Case Summary: Ezra G. Levin et al. v. Hoffman Fuel Company (Appellate Division, First Department — May 10, 1983)

Court: Appellate Division of the Supreme Court of New York, First Department.
Date: May 10, 1983.
Disposition below: Order of Supreme Court, New York County (McCooe, J.), entered March 24, 1982 — motion to dismiss granted. Appellate result: affirmed, with costs. Concurrence: Sandler, J.P., Ross, Fein and Kassal, JJ. Dissent: Asch, J.

Factual and Procedural Background

The complaint alleges that defendant Hoffman Fuel Company agreed to supply heating fuel oil to plaintiffs' residence in Carmel, New York, on an automatic delivery basis, and that in late December 1975 Hoffman breached that agreement by permitting the oil supply to run out. As a result the water in the heating system froze and the heating system and house suffered substantial damage. The record is described as somewhat confusing about when the action was commenced, but both parties accept Special Term's conclusion that the action was commenced on December 21, 1981 (just less than six years after the claimed breach).

Defendant moved to dismiss the complaint on the ground that the contract was essentially one for the sale of goods and therefore governed by the four-year statute of limitations contained in section 2-725(1) of the Uniform Commercial Code (UCC), making the action untimely. Special Term granted the motion to dismiss; the Appellate Division affirmed that order.

Legal Issues Presented

Whether the parties' contract — which provided for the sale of heating oil and for automatic delivery service — is predominantly a contract for the sale of goods (thus governed by the UCC four-year statute of limitations, UCC § 2-725(1)) or predominantly a contract for services (thus governed by the six-year contractual statute of limitations, CPLR 213(2)).
Whether dismissal on a CPLR 3211 motion was appropriate without a hearing on the parties' intent where the contract's nature (goods vs. services predominance) is contested.

Arguments of the Parties

Respondent (Defendant Hoffman Fuel Company)

Argued that the agreement was essentially for the sale of goods (heating oil) and that the promised automatic delivery service was incidental; thus the four-year statute of limitations under UCC § 2-725(1) governs and the complaint is time-barred.

Appellants (Ezra G. Levin et al.) — as reflected in the dissent

Claimed that the defendant was obligated to monitor fuel requirements and make automatic deliveries, and that the breach of that obligation led to freezing and destruction of the heating system.
Argued (through the dissent's presentation) that if the contract is predominantly for services the six-year statute (CPLR 213) applies and the complaint would be timely; that the court must look to the main objective of the parties to determine whether the contract is for goods or services; and that factual questions exist about the contract's essential nature that should have been resolved at a hearing rather than by dismissal.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Perlmutter v. Beth David Hosp., 308 N.Y. 100	Establishes the test of whether a mixed contract is "predominantly" for the sale of goods or for services (to determine whether UCC or general statute applies).	The court relied on Perlmutter as controlling authority for applying the predominance test and concluded the agreement here was essentially a sale of oil with service incidental.
Schenectady Steel Co. v. Trimpoli Gen. Constr. Co., 43 A.D.2d 234; affd on other grounds, 34 N.Y.2d 939	Also cited as authority for the predominance test for mixed contracts.	Grouped with Perlmutter as controlling authority supporting the predominance inquiry applied by the majority.
Farm Automation Corp. v. Senter, 84 A.D.2d 757	Illustrates situations where surrounding circumstances may be decisive in resolving whether a contract is for goods or services.	The majority cited it as an example of cases in which factual inquiry might be necessary, but concluded the present agreement did not present such ambiguity.
Curtis Pub. Co. v. Sheridan, 53 F.R.D. 642 (S.D.N.Y.)	Another example in which surrounding circumstances can be relevant to determine predominance in mixed contracts.	Referenced by the majority as a comparison; the court found the present contract unambiguous and not of the kind requiring such factual inquiry.
Burton v. Artery Co., 279 Md. 94	Cited as a comparative authority on the issue of mixed contracts (sale of goods vs services).	Listed among authorities supporting the predominance analysis; no separate factual application beyond citation.
Ann., Applicability of UCC Article 2 to Mixed Contracts for Sale of Goods and Services, 5 ALR4th 501	Secondary source discussing applicability of UCC Article 2 to mixed contracts.	Cited as background authority illustrating the doctrinal debate; not specifically applied beyond citation.
1 Williston, Sales [Squillante & Fonseca, 4th ed], § 5-6	Authoritative treatise offering a contrary view on applicability of UCC to mixed contracts.	Cited to acknowledge contrary scholarly authority; the court did not adopt Williston's contrary position.
Ben Constr. Corp. v. Ventre, 23 A.D.2d 44	States that the court must look to the main objective sought by the contracting parties to determine whether a contract is for goods or services.	Quoted in the dissent to support the view that the essential nature of the transaction must be examined in its entirety and could favor a services characterization here.
Dynamics Corp. of Amer. v. International Harvester Co., 429 F. Supp. 341	Example cited in the dissent that if the contract is predominantly for services the six-year statute governs.	The dissent invoked this case to support the proposition that the six-year statute applies when services predominate and that the record here might support that view.
Back O'Beyond, Inc. v. Telephonic Enterprises, 76 A.D.2d 897	Holds that where it is unclear whether a contract is principally for services or goods, a hearing is appropriate rather than dismissal.	The dissent relied on this precedent to argue that Special Term should have held a hearing because factual issues regarding predominance existed.

Court's Reasoning and Analysis

The majority applied the established "predominance" test drawn from controlling authority (e.g., Perlmutter and Schenectady Steel) to determine whether the agreement was essentially one for the sale of goods or for services. The court observed that although the automatic delivery promise was important and may have induced plaintiffs to enter the contract, the agreement was "sufficiently free from doubt" that it was essentially a sale of oil, with the promised delivery service incidental to that sale.

The majority emphasized the legal principle that when contract terms are clear and unambiguous, construction of the contract — including the intent of the parties as expressed in the agreement — is a question of law for the court rather than an issue of fact requiring a hearing. The court found no ambiguity in the agreement at issue and therefore concluded that no factual hearing was necessary to resolve the predominance question.

The opinion acknowledged authorities and examples where the determination might be difficult and surrounding circumstances decisive (e.g., Farm Automation, Curtis Publishing), but concluded that this agreement did not present that problem and that the predominant character of the contract was reasonably determinable from the face of the agreement and the complaint's allegations.

Holding and Implications

Holding: The order of the Supreme Court, New York County, granting defendant's motion to dismiss the complaint on the ground that it is barred by the statute of limitations was affirmed, with costs.

Implications:

Direct effect on the parties: The plaintiffs' complaint was dismissed as time-barred under the four-year statute of limitations of UCC § 2-725(1), because the court concluded the contract was predominantly a sale of goods (heating oil) and the automatic delivery obligation was incidental.
Procedural consequence: The Appellate Division held that where the contract is clear and unambiguous on its face, the characterization of the contract as predominately a sale of goods or services is a legal determination appropriate for the court on a motion to dismiss rather than a factual issue requiring a hearing.
Precedential note: The decision applies existing New York authority on the predominance test; the majority did not purport to announce a new rule of law, and the opinion emphasizes that there remain cases in which factual disputes will require a hearing (as the dissent noted by citing Back O'Beyond and similar cases).

Dissent (Asch, J.): The dissent would have reversed, arguing that factual questions exist about whether the contract was essentially one for services (monitoring and automatic delivery) and that, where such factual uncertainty appears, a hearing should be held instead of dismissing the complaint. The dissent relied on authorities holding that the main objective of the parties must be examined and that uncertainty warrants trial-level factfinding.

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EZRA G. LEVIN et al., Appellants, v. HOFFMAN FUEL COMPANY, a Di

Order, Supreme Court, New York County (McCooe, J.), entered March 24, 1982, which granted defendant's motion to dismiss the complaint on the ground that it is barred by the Statute of Limitations, affirmed, with costs. As detailed in the complaint, the allegations of which are deemed true on a motion to dismiss, the defendant Hoffman Fuel Company (Hoffman) agreed to supply heating fuel oil to plaintiffs' residence in Carmel, New York, on an automatic delivery basis, and in late December, 1975 Hoffman breached its agreement by permitting the oil supply to run out. As a consequence, the water in the heating system froze, causing substantial damage to the heating system and additional damage to the house. Although the record is somewhat confusing as to when this action was commenced, both parties appear to accept Special Term's conclusion that it was commenced on December 21, 1981, or just less than six years after the claimed breach. Defendant moved to dismiss the complaint alleging that the agreement was essentially one for the sale of goods, was accordingly controlled by the four-year Statute of Limitations set forth in subdivision (1) of section 2-725 of the Uniform Commercial Code and that the action was therefore untimely. Special Term granted the motion to dismiss in the order appealed from, and we agree. In evaluating whether the violation of a contract providing both for the sale of goods and for the furnishing of services is controlled by the four-year Statute of Limitations set forth in the Uniform Commercial Code or the six-year contractual Statute of Limitations in CPLR 213 (subd 2), the test established by controlling authority is whether the agreement is "predominantly" one for the sale of goods or for the providing of services. ( Perlmutter v Beth David Hosp., 308 N.Y. 100, 104; Schenectady Steel Co. v Trimpoli Gen. Constr. Co., 43 A.D.2d 234, affd on other grounds 34 N.Y.2d 939; see Burton v Artery Co., 279 Md. 94; Applicability of UCC Article 2 to Mixed Contracts for Sale of Goods and Services, Ann., 5 ALR4th 501; but see 1 Williston, Sales [Squillante Fonseca, 4th ed], § 5-6.) Although the defendant's promise to provide the oil on an automatic basis was undoubtedly important to the plaintiffs, and may conceivably have been an inducing factor in their entering into the agreement with Hoffman, we think it sufficiently free from doubt that the agreement was essentially one for the sale of oil, to which the promised service, however important, was incidental. As to the conclusion reached in the dissenting opinion that factual issues are presented which require a hearing on the intention of the parties, we note the fundamental principle that where the terms of a contract are clear and unambiguous, its construction, including the intent of the parties as expressed in the agreement, involves questions of law for the court to determine. (10 N.Y. Jur, Contracts, §§ 190, 193.) We perceive no ambiguity in the agreement at issue here. There may be agreements in which it is difficult to determine from the face of the agreement whether the sale of goods or the promise to provide service is predominant, and as to which surrounding circumstances may be decisive in resolving that question. (Cf. Farm Automation Corp. v Senter, 84 A.D.2d 757, 758; Curtis Pub. Co. v Sheridan, 53 FRD 642 [USDC, SDNY].) The agreement with which we are here concerned does not present that problem.

Concur — Sandler, J.P., Ross, Fein and Kassal, JJ.

Asch, J., dissents in a memorandum as follows:

In my opinion the order dismissing the complaint should be reversed. Plaintiffs claim that as a result of a breach of contract by defendant, under which the latter was obligated to monitor the fuel requirements of, and to make automatic fuel deliveries to, the plaintiffs' house in Carmel, New York, the water in the boiler, pipes and radiators froze, causing the boiler, pipes and radiators to burst, and the entire system had to be replaced. Special Term held that the contract between the parties was one for the sale of goods only, governed by the four-year Statute of Limitations under section 2-725 of the New York Uniform Commercial Code, rather than the six-year Statute of Limitations set out in CPLR 213 which would apply if the contract were predominantly one for services. The court briefly reviewed the allegations of the complaint and the contentions of the parties with respect to the contract. It concluded that the contract simply "called for the sale of heating oil and the automatic delivery service was merely incidental thereto." It is not disputed that if the contract were predominantly one for the provision of services, the six-year statute governs and the motion to dismiss the complaint should have been denied. (See Dynamics Corp. of Amer. v International Harvester Co., 429 F. Supp. 341.) The New York rule is well settled that in deciding whether a contract is for the sale of goods or for services, the court must look to "the main objective sought to be accomplished by the contracting parties". ( Ben Constr. Corp. v Ventre, 23 A.D.2d 44, 45; see, also, Perlmutter v Beth David Hosp., 308 N.Y. 100; Schenectady Steel Co. v Trimpoli Gen. Constr. Co., 43 A.D.2d 234, affd 34 N.Y.2d 939.) In applying this test, the transaction must be examined in its entirety to determine its essential nature. Thus, in Ben Constr. Corp. v Ventre ( supra), the court held that the contract for the installation of the pool was one for services, not for the sale of goods, in spite of the fact that defendant had contracted for a finished product, a swimming pool. Similarly, in Perlmutter v Beth David Hosp. ( supra), the Court of Appeals decided that even though the plaintiff characterized her claim, arising from contaminated blood supplied to her during a hospital stay, as one for the sale of goods, the dominant purpose of the contract was the provision for medical care and services. As a result, her claim was essentially based upon services, not a sale. ( 308 N.Y., at pp 104, 106.) Moreover, if there is a factual question as to whether a contract is in essence one for services or one for the sale of goods, it is appropriate to hold a hearing on the question, not to dismiss the complaint on motion. See Back O'Beyond, Inc. v Telephonic Enterprises ( 76 A.D.2d 897), in which the court held that it was unclear from the record whether a contract for the sale and installation of a security fire alarm system was in essence one for services, and, therefore, governed by the six-year statute, or one for the sale of goods subject to the four-year statute. Accordingly, it reversed an order of the Supreme Court dismissing the complaint as barred by the Uniform Commercial Code's four-year statute, and remanded the matter for immediate trial of that issue. (See, also, Farm Automation Corp. v Senter, 84 A.D.2d 757.) Special Term has examined the critical issue herein as if it were simply a question of law. However, there are a number of factual questions raised, the resolution of which may establish that the contract was intended by the parties to be primarily one for services. The cases relied on by the defendant are inapposite because the contracts there involved are not ones for multiple purposes. It is certainly possible the contract between the parties herein was essentially a contract for services, governed by the six-year Statute of Limitations. (See Ben Constr. Corp. v Ventre, supra, at p 45; Dynamics Corp. Of Amer. v International Harvester Co., supra, at p 346.) On the basis of these cases, Special Term should have found that it was unclear from the record whether the contract was principally one for services or one for the sale of goods only. Accordingly, it should have ordered a hearing rather than dismiss the complaint (see CPLR 3211, subd [c]).

LEVIN v. HOFFMAN FUEL COMPANY