Norcold Inc. v. Gateway Supply Co., Inc.

[Cite as Norcold Inc. v. Gateway Supply Co., Inc., 2010-Ohio-4068.]

IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
SHELBY COUNTY

NORCOLD, INC., CASE NO. 17-08-25

PLAINTIFF-APPELLANT,
CROSS-APPELLEE,

v.

GATEWAY SUPPLY COMPANY,

DEFENDANT/THIRD-PARTY OPINION
PLAINTIFF-APPELLANT,
CROSS-APPELLEE,

-and-

DAYCO PRODUCTS, INC.,

DEFENDANT-APPELLEE,
CROSS-APPELLANT.

Appeal from Shelby County Common Pleas Court
Trial Court No. 00-CV-56

Judgment Reversed and Cause Remanded

Date of Decision: August 30, 2010
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APPEARANCES:

James E. Wynne, for Appellant / Cross-Appellee

David P. Pierce, for Appellee / Cross-Appellant

WILLAMOWSKI, P.J.

{¶1} Plaintiff-appellant Norcold Inc. (“Norcold”) brings this appeal from

the judgment of the Court of Common Pleas of Shelby County granting summary

judgment to third party defendant-appellee Dayco Products, Inc. (“Dayco”).

Dayco brings a cross-appeal from that same judgment. For the reasons set forth

below, the judgment is reversed and the matter is remanded for further

proceedings.

{¶2} Norcold produces and sells refrigerators to manufacturers of

recreational vehicles and camping trailers. For several years, defendant/third party

plaintiff-appellant Gateway Supply Company (“Gateway”) distributed pipes,

fittings, and valves to Norcold for use in the refrigerators. In 1992, Norcold

contacted Gateway to discuss the possibility of combining two pre-existing parts

used to power the refrigerators into one part. This combined unit was known as a

tap tee and was used to carry flammable liquid propane gas. Gateway then

contracted with Dayco to manufacture the tap tee. Dayco then delivered the tap

tees to Gateway, who sold them to Norcold pursuant to purchase orders. The

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purchase orders gave Norcold the ability to test each tap prior to final assembly.

Norcold tested each tap tee twice before integrating it into the refrigerators.

{¶3} In the summer of 1999, Norcold discovered that the tap tees were

potentially hazardous due to stress corrosion cracking. Norcold voluntarily

recalled its mobile refrigerator units and allegedly suffered damages in excess of

$25,000.

{¶4} On March 17, 2000, Norcold filed suit against Gateway, alleging

breach of contract and breach of express and implied warranties. Gateway, on

April 19, 2000, filed its answer and a third-party complaint against Dayco alleging

that it had manufactured and sold the tap tees to Gateway which were the subject

of Norcold’s suit. The third-party complaint asserted that Dayco should indemnify

Gateway and that Gateway was entitled to damages for breach of contract, breach

of express and implied warranties, and unjust enrichment. Dayco filed its answer

to the third party complaint on June 29, 2000. On August 16, 2000, Gateway filed

a counterclaim against Norcold for breach of contract, payment of an account, and

unjust enrichment, all arising from Norcold’s receipt of credit for approximately

10,400 tap tees which Norcold returned to Gateway.

{¶5} On October 12, 2000, Norcold amended its complaint, adding Dayco

to its breach of express and implied warranty claims. In response, Gateway

reasserted its claims against Dayco as cross-claims and its counterclaims against

Norcold through its answer on October 19, 2000. Dayco answered the amended

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complaint and cross-claim on January 22, 2001, alleging via a cross-claim that it

was entitled to indemnification and/or contribution from Gateway in the event it

was liable to either Norcold or Gateway, and also filed a counterclaim against

Norcold. Gateway answered the cross-claim on February 6, 2001. On February

13, 2001, Norcold filed its answer to Gateway’s counterclaim.

{¶6} On February 11, 2002, Dayco sought summary judgment against

Norcold and Gateway. Dayco argued that Gateway’s claims must fail because the

invoices and packaging slips all contained disclaimers of all warranties, except an

express warranty that the goods were “free from defects in material and

workmanship.” Dayco also argued that the invoices and packaging slips limited

the available remedies to a refund, or at its option, repair or replacement, provided

that Gateway provided Dayco notice of the problems within 120 days of invoice.

On that same day, Gateway sought summary judgment against Norcold and

Dayco. On May 20, 2002, the trial court entered judgment denying Dayco’s

motion. The trial court determined that Dayco had expressly warranted the

materials and workmanship and that the limited remedy provision failed its

essential purpose. In a separate entry, the trial court granted Gateway’s motion for

summary judgment and dismissed all claims against Gateway. The trial court

granted Norcold leave to file a second amended complaint.

{¶7} On July 22, 2002, Norcold filed its second amended complaint

asserting breach of contract and breach of implied and express warranties against

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Gateway. Norcold also asserted tort claims against Dayco. Gateway and Dayco

both filed answers with the same claims previously provided in response to

Norcold’s first amended complaint. On September 4, 2002, the parties agreed to

dismiss all claims asserted by Norcold against Gateway in accordance with the

prior grant of summary judgment.

{¶8} On November 15, 2002, Dayco moved for summary judgment on

Norcold’s tort claim against it. The trial court granted the motion on December

13, 2002, finding that Ohio law does not provide a remedy in tort for a commercial

purchaser of a defective product for purely economic loss. Norcold appealed from

the granting of summary judgment to Dayco and Gateway on January 13, 2003.

No cross-appeal was filed. On August 3, 2003, this court affirmed the trial court’s

granting of Dayco’s summary judgment motion on the tort claim and reversed the

granting of Gateway’s summary judgment on the contract claims, specifically the

express warranty and implied warranty of fitness for a particular purpose claims.

Norcold, Inc. v. Gateway Supply Co, Inc., et al., 154 Ohio App.3d 594, 2003-

Ohio-4252, 798 N.E.2d 618 (“Norcold I”).

{¶9} On October 15, 2004, the parties entered into a stipulation which

defined the outstanding claims remaining for determination. Under the stipulation,

Norcold had claims against Gateway for breach of express warranty, under R.C.

1302.26, and breach of implied warranty of fitness for a particular purpose under

R.C. 1302.28. Gateway maintained a counterclaim against Norcold for an

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affirmative recovery for the returned parts. In addition, Gateway claimed that if

Dayco manufactured defective tap tees, then Dayco would have breached its

contract with Gateway and its express warranties and implied warranties of

merchantability and of fitness for a particular purpose. Gateway also claimed

unjust enrichment, indemnity, and contribution against Dayco. Dayco had no

claims pending against either Norcold or Gateway.

{¶10} In November of 2004, a jury trial was held. The trial court

determined at trial that it would follow its May 2002 ruling on Dayco’s summary

judgment motion on Gateway’s claims. In doing so, the trial court excluded any

evidence relating to the disclaimer of warranties between Dayco and Gateway.

Dayco objected and sought an opportunity to proffer evidence, which was granted.

Dayco then filed a written proffer wherein it described its disclaimer and

limitation of remedy language as well as other evidence. Dayco also moved for a

directed verdict on the same grounds it had argued in its summary judgment

motion against Gateway, as well as for lack of evidence of reliance as to both

warranties and for lack of proof of an express warranty. The motion was denied.

{¶11} Before closing arguments, the parties entered into a stipulation

removing Gateway’s counterclaims against Norcold for the returned tap tees and

Gateway’s cross-claims against Dayco for breach of contract and unjust

enrichment from the jury’s consideration. Pursuant to the stipulation, if the jury

found against Norcold, the trial court would enter a verdict for Gateway against

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Norcold for $22,241.02 for the returned tap tees. If the jury returned a verdict for

Norcold, then the trial court would enter a verdict against Dayco for the price

Gateway paid Dayco for the tap tees. In addition, the stipulation preserved all

rights to post-verdict relief and appeal. Gateway then dismissed its

indemnification, contribution, and breach of implied warranty of merchantability

claims against Dayco.

{¶12} After closing arguments, the trial court instructed the jury to decide

the four remaining stipulated claims. The first two claims were Norcold’s claims

against Gateway for breach of express warranty and implied warranty of fitness

for a particular purpose. The other two claims were Gateway’s claims against

Dayco for breach of express warranty and implied warranty of fitness for a

particular purpose. The jury returned a verdict in favor of Norcold on “either or

both of its claim(s)” in the amount of $2,366,930 and in favor of Gateway on

“either or both of its claim(s)” in the same amount. The trial court then ordered

Gateway to pay Norcold $2,366,930 plus interest. Additionally, the trial court

ordered Dayco to pay Gateway the same. Gateway was also awarded $18,707.40

for the returned tap tees.

{¶13} Dayco moved for judgment notwithstanding the verdict and for a

new trial. Both motions were denied. Dayco then appealed from the judgment

and claimed that 1) it was not liable to Gateway so the trial court erred in denying

its motion for summary judgment; 2) the trial court erred in excluding the

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warranty related evidence; 3) the trial court erred in instructing the jury on the

breach of warranty claims; 4) the trial court erred in denying the motion for a

directed verdict; 5) the trial court erred in denying the motion for judgment

notwithstanding the verdict; and 6) the trial court erred in denying the motion for a

new trial. On December 28, 2006, this court held as follows:

Based on the foregoing discussion, we find that the trial court in
its May 2002 judgment entry properly denied Dayco’s summary
judgment motion with respect to Gateway’s claim that the tap
tees violated Dayco’s express warranty that the tap tees will be
“free from defects in material or workmanship”, since there are
material issues of fact as to whether the tap tees were free from
defects in material or workmanship. Additionally, we find that
the trial court erred in denying Dayco’s summary judgment
motion with respect to any other express warranties given by
Dayco to Gateway, since Dayco properly disclaimed all other
express warranties in their packaging slips, except that the tap
tees would be “free from defects in material or workmanship”
under [R.C.] 1302.29(A). Also, we find that the trial court
should have granted Dayco’s summary judgment motion with
respect to Gateway’s claim that Dayco violated its implied
warranty of fitness for a particular purpose, since Dayco
properly disclaimed that warranty under R.C. 1302.29(B).
Further, we find that the trial court improperly concluded that
Dayco’s limited remedy provision failed in its essential purpose,
since that is an issue of fact reserved for the trier of fact to
determine whether Dayco was unable or unwilling to make
repairs to the tap tees in a reasonable time. Also, we remand
the issue of limited remedies to the trial court for a
determination of exactly which damages are excluded under
Dayco’s limited remedy provision. Finally, the agreed
stipulation between the parties for the returned parts shall
remain in effect until further proceedings determine who is
liable for the defects in the tap tees.

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Norcold, Inc. v. Gateway Supply Co., et al., 3d Dist. No. 17-05-11, 2006-Ohio-

6919, ¶58 (“Norcold II”). This court then determined that since the case was

being remanded for further findings of fact, the remaining assignments of error

were moot and need not be addressed. Id. at ¶60.

{¶14} Upon remand, additional discovery occurred between the parties.

On August 5, 2008, the trial court granted summary judgment to Dayco and

ordered that Dayco pay $3,019.44 to Gateway. Norcold and Dayco both appeal

from this judgment. Norcold raises the following assignments of error.

Norcold’s First Assignment of Error

The trial court erred in granting Dayco’s motion for summary
judgment on August 5, 2008 because in doing so it engaged in
impermissible fact finding. At a minimum a genuine issue of
material fact existed with respect to when Dayco received notice
of a defect, and if notice of defect was truly an issue before the
trial court on remand it should have been decided by the jury
and not by the judge on summary judgment.

Norcold’s Second Assignment of Error

The trial court erred in denying Norcold’s cross motion for
summary judgment since Dayco’s limited remedy failed of its
essential purpose as a matter of law under the facts admitted by
Dayco.

Norcold’s Third Assignment of Error

The trial court erred in even considering Dayco’s defenses based
on notice or lack of notice as Dayco waived the notice issue at
the underlying jury trial and was foreclosed from raising the
issue on remand.

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Norcold’s Fourth Assignment of Error

The trial court erred in failing to determine that the 120 day
term in Dayco’s limited remedy was “manifestly unreasonable”
as a matter of law and, therefore, unenforceable under R.C.
1301.01 because the defects alleged in the tap tees were latent
and not capable of detection within the 120 day limitation
period.

On cross-appeal, Dayco raises the following assignment of error.

The trial court erred by limiting the scope of proceedings on
remand to damages and the limitation of remedies provisions
accompanying Dayco’s express warranty when the remand was
for further proceedings on issues of both liability and damages.

In the interest of clarity, the assignments of error will be addressed out of order.

{¶15} When reviewing a motion for summary judgment, courts must

proceed cautiously and award summary judgment only when appropriate. Franks

v. The Lima News (1996), 109 Ohio App.3d 408, 672 N.E.2d 245. “Civ.R. 56(C)

provides that before summary judgment may be granted, it must be determined

that (1) no genuine issues as to any material fact remains to be litigated; (2) the

moving party is entitled to judgment as a matter of law; and (3) it appears from the

evidence that reasonable minds can come to but one conclusion, and viewing the

evidence most strongly in favor of the nonmoving party, that conclusion is adverse

to the nonmoving party.” State ex rel. Howard v. Ferreri (1994), 70 Ohio St.3d

587, 589, 639 N.E.2d 1189. When reviewing the judgment of the trial court, an

appellate court reviews the case de novo. Franks, supra.

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{¶16} Dayco’s cross-appeal raises the question of what issues were

remanded to the trial court. Dayco argues that this court’s prior opinion sent the

entire matter, including the issue of liability, back to the trial court for a new trial.

In Norcold II, this court held that the trial court erred in denying summary

judgment on the issue of a warranty of fitness for a particular purpose. However,

the court determined that Dayco did have a limited express warranty covering

defects in material and workmanship. This court noted that Dayco had not been

permitted to argue the warranty limitations at trial. Additionally, this court noted

that the question of whether the limited warranty failed in its essential purpose

was a question of fact to be determined by the jury, not a question of law. This

court also remanded the issue of the limited remedies to the trial court to

determine which damages, if any, should have been excluded. Finally, this court

held that “the agreed stipulation between the parties for the returned parts shall

remain in effect until further proceedings determine who is liable for the defects

in the tap tees.” Norcold II, at ¶58. Thus, the trial court erred in finding that there

was no issue of liability when the remand specifically stated that liability was an

issue to be addressed. Dayco’s assignment of error on its cross-appeal is

sustained.

{¶17} In Norcold’s first assignment of error, it argues that the trial court

erred in granting summary judgment to Dayco on the issue of notice. Norcold

alleges that it provided notice to Gateway who provided notice to Dayco of

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problems with the tap tees as early as 1996. In support of this allegation, it

provided copies of various documents, including letters, returned goods memos,

faxes, indicated that the tap tees were cracking and that there was a potentially

serious problem. Dayco denies that it had any notice until 1999. These

documents do raise a question of fact as to when Dayco had notice of problems

with the tap tees. Thus, Norcold’s first assignment of error is sustained.

{¶18} Norcold’s second assignment of error alleges that the trial court

erred by denying its motion for summary judgment as to whether Dayco’s limited

remedy failed of its essential purpose as a matter of law. During discovery,

Dayco admitted that it did not offer any remedy for repair or replacement of the

tap tees determined in the prior trial to be defective. Instead, Dayco offered to

give a credit to Gateway for the tap tees returned in exchange for offsetting orders

equal to twice the value of the return spread out over a four month period. March

23, 2000 Fax. The other option was a credit equal to 60% of the purchase price

with an offsetting order required. When this offer was declined, Dayco presented

a second offer of a $15,000 credit to Dayco’s account to be held in escrow for six

months pending resolution of the matter. If the matter was not resolved in six

months, as it was not, they would meet again to discuss options. March 31, 2000

Fax. Both options required the return of all tap tees in stock. Dayco admitted in

its answer to the interrogatories that it had not offered to either repair or replace

the tap tees. March 21, 2008 Interrogatories. However, some remedy was

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offered. Whether the remedy offered caused the warranty to fail in its essential

purpose is a question of fact to be determined at trial. Norcold II, at ¶58. Thus,

Norcold’s second assignment of error is overruled.

{¶19} In its third assignment of error, Norcold claims that the trial court

erred in considering Dayco’s defenses based on notice or lack of notice as Dayco

waived the notice issue at the prior trial by not raising it. However, the prior trial

was reversed and a new trial was ordered. Norcold II. Thus, the parties are free

to proceed as if that trial did not occur. Norcold’s third assignment of error is

overruled.

{¶20} Norcold’s fourth assignment of error alleges that the trial court erred

in failing to determine that the 120 day term of the limited remedy was manifestly

unreasonable. The materials in question here are alleged to contain latent defects

that were not discoverable within the 120 day term. Thus, Norcold argues that the

120 day limit was manifestly unreasonable. This determination is one of fact that

must be proven at trial. Therefore, the trial court did not err in not making this

finding of fact on summary judgment. The fourth assignment of error is

overruled.

{¶21} A review of the record indicates that there are genuine issues of

material fact as to liability, damages, notice, the effect of the warranty, the

effectiveness of the remedy, and the reasonableness of the warranty. Therefore,

the trial court erred in granting summary judgment on these issues as the

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questions of material fact must be determined by the trier of fact, i.e. the jury. For

this reason, the judgment of the Court of Common Pleas of Shelby County is

reversed and the matter is remanded for further proceedings.

Judgment Reversed and Cause Remanded

SHAW and PRESTON, J.J., concur.

/jnc

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