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Custom Communications Engineering Inc. v. E.F. Johnson Co.

Decided: December 30, 1993.

CUSTOM COMMUNICATIONS ENGINEERING, INC., A NEW JERSEY CORPORATION, PLAINTIFF-APPELLANT,
v.
E.F. JOHNSON COMPANY, A MINNESOTA CORPORATION; TEL-AIR COMMUNICATIONS, INC., A NEW JERSEY CORPORATION; AND JONACH ELECTRONICS, INC., DEFENDANTS-RESPONDENTS, AND WESTERN UNION CORPORATION, A DELAWARE CORPORATION; ROBERT LIBBEY, AN INDIVIDUAL; REILLY RADIO COMMUNICATIONS, A SOLE PROPRIETORSHIP; GLEN REILLY, AN INDIVIDUAL; COMMUNICATIONS SERVICES, INC., A NEW JERSEY CORPORATION; KREEGER ASSOCIATES, A SOLE PROPRIETORSHIP; AND BRUCE KREEGER, AN INDIVIDUAL, DEFENDANTS



On appeal from the Superior Court, Law Division, Morris County.

King, Havey and Ariel A. Rodriguez. The opinion of the court was delivered by Havey, J.A.D.

Havey

[269 NJSuper Page 534] The central issue on appeal is whether the four-year statute of limitations under the Uniform Commercial Code (UCC), N.J.S.A. 12A:2-725(1), is applicable to the parties' dealership agreement.

Plaintiff Custom Communications Engineering, Inc. (Custom) appeals from an order for summary judgment dismissing its complaint against defendants E.F. Johnson Company (Johnson), Tel-Air Communications, Inc. (Tel-Air) and Jonach Electronics, Inc. (Jonach). In its complaint, Custom seeks damages against Johnson for economic loss arising from Johnson's termination of its dealership agreement with Custom. The remaining defendants are other Johnson dealers who, Custom alleges, conspired with Johnson and tortiously interfered with Custom's agreement. The Law Division Judge determined that N.J.S.A. 12A:2-725(1) applied and therefore Custom's complaint was time-barred because it was filed four years after the accrual of its cause of action. We affirm the summary judgment order as to Johnson, but reverse as to the defendant-dealers.

Johnson is a manufacturer of radio equipment. On June 17, 1978, Custom entered into a Land Mobile Dealer Agreement with Johnson which granted Custom the right to sell and service Johnson's products within a designated "Dealer's Territory" in northern New Jersey. The agreement provides that Custom is required to use its best efforts to promote the sale of Johnson products in the designated area and to maintain an inventory of products, as well as a service facility for the benefit of Johnson customers.

The agreement also restricts Custom to the selling of Johnson products within its designated territory. Although the agreement does not expressly state that Custom's territory was exclusive, Custom claims that Johnson had made oral representations as to its exclusivity. Paragraph 3 of the agreement provides that Custom may sell Johnson products in the territory of other dealers only upon their approval and upon Custom paying them compensation for the sales. Paragraph 11 specifies that the relationship between the parties was "that of buyer and seller." Finally, paragraph 14 provides that either party may terminate the agreement, with or without cause, upon thirty days' written notice.

According to Custom, in 1978 Johnson began making sales in Custom's territory through other dealers without permission and without compensating Custom. Custom also claims that Johnson established other dealers in Custom's "exclusive" territory beginning some time in 1981-82. On March 18, 1985, Johnson terminated the agreement.

On March 20, 1985, Custom filed a complaint against defendants alleging breach of contract, conspiracy and tortious interference with its agreement. Custom amended the complaint on April 8, 1985 adding a count charging Johnson with a violation of the New Jersey Franchise Practices Act, N.J.S.A. 56:10-1 to -15. Custom also demanded an accounting and a credit for the sales made by Johnson and its other dealers within Custom's territorial limits. The complaint was dismissed on January 24, 1986 for failure to answer interrogatories.

Custom filed a second complaint on July 7, 1986 which, except for the abandonment of its claim under the Franchise Practices Act, was essentially identical to its original complaint. The second complaint was dismissed without prejudice for lack of prosecution on January 31, 1987.

On April 19, 1988, Custom filed the present complaint which basically mirrored the second complaint, except that it adds a count charging Johnson with wrongful discharge. Defendants moved for summary judgment, arguing that Custom's cause of action accrued no later than 1982, and thus was barred by the four-year statute of limitations under the UCC, N.J.S.A. 12A:2-725. Judge D'Ambrosio of the Law Division agreed, reasoning that since the parties were involved in a "sales" agreement, Custom's claim of breach of contract was governed by the UCC time-bar. He also concluded that because Custom's tort claims against all defendants were "derivative" of its breach of contract claim, they were barred as well.

I

N.J.S.A. 12A:2-725(1) provides that an action for breach of any contract for "sale" under the UCC ...


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