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Smart Summary

Factual and Procedural Background

In December 1985, Sears, Roebuck Company (plaintiff) and Nancy E. Galloway (defendant) entered into a "Retail Installment Contract and Security Agreement" whereby plaintiff agreed to sell and install a boiler at premises owned by defendant for $5,375.92. The contract specified that defendant was responsible for the condition of the main steam and water lines, radiators, and radiator air vents. After installation in January 1986, defendant complained about inadequate boiler performance. Plaintiff serviced the boiler without finding defects and subsequently offered a $1,000 price reduction or to remove the boiler and credit defendant's account, offers which defendant refused, instead demanding a new boiler despite having paid only $162. Defendant continued to use the boiler over several heating seasons.

In July 1989, plaintiff commenced an action seeking payment of the balance or return of the boiler. Plaintiff moved for penalties under CPLR 3126 due to defendant's refusal to disclose expert witnesses. The Supreme Court ordered defendant to respond, and upon her failure to disclose experts, plaintiff moved for summary judgment arguing no triable issue existed without expert evidence from defendant. Defendant cross-moved to amend her answer to add a negligence counterclaim. The Supreme Court granted plaintiff's summary judgment motion and denied defendant's cross motion. Defendant moved to renew her cross motion based on new information, which was denied. Defendant appeals both rulings.

Legal Issues Presented

  1. Whether defendant's continued use and failure to reject the boiler constituted acceptance under UCC Article 2.
  2. Whether plaintiff was entitled to summary judgment based on defendant's failure to produce expert evidence demonstrating a defect in the boiler or installation.
  3. Whether defendant should have been permitted to amend her answer to assert a negligence counterclaim regarding the boiler installation.
  4. Whether defendant's motion to renew her cross motion was properly denied for failure to show that new information was unavailable at the time of the original motion.

Arguments of the Parties

Plaintiff's Arguments

  • Defendant's failure to produce expert testimony on the boiler's alleged defects precludes a triable issue of fact, justifying summary judgment.
  • Defendant's failure to reject or return the boiler and her continuous use constitute acceptance under UCC 2-606.
  • Defendant's refusal to disclose experts justified penalties and supports summary judgment.
  • Allowing defendant to amend her answer to add a negligence counterclaim would prejudice plaintiff.

Defendant's Arguments

  • Defendant contends she rejected the boiler due to inadequate performance, though mere complaints do not constitute clear rejection.
  • Defendant asserts she relied on plaintiff's expertise and that the boiler system produced inadequate heat compared to the old boiler.
  • Defendant sought to amend her answer to add a negligence counterclaim based on alleged improper installation.
  • Defendant argued that new information justified renewal of her cross motion to amend.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Lansing Research Corp. v. Sybron Corp., 142 A.D.2d 816, 819 Standard for renewing motions based on new information. Used to affirm denial of defendant’s motion to renew because new information was available at original motion time.
Hass Co. v. Kristal Assocs., 127 A.D.2d 541, lv denied 69 N.Y.2d 611 Distinction between contracts for goods and services; application of UCC Article 2. Supported the court’s determination that the contract was predominantly for sale of goods and governed by UCC Article 2.
Schenectady Steel Co. v. Trimpoli Gen. Constr. Co., 43 A.D.2d 234, 236-237, affd 34 N.Y.2d 939 Contracts involving goods and services and applicability of UCC. Compared to Hass Co. to confirm governing law under UCC Article 2.
Milligan Contr. v. Mancini Assocs., 174 A.D.2d 136, 138 Acceptance of goods and valid counterclaims in contract disputes. Used to explain acceptance standards and to support that defendant’s counterclaim stated a valid claim.
Maggio Importato v. Cimitron, Inc., 189 A.D.2d 654 Complaint alone does not constitute clear and unequivocal rejection of goods. Supported the court’s rejection of defendant’s claim that mere complaints constituted rejection.
Zappala Co. v. Pyramid Co., 81 A.D.2d 983, lv denied 55 N.Y.2d 603 Acceptance occurs when buyer acts inconsistently with seller’s ownership, such as continued use. Supported finding that defendant’s continued use constituted acceptance.
Chouiniere's Trucking Excavating v. Michaels Group, 194 A.D.2d 971 Standard for burden of proof and sufficiency of evidence to raise questions of fact. Used to explain that defendant’s complaints raise factual issues but do not preclude summary judgment for plaintiff.

Court's Reasoning and Analysis

The court analyzed the contract under UCC Article 2, concluding it was predominantly for the sale of goods. It applied UCC 2-606 to determine that defendant accepted the boiler by failing to reject it after a reasonable opportunity to inspect and by continuing to use it over multiple heating seasons despite plaintiff’s offers to remove it. The court noted that mere complaints do not constitute unequivocal rejection, and there was no evidence of timely revocation of acceptance under UCC 2-608.

Although acceptance requires payment, it does not bar remedies for nonconformity. Defendant’s complaints raised factual questions about possible breach of the implied warranty of fitness for a particular purpose (UCC 2-315). However, defendant failed to produce expert evidence to substantiate her claims, which was critical given the complexity of the boiler system and her burden to prove breach under UCC 2-607.

The court found the absence of expert testimony fatal to defendant’s opposition to summary judgment. Nevertheless, the evidence including a report indicating the system might be too small raised sufficient factual questions to warrant denial of plaintiff’s summary judgment motion. Consequently, the court held that defendant’s proposed negligence counterclaim was valid and should have been permitted, as it related to the same factual issues.

Finally, the court affirmed denial of defendant’s motion to renew her cross motion because she failed to demonstrate that the purported new information was unavailable at the time of the original motion, citing established standards for renewal motions.

Holding and Implications

The court issued the following rulings:

  • The order entered October 24, 1991, granting summary judgment to plaintiff, is AFFIRMED.
  • The order entered August 10, 1990, granting plaintiff’s summary judgment motion and denying defendant’s cross motion to amend, is REVERSED.
  • Plaintiff’s motion for summary judgment is DENIED.
  • Defendant’s cross motion to amend her answer to assert a negligence counterclaim is GRANTED.

The direct effect is that plaintiff’s claim for summary judgment is rejected and defendant may assert a negligence counterclaim, permitting further factual development on the adequacy of the boiler’s size and installation. No new legal precedent was established beyond the application of existing UCC principles and procedural standards.

SEARS, ROEBUCK COMPANY, Respondent, v. NANCY E. GALLOWAY, Appellant.

Casey, J.

In December 1985 plaintiff and defendant signed a "Retail Installment Contract and Security Agreement", whereby plaintiff would sell and install a boiler at premises owned by defendant for $5,375.92. The estimate and proposal of the work submitted by plaintiff and accepted by defendant outlined the services to be performed under the contract, and specifically stated that defendant, as customer, was to be responsible for the condition of the main steam and water lines, radiators and radiator air vent.

After the boiler was installed, defendant complained that the boiler was not performing satisfactorily. Plaintiff had the boiler serviced but could find nothing wrong with the boiler. When defendant continued to complain, plaintiff offered to reduce the sales price by $1,000. Plaintiff also offered to remove the boiler and credit defendant's account. Defendant refused these and other offers and demanded a new boiler, even though she had paid only $162 on the purchase price. Thus, without any substantial payment, defendant has had continuous use of the boiler since its installation in January 1986.

Plaintiff commenced this action in July 1989 for payment of the balance due or return of the boiler, and after issue was joined moved pursuant to CPLR 3126 for an order awarding it penalties based on defendant's refusal to disclose experts as plaintiff had requested. Supreme Court ordered defendant to make a formal verified response to plaintiff's demand for experts, and when defendant failed to reveal her experts, plaintiff moved for summary judgment, claiming that due to defendant's failure to produce any expert to demonstrate that it was the boiler that was responsible for the insufficiency of heat in the building, no triable issue of fact existed. Plaintiff further argued that defendant's failure to reject or return the boiler constituted an acceptance. Defendant replied and crossmoved to amend her answer to add a counterclaim, asserting negligence on plaintiff's part in installing the boiler. Supreme Court granted plaintiff's motion for summary judgment and denied defendant's cross motion. Defendant appeals.

Defendant subsequently moved to renew her cross motion on the ground of new information. Her motion was again denied and she appeals. We believe the denial of this motion for renewal was appropriate, because defendant made no showing that the new information was not available to her at the time of the original motion (see, Lansing Research Corp. v. Sybron Corp., 142 A.D.2d 816, 819).

Although the parties' contract involved the sale of both goods (the boiler and related equipment) and services (installation), the agreement was one predominantly for the sale and delivery of goods and, therefore, the parties' rights and obligations are governed by UCC article 2 (compare, Hass Co. v. Kristal Assocs., 127 A.D.2d 541, lv denied 69 N.Y.2d 611, with Schenectady Steel Co. v. Trimpoli Gen. Constr. Co., 43 A.D.2d 234, 236-237, affd 34 N.Y.2d 939). Acceptance of goods can occur in a number of ways (see, Milligan Contr. v. Mancini Assocs., 174 A.D.2d 136, 138), one of which is when the buyer fails to make an effective rejection after having had a reasonable opportunity to inspect the goods (UCC 2-606 [b]). Defendant contends that she rejected the boiler, but "mere complaint about the goods does not constitute a clear and unequivocal act of rejection" (Maggio Importato v. Cimitron, Inc., 189 A.D.2d 654). In any event, acceptance also occurs when the buyer acts inconsistently with the seller's ownership (UCC 2-606 [c]), and the undisputed evidence of defendant's continued retention and use of the boiler for a substantial period of time, covering several heating seasons, despite plaintiff's offers to remove the boiler and credit her account, constitutes an acceptance (see, Zappala Co. v. Pyramid Co., 81 A.D.2d 983, lv denied 55 N.Y.2d 603). Defendant also contends that she revoked her acceptance, but there is no evidence of the unequivocal timely notice required by UCC 2-608 (2).

Although a buyer must pay for any goods accepted (UCC 2-607) and is precluded from rejecting the accepted goods (UCC 2-607), acceptance does not in and of itself impair any other remedy provided by UCC article 2 for nonconformity (UCC 2-607). Thus, "acceptance leaves unimpaired the buyer's right to be made whole, and that right can be exercised by the buyer not only by way of cross-claim for damages, but also by way of recoupment in diminution or extinction of the [purchase] price" (UCC 2-607, Comment 6). Pursuant to UCC 2-607 (3) (a), however, a buyer who has accepted goods "must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy". We are of the view that the evidence submitted by defendant, including her complaints to plaintiff about the inadequacy of the heat in her building after the boiler was installed, is sufficient to raise questions of fact about the reasonableness of defendant's conduct in preserving her remedies after her acceptance of the boiler, but those questions of fact do not preclude an award of summary judgment to plaintiff (see, Chouiniere's Trucking Excavating v Michaels Group, 194 A.D.2d 971).

"The burden is on the buyer to establish any breach with respect to the goods accepted" (UCC 2-607), and mere conclusions, expressions of hope and unsubstantiated allegations are insufficient to meet this burden when the party seeking to recover for goods sold and delivered moves for summary judgment (see, Chouiniere's Trucking Excavating v. Michaels Group, supra). Defendant has not identified any particular defect in the boiler or its installation which would constitute a material breach of the contract. Nor has she submitted an affidavit of an expert, and it appears that she will be precluded from introducing any expert evidence as a result of her failure to comply with prior disclosure orders. She does, however, allege that the heating system provided adequate heat with the old boiler, which she decided to replace with a more efficient one, that she relied upon plaintiff's expertise to select the proper boiler and that the system produced inadequate heat after the new boiler was installed. More importantly, however, the record contains a report prepared by Eastern Heating and Cooling, Inc., after an inspection at plaintiff's request, which states: "System seems to be too small for the application (Bldg. size)."

We are of the view that this evidence is sufficient to satisfy defendant's burden, for it raises questions of fact as to whether the implied warranty of fitness for a particular purpose was applicable (see, UCC 2-315) and, if so, whether plaintiff breached that warranty. Plaintiff's motion for summary judgment should, therefore, have been denied. The counterclaim contained in the proposed amended answer appears to assert the same breach as that asserted in opposition to plaintiff's motion for summary judgment, i.e., the inadequate size or capacity of the boiler installed by plaintiff. Having concluded that defendant submitted sufficient evidence on that issue to avoid summary judgment in plaintiff's favor, we are of the view that a valid counterclaim has been stated (see, Milligan Contr. v. Mancini Assocs., 174 A.D.2d 136, 138, supra) and defendant's motion to amend the answer to assert the counterclaim should have been granted. Plaintiff's claims of prejudice from such an amendment are meritless.

Mikoll, J.P., Yesawich Jr., Levine and Crew III, JJ., concur. Ordered that the order entered October 24, 1991 is affirmed. Ordered that the order entered August 10, 1990 is reversed, on the law, with costs, plaintiff's motion for summary judgment denied and defendant's cross motion to amend her answer to assert a counterclaim granted.

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ROEBUCK COMPANY v. GALLOWAY
(Jul 22, 1993)