yachts of Stuart, Inc. (Lydia), a boatyard in Stuart, Florida, for the construction of a new 77-foot "party/fishing boat," the Ocean City Princess (O.C. Princess). Sometime after June 16, 1990, Shantytown purchased for use in the O.C. Princess three MAN D2840LXE 820-horsepower, 10-cylinder engines from Washington Freightliner, Inc. (WFI), one of the defendants. WFI, based in Capitol Heights, Maryland, is an authorized dealer in engines manufactured by another of the defendants, MAN Roland, Inc. (MAN), a German corporation with offices in the United States. The third defendant in this action is Marine Mechanical Systems, Inc. (MMS), an authorized distributor of MAN engines. MMS is based in Pompano Beach, Florida.

Shantytown purchased the three MAN engines at a total price of $163,000, "FOB Pompano Beach, Florida." The entire purchase price was paid before delivery. MMS caused the engines to be delivered to Lydia no later than September 30, 1990. Lydia completed construction of the O.C. Princess, and it was commissioned on April 20, 1991.

On ten separate occasions during nearly four years of operating the O.C. Princess, Shantytown experienced failures of one or another of each of the three engines. Although some of the failures were due to human error, most were due to complications involving faulty pistons. MAN's agents kept addressing the problems and performing repairs, but the problems, particularly failures related to the pistons, kept recurring. In April 1994, Shantytown, for $30,000, purchased another MAN engine for the O.C. Princess to replace one of the original MAN engines; within months, it too began suffering piston failure.² These failures led Shantytown to file suit on October 6, 1994, against MAN, WFI, and MMS. The complaint alleged breaches of express warranty, of contract, and of the implied warranties of merchantability and of fitness for a particular purpose.

Each defendant moved for summary judgment based, inter alia, on limitations grounds. Judge Theodore R. Eschenburg denied these motions. Prior to trial the plaintiff experienced an eleventh piston failure and decided to replace all three MAN engines with engines manufactured by another company. Three days before trial Shantytown, with leave of court, voluntarily dismissed its express warranty and breach of contract claims, leaving only the implied warranty claims against the three defendants.

At a jury trial with Judge Thomas C. Groton, III presiding, the defendants renewed their limitations argument by a motion for judgment at the conclusion of the plaintiff's case and by a motion for judgment at the conclusion of all the evidence, on which the court reserved both rulings. The jury found that the implied warranties had been breached, that there was an agency relationship between all of the defendants, and that the damages were $236,919.21. The court denied the defendants' motion for judgment notwithstanding the verdict.

Judge Eschenburg's order denying the defendants' motion for summary judgment gave no reasons, but Shantytown had argued that tender of delivery had not occurred until the O.C. Princess was commissioned.

At trial the most detailed description of commissioning was given by John Wilhelm who had been in charge of the service and maintenance aspects of the MMS business. His deposition testimony, introduced by Shantytown, reads in relevant part as follows:

"Q [C]an you just give me sort of a general understanding of what it means in your trade to commission engines so that in April of 1991 when you commissioned these three new engines, what kind of things would you do?

"A You have to put a variety of monitoring equipment on the engines in the engine room itself to monitor operating temperatures, pressures, exhaust temperatures, engine room depression, and record the values at a variety of speeds, including wide-open throttle.

"Q Now, are these instruments that you are talking about, are they separate from the normal instruments that the boat would permanently be equipped with?

"A Some boats are equipped with similar instrumentations. During commissioning we generally use our own.

"Q So you take the boat to sea and you operate it for approximately how long?

"A It depends on conditions and a number of things. But there is a prescribed format that MAN has set forward, and you have to complete the forms.

"Q And was that commissioning done in this case without incident?

"A Yes.

"Q So that on or about April 20, 1991, or whatever that precise date was of the commissioning, as far as you were concerned, the engines had been properly installed and tested and seemed to be working properly?

"A The details escape me right now, but as long as all the numbers fell in normal operating parameters, yes. And I believe they did."

The engines were not commissioned separately from the vessel; rather, both were commissioned simultaneously. Captain Robert Gowar, one of two captains of the O.C. Princess, spoke of "when we were getting ready to commission the boat and the engine." Captain Monty Hawkins, the vessel's other captain, testified that the commissioning process took place "over a couple of different sea trials," and implied that different individuals may have been present on different days. R. Charles Nichols, Shantytown's president, testified that six people were on the vessel during commissioning: himself; Monty Hawkins and Robert Gowar; John Wilhelm, MMS's chief engine mechanic; Ed Clifton, described as "one of the Lydia Yacht folks"; and an individual named "Bo," the yard foreman for Lydia. Captain Hawkins described "Bo" as "acting master" at the time of the sea trials.

In denying the motion for judgment notwithstanding the verdict, Judge Groton found that Shantytown was "not given control of the engines until they were placed in the boat and the boat was commissioned, and then when it was first commissioned, the boat wasn't even in their control. It was in the control of ... more than Lydia.... It was some of [the defendants'] representatives that were part of the commissioning that, in essence, were in charge of that process."

The defendants appealed to the Court of Special Appeals, which, in an unreported opinion, affirmed the trial court's ruling on limitations. The Court of Special Appeals, as is this Court, was required to decide whether tender of delivery under § 2-725(2) occurred when the defendants delivered the engines for Shantytown to Lydia or when the O.C. Princess was commissioned. In addressing that issue the Court of Special Appeals, as is this Court, was faced with a void in the record because the contract of sale is not in evidence.³ The record, however, does contain a two-page quotation which all parties in effect agree contains the specific terms (as contrasted with the general terms) for the sale to Shantytown. The quoted price of $163,000, F.O.B. Pompano Beach, includes "Start up and Commissioning (8 Hr. Allowance)."

The Court of Special Appeals held that the defendants had the burden of proving that limitations had run and, because "the trial court had before it evidence from which it reasonably could have decided that the price quotation and testimony at trial constituted sufficient proof of a requirement of commissioning,... that [defendants] had thus failed to carry their burden of persuasion."

We granted the defendants' petitions for certiorari, each of which raised the limitations issue.

I

The limitations issue presented here is quite narrow. "A breach of warranty occurs when tender of delivery is made." § 2-725(2). The cause of action accrues ...