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D''ercole Sales, Inc. v. Fruehauf Corp.

Decided: November 21, 1985.

D'ERCOLE SALES, INCORPORATED, PLAINTIFF-RESPONDENT, CROSS-APPELLANT,
v.
FRUEHAUF CORPORATION, ALSO KNOWN AS FRUEHAUF DISTRIBUTING COMPANY AND FRUEHAUF TRAILER COMPANY, DEFENDANT-APPELLANT, AND GENERAL MOTORS CORPORATION, BEYER BROTHERS GMC CORPORATION, RESPONDENTS



On appeal from Superior Court of New Jersey, Law Division, Bergen County.

King, Deighan and Bilder. The opinion of the court was delivered by Deighan, J.A.D.

Deighan

Under the facts and circumstances of this appeal we are required to determine, among other things, whether in a commercial transaction a purchaser of a product is restricted to a claim for damages for breach of warranty under the Uniform Commercial Code -- Sales, N.J.S.A. 12A:2-101 et seq., for a defective product or whether the Consumer Fraud Act, N.J.S.A. 56:8-2, may apply, as an unconscionable commercial practice, where the seller fails to rectify the defect.

Plaintiff D'Ercole Sales Incorporated (D'Ercole) ordered a new tow truck from Fruehauf Corporation (Fruehauf) who custom built and assembled the vehicle. The chassis, cabin,

engine and drive train were manufactured by General Motors Corporation (GMC) and purchased from Beyer Brothers GMC Corporation (Beyer Brothers), a dealer of GMC. The tow truck broke down on the date of delivery to plaintiff and several times thereafter despite attempts by Beyer Brothers to rectify the mechanical failure. After the last breakdown Beyer Brothers kept the tow truck for some four to six weeks to determine the cause of the mechanical failure and concluded that the source of the problem was the responsibility of Fruehauf. Without telling plaintiff the nature of the defect, Beyer Brothers tendered delivery of the tow truck to plaintiff, which was refused. Plaintiff filed a complaint against GMC, Fruehauf and Beyer Brothers for negligence, breach of contract, breach of warranty, rescission and damages under the Consumer Fraud Act. Fruehauf crossclaimed against GMC and Beyer Brothers for indemnity and contribution.

At the conclusion of plaintiff's case, the trial judge dismissed the claim based on the Consumer Fraud Act against General Motors and also dismissed plaintiff's claims against all defendants for punitive damages. R. 4:37-2(b). At the close of all of the evidence, the trial judge dismissed all claims against GMC and Beyer Brothers, including Fruehauf's crossclaims for contribution and indemnity. R. 4:40-1.

The jury returned a $22,500 verdict against Fruehauf under the Consumer Fraud Act. The trial judge molded the verdict by trebling the damages under the Act to $67,500 and added $3,000 attorneys fees for a total verdict of $70,500. The trial judge denied Fruehauf's subsequent motion for a new trial as to liability. R. 4:49-1. On the issue of damages, he ordered a remittitur of the judgment from $22,500 to $8,500 to reflect a deduction of $14,000 which plaintiff recouped from the resale of the tow truck. The verdict was adjusted for treble damages to the sum of $25,500 plus the $3,000 attorneys fees for a total judgment of $28,500. Although plaintiff accepted the remittitur, Fruehauf appealed and plaintiff cross-appealed for a reinstatement of the original verdict.

I.

Plaintiff is engaged in the business of towing motor vehicles and the sale of motorcycles, snowmobiles, and accessories. In March 1981, plaintiff ordered a new tow truck from Fruehauf. A completed tow truck is not manufactured on an assembly line but must be custom built from a cab and chassis which is designed to be converted into a tow truck. Fruehauf assembled and sold the tow truck and certified it as a completed unit. Fruehauf did not manufacture any of the component parts but acted as the completed vehicle manufacturer. GMC manufactured the cab and chassis, including the engine and drive train which Fruehauf purchased from Beyer Brothers. Other manufacturers, not parties to this action, supplied other parts to the tow truck, such as lights, tow equipment, a front end "push" bumper, and other equipment.

Fruehauf made several alterations and additions to the original GMC's cab and chassis in order to assemble a completed tow truck. These included the attachment of a tow truck body on the chassis, alteration of the electrical, fuel and throttle-control system, and the installation of substitute gas tanks on the vehicle. The tanks were changed after Fruehauf discovered that the original GMC gas tanks were too large to accommodate the tow apparatus which had been requested by the plaintiff. The tow truck was completed and delivered to plaintiff in June 1981 at a purchase price of $20,656. After delivery plaintiff installed other optional equipment at a cost of approximately $900.

Fruehauf gave a limited warranty to plaintiff for all materials and workmanship provided by it. General Motors issued a limited warranty on the chassis, cab, engine and drive train. On the day the tow truck was delivered to plaintiff it broke down. Robert D'Ercole, principal of plaintiff, called Fruehauf, and, since the problem was mechanical, Fruehauf dispatched Beyer Brothers to pick up the tow truck. A few days after the tow truck was returned to D'Ercole by Beyer Brothers, it broke

down again. When it was returned a week later by Beyer Brothers, plaintiff refused to accept it because of "what appeared to be a rubber hose which ran from the gas tank to the carburetor, and because the body had numerous chips and scratches." Beyer Brothers picked up the vehicle and returned it approximately two days later when it was accepted by D'Ercole.

In July the tow truck again broke down. Once more it was picked up by Beyer Brothers who retained it for over one month. In August it was re-delivered to plaintiff's place of business by a representative of Beyer Brothers and a GMC regional manager. Plaintiff refused to accept the vehicle because "it still had a hose from the tank to the carburetor, the bumper had been pushed in, there were dents and scratches that had not been fixed, and the carpets were soiled." Plaintiff also pointed out that although he had only logged approximately 100 miles on the vehicle, its odometer registered 956 miles. Since plaintiff was unable to reach an accommodation with the parties to the transaction, this action was instituted.

A substantial portion of the evidence at trial concerned the cause of the mechanical failure of the tow truck. Defendant Beyer Brothers maintained that all of their work on the tow truck in June, July and August was diagnostic in nature. This included the testing and installation of several replacement parts in an effort to discover the cause of the problem. During the course of testing, they discovered that the "sending unit" of the fuel tank, which consists of a fuel gauge and a line to draw fuel from the tank, was the cause of the vehicle's problem. The sending unit of a General Motors' fuel tank is a steel pipe*fn1 which extends almost to the bottom of the tank. When the mechanics for Beyer Brothers removed the tanks in the tow truck, they discovered that the sending unit steel pipe extended

only half-way to the bottom of the tank and that a rubber hose was fitted to the pipe extending it to nearly the bottom of the tank. The replacement of the fuel tanks was one of the alterations made by Fruehauf when assembling and constructing the tow truck.

At trial, according to William Dubois, an expert who testified on behalf of Beyer Brothers, and Paul Bary and Bernard Lee who testified on behalf of GMC, the submersion of the rubber hose in the gasoline caused the rubber to soften. When the fuel started to pass through the hose into the gas line, a pressure vacuum was created and the soft rubber hose collapsed blocking the flow of gasoline through the fuel line to the carburetor. The experts ascribed this fuel starvation as the basis of plaintiff's problems and attributed it solely to Fruehauf. This information was conveyed to Fruehauf's service manager, Guilfoil, and GMC and Beyer Brothers asserted that it was Fruehauf's responsibility to make the necessary repairs. Fruehauf refused to acknowledge any responsibility and took no action to rectify the condition.

After discovery of the source of the problem, Beyer Brothers restored the vehicle to the original factory specifications except with respect to the gas tanks. The rubber hoses were removed from the metal pipes of the sending units leaving short stand pipes. The fuel starvation condition was apparently corrected, but because of the short stand pipe which did not extend to the bottom of the gas tank, the tow truck would not operate even though the tank was half full of gas and was so indicated on the gas gauge.

Fruehauf presented no proof contrary to the opinions of GMC's and Beyer Brothers' experts regarding the tow truck problems. The thrust of Fruehauf's defense was that the defect with the tow truck was the result of a malfunction in the engine manufactured by General Motors and the faulty repairs made by Beyer Brothers. Fruehauf maintained that certain work orders of Beyer Brothers in evidence supported the argument

that Beyer Brothers was involved not only in diagnostic work but also with repairs.

On this appeal Fruehauf contends that: (1) the trial court erred in dismissing its crossclaims for contribution and indemnity against Beyer Brothers and GMC; (2) the verdict was tainted because it was based upon prejudice, partiality and passion as a result of improper comments by plaintiff's counsel in the summation; (3) it was plain error to submit the issue of consumer fraud against Fruehauf to the jury, and (4) that the trial court erred in its charge on consumer fraud. Plaintiff cross-appeals contending that the trial court improperly invaded the province of the jury in directing a remittitur of the verdict and further abused its discretion by awarding insufficient attorneys fees to plaintiff under the Consumer Fraud Act.

II.

Since the rights and liabilities of the parties are primarily grounded in the law of sales, Springfield Motors Distributor's, Inc. v. Ford Motor Co., 98 N.J. 555, 571-576 (1985), we begin with the Uniform Commercial Code -- Sales, N.J.S.A. 12A:2-101 et seq. (UCC). The sales order sets forth a description of the tow truck and equipment on the face sheet which has the following notation:

GOODS SOLD HEREUNDER, UNLESS CLEARLY MARKED AS BEING MANUFACTURED BY FRUEHAUF CORPORATION, ARE SUBJECT TO SECTION C(i) OF THE WARRANTY WHICH APPEARS ON THE REVERSE SIDE OF THIS ORDER.

Above the signature of the purchaser also is a notation concerning the warranty and terms on the reverse side. The warranty provides:

A. Except for tires, to which a separate tire warranty applies, the Fruehauf Division Corporation (Seller) hereby warrants to the first purchaser thereof, for a period of time (5) years after delivery, all new trailers, equipment, and other goods manufactured by Fruehauf Corporation (Manufacturer) to be free of defects in workmanship and material when properly maintained and used in normal service. "Normal service" means usage in the manner and for the purposes for which such goods are ...


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