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Santor v. A & M Karagheusian Inc.

Decided: February 17, 1965.

DANIEL SANTOR, PLAINTIFF-APPELLANT,
v.
A & M KARAGHEUSIAN, INC., A DELAWARE CORPORATION AND SEABOARD FLOOR COVERING, INC., A DELAWARE CORPORATION, JOINTLY, SEVERALLY OR IN THE ALTERNATIVE, DEFENDANTS-RESPONDENTS



For reversal -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None. The opinion of the court was delivered by Francis, J.

Francis

[44 NJ Page 55] Plaintiff was awarded a judgment of $1,512 representing the cost of certain carpeting he purchased from a retailer of the manufacturer, defendant A & M Karagheusian, Inc. The carpeting was sold as Grade No. 1 and turned out to be defective. The judgment was entered also against defendant Seaboard Floor Covering, Inc., the distributor and wholly-owned subsidiary of Karagheusian which sold the carpeting to the retailer from whom plaintiff bought it. (The matter was treated at the trial level and in the Appellate Division as if a decision as to the manufacturer's liability would be determinative of the case. No separate consideration was asked or given to the distributor. The same is true in this Court. Consequently we shall proceed on the assumption that the judgment below will stand or fall on our view of Karagheusian's liability.) The Appellate Division reversed plaintiff's recovery. 82 N.J. Super. 319 (App. Div. 1964). We granted plaintiff's petition for certification. 42 N.J. 288 (1964).

Defendant Karagheusian manufactures a type of carpeting which it designates and advertises on a nationwide scale as "Gulistan." Plaintiff Santor was aware of the advertising.

On September 6, 1957 Santor purchased for his home 96-2/3 square yards of Gulistan carpeting from A.P. Davis Company, Inc. of Oaklyn, New Jersey, a retailer of Karagheusian. The price was $14 per square yard plus a laying charge of $1.75 per linear yard. The style and pattern had been selected at the showroom of the distributor Seaboard. It was laid around January 1958 and almost immediately plaintiff noticed an unusual line in it. He telephoned the dealer who advised him it would wear away. Some weeks later the dealer examined the carpeting and expressed the view that the line would "walk out" as the pile subsided, and he counseled patience. That reassurance was repeated on a number of occasions. Then, instead of improving when the pile wore down, it became worse and two additional lines appeared.

About eight months after delivery plaintiff decided to "really have it out" with the dealer. But when he drove to the place he found a sign in the window saying "Out of Business." Plaintiff then felt his situation was hopeless and nothing could be done. Later he decided to try to locate the dealer. Some information came to light indicating the dealer had moved to Maine. Correspondence produced no result. Finally contact was made by telephone sometime in 1960 and the dealer assured the plaintiff the carpeting was not second but first grade quality. Santor said it took him that long to locate the dealer. Thereafter he endeavored to ascertain the name and location of the manufacturer. Although the nature of the search and the dispatch with which it was made are not described in any detail, Santor wrote to Karagheusian in September 1960 complaining about the carpeting and requesting that a mill representative be sent to examine it. Such an examination took place and apparently the parties had conversations about the situation for some time thereafter. The record indicates that on December 8, 1960 the dealer wrote Santor giving him full information identifying the type carpeting

he had purchased, specifying that it was No. 1 grade, and giving the dates of the Seaboard invoices. The dealer also expressed the hope Santor would have "no further trouble" in obtaining a satisfactory adjustment. The adjustment was not made and suit was instituted sometime in November 1961. The filing date of the complaint does not appear in the appendix as required by R.R. 1:7-1(f).

The original complaint simply alleged the carpeting was defective and sought recovery of its cost. Later an additional paragraph was added charging defendant Karagheusian with breach of an implied warranty of merchantability. At the trial Karagheusian conceded the carpeting had been manufactured defectively. The court decided there was an implied warranty of merchantability from the manufacturer to the purchaser Santor even though there was no privity of contract between them. On the basis of the admission of defective manufacture, the court found a breach of the warranty and entered judgment for the plaintiff for the full purchase price.

I.

In the trial court defendant manufacturer contended that plaintiff, not being a privy to the contract between it and the dealer (or distributor) for the sale of the carpeting, could not recover for the breach of it. A distinction was sought to be drawn between the present situation and that before this Court in Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358 (1960). More specifically, Henningsen was said to have adopted the rule that where commodities advertised by the manufacturer for the purpose of promoting their sale to the public are such that if defectively manufactured they will be dangerous to life or limb, society's interests can be protected only by eliminating the requirement of privity between the maker and the reasonably expected ultimate consumer when such a consumer suffers bodily injuries as the result of defective manufacture thereof. And, the argument continued, the privity rule was abrogated only in such cases, not for situations

where defective manufacture of the article would not be likely to render it dangerous to the user or did not cause personal injury to him. Thus, said Karagheusian, where defective manufacture results only in a valueless article or in its reduced value, the long-standing requirement for privity of contract between buyer and seller persists, and the buyer's remedy is solely against his seller; there can be no recovery for total or partial loss of value against the manufacturer. The trial court rejected the contention. The Appellate Division accepted it, saying:

"It is clear to us that as of this writing, absent personal injury or damage to health consequent upon use of the product in question, there is no action in this State on the part of a purchaser of goods for breach of warranty in respect of their quality or fitness for use except as against the party from whom he has purchased them." 82 N.J. Super., at p. 322.

It is true that most of the discussion in Henningsen centers about the right to recover damages for personal injuries suffered by a person not a party to the contract of sale between the purchaser on the one hand and the dealer or the manufacturer on the other. And it was held that, regardless of privity, the injured person, i.e., the purchaser's wife, could recover against the manufacturer and dealer for breach of an implied warranty of merchantability, which by operation of law became an incident of the sale of the automobile to her husband. But plaintiff says defendants overlook that the suit included a claim by Claus Henningsen against Chrysler Corporation for damage to his car in the mishap which resulted in his wife's injuries. Recovery for such damage was allowed against both dealer and Chrysler Corporation. With respect to the manufacturer, the controlling principle was said to be that when a manufacturer puts a new automobile in the stream of trade and promotes its purchase by the public, an implied warranty that it is reasonably suitable for use as such accompanies it into the hands of the ultimate purchaser from the dealer. 32 N.J., at p. 384.

In fairness it must be said, however, that no particular emphasis was placed upon the property damage aspect of the case. No effort was made to distinguish between the manufacturer's liability for personal injuries resulting from the defective automobile and damage sustained by the vehicle itself in an accident caused by its defective manufacture. In fact, no argument was made that if the law recognized the existence of an implied warranty between maker and ultimate purchaser, redress for breach thereof should be limited to situations involving personal injuries to such person. And it cannot be said that serious consideration was given to whether a distinction should be made between personal injury claims and loss of bargain claims, i.e., where the breach of the warranty produced total or partial destruction or diminution in value of the article sold.

There is no doubt that the great mass of warranty cases imposing liability on the manufacturer regardless of lack of privity were concerned with personal injuries to the ultimate consumer. See Henningsen, supra (32 N.J., at pp. 372, 379-384); Goldberg v. Kollsman Instrument Corporation, 12 N.Y. 2 d 432, 240 N.Y.S. 2 d 592, 191 N.E. 2 d 81 (Ct. App. 1963); Greenman v. Yuba Power Products, Inc., 59 Cal. 2 d 57, 27 Cal. Rptr. 697, 377 P. 2 d 897 (Sup. Ct. 1962); Jaeger, "Privity of Warranty: Has the Tocsin Sounded?," 1 Duquesne L. Rev. 1 (1963); Jaeger, "Warranties of Merchantability and Fitness for Use: Recent Developments," 16 Rutgers L. Rev. 493 (1962); Prosser, "The Assault Upon the Citadel (Strict Liability to the Consumer)," 69 Yale L.J. 1099 (1960). But we see no just cause for recognition of the existence of an implied warranty of merchantability and a right to recovery for breach thereof regardless of lack of privity of the claimant in the one case and the exclusion of recovery in the other simply because loss of value of the article sold is the only damage resulting from the breach.

The manufacturer is the father of the transaction. He makes the article and puts it in the channels of trade for sale to the public. No one ...


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