Appalachian Leasing, Inc. v. Mack Trucks, Inc.

234 W.Va. 334

765 S.E.2d 223

APPALACHIAN LEASING, INC., a West Virginia corporation, Plaintiff Below, Petitioner

v.MACK TRUCKS, INC., a foreign corporation; and Worldwide Equipment, Inc., a foreign corporation, Defendants Below, Respondents.

No. 13–1247.

Supreme Court of Appeals of West Virginia.

Submitted Oct. 1, 2014.

Decided Oct. 30, 2014.

Stephen P. New, Esq., The New Law Office, Beckley, WV, for Petitioner.

Harry F. Bell, Jr., Esq., Jonathan W. Price, Esq., The Bell Law Firm, PLLC, Charleston, WV, for Respondents.

Opinion

KETCHUM, Justice:

This matter arose from a business transaction subject to the West Virginia Uniform Commercial Code. The plaintiff, Appalachian Leasing, Inc., (“Appalachian”) purchased four coal trucks from the defendants, Mack Trucks, Inc., (“Mack”) and Worldwide Equipment, Inc., (“Worldwide”). Alleging that the trucks were defective, Appalachian filed an action in the Circuit Court of Mercer County, seeking a revocation of acceptance of the vehicles, a refund of the purchase price, and incidental and consequential damages.

On November 12, 2013, the circuit court entered an order granting summary judgment in favor of Mack and Worldwide and dismissing the action with prejudice. The circuit court determined that Mack and Worldwide had satisfied their obligations under the trucks' express warranty and that all implied warranties had been disclaimed.

Upon review, this Court reverses the summary judgment. Although the implied warranties were validly disclaimed, the appendix record reveals genuine issues of material fact concerning whether Mack and Worldwide satisfied their obligations under the trucks' express warranty. Appalachian is entitled, on remand, to pursue the various remedies and damages provided in Article 2 on “Sales” of the Uniform Commercial Code.

Accordingly, the November 12, 2013, order of the circuit court is reversed, and this action is remanded to that court for proceedings consistent with this opinion.

I. Factual Background

Appalachian is a coal hauling company in southern West Virginia with approximately seventy-five employees and in excess of one hundred trucks. Its principal officers were Kenny Compton and his wife, Lynn Compton. In December 2007 and January 2008, Appalachian purchased four, new 2008 Mack trucks, Model GU–713, for off-road coal hauling purposes. The trucks were sold to Appalachian by Worldwide, a franchised retail dealer for Mack.¹ Appalachian purchased three of the trucks for $165,000 each and the fourth for $175,000. The sale agreements for the trucks were signed on Appalachian's behalf by Kenny Compton.

A. Warranties and Disclaimers

The only express warranty made with regard to Appalachian's purchase of the four trucks was included in Mack's “Pedigreed Protection Plan.” That warranty, known as Mack's “Standard Warranty,” along with various disclaimers, stated:

Mack Trucks, Inc. (the “Manufacturer”) warrants each new Mack motor vehicle (the “Vehicle”) sold by it or by any of its authorized new truck sales facilities to be free from defects in material or workmanship under normal use and service, its obligation under this warranty being limited to repairing or replacing, as hereinafter provided, at its option, at the Manufacturer's authorized truck repair facility any part or parts of the Vehicle found to the Manufacturer's satisfaction to be defective upon examination by it[.] * * *

THIS WARRANTY IS MADE EXPRESSLY IN LIEU OF ANY OTHER WARRANTIES OR CONDITIONS, EXPRESSED OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND OF ANY OTHER OBLIGATION

OR LIABILITY ON THE PART OF THE MANUFACTURER INCLUDING, WITHOUT LIMITATION OF THE FOREGOING, CONSEQUENTIAL AND INCIDENTAL DAMAGES.

Worldwide's sales agreement with Appalachian incorporated by reference Mack's Standard Warranty. The sales agreement, entitled the “Truck–Equipment Sales Agreement,” included the following disclaimer (with emphasis added):

DISCLAIMER OF WARRANTIES: SELLER MAKES NO WARRANTIES AS TO THE PROPERTY, EXPRESS, IMPLIED OR IMPLIED BY LAW EXCEPT, AS TO NEW VEHICLES ONLY, THE MANUFACTURER'S [Mack's] STANDARD VEHICLE WARRANTY, WHICH IS INCORPORATED HEREIN BY REFERENCE. SELLER SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ANY LIABILITY FOR CONSEQUENTIAL DAMAGES FOR ANY BREACH OF WARRANTY.

Finally, a similar disclaimer appeared on Worldwide's invoices for the four trucks:

Any warranties applicable to a new motor vehicle ordered hereunder are the Manufacturer's [Mack's] warranties only and not the Dealer's. DEALER HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. BUYER SHALL NOT BE ENTITLED TO RECOVER FROM THE SELLER ANY CONSEQUENTIAL DAMAGES, DAMAGES TO PROPERTY, DAMAGES FOR LOSS OF USE, LOSS OF TIME, LOSS OF PROFITS OR INCOME OR ANY INCIDENTAL DAMAGES.

B. Allegations that the Trucks were Defective

According to Appalachian, each of the four trucks failed to properly function due to a multitude of problems beginning immediately after the purchase from Worldwide. The trucks continually broke down, resulting in repeated instances of driving or towing the trucks back to Worldwide for repairs. As described by Kenny and Lynn Compton, the problems included (1) would not run, (2) hard to start, (3) transmission problems, (4) overheating, (5) leaking water pump, (6) hoods falling off and (7) cabs falling apart. Moreover, although Mack and Worldwide never declined to try to repair the trucks, the repairs allegedly were never successful and replacement vehicles were never provided.

II. Procedural Background

On September 16, 2008, Appalachian filed a complaint in the Circuit Court of Mercer County against Mack Trucks and Worldwide. The complaint was grounded on Article 2 on “Sales” of the West Virginia Uniform Commercial Code, W.Va.Code, 46–1–101 [2006]et seq. Appalachian alleged that Mack and Worldwide breached both express and implied warranties relating to the four trucks. With regard to the express warranty, Appalachian alleged that, despite repeated attempts, the trucks were never repaired as initially promised, and Appalachian never received comparable replacement vehicles. With regard to the implied warranties of merchantability and of fitness for a particular purpose, the complaint alleged:

The implied warranty made by defendants that their off-road coal trucks were of good and merchantable quality and fit and suitable for its intended use was breached upon the failure of defendants to design and install component parts of fully and reliably built design and manufacture, so as to permit their proper use in the off-road trucking industry.²

For relief, Appalachian sought a revocation of acceptance of the four trucks, a refund of the purchase price, and incidental and consequential damages. Included in the demand for damages, Appalachian sought lost business income, expenses for towing and replacement transportation, and compensation for annoyance and inconvenience.

On September 5, 2013, Mack and Worldwide filed a motion for summary judgment. Mack and Worldwide alleged that, since they never refused to attempt repairs on the four trucks, Appalachian would be unable to show a breach of the Standard Warranty found in Mack's Pedigreed Protection Plan. That express warranty was limited to repairing and replacing defective parts. Moreover, Mack and Worldwide alleged that Appalachian would be unable to show a breach of the implied warranties of merchantability and fitness because Appalachian waived those claims at the time of purchase, as evidenced by Worldwide's Truck–Equipment Sales Agreements and invoices.

On November 12, 2013, the circuit court granted summary judgment in favor of Mack and Worldwide and dismissed the action with prejudice. The order addressed (1) Mack and Worldwide's (incorporated) express warranty, (2) Mack's and Worldwide's disclaimers of implied warranties and (3) Mack's and Worldwide's limitation of Appalachian's remedies. With regard to the express warranty, the circuit court concluded:

The defendants' obligation pursuant to Mack's express warranty was limited to repair or replacement of any vehicle components that Defendant Mack found to be defective. * * * Kenny Compton gave sworn testimony that the Defendants had never failed to perform warranty service upon the subject vehicles. Accordingly, Appalachian's claim for breach of express warranty is without merit.

Next, the circuit court recognized that W.Va.Code, 46–2–316(2) [1963], allows the parties to a commercial sale to exclude or modify the implied warranties of merchantability and of fitness for a particular purpose, if the language used in the transaction specifically mentions those warranties and is conspicuously set forth in the sale documents. The circuit court concluded that the disclaimers of the implied warranties found in Mack's Pedigreed Protection Plan and in Worldwide's Truck–Equipment Sales Agreements and invoices met the requirements of W.Va.Code, 46–2–316(2) [1963], and that, consequently, Appalachian could not prevail on a theory of implied warranties.

Finally, the circuit court recognized that W.Va.Code, 46–2–316(4) [1963], provides that “[r]emedies for breach of warranty can be limited” by the parties. Accordingly, the circuit court noted that Mack was only obligated to repair the trucks and replace defective parts and that under the terms of its Pedigreed Protection Plan and Worldwide's sale agreement and invoices, all claims for incidental and consequential damages were precluded. Finding that Kenny Compton, who signed the sale documents, had sufficient experience in the coal industry to understand their import, the circuit court rejected Appalachian's assertion that the limitation of remedies was unconscionable.

The ruling of the circuit court precluded Appalachian from seeking a revocation of acceptance and a...