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GATES RUBBER COMPANY v. USM CORPORATION

November 27, 1972

THE GATES RUBBER COMPANY, A CORPORATION, PLAINTIFF,
v.
USM CORPORATION, A CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Robert D. Morgan, District Judge.

DECISION AND ORDERS ON MOTION FOR SUMMARY JUDGMENT

This action seeks damages allegedly sustained by plaintiff as a result of the failure of the base of a lead extrusion press manufactured and sold to plaintiff by Farrel-Birmingham Company, Inc. The latter is now an operating division of defendant, USM Corporation.*fn1

The press was delivered to, and installed in plaintiff's plant at Galesburg, Illinois, in the early part of the year 1964. It was used by plaintiff in the process of manufacturing high-pressure, commercial rubber hose. Suffice it to state, for present purposes, that the press was designed to extrude lead at a pressure in excess of 2,500 pounds per square inch, to form a temporary mold to maintain the proper shape of the hose material during a vulcanizing process in hose manufacturing.

The press was operated by plaintiff until about July 23, 1968, at which time the base platen of the machine cracked rendering the machine inoperable. The base platen is an integral part of the machine. It not only supports the some 288,000 pounds bulk thereof, but, also, it absorbs forces generated in the lead extrusion process, which are distributed to and throughout the base.

Plaintiff's original complaint was filed on March 16, 1971. Count I thereof alleged that defendant was negligent in the design, manufacture and installation of the press and that such negligence was the cause of the subsequent failure of the machine and the consequent damage to plaintiff. Count II is predicated upon a theory that defendant is strictly liable in tort for the failure of the machine and consequent damage to plaintiff. Plaintiff later amended its complaint to add as Count III the allegation that defendant had fraudulently misrepresented facts as to the design of the base upon which plaintiff relied. The complaint prays both actual damages and consequential damages, including loss of profits, and enhanced costs incurred by plaintiff as a result of the machine failure.

Defendant answered the complaint, as amended, inter alia, denying its liability and asserting statutes of limitation as defenses to all three counts of the complaint.

The cause is now before the court upon defendant's motion for summary judgment upon each of the three counts. In its reponse to that motion, plaintiff has indicated its withdrawal of Count II of the complaint, predicated upon the theory of strict liability in tort. In order that the record shall clearly reflect the status of the cause, an order will enter in conjunction with this memorandum, and upon that representation by plaintiff, dismissing Count II of the complaint.

Defendant moves for summary judgment on Count I, the negligence count, that plaintiff's recovery, if any, must be limited, as a matter of law, to its actual damages, to the exclusion of plaintiff's claim for consequential damages.

It also moves for summary judgment dismissing both Counts I and III upon the ground that the causes of action therein stated are barred by statutes of limitation. The court is convinced that the causes of action are barred by statutes of limitation as hereinafter found and stated. The court also believes that circumstances justify resolution at this time and in this court of the question of limitation of liability as well.

Limitation of Liability

Defendant relies upon an exclusionary clause contained in its proposal for sale of the press to plaintiff to limit its liability for negligence to actual damages suffered. Plaintiff claims that there is a question of fact on whether that exclusionary clause is a part of the sales agreement between the parties. The court has before it extensive depositions taken by the parties to this cause, all documentary evidence exchanged by the respective parties in conjunction therewith, and the affidavit of Gerald R. Gonyer, an officer of defendant, stating chronologically pertinent events connected with the sale of the subject press. From such evidentiary material it clearly appears that there exists no genuine issue as to any material fact to be tried, and that the exclusionary clause does form a part of the sales agreement between the parties.

The following evidentiary facts are undisputed in the sworn material before the court.

Plaintiff, a Colorado corporation, is a large corporate manufacturer of rubber products, operating a number of plants in the United States and several foreign countries. One such plant is located at Galesburg, Illinois. Defendant, through its Farrel division, is a manufacturer of heavy industrial machinery and equipment.

About October 30, 1962, defendant issued from its office in Rochester, New York, a proposal and quotation for the sale to plaintiff of a 2,500 ton lead extrusion press. That proposal included a description, specifications and price for the press, under general terms and conditions of sale printed thereon. Paragraph 5 of such conditions contained a limited warranty against defects in material and workmanship for one year after the date of shipment.*fn2 In addition to the warranty provisions, paragraph 7 thereof provided:

  "We shall have no liability for any special,
  indirect or consequential damages

  arising from loss of production or other losses
  owing to failure of machinery or equipment."

Gerald R. Gonyer was then the defendant's midwest district manager and sales representative who serviced accounts with plaintiff. His office was located in Chicago, Illinois. On March 21, 1963, Gonyer and other representatives of defendant met with representatives of the plaintiff at plaintiff's Galesburg plant, at which time agreement as to certain modifications in specifications and price as contained in the October 30th proposal were reached. Such modifications were included in a letter from defendant to plaintiff on March 28, 1963, which updated and revised the prior proposal to reflect the result of the conference of March 21.

Alpha M. Chase, of plaintiff's purchasing department, stated on deposition that plaintiff had internally issued a purchase requisition for the press, dated May 23, 1963. On May 27, 1963, Mr. Chase contacted Mr. Gonyer by phone and stated that he was placing plaintiff's order number C-70285 for the press in accordance with defendant's proposal, as revised. Gonyer relayed the order to defendant's office in Rochester on the same day. An engineering order was issued by defendant on May 28, 1963, to begin construction of the press. In the early part of June defendant released for that production certain components of the press and placed orders for the obtaining of others. In early November, 1963, Gonyer received from plaintiff its formal written order number C-70285, which was dated March 23, 1963, but which was actually prepared on or about November 1, 1963.

Plaintiff's position that there are material factual issues to be determined rests upon its contention that there is conflicting testimony as to the fact of the May 27th phone order. It also suggests that defendant's proposals are in conflict with plaintiff's written order of November, 1963, and thus are not a part of the sales agreement.

As to the first contention, plaintiff relies upon Chase's deposition statement that he did not recall a phone conversation with Gonyer on May 27, 1963. But he also stated that he might have made such a call and that verbal placement of an order for equipment was not an unusual practice. At best, Chase does not remember. That does not refute the positive testimony that the call was received and that immediately thereafter defendant commenced production of the press.

With respect to the written purchase order, plaintiff takes the position that two such orders were sent to defendant, the first dated June 25, 1963, and the second dated November 1, 1963.*fn3 The June 25 order described the press ordered, and states on its face:

  "* * * The above to be in accord with your
  proposal #62-6, revised 10-30-62, to include
  revisions and recommendations in your letter of
  3-28-63 * * *.
  "Confirming our calls to Jerry Gonyer on 5-24,
  5-27, and Jerry Gonyer's call of 6-11-63."

The November 1, 1963 order stated, in part:

  "* * * The above to be in accord with Farrel
  proposal 62-6 revised dated 10-30-62 and to
  include recommendations and revisions in their
  letter of 3-28-62."

Each of those orders contained in the terms and conditions printed on the back thereof the statement that "The liability of Buyer and of Seller under this contract shall not ...


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