GARLOCK SEALING TECHNOLOGIES v.NAK SEALING TECHNOLOGIES CORP.,
Filed 3/21/07
CERTIFIED FOR PUBLICATION
COPY
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
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GARLOCK SEALING TECHNOLOGIES, LLC, Plaintiff and Appellant, v. NAK SEALING TECHNOLOGIES CORP., Defendant, Cross-Complainant and Appellant; SUNRISE TRADING CO., Defendant, Cross-Defendant and Respondent. | C050813 (Super. Ct. No. 02AS06092) |
STORY CONTINUED FROM PART I..
On October 4, 2002, Garlock filed this action against Mao Shun and Sunrise Trading for declaratory relief regarding implied equitable indemnity, breach of express warranties, breach of implied warranties, breach of contract, and breach of the implied covenant of good faith and fair dealing. Mao Shun and Sunrise Trading each filed cross-complaints against each other.
After a court trial, the trial court concluded, among other things, that Sunrise Trading was acting as Mao Shuns agent in consummating the brown viton sales transactions with Garlock and that Mao Shun breached the implied warranty of merchantability. The court awarded Garlock damages of $1,870,424 in lost profits, consequential and incidental damages, plus interest and costs of suit against Mao Shun. It denied Garlocks claim of equitable indemnity against Mao Shun. The trial court ordered Garlock take nothing by its complaint against Sunrise Trading and awarded Sunrise Trading its costs of suit against Garlock. The trial court ordered Mao Shun take nothing by its cross-complaint against Sunrise Trading and awarded Sunrise Trading on its cross-complaint against Mao Shun its legal costs, expenses and fees incurred in defending Garlocks action.
DISCUSSION
MAO SHUNS APPEAL
I.
The Implied Warranty Of Merchantability Does Apply To This Case
Mao Shun argues the implied warranty of merchantability is inapplicable to this case for two reasons. First, according to Mao Shun, such implied warranty is inconsistent with the trial courts finding of fact and conclusion of law that Mao Shun manufactured the brown viton oil seals in compliance with the RA-37 specifications Garlock provided. Second, Mao Shun claims the implied warranty is precluded by California Uniform Commercial Code section 2316, subdivision (3)(b)[1](exclusion or modification of warranties). We disagree with both claims.
A. The RA-37 Specifications
Mao Shun contends application of the implied warranty of merchantability is precluded in this case as a matter of law because the trial court concluded RA-37 was an express warranty relating to the brown viton oil seals and then found Mao Shun manufactured the seals in compliance with the RA-37 specification. Mao Shun relies on The Carpenter Steel Co. v. Pellegrin (1965) 237 Cal.App.2d 35 (Pellegrin), pointing to its language that where a product is made according to plans and specifications, there is no implied assurance or warranty that it is adequate for the buyers purpose, or even for the general purpose for which such things are designed. If the article corresponds with the plans and specifications, the manufacturer cannot be held liable[.] (Id. at p. 38.)
The trial court found RA-37 controlled Mao Shuns manufacture of the oil seals based on the parties extensive course of dealings. However, contrary to Mao Shuns representation in its opening brief, the trial court did not characterize RA-37 as an express warranty. The only express warranty found by the trial court was the express warranty that the manufactured oil seals would conform to the sample oil seals and brown viton slabs provided by Mao Shun to Garlock prior to the creation of the parties contract. ( 2313, subd. (1)(c).)
Even assuming RA-37 was an express warranty that the oil seals would conform to the RA-37 specifications, an implied warranty of merchantability is not precluded.
Section 2314, subdivision (1) (implied warranty; mechantability; usage of trade) provides a warranty of merchantability is implied in every contract for the sale of goods if the seller is a merchant with respect to goods of that kind, unless it is excluded or modified as provided in section 2316. Mao Shun is a merchant with respect to oil seals of this kind. A warranty of merchantability will normally be included in its sale of oil seals. (We will consider Mao Shuns argument that the implied warranty is excluded by section 2316 in the next portion of our discussion.) Section 2317 (cumulation and conflict of warranties express or implied) requires express and implied warranties to be construed as consistent with each other and as cumulative unless such construction is unreasonable, in which case the intention of the parties determines which warranty is dominant. In ascertaining that intention, express warranties displace[] inconsistent implied warranties other than an implied warranty of fitness for a particular purpose. ( 2317, subd. (c), italics added.) The trial court determined the express warranty created by sample was not inconsistent with the implied warranty of merchantability and the same is true for any express warranty in the RA-37 specification.
The implied warranty of merchantability and the express warranty of the RA-37 specification can be reasonably construed as consistent and cumulative. The RA-37 specification covered the physical materials, properties and dimensions of the seals. The RA-37 specification may have requested Mao Shuns standard brown viton compound, but Garlock did not tell Mao Shun how to compound its viton or specify any particular iron oxide as the brown pigment for the viton. Garlock did not provide its own internal specification for iron oxide to Mao Shun, but relied on its previous experience with Mao Shun and Mao Shuns reputation as a manufacturer of oil seals. There is no evidence Garlock knew Mao Shuns formula for its standard brown viton and specifically requested it based on that knowledge. Brown was simply the standard color used for viton for identification purposes.
Contrary to Mao Shuns claim that Garlock specified Mao Shuns standard brown viton with full knowledge of the problems that Rockwell was experiencing, the evidence, which Mao Shun does not fully or adequately summarize, shows the leakages reported to Garlock in the second quarter of 1998, for the very small number of brown viton seals that were in use at that time, were not chronic or widespread. There is no evidence Garlock or anyone else had knowledge that such leakages related to the iron oxide pigment used by Mao Shun in its standard brown viton. Indeed, even when catastrophic leakage rates were subsequently experienced, it took multiple engineers at Rockwell and Garlock, plus specialized laboratory tests, to isolate the pigment as the source of the problem. Garlock did not rely on its own skill, knowledge, and expertise to specify a particular pigment regardless of its fitness for a radial lip-type oil seal purpose.[2] Thus, the RA-37 specification is not inconsistent with an implied warranty of merchantability.
Pellegrin, supra, 237 Cal.App.2d 35, is inapposite. In Pellegrin the purchaser gave the manufacturer a written order for wire that specified a particular chemical analysis for the wire. (Id. at p. 37.) In that context, the court reasoned there was no implied warranty that [the wire was] adequate for the buyers purpose, or even for the general purpose for which such things are designed. (Id. at p. 38.) The situation is different in this case where Garlock did not specify the particular chemical composition of the viton or the specific iron oxide to be used as pigment.[3]
RA-37 did not supplant the implied warranty of merchantability.
B. Section 2316, Subdivision (3)(b), The Exclusion or Modification of Warranties, Does Not Preclude The Warranty
A warranty of merchantability is implied in every contract for the sale of goods if the seller is a merchant with respect to goods of that kind, unless it is excluded or modified as provided in section 2316. ( 2314, subd. (1).) Mao Shun argues section 2316, subdivision (3)(b), excluded the warranty of merchantability in this case. Such section provides: When the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him[.][4]
The trial court concluded the implied warranty of merchantability was not excluded under section 2316, subdivision (3)(b) because it found the latent abrasive characteristics of the oil seals was not a defect that was, or ought to have been, revealed to Garlock under the circumstances or prevailing testing methodologies. (Capitalization omitted.)
Mao Shun takes issue with this finding, contending Garlock was a professional buyer who should have performed functional testing on the sample seals provided by Mao Shun, which functional testing would have revealed the abrasive lip problem. Although Mao Shun presents its argument as being one of preclusion as a matter of law, its claim is essentially a challenge to the sufficiency of the evidence supporting the trial courts finding that the abrasiveness of the oil seal lips was not a defect that Garlock ought to have discovered. (Wickham v. Southland Corp. (1985) 168 Cal.App.3d 49, 54 [contention that evidence establishes a particular fact as a matter of law when the fact finder has determined the fact to the contrary is but another way of asserting insufficiency of the evidence to support the finding].)
Where the appellant challenges the sufficiency of the evidence, the reviewing court starts with the presumption that the record contains evidence sufficient to support the judgment; it is the appellants affirmative burden to demonstrate otherwise. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881 (Foreman & Clark); Baxter Healthcare Corp. v. Denton (2004) 120 Cal.App.4th 333, 368.) The appellants brief must set forth all of the material evidence bearing on the issue, not merely the evidence favorable to the appellant, and must show how the evidence does not sustain the challenged finding. (Foreman & Clark, supra, at p. 881; Baxter Healthcare Corp. v. Denton, supra, at p. 368.) If the appellant fails to set forth all of the material evidence, its claim of insufficiency of the evidence is forfeited. (Foreman & Clark, supra, at p. 881; Road Sprinkler Fitters Local Union No. 669 v. G & G Fire Sprinklers, Inc. (2002) 102 Cal.App.4th 765, 782.)
Furthermore, [i]n reviewing the sufficiency of the evidence, we must consider all of the evidence in the light most favorable to the prevailing party, accept as true all the evidence and reasonable inferences therefrom that tend to establish the correctness of the trial courts findings and decision, and resolve every conflict in favor of the judgment. (Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 630-631 [85 Cal. Rptr. 2d 386].) It is not our task to weigh conflicts and disputes in the evidence; that is the province of the trier of fact. Our authority begins and ends with a determination as to whether, on the entire record, there is any substantial evidence, contradicted or uncontradicted, in support of the judgment. (Ibid.) (Baxter Healthcare Corp. v. Denton, supra, 120 Cal.App.4th at p. 369, italics omitted.)
Mao Shun fails to set forth all of the material evidence relevant to the question of whether Garlock should have discovered the latent problem with the abrasiveness of the oil seal lips. Indeed, Mao Shun not only cites just the evidence in its favor, it takes much of such evidence out of context, thereby misrepresenting the actual substance of the testimony. For example, Mao Shun claims Rockwells gear engineering manager Pizzichil testified, functional testing should always be done when determining the applicability of an oil seal in a particular application. In fact, at the portion of his testimony to which Mao Shun cites, Pizzichil was testifying regarding testing Rockwell did for a subsequent generation of gear reducer oil seals and an article he wrote after Rockwells experience with the brown viton oil seals at issue in this case. The fact Rockwell learned from their experience with the Mao Shun brown viton seals is not the same as testimony that functional testing should have been done by Garlock back in 1998. Similarly, Mao Shun represents that Garlocks manager of engineering, James Drago, testified Garlock normally did functional testing and maintained a functional testing lab for precisely this reason. In fact, Drago testified Garlock would do functional testing only for a newly configured component with a new compound. As Garlock considered the radial lip-type seals proposed in the summer of 1998 to be a standard design configuration not made with a new compound, Garlock did not feel functional testing was required.[5]
Mao Shuns failure to fully and accurately summarize the material evidence on this issue forfeits the claim on appeal, which in any event, is meritless.
Substantial evidence established Garlock tested the Mao Shun sample seals for purposes of ensuring they were the proper configuration, dimension, and otherwise met specification requirements and that Garlock did the normal ASTM tests to check the basic physical properties of the rubber compound. The seals met specifications and passed the standard ASTM tests. Garlock gave a reasonable explanation of why it did not do any functional testing of the samples. Drago specifically testified Garlock had no reason to suspect Mao Shuns brown viton seals contained abrasives, which testimony is circumstantially supported by the extraordinary testing later required to isolate the pigment problem. Garlocks notice in the second quarter of 1998 of some unexplained leakage problems with the small number of brown viton seals then in use does not require a finding to the contrary.
Substantial evidence supports the trial courts finding that the abrasiveness of the oil seal lips was not a defect that Garlock ought to have discovered. Section 2316, subdivision (3)(b), therefore, did not exclude the implied warranty of merchantability.
II.
Substantial Evidence Supports The Trial Courts Finding Mao Shun Breached Section 2314, The Implied Warranty Of Merchantability
Mao Shun contends that, even if the implied warranty of merchantability were not precluded as a matter of law, the trial courts finding that Mao Shun breached the implied warranty is erroneous as a matter of law based upon the trial courts findings of fact. (Capitalization omitted.) Mao Shun argues the trial courts findings of fact preclude a conclusion of law that the oil seals at issue were not fit for the ordinary purposes for which such goods are used.[6] Mao Shun contends the seals were not used in their ordinary course.[7] In its reply brief, Mao Shun argues there is not substantial evidence to support the finding of breach of the implied warranty because Garlock has failed to identify the evidence supporting the trial courts conclusion of breach and, going back to its original theme, there is evidence that shows the seals did not fail in ordinary use, but in Rockwells particular use.
Although Mao Shun initially frames this issue as one of inconsistency of the trial courts findings with its conclusion of law, at its heart, this issue is a challenge to the sufficiency of the evidence of breach. As such, it is Mao Shuns obligation as appellant, not Garlocks, to demonstrate that there is no substantial evidence to support the challenged findings. [Citations.] A recitation of only [appellants] evidence is not the demonstration contemplated under the above rule. [Citation.] (Foreman & Clark, supra, 3 Cal.3d at p. 881, italics added by Foreman.)
TO BE CONTINUED AS PART III..
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[1]Hereafter, undesignated statutory references are to the Uniform Commercial Code.
[2]Mao Shun claims the trial court made a finding of fact that Garlock did not rely on Mao Shuns skill or judgment to select or furnish suitable seals. Mao Shun takes such finding out of its context, which was in the trial courts conclusions regarding the implied warranty of fitness for a particular purpose. When read in context, it is clear the trial court found only that Garlock did not rely on Mao Shuns skill or judgment to select or furnish seals suitable for Rockwells specific purpose. Such finding does not equate to a finding Garlock did not rely on Mao Shuns skill or judgment in determining an appropriate formula for the brown viton.
[3]In its reply brief, Mao Shun contends displacement of an implied warranty by an express warranty should not be limited to the situation where every component part and every ingredient used to make every component part is specified. We do not so limit the rule. We only conclude that where a buyer specifies a standard component with no knowledge of its ingredients and no reason to know of any potential flaws in such ingredients, its specification of the standard component is not inconsistent with an implied warranty of merchantability by the seller of that component.
[4]Mao Shuns opening brief does not correctly quote section 2316, subdivision (3)(b). Instead, Mao Shun quotes a portion of comment 8 of the Uniform Commercial Code Comment and represents it is the language of section 2316, subdivision (3)(b). Intentionally misciting and misquoting authorities is contrary to the California Rules of Professional Conduct. (Rules Prof. Conduct, rule 5-200(C).) Although we will assume the miscite/misquote in Mao Shuns brief was not intentional, it cannot be condoned.
[5]Mao Shun contends functional testing was required because the trial court described the oil seal as a newly designed custom manufactured radial lip-type oil seal, citing the trial courts statement of decision. Again, Mao Shun takes these terms out of context. A review of the statement of decision shows the trial court was not using these terms in connection with any consideration of functional testing, but was using the terms to distinguish these oil seals from a standard off-the-shelf product. The fact the seals were designed and manufactured specifically for Garlock does not mean they are not a standard design configuration.
[6]Mao Shun cites the trial courts findings that the oil seals at issue were custom manufactured and newly designed for two specific applications, which were the only applications that experienced any problems, along with the trial courts consideration of six areas of evidence generally regarding Mao Shuns lack of knowledge of the potential problem, its quality control procedures and testing.
[7]Mao Shun points basically to the same findings of fact.