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THERMO KING CORP. v. STRICK CORP.

March 19, 1979

THERMO KING CORPORATION, a corporation, Plaintiff,
v.
STRICK CORPORATION, a corporation, Defendant



The opinion of the court was delivered by: COHILL

AMENDED MEMORANDUM

Plaintiff, Thermo King Corporation ("Thermo King"), brought a diversity action against defendant, Strick Corporation ("Strick"), to recover $ 15,000 that Strick had deducted from the purchase price of goods Thermo King sold to Strick in early 1974. In its answer, Strick admitted all factual allegations of the complaint but asserted a $ 15,000 indemnity counterclaim against Thermo King arising from an unrelated, separate transaction.

 Quinn never sued Strick, but in December, 1974, Strick settled Quinn's claim by crediting Quinn's account for $ 15,000. On the theory that Thermo King, as the original manufacturer of the refrigeration units, was primarily liable to Quinn, Strick set off the $ 15,000 against the purchase price for the acceptable goods Thermo King had shipped to it in 1974.

 Thermo King moved for summary judgment on its claim and on Strick's counterclaim, contending that the counterclaim is barred by either the four year statute of limitations applicable to actions for breach of any contract for sale, 12A P.S. (UCC) § 2-725, or the six year limitation for contract actions in general.

 Strick, on the other hand, argues that it has six years from the December, 1974 settlement in which to bring an action for Thermo King to indemnify it for the settlement amount on the basis of Thermo King's primary liability to Quinn for breach of warranty, negligence or strict liability.

 By memorandum and order dated December 22, 1978, we granted summary judgment in favor of Thermo King. On Strick's motion, we now reconsider that decision.

 We agree that a distributor may have a right to have the manufacturer of defective goods indemnify it for liability that the distributor incurs to the ultimate purchaser of the goods. *fn1" See, e.g., United New York Sandy Hook Pilots Ass'n v. Rodermond Industries, 394 F.2d 65 (3d Cir. 1968); Mack Trucks, Inc. v. Bendix-Westinghouse Automatic Air Brake Co., 372 F.2d 18 (3d Cir. 1966), Cert. denied, 387 U.S. 930, 87 S. Ct. 2053, 18 L. Ed. 2d 992 (1967). Due to its contractual nature, a claim for indemnity is governed by the statute of limitations applicable to contract actions, United New York Sandy Hook Pilots Ass'n v. Rodermond Industries, supra; Mack Trucks, Inc. v. Bendix-Westinghouse Automatic Air Brake Co., supra, which in this case specifies a limitation of six years after the cause of action accrues. 12 P.S. § 31. An indemnity claim does not accrue until the indemnitee's liability is fixed by a judgment against, or payment in settlement by, the indemnitee. United New York Sandy Hook Pilots Ass'n v. Rodermond Industries, supra; Mack Trucks, Inc. v. Bendix-Westinghouse Automatic Air Brake Co., supra; 3 Moore's Federal Practice P 14.09 (2d ed. 1967). Thus, Strick had six years from its December, 1974 settlement payment to Quinn to pursue any right it had to indemnity by Thermo King.

 This right to indemnity, however, is predicated on Thermo King's primary liability to Quinn. The main basis that Strick asserts for Thermo King's underlying liability is the breach of implied warranties of merchantability and fitness for a particular purpose. UCC §§ 2-314, 2-315. These implied warranties can be modified or excluded, however, in the case of a writing, by appropriate "conspicuous" language. UCC § 2-316(2). Whether language is "conspicuous" under this section is a question of law for the court. UCC § 1-201(10). The test is whether a reasonable person against whom the modification or exclusion is to operate ought to have noticed it. Id.

 Having inspected the warranty card, we are satisfied that the warranty card contained appropriate "conspicuous" language within the meaning of § 2-316(2) that excluded the implied warranties. On the front side of the customer copy of the warranty card clearly appear the words "(See reverse side for warranty)." On the back, under the heading "MANUFACTURER'S WARRANTY," the fourth of six short paragraphs begins as follows: "THIS WARRANTY IS EXCLUSIVE AND IN LIEU OF ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR PURPOSE, OR OTHER WARRANTY OR QUALITY, WHETHER EXPRESSED OR IMPLIED, AND OF ALL OTHER LIABILITIES AND OBLIGATIONS ON THE MANUFACTURER'S PART." No other language in the warranty appears in all capital letters. We conclude, therefore, that such language is "conspicuous," since a reasonable person should have noticed and understood it.

 This exclusion of implied warranties is distinguishable from the one held not conspicuous in Salov v. Don Allen Chevrolet Co., 55 D. & C.2d 180 (Pa.C.P.1971), cited by Strick. There the purported exclusion was on the reverse side of an automobile sales contract, and the language on the front side referring to the clause was much smaller than any other language on that side. The language of exclusion was the tenth of twelve paragraphs, and only slightly larger, darker and more slanted than other print on the page, and capitals were used freely on the front side. Id. at 183-84.

 The terms of Thermo King's express warranty (See UCC § 2-313(1)(a)) and limitation of remedy (See UCC § 2-719) are stated clearly:

 
"Subject to the conditions hereinafter stated, the Manufacturer (Thermo King Corporation) warrants its equipment to be free from defects in material and workmanship for a period of 90 days from the date of original installation. This warranty extends only to the original owner of the equipment and is limited to repair or replacement (at Manufacturer's option) at any of its authorized service agencies of any part or parts which are returned to the ...

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