Source: https://casetext.com/case/veeder-v-nc-machinery-co
Timestamp: 2019-04-18 18:44:16+00:00

Document:
Veeder v. NC Machinery Co.
Matthew Phillip Veeder, Anthony Martin Urie, Seattle, Wash., for plaintiff.
David J. Farrell, Jr., Maritime Law Offices of Squires Farrell, Seattle, Wash., for defendant.
Plaintiff's port engine failed in Bristol Bay, Alaska during June 1987 and was replaced that August by defendant NC Machinery Company (NC). Plaintiff alleges that the engine was damaged before he received it, but does not assert breach of contract or warranty claims. Plaintiff does assert claims for negligence, strict liability, misrepresentation and punitive damages, and Consumer Protection Act violations.
NC contends that Veeder is bound by the limitation of liability provision in the Purchaser's Order because Modutech was acting as Veeder's agent for that purchase.
The only element required for authority to do acts or conduct transactions not involving writings or seals is the communication by one person to another that the other is to act on his account and subject to his orders. Acceptance by the other is unnecessary; he has the power, although he does not become an agent until he accepts.
W. Seavy, Law of Agency, Ch. 2, § 18 (1964).
Q. Well, now, getting onto a little different subject here, I would like to ask what sort of things occurred back at the time you were selecting components for this boat and making the deal with Modutech that you did.
It sounds as though you did quite a bit of your own exploration into what were the best components in this boat, is that correct?
A. Modutech did none of that for me. I knew what I wanted.
What I wanted out of them was that hull, the cabin, the fly bridge, the deck, the building to build it in, and the assistance of their people there to help me along with the construction.
I worked every day down there with those people.
Did they provide you with information about the Caterpillar engine being preferable to the GMC, or did you sort of seek this information out yourself?
A. No, I was on my own on all that.
A. I had talked to different engine distributors, or their sales representatives — . . . and with the information I had gathered, I made my own decisions as to what power was going to be put into that boat.
I changed engines in this boat. . . . I was originally going to go with. . . . 300 horse GMCs. . . . Those are what I instructed them [Modutech] to order for me. . . . I changed my mind later and went with the Caterpillar engines.
What Carl has that I want is the hull, the house, the deck, the work space. I tell him what I want purchased, he purchases it. And, uh, you get his price and the product is mine and the warranties are mine. It doesn't go through to Modutech.
Q. When you entered into your agreement, as you mentioned earlier, with Modutech in regard to this PACIFIC PRIDE LIMITED building, in respect to the warranties, how did you go about obtaining them?
A. Well, I had talked with Carl [Modutech's President], explaining to him that I wanted to buy components through his builder's discount; that I expected the warranties to be mine and mine only. And that's the way it had been and that was the understanding we had.
Q. So it's my understanding then that you requested the warranties?
A. Yes, I requested the warranties.
Q. Was Modutech acting as your agent in the purchase of the NC engines?
A. It's the same way I bought all of the others.
Well, like I said, I, uh, buy through Carl, being that he gets a better discount. And that's the arrangement we've had for four years, that I don't want to deal with Carl when I have a problem. I want to have the power to go directly to the people that sold me the shaft, or the people that sold me the props, the motors. Anything I've purchased through him, I want to be able to go right — I don't want to deal with Modutech. He gets a better price than I do on a lot of things and I wanted to take advantage of that, and retain all the warranties and the rights to get warranty work or whatever I needed myself, without having to depend on them to try and work things out. Because that takes a lot of time, usually, and they don't want to mess with it. And I get better results doing it myself.
I can now clearly state that Modutech was never an agent of mine in the purchase of the NC engines. To the best of my understanding, Carl sold me a vessel which included two engines just as it states in the contract that I entered into with Modutech, on page 11. . . .
In actuality, I merely provided Modutech with money to build me a fishing vessel pursuant to our contract, and that is all.
Quite frankly, Carl Swindahl is a very good, yet shrewd businessman, Carl made sure that I was legally bound to him in every way. For instance, if I failed to comply with any term or condition in our contract, Carl Swindahl made sure that Modutech could keep all of the monies that I paid to them in addition to sueing [sic] me for breach of contract. This, I assure you, shows that in no way did I have control over Modutech regarding any aspect of any matter that I dealt with Modutech.
[I]f a party who has been examined at length on deposition could raise an issue of fact simply by submitting an affidavit contradicting his own prior testimony, this would greatly diminish the utility of summary judgment as a procedure for screening out sham issues of fact.
On the issue of agency, the Washington Supreme Court held in Turnbull v. Shelton, 47 Wn.2d 70, 73, 286 P.2d 676, 678 (1955), that control over purchases evidences an agency relationship and is inconsistent with an independent contractor status. In that case an owner asked a second party (Sager) to purchase equipment, in part because that person could obtain a discount; Sager made the purchases in his own name. While the Court noted that Sager played a number of roles, including independent contractor and joint venturer, it held that Sager was at all times the agent of the owner. Id. at 71, 286 P.2d at 677.
The relation of principal and agent is consensual; it may be either express or implied; and, if the necessary elements are present, the relation exists whether the parties understood the exact nature of the relation or not. . . .
Since [the installer] was entirely subject to the [developer's] control in its choice of insulated pipe . . ., and did not exercise any independent judgment, it acted in the capacity of an agent, and the contract was between the [developer] and the [pipe supplier/manufacturer/furnisher]. Thus, all of the warranties, if they were in fact given and relied upon, were given to the [developer].
Id. at 767-79, 289 P.2d at 1019.
When material facts relative to the question of agency are undisputed and susceptible of only one interpretation, the question of agency is a question of law that may be decided by the Court on summary judgment. It is established that Modutech contracted to purchase equipment, including engines, according to Plaintiff's specifications, Modutech purchased those engines in accordance with Plaintiff's instructions, and Modutech made the purchases without exercising independent judgment. Accordingly, it is established that Modutech acted as Plaintiff's agent in the purchase of the engine that is the subject of this dispute.
The next question is the validity of the Limitation of Remedy contained in Paragraph 7 of the Purchaser's Order Modutech signed for the engine purchase from NC. If the Limitation of Remedy is valid, it will be enforceable against Veeder. An agent's knowledge is imputed to the principal. Todd Shipyards Corp. v. Turbine Service, Inc., 467 F. Supp. 1257, 1297 (E.D.La. 1978), aff'd in pertinent part, 674 F.2d 401 (5th Cir. 1982); Restatement (Second) of Agency § 272 (1958).
2. Additional Terms and Conditions. THIS ORDER IS SUBJECT TO THE TERMS AND CONDITIONS ON THE REVERSE SIDE, INCLUDING DISCLAIMERS OF WARRANTY AND LIMITATION OF REMEDIES AVAILABLE WHICH SELLER AND PURCHASER HAVE NEGOTIATED AND WHICH PURCHASER HAS READ AND UNDERSTANDS AND TO WHICH IT AGREES. . . .
3. Required Acceptance and Method of Modification.. . . SELLER'S ACCEPTANCE OF THIS CONTRACT IS EXPRESSLY CONDITIONED ON PURCHASER'S ASSENT TO ALL OF THE CONDITIONS OF SALE ON THE FRONT AND REVERSE SIDE OF THIS ORDER. ANY ADDITIONAL OR DIFFERENT TERMS OR CONDITIONS WHICH MAY APPEAR IN ANY COMMUNICATION FROM PURCHASER ARE HEREBY OBJECTED TO AND SHALL NOT BE EFFECTIVE OR BINDING UNLESS SPECIFICALLY RECOGNIZED AND ASSENTED TO IN WRITING BY SELLER'S AUTHORIZED REPRESENTATIVE. . . .
Agent acknowledges he/she has read, understands and agrees to the terms and conditions of this order, including the DISCLAIMER OF WARRANTY AND LIMITATION OF REMEDIES, and is authorized to execute this order.
7. Limitation of Remedies. THE SOLE AND EXCLUSIVE REMEDY OF PURCHASER FOR DEFECTIVE EQUIPMENT SHALL BE AS PROVIDED IN ANY WARRANTY OR WARRANTIES RELATING TO THE EQUIPMENT AS REFERRED TO IN PARAGRAPH 6. SELLER SHALL IN NO EVENT BE LIABLE TO PURCHASER OR THIRD PARTIES, WHETHER FOR BREACH OF WARRANTY, FOR NEGLIGENCE OR STRICT LIABILITY IN TORT OR FOR ANY INCIDENTAL, CONTINGENT, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING FROM OR OUT OF THE EQUIPMENT, INCLUDING, BUT NOT LIMITED TO, NO LIABILITY FOR LOSS OF PROFITS OR REVENUE, LOSS OF USE OF GOODS OR OTHER ITEMS TO BE FURNISHED TO PURCHASER HEREUNDER, COST OF CAPITAL, COST OF SUBSTITUTE EQUIPMENT, ADDITIONAL COSTS INCURRED BY PURCHASER AT ITS PLANT OR IN THE FIELD (WHETHER BY WAY OF CORRECTION OR OTHERWISE), OR CLAIMS BY PURCHASER, PURCHASER'S CUSTOMERS OR OTHER THIRD PARTIES, FOR DAMAGES RESULTING FROM PERSONAL INJURY OR PROPERTY DAMAGE. . . .
(1)(b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy. . . .
Limitation of other consequential damages is valid unless it is established that the limitation is unconscionable.
The remedy to which Veeder is limited is that provided in the Caterpillar Warranty (SELF5043), replacement of the engine. NC replaced the engine and provided him with his exclusive remedy. Veeder is not entitled to other damages such as the consequential damages of lost profits and is limited to the remedy of replacement, unless the contractual limitation of remedies is shown to be unconscionable.
The UCC provides that an agreement may provide for remedies in addition or in substitution for those provided in Article 2 of the Code and may limit or alter the measure of damages recoverable unless the limitation under the circumstances is proven to be unconscionable. See RCW 62A.2-302 and 2-719. The Court must determine unconscionability as a matter of law. RCW 62A.2-302. Moreover, "exclusionary clauses in purely commercial transactions are prima facie conscionable . . . ," and "the burden of establishing that a clause is unconscionable lies upon the party attacking it." Schroeder v. Fageol Motors, 86 Wn.2d 256, 262 — 63, 544 P.2d 20 (1975).
No one element is controlling. The court must examine all the circumstances surrounding the transaction, including conspicuousness of the clause, prior course of dealings between the parties, negotiations about the clause, the commercial setting and usage of the trade. Not each element will be applicable factually to every transaction.
92 Wn.2d at 50, 593 P.2d at 1313.
As described above, the clause was not hidden in fine print but was highlighted by headings in bold typeface, there were repeated notices that additional terms were set forth on the reverse side of the page, the notice that the limitation of remedies was set forth on the reverse was printed in capital letters within one half inch of the signature line, and the limitation paragraph itself was printed in capital letters set off by a heading in bold typeface, "Limitation of Remedies."
Modutech's President, Carl Swindahl, had opportunity to be familiar with the provisions of the document he was signing both by virtue of his prior dealings with NC as well as at the time he signed the document in November 1986. While Swindahl stated he had not read the November 1986 Purchase Order, he stated that he did sign the document and that it was for the purchase of engines for Veeder's boat. (Swindahl dep. at 19.) But then Swindahl said, "If I thought it was a contract I would find my glasses. I didn't think this was a contract, to be honest with you. I thought it was a purchase order." (Swindahl dep. at 20 — 21.) He did not volunteer that he could not read without his glasses when he signed the November 1986 purchase order. ( Id. at 22 — 24.) Swindahl said he was a vain person and would not wear glasses. ( Id. at 42.) Swindahl had signed similar purchase orders in 1978 when he had poor eyesight but did not wear glasses. ( Id. at 40 — 42.) Swindahl as a businessman must be at least disingenuous when he states that he didn't believe the purchase order was a contract. Neither he nor plaintiff alleges that fraud by NC prevented him from reading the contract. Failure to read contract terms when not brought about by fraud does not excuse the signing party from compliance with those terms. H.D. Fowler Co. v. Warren, 17 Wn. App. 178, 181, 562 P.2d 646 (1977) (defendant claimed ignorance of contract terms found on the reverse side of the form and referred to plainly slightly below and to the left of the signature line).
Contract law, and the law of warranty in particular, is well suited to commercial controversies of the sort involved in this case because the parties may set the terms of their own agreements. The manufacturer can restrict its liability, within limits, by disclaiming warranties or limiting remedies. See UCC §§ 2-316, 2-719. In exchange, the purchaser pays less for the product. Since a commercial situation generally does not involve large disparities in bargaining power, we see no reason to intrude into the parties' allocation of the risk.
East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 2303, 90 L.Ed.2d 865 (1986).
Under all the circumstances, the limitation of remedies in paragraph 7 of the purchase order is not unconscionable. Accordingly, all Plaintiff's causes of action in this case must be DISMISSED.
While in view of the conclusion explained above the Court need not address the other bases for dismissal cited by NC, they will be touched upon briefly.
When a product injures only itself the reasons for imposing a tort duty are weak and those for leaving the party to its contractual remedies are strong.
Thus, whether stated in negligence or strict liability, no products-liability claim lies in admiralty when the only injury claimed is economic loss.
(1) unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury to plaintiff in his or her business or property, (5) causation.
Id. at 780, 719 P.2d at 533. Viewed as a "consumer transaction" (see 105 Wn.2d at 790, 719 P.2d 531), first, no deceptive act can be shown as discussed under the misrepresentation claim. Second, there is no showing whatsoever that the alleged misrepresentation was part of a pattern or general course of conduct, or that similar acts had occurred before the act complained of by plaintiff, or that there was substantial potential for repetition; moreover, the act complained of appears merely to be a single transaction with no other consumers affected by it. Even viewed as a "private dispute," there is no showing that NC solicited Plaintiff to purchase the engine, nor that NC occupied a far superior bargaining position to Modutech, an experienced commercial boat builder.
Based upon the foregoing analysis, Plaintiff Veeder's Cross-motion for Summary Judgment is DENIED, NC Machinery Company's Motion for Summary Judgment is GRANTED, and Plaintiff's cause of action is DISMISSED.

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