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Hungerford & Terry, Inc. v. Waterlink Separations

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 19, 2007

HUNGERFORD & TERRY, INC., A DELAWARE CORPORATION, PLAINTIFF-APPELLANT,
v.
WATERLINK SEPARATIONS, INC., A WHOLLY OWNED SUBSIDIARY OF WATERLINK, INC., AND WATERLINK, INC., A WHOLLY OWNED SUBSIDIARY OF PARKSON CORPORATION, DEFENDANTS,
AND PARKSON CORPORATION, A SUBSIDIARY OF ALEX JOHNSON, INC., JOINTLY, SEVERALLY AND IN THE ALTERNATIVE, DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, L-2135-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted March 19, 2007

Before Judges Lintner, S.L. Reisner and Seltzer.

Plaintiff, Hungerford & Terry, Inc., appeals from an April 12, 2006, summary judgment dismissing its complaint that alleged breaches of contract and warranty against defendant, Parkson Corporation.*fn1 We affirm.

The facts presented to the motion judge were essentially uncontradicted, the parties disputing only whether those facts could permit a reasonable factfinder to conclude that defendant had made express warranties respecting its water filtration system. The record submitted to the motion judge reveals that plaintiff is a Delaware corporation manufacturing water treatment equipment. Black & Veatch Zachary Power Partners (BVZ) contracted with plaintiff to provide a water treatment system for Sequin, Texas. The treatment system, necessary for use in conjunction with a power plant, was intended to "purify gray water," or secondarily treated waste water, from the city's water supply. The contract specifications called for a continuous sand filtration system to reduce phosphates suspended in the water to a specified level. Because the primary issue before the judge was whether the communications of defendant rise to the level of an express warranty, we recount the evidence of those communications in some detail.

On March 29, 2000, Harold L. Aronovitch, plaintiff's Vice President and Technical Director, inquired of defendant concerning defendant's filtration systems. He provided defendant with a suggested profile of gray water, with flow-rate data, and the expected specification of the water after treatment. Patrick Herrick, defendant's industrial sales manager, authored an April 3, 2000, letter enclosing information on sand filters. The letter included this statement: "Without having feed [total suspended solids] information, it is difficult to estimate what the filter performance will be." The parties continued to communicate and, on April 13, 2000, Herrick faxed to Aronovitch a confirmation of a telephone message. The fax contained the statement: "[W]e are confident that the SuperSand(r) filter can reduce phosphate, as PO4, from 30 mg/l*fn2 to 3 mg/l or less." The comment was qualified immediately: "This is based on the phosphate, as PO4, being capable of effective flocculation. This needs to be determined either by bench testing or on site pilot testing."

On September 7, 2000, Herrick provided plaintiff with a proposal calling for the use of eight filters, which he suggested might be reduced to six. The cover letter, however, cautioned: "We have a concern with the level of phosphate (PO4) in the filter feed water. Our primary concern is that the volume of coagulant required to precipitate the phosphate will generate a solids volume which will overload the filters." He explained that the design was based "on a maximum feed of 10 mg/l of phosphate (PO4)."*fn3

On September 20, 2000, Herrick faxed to plaintiff a response to questions apparently made telephonically and indicated "our proposed system will reduce the phosphate (PO4) level from 30 mg/l down to 10 mg/l," but warned that "[t]his statement is based on the assumption that the required amount of phosphate (PO4) can be made insoluable by precipitation with a coagulant." On September 21, 2000, Herrick provided plaintiff with a proposal for the sale of six filters, specifying filter material, filter media, and other information, but making no reference to the performance of the filters.

On October 17, 2000, representatives of plaintiff and BVZ placed a conference call to Peter Wood, defendant's regional sales manager. Wood's deposition would confirm that performance guarantees were discussed at that meeting. Nevertheless, he insisted that he informed the attendees that defendant could not offer a guarantee of performance without testing samples of the gray water intended to be purified. He was told that samples were not available.

On October 23, 2000, in what the motion judge characterized as "the key letter in the case," Wood wrote to Aronovitch and congratulated him on the contract with BVZ (although that contract had not yet been awarded). Wood expressed defendant's interest in supplying filters for the purification system and included a performance statement in the letter to the effect that the influent PO4 would equal "35-45 ppm" and the effluent PO4 would equal "5 ppm." Thus defendant opined that the filters would be able to reduce the phosphate content of the water from 35-45 parts per million to 5 parts per million. Wood continued that "this application is within reasonable process expectations." However, he conditioned the comment by noting that, "[t]he only remaining area for concern is the total solids generated. . . . We would be happy to conduct bench-scale laboratory testing to determine alkalinity and subsequent reactive solids levels."*fn4

On November 8, 2000, plaintiff sent a purchase order to defendant for six filters and, on December 5, 2000, defendant returned an order package for the six filters. The package contained a product brochure, a letter of compliance, a warranty, and a process guarantee. The warranty information related to the freedom of the product from defects in material and workmanship and contained a disclaimer:

OTHER THAN THE EXPRESS WARRANTIES MADE HEREIN, [DEFENDANT] MAKES NO OTHER WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE. [DEFENDANT] SHALL NOT BE LIABLE FOR INCIDENTAL OR CONSEQENTIAL DAMAGES OR LOST PROFITS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.

The process guarantee provided: "A process guarantee cannot be made unless a sample of the influent is tested by [defendant]. Please refer to the attached correspondence for information on the performance expected."

After the plant was operating with the six filters, laboratory testing indicated that two gray water samples from the power plant had phosphate levels higher than those which Wood had indicated were "within reasonable process expectations" in his October 23, 2000, letter. Defendant responded to an initial complaint by plaintiff's president, Alan Davis, by noting on December 11, 2002, that, although it had expected the filters to reduce phosphate to "5 mgs/l," bench testing had been required to verify this expectation.

Defendant suggested two solutions, one of which was the installation of two additional filters. Defendant's representative, Bill Rogers, thereafter confirmed a conversation with Davis by e-mail to plaintiff's assistant chief engineer, Bill Probasco, to the effect that an additional pilot test was necessary before any form of guarantee could be provided in conjunction with the new purchase. The filters were purchased but did not reduce the phosphate levels to the required level. Davis testified by deposition that he determined not to seek pilot testing before purchasing the additional filters. He felt there had been one round of testing after the system was initially installed and did not wish to spend the additional $20,000-$30,000 necessary for that testing. He acknowledged that defendant required the second round of pilot testing before making a guarantee for the additional filters. When the parties were unable to resolve the question of defendant's responsibility, plaintiff instituted this suit.

Based on this record, Judge David W. Morgan concluded that no factfinder could conclude that the communications from defendant rose to the level of assurance necessary to form an express warranty; that any implied warranty of merchantability was disclaimed; that consequential damages resulting from the performance of the filters had been contractually abandoned; and that no performance guarantee for the additional two filters could be found. Accordingly, he granted defendant's motion and dismissed the complaint.

We review a grant of summary judgment by applying the same standard used by the motion judge, Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998), without affording any special deference to the judge's interpretation of the law. Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 372 (1999); Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). That is, we review the record in the light most favorable to plaintiff and determine if the record thus viewed requires judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Although our decision is de novo, we agree with Judge Morgan's analysis and affirm substantially for the reasons given by him in his oral April 12, 2006, decision.

N.J.S.A. 12A:2-313 describes the conditions under which express warranties may be created. In the part relevant to our factual situation, the statute recognizes that

(1) Express warranties by the seller are created as follows:

(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.

(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.

(2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.

[N.J.S.A. 12A:2-313]

"A statement can amount to a warranty, even if unintended to be such by the seller, 'if it could fairly be understood . . . to constitute an affirmation or representation that the [product] possesse[s] a certain quality or capacity relating to future performance.'" L.S. Heath & Son, Inc. v. AT&T Info. Sys., Inc., 9 F. 3d 561, 570 (7th Cir. 1993) (quoting Gladden v. Cadillac Motor Car Div., Gen. Motors Corp., 83 N.J. 320, 326 (1980)). We agree with the motion judge that none of the communications from defendant to plaintiff, which we have described in detail, could reasonably have been understood to make "an affirmation or representation" that the filters would reduce phosphates in the treated water to 5 parts per million.

As Judge Morgan correctly noted, each discussion of the filter's capability was accompanied by "'howevers' or 'buts', and most significantly, [by] an expressed statement that we can't give you a process guarantee without a sample." No matter how indulgently the communications are viewed, no reasonable interpretation supports a conclusion that a representation of performance was being made in the absence of testing.

Plaintiff argues that the disclaimer of the express warranty is ineffective by virtue of N.J.S.A. 12A:2-316. We need not decide if that statute would invalidate an express warranty in the circumstances of this case because the statute simply does not apply where, as here, there is no express warranty. The same infirmity infects plaintiff's other arguments respecting the disclaimer of any express warranties. The efficacy of a disclaimer is not the issue; once the initial question of the existence of an express warranty is decided against plaintiff, no further discussion is necessary.

We also conclude that any implied warranty was properly excluded by the disclaimer because it specifically mentioned implied warranties of merchantability and was prominently displayed. Such disclaimers are effective. See N.J.S.A. 12A:2-316(2); Fablok Mills, Inc. v. Cocker Mach. & Foundry Co., 125 N.J. Super. 251, 259 (App. Div.), certif. denied, 64 N.J. 317 (1973).

Although, in the absence of a contractual obligation to produce filters that would achieve a specified result, there can be no consequential damages, we reject plaintiff's claim that a factual dispute existed regarding the reasonable commercial expectations of the parties relating to the limitation of damages contained in the order package. Plaintiff's only damages were consequential and were specifically abandoned by the language in the order package relieving defendant of liability for "incidental or consequental damages or lost profits." That language is effective, N.J.S.A. 12A:2-719(3), in the absence of any reasonable belief that defendant was representing that the filters would reduce the phosphate levels to a specific position.

Finally, we note that Judge Morgan's conclusion that no warranty arose with respect to the second purchase of two filters is beyond question. The plaintiff's president testified in his deposition that he knew that defendant "weren't [sic] going to give a promise of guarantee for the performance of these two filters without the second round [of testing]." Having admitted that defendant would not provide a guarantee without testing that was not performed, plaintiff may not now claim such a guarantee in the absence of the required testing.

The balance of defendant's arguments lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed.


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