Opinion
24201/06.
Decided January 6, 2011.
Robert Steinberg, Esq, Steinberg Boyle, LLP, Attorneys for Plaintiff, EIslip NY.
Edward J. Yule, Esq, Attorney for Defendant, Northport NY.
NATURE OF THE CASE
Plaintiff, Joseph Silhan, commenced this action by summons and complaint. After purchasing a custom boat through Defendant, Britannia Custom Yachts, Inc. significant mechanical and electrical problems developed. Plaintiff claimed to have spent $18,125.60 for repairs resulting from Defendant's poor workmanship. Defendant's primary defense was that the purchase agreement contained a waiver of liability. Further, Plaintiff should have made claims against manufacturers for items which Plaintiff had warrantees. Defendant filed a counterclaim for $7,800.00 representing the balance of due on the purchase of the boat. The action was transferred to this Court, pursuant to Civ. Pract Law Rules § 325(d). A bench trial was conducted. Plaintiff, and Plaintiff's marine surveyor, testified. Defendant relied upon the testimony of the managing partner.
TRIAL TESTIMONY
Plaintiff met Peter Houmere at a boat show in 2003. Houmere was managing partner of the Defendant, Britannia Custom Yacht Inc, a local boat dealership. Defendant was the exclusive dealer for boats custom built by Dorado, a Florida based corporation. Houmere testified that Plaintiff was an experienced and well-known local fisherman. Plaintiff was provided information about Dorado boats, and, about a month later, Plaintiff to the Defendant's showroom and spoke with Rick and Pete. On October 23, 2003, Plaintiff entered into a written purchase agreement to purchase a forty-foot Dorado. That initial purchase agreement was for a 2005 Dorado with twin 385hp Caterpillar engines. The options included an enclosed head (bathroom), trim tabs and lighting package. Plaintiff was to arrange for purchasing and installing electronics. The total price, after providing for a trade-in, was $178,980.00. The back contained additional terms and conditions, paragraph 9, which stated:
"Except to the extent required by state law, seller expressly disclaims all warranties, express or implied, including any implied warranty of merchantability or fitness for a particular use."
On the front of the agreement appeared an "unchecked" box which stated:
"When this box is checked, the unit which is the subject of this contract is being sold on an "as is" basis, the entire risk as to the quality and performance of this unit is with the purchaser."
Shortly thereafter, the contract was modified to permit certain options selected by the Plaintiff. The modified purchase agreement, after Plaintiff updated the options, was for a 2005 Dorado with twin 385 hp Caterpillar engines. The options included an aluminum bow rail, enclosed head, shore power, trim tabs and upper station tower. The total price increased to $230,000.00. There was no allowance for a trade-in. On the front of the agreement appeared the same "unchecked" box which stated:
"When this box is checked, the unit which is the subject of this contract is being sold on an "as is" basis, the entire risk as to the quality and performance of this unit is with the purchaser."
Houmere confirmed that the manufacturer would not have installed any of the options, including the engines, if such items would have been inappropriate for the size of the boat. Houmere testified that Defendant faxed its version of the purchase details to Dorado to begin production. The relevant portions of that transmittal reflected the production of a forty-foot Dorado with twin 385hp engines. But, it provided for a porta potty, not an enclosed head, and did not reflect the bow rail, trim tabs, or tower, ordered by Plaintiff.
The boat was expected to be completed in time for use in Spring 2004. Plaintiff began visiting the Dorado plant in Florida with Pete and Rick in Fall 2003. In early 2004, Plaintiff visited again with either Rick or Pete. At that time, the hull was out of the mold, gas tanks were being installed, and the forward topside of the boat had been attached to the hull. However, production was behind schedule. Plaintiff made a third trip to Dorado, again with either Pete or Rick. The engines and generators were installed, but production was still behind schedule. It became obvious that the boat would not be completed in time for Spring 2004. Later in 2004, Plaintiff traveled to Florida again with Rick and Pete, after being informed that the boat was ready for its first "sea trial." That is, although the boat was not completed, sufficient controls, gauges and the engines were installed to test run the boat in open water. Upon arriving at the Dorado plant, Plaintiff observed the local Sheriff seizing boats, engines and materials from Dorado. Dorado was having financial problems, specifically with Caterpillar, maker of the engines. Plaintiff located his boat at a local marina. The boat did not yet have its bow railings, nor tower. Finding the keys in the boat, Plaintiff, Rick and Pete ran the boat. The boat had a vibration, the tachometers were inaccurate, and the boat's projected speed could not be attained. Pete and Rick were able to show the Sheriff sufficient paperwork and the Sheriff released Plaintiff's boat. Pete and Rick then told Plaintiff they would arrange for the boat to be transported to the dealership in New York. When Plaintiff saw the boat in New York, he immediately noticed two different sized propellers on the shafts which accounted for the vibrations.
Houmere testified that at that point it was the agreement that after Defendant got the boat from Dorado, Defendant would complete the boat. The boat required additional wiring and installation of electronics, as well as several structural elements like bow rails and the tower. Dorado had completed the gauge and control wiring required to run the boat. Once the boat arrived at Defendant's yard, Plaintiff visited the dealership two-to-three times weekly until completion in April 2005. The bow rail and tower had to be constructed and installed by a local aluminum craftsman. The boat was actually piloted by Rick from the dealership in Northport to the Plaintiff's south shore home so the craftsman could install the rails and tower. Upon completion of the rail and tower, Rick piloted the boat back to the dealership for additional work. Plaintiff then purchased an electronics package at another boat show, and delivered the items to Defendant for installation. As Plaintiff continued to visit the boat, issues developed. There were shifting problems from the boat's tower when the shift would bind. The tower gauges did not work, and water would enter into the head (bathroom) when the boat ran. Circuit breakers would trip, and the generator had a reverse polarity warning.
Plaintiff did not perform a final sea trial before taking title and possession in April 2005. A week later, Rick piloted the boat from Northport back to Plaintiff's south shore home. The same issues existed. When Plaintiff operated the boat at home, there were steering problems, the shift did not work, and he could not "kill" the engines from the tower. If the air was damp, Plaintiff could feel "voltage" from the electrical panel, and the electronics continued to trip the circuit breakers. Plaintiff continued to complain to Rick and Pete. One day, as Plaintiff was departing from his local marina, a propeller shaft sheered off.
In Fall 2005, Plaintiff hired a marina surveyor to inspect the boat. The auto-pilot was inoperative, circuit breakers continued to trip, tower controls and steerage did not operate properly. The surveyor testified at trial that on plane, if the boat was turned sharply in one direction, the steering "locked" in that turn. The tripped circuit breakers were not caused by inherent problems with the electronics, but by the voltage and wiring to the electrical panel. In the surveyors opinion, the electronics needed to be on an independent circuit which would have avoided the overloading and circuit tripping. The surveyor also explained that the upper tower controls and lower boat controls were not compatible. The controls installed on the lower deck were not intended to work with an upper control resulting in incompatibility. This accounted for the shift jamming, and the inability to "kill" the engines from the tower. The trim tabs (used to stabilize the boat) required a 20 amp circuit, but was installed on a 10 amp circuit causing the breakers to trip and render the trim tabs inoperable. Plaintiff gave the surveyor's report to Houmere who said he would get back to Plaintiff. Plaintiff never heard back from Defendant. Houmere testified that he never participated in any sea trials, so he did not have personal knowledge of the on-going problems. He did acknowledge receiving Plaintiff's continued complaints, but did not know if the problems were resolved.
Plaintiff had the boat repaired, the costs of which are the basis of his claim. Plaintiff provided receipts for the following:
Cost of shaft, propeller $1,255.00 Removal and replacement of shaft 1,041.28 Diver to recover lost prop/sheered shaft1, 575.00 Electrical circuit tracing and repair1, 464.84 Warrantied bottom paint repair1, 564.20 Rewire shore power, rewire stations 8,302.03 Navtech sensor replacement 1,079.73 Navtech autopilot service 705.52 Sanitation system repair, corrosion 138.00 $17,125.60
ARGUMENTS
Plaintiff argued that there was no evidence that he was provided the terms and conditions relied upon by Defendant. His contract was between himself and Defendant Britannia, not with Dorado. Plaintiff also argued that Defendant assumed responsibility for the wiring and installation of electronics, and Plaintiff was never told by Defendant to go anyplace else for the work. Plaintiff also pointed out that Defendant failed to call Rick to testify, the employee at Britannia who had first hand experience with the problems.
In opposition, Defendant relied upon the terms and conditions, specifically the waiver of liability. Defendant stated that Plaintiff had manufacturer warranties for the electronics, and Plaintiff should have made claims against those manufacturers. Defendant also questioned whether many of the problems were caused by Plaintiff after Plaintiff took possession of the boat. Defendant sought, by counter claim, payment of $7,800.00 it believed was due on the balance of the purchase.
ANALYSIS
In a matter such as this, it is the province and indeed the obligation of the trial court to assess and determine matters of credibility. Morgan v McCaffrey , 14 AD3d 670 , 789 N.Y.S.2d 274 (2d Dep't 2005); Matter of Liccione v Michael A., 65 NY2d 826, 493 N.Y.S.2d 121 (1985). Here, the burden is upon the plaintiff to plead and prove its direct case by a fair preponderance of the credible, relevant and material evidence with the same burden imposed upon the Third-party Plaintiff respecting his claim against the Third-party Defendant. Prince-Richardson on Evidence, § 3-210; Torem v Central Avenue Rest, 133 AD2d 25, 518 N.Y.S.2d 620 (1st Dep't 1987). The burden of proving compliance with contract terms and conditions is upon the party suing for damages for its breach, and if he relies on the theory of substantial performance he has the burden of showing the nature of his defects and omissions, their unsubstantiality and the expense of making them good. Fisch on New York Evidence, Second Edition, § 1098, Lond Publications 1977/2008. Plaintiffs cause of action is for breach of contract, and negligence. The elements of a cause of action for breach of contract are: (1) formation of a contract between the parties; (2) performance by plaintiff; (3) defendant's failure to perform; and (4) resulting damage. Furia v. Furia, 116 AD2d 694, 498 N.Y.S.2d 12 (2nd Dept. 1990). A contract is formed when there are at least two parties with legal capacity to enter into an contract give their mutual assent to the terms of a contract and there is consideration. 2 PJI 3d 4:1 at 626 (2010); see: Maas v. Cornell University, 94 NY2d 87, 93, 699 N.Y.S.2d 716 (1999). Where a third person contracts with a debtor to assume, as an immediate substitution for the debtor's duty, a duty to the creditor to render either the performance for which the debtor was previously bound, or some other performance, and the creditor agrees either with the debtor or with the third person to such substitution, there is a novation that discharges the original debtor and subjects the third person to a duty to the creditor. Restatement Contracts, § 428. Restatement Contracts § 424 defines a novation as a contract that (a) discharges immediately a previous contractual duty or a duty to make compensation, and (b) creates a new contractual duty and (c) includes as a party one who neither owed the previous duty nor was entitled to its performance.' It may be a promise to perform the substituted party's duties. S L Paving Corp v MacMurray Tractor Inc, 61 Misc 2d 90, 304 N.Y.S.2d 652 (SupCt, Onondaga Cnty, 1969), citing, Bank of U.S. v. Irving National Bank, 122 Misc. 815, 203 N.Y.S. 906; Rogers v. Thomson, 215 App.Div. 541, 214 N.Y.S. 193, aff'd, 248 NY 631, 162 N.E. 553; Drake v. Hodgson, 207 App.Div. 783, 202 N.Y.S. 813; Schloss Bros. Co. v. Bennett, 260 NY 243, 183 N.E. 376. Negligence arises from a breach of a legal duty. NY Pattern Jury Instructions, Civil 2:10, citing, Strauss v Belle Realty Co., 65 NY2d 399, 492 NYS2d 555, 482 NE2d 34; Pulka v Edelman, 40 NY2d 781, 390 NYS2d 393, 358 NE2d 1019; Levine v New York, 309 NY 88, 127 NE2d 825; Palsgraf v Long Island R.R. Co., 248 NY 339, 162 NE 99, and is not actionable unless it results in damage to a person to whom the legal duty is owed, Levine v New York, supra; Schmidt v Merchants Despatch Transp. Co., 270 NY 287, 200 NE 824; Larmore v Crown Point Iron Co., 101 NY 391, 4 NE 752. As stated by the Court of Appeals, a "finding of negligence may be based only upon the breach of a duty," Darby v Compagnie National Air France, 96 NY2d 343, 728 NYS2d 731, 753 NE2d 160. A dealer agreement does not modify or exclude the implied warranty of merchantability if the disclaimer is not conspicuous. Bimini Boat Sales, Inc v. Luhrs Corporation , 69 AD3d 782 , 892 N.Y.S.2d 548 (2d Dep't 2008). A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals (as: Non-Negotiable Bill of lading) is conspicuous. Language in the body of a form is "conspicuous" if it is in larger or other contrasting type or color. But in a telegram any stated term is "conspicuous". Whether a term or clause is "conspicuous" or not is for decision by the court. UCC 1-201(10). Warranties are limited to sales of goods; no warranty attaches to the performance of a service which, if performed negligently, has a cause of action in negligence. Aegis Productions, Inc. v Arriflex Corporation of America, 25 AD2d 639, 268 N.Y.S.2d 185 (1st Dep't 1966). Likewise, if it constitutes a breach of contract, the action is for that breach. Id.
The Court credits the testimony of each witness. Factually, there was no dispute as to the material and relevant facts. Perhaps had Defendant called Rick to testify, the only employee who had personal knowledge of the situation, could Defendant have refuted the claims. Houmere, Defendant's managing partner, acknowledged that it agreed to retrieve the boat from the manufacturer and promised to complete the boat. Plaintiff agreed, and continued to make payments for the boat's completion. Under contract theory, there was a novation of the underlying purchase agreement. Alternatively, Defendant's representation and promise to Plaintiff created a new and enforceable contract. Under negligence theory, Defendant assumed the duty to complete the boat, a duty it might not have originally had to the Plaintiff. The Court finds that the Defendant had a duty to complete the boat and ensure its proper operation.
The Court is not persuaded by Defendant's argument that the electrical problems were covered under the individual warranties. There was no testimony that the devices had inherent problems in the designs or manufacture. Based upon the credible evidence, the problems were caused by Defendant's improper installation and wiring of the circuits leading to the electronics. But for the circuit breakers tripping, the electronics worked properly. Defendant also failed to inform Dorado of the Plaintiff's desire to install a tower with upper controls. The purchase agreement with Defendant reflected the tower, but the transmittal to Dorado did not. So, although it was the manufacturer which installed the lower control panel which was not compatible with an upper control panel, it was the Defendant which failed to include the tower information in its transmittal to Dorado. The Court finds that the Defendant breached its contractual duty, and performed its work negligently. The Court also finds, pursuant to the authority referenced above, Defendant's argument that it is protected by the waiver of liability is equally unpersuasive. The complaint clearly goes to the Defendant's quality of services, not about the sale of defective goods. Lastly, the Court, based upon the copy of the terms and conditions submitted at trial, finds that the waiver was not sufficiently conspicuous so that a reasonable person would have noticed it. The Court had to search for the waiver within the page-long conditions perhaps because a copy was submitted instead of an original.
The Court must now determine damages. Defendant provided an accounting, dated March 24, 2005, with a balance due of $7,382.00. Plaintiff provided no evidence controverting this balance, and Defendant is entitled to the payment. Determining Plaintiff's damages required further scrutiny.
There was no evidence regarding the extent of the agreement Defendant made with Dorado when it took the boat from Dorado. That is, did Defendant assume all liability for the boat, or just liability for work to be completed from that point forward? On its face, the Court generally would hold Defendant liable only for the work it completed from that day forward. However, the credible evidence was that Pete and Rick were aware of the vibrations when the boat was in Florida, and of the mismatched propellers which likely caused the vibrations and impacted the integrity of the shaft. The Court finds that Defendant, when it agreed to complete the boat, undertook to inspect the vibration issue, inspect the shaft, and take steps to address the issue. Defendant submitted no evidence that it did anything regarding the propeller and shaft. The Court cannot, however, award Plaintiff the sum of $1,923.25 for three (3) repairs completed in 2007 which post dated the commencement of this action and for which the Court could find no corroborating testimony that such repairs were proximately caused by Defendant's defective workmanship. Otherwise, Plaintiff is due the cost of the other repairs which totaled $15,202.35, less the balance due the Defendant.
Accordingly, Plaintiff is entitled to judgment in the amount of $7,820.35, together with statutory interest from November 1, 2006.
Any interest which might accrue on the balance due defendant is offset by the interest which would have accrued on the full balance due Plaintiff. Accordingly, defendant's award is without interest.
This constitutes the decision and order of this Court
Submit judgment.