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Kehrer Brothers Construction, Inc. v. Custom Body Co.

January 18, 2008

KEHRER BROTHERS CONSTRUCTION, INC., PLAINTIFF,
v.
CUSTOM BODY COMPANY, INC., CUSTOM TRUCK & EQUIPMENT, LLC, F/K/A CUSTOM BODY, LLC, AND ATLAS TRUCK SALES, LLC, D/B/A CUSTOM TRUCK SALES, LLC, DEFENDANTS.



The opinion of the court was delivered by: Herndon, Chief Judge

MEMORANDUM & ORDER

I. Introduction

This case concerns an allegedly defective commercial hydraulic crane purchased by plaintiff Kehrer Brothers Construction, Inc. ("Kehrer"). Plaintiff thus filed suit against several corporate entities, including the crane manufacturer and dealer. Since initially filing suit, Plaintiff has reached settlement with the crane manufacturer and now seeks relief against entities Plaintiff believes bear liability for the sale of the crane. Therefore, Plaintiff's Third Amended Complaint (Doc. 131) is comprised of two counts brought against the three remaining defendants. Count I states a claim for breach of express warranty. Count II states a claim for breach of the implied warranties of merchantability and fitness for a particular purpose. Before the Court are three separate Motions for Summary Judgment, each filed by the remaining three defendants: Atlas Truck Sales, LLC, d/b/a Custom Truck Sales, LLC ("Atlas") (Doc. 132), Custom Truck & Equipment, f/k/a Custom Body, LLC ("Custom Truck") (Doc. 133) and Custom Body Company, Inc. ("Custom Body") (Doc. 134). Plaintiff has responded in opposition to each, making the issues ripe for determination (Docs. 135, 137 & 138). For reasons discussed within this Order, Atlas' Motion is granted in part and denied in part; Custom Truck's Motion is also granted in part and denied in part; lastly, Custom Body's Motion is granted in part and denied in part.

II. Background

Plaintiff is in the commercial roofing business (Doc. 131 - Third Am. Comp., ¶ 1). Defendants Custom Body, Custom Truck and Atlas all market custom trucks for use in the construction and roofing industries (Id. at ¶¶ 2-4). In August 2002, Plaintiff purchased a Terex TC-4792 Crane (the "Crane") and a Kenworth T-800 Crane Truck (the "Truck") for the price of $136,000 (Doc. 131, ¶ 13). Plaintiff made an initial down payment of $68,000 and paid the remaining $68,000 upon delivery of the Crane and Truck in September 2002 (Id. at ¶¶ 16, 18-20). The Crane was manufactured by Terex Corporation (Id. at ¶ 5). Terex-RO Corporation is a wholly-owned subsidiary of Terex Corporation (both entities collectively referred to as "Terex") (Id. at ¶ 6).*fn1 Atlas was a dealer of Terex cranes (Id. at ¶¶6-7). The Truck Plaintiff purchased was originally sold by Custom Body to Atlas, who then sent it to Terex to install the Crane on the Truck (Id. at ¶¶ 17-18; Doc. 134, p. 2).

Plaintiff alleges that the Crane is defective because it repeatedly "retract[s] without warning and without input from the operator" (Doc. 131, ¶ 24). Plaintiff claims it first became aware of this defect on October 7, 2002, while attempting to put the Crane into service for its roofing business, whereupon it notified Atlas of the Crane's faulty retraction. Atlas attempted to repair the Crane on five separate occasions, beginning November 2002 through July 2003, due to numerous defects, such as improper retracting of the Crane, leaking hoses, a defective stop, a broken throttle cable, a defective circuit hose, a leaking swivel on the roofers reel, a defective counterbalance cartridge and a defective winch motor (Id. at ¶ 27, Exs. 6-10). Each time, Atlas submitted a Warranty Claim Report and corresponding Credit Memos to Terex, seeking reimbursement for parts and labor. Plaintiff also alleges that on one occasion in August 2004, Atlas once again attempted to repair the Crane at no charge to Plaintiff and without submitting a reimbursement request to Terex (Id. at ¶ 31). Yet, despite all attempts at repair, Plaintiff believes the Crane is still defective, alleging that it continues to improperly retract without warning and without input from the operator (Id. at ¶¶ 32-33).

Although Plaintiff had purchased other Terex cranes in the past, it had never purchased a crane through Atlas. Plaintiff's owner, Joe Kehrer, states in his affidavit that as part of its sales pitch, Atlas told him it would "stand by the Crane and that the Crane would have a warranty." The Crane came with a written Limited Warranty Statement (the "Warranty"),*fn2 which reads, in pertinent part: Terex-Ro Corp. warrants that all new products manufactured by Terex-RO Corp. which have been "properly registered" shall be free from defects in materials and workmanship for three hundred sixty five days (365) after the "in service date". "Properly registered" means the following three forms are completed, signed by dealer and customer as required and received at Terex-RO Corp. plant within five (5) days of the service date: (1) warranty registration; (2) certification of pre-delivery inspection and service; and (3) certification of customer operator orientation. The "in service date" shall be the first to occur of date of sales to the dealer's customer; or entry to dealer's rental fleet. If any product fails to meet the foregoing warranty and such defect is properly reported to Terex-RO Corp. during said three hundred sixty five (365) day period, Terex-RO Corp. will be responsible for the reasonable cost of labor and Terex-RO Corp. standard parts to correct any such defect. This warranty shall only apply to warranty work that is performed by an authorized dealer facility.

***

No representative of Terex-RO Corp. or any dealer has authority to change the terms of this warranty in any manner whatsoever and no assistance to any purchaser by a dealer or by Terex-RO Corp. in repair or operation of Terex-RO Corp. products shall constitute a waiver of the conditions of this warranty nor shall such assistance extend or revive it.

***

Upon the expiration of the warranty period all liability of TerexRO Corp. shall terminate except with respect to those warranty claims properly filed with Terex-RO Corp. prior to such expiration. No action or breach of the terms hereof shall be commenced later than one (1) year after the alleged breach.

***

IN NO EVENT SHALL TEREX-RO CORP. BE LIABLE FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES RESULTING FROM THE FAILURE OF ANY PRODUCT FROM ANY OTHER EVENT, INCLUDING WITHOUT LIMITATION, LOSS OF PROFIT OR OTHER COMMERCIAL LOSS OR INJURY OR DAMAGE TO PERSONS OR PROPERTY.

***

EXCEPT AS SPECIFICALLY AND EXPRESSLY REQUIRED BY LAW, TEREX-RO CORP. MAKES NO OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND THE FOREGOING WARRANTIES ARE EXCLUSIVE AND SUPERSEDE ALL OTHER WARRANTIES WHETHER WRITTEN, ORAL, IMPLIED OR STATUARY. (Doc. 131, ¶ 21, Ex. 4).

Plaintiff has filed suit for breach of the Crane's express written warranty, alleging that the numerous failed attempts to repair the Crane demonstrate that the Crane was not free from defects as warranted. Although the manufacturer of the Crane, Terex, is no longer a party to this suit, Plaintiff argues that Atlas, as its authorized dealer, adopted the written warranty and is estopped from denying its obligations under the Warranty. Plaintiff also claims that because the written warranty failed of its essential purpose, the warranty's disclaimer should not be enforceable. Plaintiff also states a claim for breach of the implied warranty of merchantability and the implied warranty of fitness for a particular purpose. Claiming it spent over $15,667.06 in various repairs, Plaintiff seeks this amount in compensatory damages, along with its expended costs to rent a crane to replace the defective Crane and costs to eventually replace the Crane, as well as damages for loss of use and lost man-hours (Id. at ¶ 42).

Plaintiff believes that defendant Custom Truck is also liable for breach of the Warranty and implied warranties, alleging it is a "successor to and continuation of" Atlas (Id. at ¶ 8). Pursuant to an Asset Purchase Agreement (the "Agreement"), on January 19, 2003, Custom Truck, when it was formerly "Custom Body, LLC,"*fn3 purchased certain assets and liabilities from Atlas (Id. at ¶ 8, Ex. 11; see also Doc. 133, p. 2). Shortly thereafter, Custom Body, LLC, merged with Custom Truck; Custom Truck was the surviving entity of the merger (Doc. 133, p. 3, Ex. B). Section 1.03 of the Agreement set forth the liabilities Custom Truck was to assume from Atlas, as well as the excluded liabilities, providing:

(a) Assumed Liabilities. The Buyer agrees to assume all ongoing obligations related to the Business for debts incurred by the Buyer after the Closing Dates (the "Assumed Liabilities"). The following is a partial list of the Assumed Liabilities and is not meant to be all inclusive:

***

All purchases and expenses related to the operation of the business where the benefits accrue to the Buyer after closing;

All deals (contracts) in process at Closing.

The Assumed Liabilities will only be Assumed Liabilities if the Buyer has knowledge of the historical amounts of these liabilities. Sellers agree to provide information as requested by Buyer ...


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