Source: http://law.justia.com/cases/federal/appellate-courts/F2/602/767/252373/
Timestamp: 2013-06-18 21:58:04
Document Index: 289656795

Matched Legal Cases: ['§ 402', '§ 402', '§ 2', '§ 402', '§ 1', '§ 1', '§ 402']

602 F.2d 767: County of Milwaukee, Plaintiff-appellant, v. Northrop Data Systems, Inc., Defendant-appellee :: US Court of Appeals Cases :: Justia
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602 F.2d 767: County of Milwaukee, Plaintiff-appellant, v. Northrop Data Systems, Inc., Defendant-appelleeUnited States Court of Appeals, Seventh Circuit. - 602 F.2d 767
Argued April 4, 1979.Decided July 23, 1979
James J. Bonifas, County Corp. Counsel, Milwaukee, Wis., for plaintiff-appellant.
John R. Dawson, Milwaukee, Wis., for defendant-appellee.
This provision remained intact in all subsequent revisions and appears as sub-paragraph 15(h) in the executed agreement.1
An action for breach of any contract of sale must be commenced within 6 years after the cause of action has accrued. By the original agreement the parties, if they are merchants, may reduce the period of limitations to not less than one year.2
Other courts have held that upon the adoption of the Uniform Commercial Code the period of limitations therein prescribed supersedes preexisting statutes. See e.g., Sesow v. Swearingen, 552 P.2d 705 (Okl.1976)3 and cases there cited. The Supreme Court of Wisconsin recognized in Columbian Banking Co. v. Bowen, 134 Wis. 218, 114 N.W. 451, 452, (1908), that the negotiable instrument statute was enacted for the purpose of furnishing a certain guide in the determination of questions relating to commercial paper, and in the absence of ambiguity was controlling, and "reference to case law as it existed prior to the enactment is unnecessary and is liable to be misleading". We think the same reasoning is applicable with respect to the Uniform Commercial Code. We conclude that § 402.725(1) is controlling. Accordingly the one-year limitation is applicable only if the County is a "merchant" as defined in the Code.
The definition of "merchant" in the Wisconsin Statute, § 402.104(1) (set out in note 2), follows verbatim the definition in the Uniform Commercial Code, § 2-104(1).4 The Official Comment notes that the term "merchant" as defined in the code "roots in the 'law merchant' concept of a professional in business". "Merchant" as used in the code is given three alternative definitions: (1) a person5 who deals in goods of the kind involved in the transaction; (2) a person who holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction; or (3) a person to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
The Official Comment distinguishes "professionals" from a "casual or inexperienced seller or buyer". The comment indicates that code provisions6 regarding merchants which "rest on normal business practices which are or ought to be typical of and familiar to any question in business" (such as contract modifications) should be read broadly; almost every person in business would be deemed to be a merchant since the business practices involved are non-specialized. In these business practices banks and even universities may be "merchants".7 But the comment stresses that this applies only to a merchant in his mercantile capacity.8
The County, through its agents, solicited the contract bids in conformity with specifications which the County had prepared. BSL's bid was accepted and contract negotiations began between BSL and the County. The County was represented in the contract negotiations by Ronald Bruni, Associate Hospital Administrator of Milwaukee County Complex, James Cox, Manager of Administrative Services of the County's Department of Administration, and James Walters, then Planning and Research Administrator. Mr. Bruni was primarily responsible for the negotiations. He is a certified public accountant whose responsibilities as an employee of the hospital include management of the finances, business operations, and systems of the hospital. The contract was extensively negotiated over the fourteen months between acceptance and execution. The final contract was executed by the Purchasing Administrator of the County Procurement Division and Mr. Bruni. The County's use of these agents who had special skill and knowledge as to the practices involved in contract negotiations and to the specification of the computer (the goods) involved in the transaction bring Milwaukee County within the third alternative U.C.C. definition of a merchant.9 The County comes within this definition of "merchant" just as the university cited in the Official Comments might be found to be a merchant because it employed business personnel who were familiar with business practices and who were equipped to take any action required.10
The County's argument that it is a consumer because it is not engaged in the manufacture, sale or marketing of a laboratory systems or other products, but is engaged only in the procurement of supplies, materials and equipment for the operation of the hospital ignores the broad U.C.C. definition of a merchant. The purchase of a laboratory systems computer is sufficiently related to the County's operation of the hospital as a professional enterprise that the contract should not be treated as a casual consumer transaction.11
The County created the appearance of apparent authority for its Purchasing Administrator to contract for the purchase of the computer. During the contract negotiations the County directed that the signature line for Milwaukee County be revised to read "Milwaukee County By its Department of Administration, Procurement Division". The applicable county ordinance gives the Administrator broad powers to contract. There is no restriction of the Administrator's authority to negotiate a shorter period of limitations.12 The contract period of limitations is valid.
The County cancelled the contract in June, 1975.13 It did not initiate this action until May, 1977.14 The County does not argue that any actions of BSL after the cancellation of the contract manifest a waiver of the one-year period of limitations. Once, the contract was cancelled the one-year period of limitations began to run. Any activities modifying the dates of performance of the contract prior to the cancellation of the contract are irrelevant to that period of limitations. Waiver by BSL of the one-year period of limitations has not been established.
1 Changes were made in other portions of paragraph 15. There is no evidence that any question was ever raised with respect to the one-year limitation provision in sub-paragraph 15(h)
2 The term "merchant" is defined in Wis.Stat. § 402.104:
3 It may be noted also that in Sesow v. Swearingen the Oklahoma U.C.C. provided for a five year limitation instead of the four year limitation period in the Model Act
4 This court in Lambert Corp. v. Evans, 575 F.2d 132 (7 Cir. 1978) recognized that the definition of "merchant" is the same in the Model Act and the Wisconsin statute. That case involved a contract for the sale of a product line "package" of floor sweepers, and the court held that there could be "no real doubt that both of the parties were 'merchants' as that term is defined in the Uniform Commercial Code"
5 "Person" is defined in § 1-201(30) of the Uniform Commercial Code as including an individual or an organization. "Organization" is defined in § 1-201(28) of the U.C.C. as including Inter alia, a government or governmental subdivision or agency
6 The Official Comment does not, of course, deal with the definition of "merchant" with respect to the statute of limitations, as this exception does not appear in the Model Act. Rather it is concerned with the use of the term "merchant" in Code provisions relating to "the statute of frauds, firm offers, confirmatory memoranda and modification". The same is true of the cases cited Infra. We see no reason, however, why the same construction of the term "merchant" should not apply to § 402.725(1) of the Wisconsin U.C.C
7 On the other hand, it appears from the Official Comment that any implied "warranty of merchantability" is restricted to "a much smaller group than everyone who is engaged in business and requires a professional status as to particular kinds of goods"
8 Many of the cases which have considered the meaning of "merchant" in the U.C.C. have involved farmers, including two cases construing the Wisconsin U.C.C. In Gerner v. Vasby, 75 Wis.2d 660, 250 N.W.2d 319, 325 (1977) the court held that Gerner "was not a merchant in respect to the sale of grain" because he was not in the business of selling grain but, rather, conducted a cattle-feeding operation and grew grain primarily for that purpose and sold grain only when it was surplus to his cattle feeding needs. In Continental Grain Co. v. Brown, 19 U.C.C.R.S. 52 (Wis.1976) the United States District Court, W.D.Wis., noted that, "There seems to be wide acceptance of the view that, in dealing in sales of his own products, a farmer may be a 'merchant' as the term is used in the Uniform Commercial Code. . . . In fact, it appears likely that the term 'merchant' was intended to apply to all but the consumer purchaser or the most casual and inexperienced seller. . . . It is reasonable to charge persons with the knowledge and skill of merchants if the persons create the impression of familiarity with particular products or practices"
9 See Old Albany Estates, Ltd. v. Highland Carpet Co., Inc., 24 U.C.C.R.S. 114 (Okl.1978) where a warranty disclaimer as to carpet was found to be effective against a contractor because the contractor employed an interior decorator who knew more than the average person about carpet. The interior decorator's knowledge regarding the goods chosen was imputed to the contractor
10 But see Western Sign, Inc. v. State of Montana, 590 P.2d 141, (Mont.1979), where the State of Montana and three of its agencies through their agents had solicited bids. The court held that Western Sign had failed to carry its burden of proof in establishing the State to be a merchant which could be held to a higher standard than good faith in performance of the contract. The court said it found no case in which the court had found a state to be a merchant, although other governmental entities including municipalities had been found to be merchants, but it acknowledged that a state may be a merchant in some circumstances. That question was not decided in the case. 590 P.2d at 144
11 This case is factually distinguishable from the cases dealing with blood transfusions which concern a warranty of merchantability by the hospital or doctor. See Foster v. Memorial Hospital Association of Charleston, 219 S.E.2d 916, 18 U.C.C.R.S. 287 (W.Va.1975). As previously discussed, the definition of a merchant is more restricted when concerned with a warranty of merchantability. When a hospital contracts for more traditionally recognized market products it may be a merchant under the U.C.C. definition. The County and the hospital have a professional status as to the computer. See also Schuman v. Johns Hopkins Hospital, 9 U.C.C.R.S. 637 (S.Ct. of Baltimore City, 1971)
12 See Independent Consolidated School District No. 24 v. Carlstrom, 277 Minn. 117, 151 N.W.2d 784, 787 (1967)
13 The district court found that the County's June 17, 1975 letter canceling the contract established the last date from which it could be argued that the County's cause of action accrued since that was the County's acknowledgment that there was no hope of performance by BSL
14 The action was filed on May 17, 1977 in the Circuit Court for the State of Wisconsin in Milwaukee County and removed to federal court on July 19, 1977