Opinion
No. 92-00014
October 11, 1996
MEMORANDUM OF DECISION AND ORDER ON THIRD-PARTY DEFENDANTS SAMSUNG DISPLAY DEVICES CO., LTD's and SAMSUNG AMERICA, INC.'S MOTION FOR SUMMARY JUDGMENT
Plaintiffs, Raymond J. Lauring and Claire E. Lauring, brought this action to recover damages to their real property arising out of a fire allegedly caused by a computer monitor sold by defendant Apple Computer, Inc. ("Apple"). Apple, in turn, has brought third-party claims for indemnity and contribution against the manufacturer and distributor of the monitor. This matter is now before the court on third-party defendants, Samsung Display Devices Co., Ltd.'s and Samsung America, Inc.'s (hereinafter referred to collectively as "Samsung"), motion for summary judgment. For the reasons set forth below, the motion for summary judgment is allowed in part and denied in part.
BACKGROUND
The undisputed material facts are as follows:
On December 1, 1982, Apple entered into an agreement with Samsung for the purchase of monitors ("Agreement"). The Agreement contained two exculpatory provisions, viz, a disclaimer of warranty and limitation of liability, both which are at issue in the matter at bar.
On August 25, 1989, a fire damaged a three-story apartment building owned by plaintiffs and located at 16 Samoset Road in Worcester, Massachusetts. Plaintiffs allege that the fire was caused by an Apple computer monitor owned by defendants Timothy and Laura Lincoln, who were tenants of the building. The monitor was manufactured for Apple by Samsung Display Devices Co., Ltd., and distributed by Samsung America, Inc. Lee Aff. ¶ 6.
In their complaint, plaintiffs brought two claims against Apple alleging negligence and breach of warranty. Subsequently, defendants Timothy and Laura Lincoln filed an amended cross-complaint against Apple seeking damages for negligence. Apple, in turn, has brought third-party claims against Samsung for indemnity, by reason of contract and common law, and for contribution. In each count of its amended third-party complaint, Apple alleges that, if plaintiffs or cross-claim plaintiffs suffered any damages, they were the result of Samsung's negligence or breach of warranty for which Samsung should indemnify Apple. In its motion for summary judgment, Samsung maintains that under terms of the Agreement, Apple waived its right to contribution and indemnification from Samsung.
DISCUSSION
Summary judgment shall be granted where there are no genuine issues as to any material fact and where the moving party is entitled to judgment as a matter of law. Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991); Cassesso v. Commissioner of Correction, 390 Mass. 419, 422 (1983); Community Nat'l Bank v. Dawes, 369 Mass. 550, 553 (1976); Mass.R.Civ.P. 56(c). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue "and [further] that the moving party is entitled to judgment as a matter of law." Pederson v. Time, Inc., 404 Mass. 14, 16-17 (1989). Where the situation is such that "in essence there is no real dispute as to the salient facts or if only a question of law is involved," summary judgment shall be granted to the party entitled to judgment as a matter of law. Cassesso v. Commissioner of Correction, supra.
The Agreement between Apple and Samsung is governed by California law. General Laws, c. 106, § 1-105, provides, in relevant part, "[W]hen a transaction bears a reasonable relation to . . . another state . . . the parties may agree that the law . . . of such other state . . . govern[s] their rights and duties." Here, the parties expressly agreed that the Agreement would be governed by the laws of California. The transaction bears a reasonable relation to that state because, as the Agreement recites, the contract was made and to be performed in California and both parties were residents of that state.
The issue at bar is whether Apple, by the terms of the exculpatory provisions of the Agreement, (specifically sections 3:07 and 3:08) waived its rights to recover indemnity or contribution from Samsung. Apple contends that the language of the Agreement is ambiguous with respect to Apple's responsibility for Samsung's liability to third parties. Under California law, "It is . . . solely a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence." American President Lines Ltd. v. Zolin, 38 Cal.App.4th 910, 923 (Cal.Ct.App. 1995) quoting Parsons v. Bristol Dev. Co., 44 Cal.Rptr. 767, 770 (Cal. 1965); Hillman v. Leland E. Burns, Inc., 209 Cal.App.3d 860, 866 (Cal.Ct.App. 1989) (stating that the determination of whether a written instrument is ambiguous is a matter of law). Since the parties presented no conflicting extrinsic evidence regarding the Agreement, its interpretation is a question of law that may appropriately be determined on a motion for summary judgment.
WARRANTY PROVISION — SECTION 3.07
First, it should be noted, regarding both section 3.07 and 3.08 of the Agreement, that, under California law, commercial entities, such as Apple and Samsung, are entitled to contract to limit the liability of one to the other, or otherwise allocate the risk of doing business. Philippine Airlines, Inc. v. McDonnell Douglas Corp., 189 Cal.App.3d 234, 237 (Cal.Ct.App. 1987). Specifically, California Commercial Code § 2316 allows implied warranties to be excluded contractually and § 2719 permits contractual limitation of remedies.
In section 3.07 of the Agreement, Samsung disclaims any implied or express warranties as to the monitors. The section provides:
3.07 Warranty. Samsung makes no warranties as to the products, either express or implied, including without limitation any implied warranty of merchantability or fitness for a particular purpose, and of any other obligation on the part of Samsung.
Section 3.07 of the Agreement is an unambiguous disclaimer of warranty by the seller to the buyer. Samsung clearly and explicitly makes no express warranties and excludes any implied warranties to Apple. Insofar as Apple's cause of action for each count of its amended third-party complaint against Samsung arises from the law of breach of warranty, Apple is barred from recovery by the terms of section 3.07 of the Agreement. Samsung's motion for summary judgment upon the breach of warranty claim is, therefore, meritorious.
LIMITATION OF LIABILITY PROVISION — SECTION 3.08
In section 3.08 of the Agreement, Samsung limits its liability to Apple for general damages and excludes its liability for special damages. This section provides:
3.08 Limitation of Liability. Any provision herein to the contrary not withstanding, in no event shall Samsung be liable [sic] for indirect, incidental or consequential damages and in no event shall the liability of Samsung arising in connection with any Product sold hereunder (whether such liability arises from a claim based on contract, warranty, tort or otherwise) exceed the actual amount paid by Apple to Samsung for such Product. Nothing contained in this paragraph shall be construed to be an indemnity to Samsung by Apple for Samsung liability, if any, to third parties.
Contractual language limiting liability is to be "strictly construed" and any ambiguities are resolved "against the party seeking to limit its liability for negligence." In order to exclude liability for negligence, the language of the agreement must be "clear and explicit" and "free of ambiguity or obscurity." Philippine Airlines, Inc. v. McDonnell Douglas Corp., supra at 237.
In the first sentence of section 3.08, Samsung excludes its liability for consequential damage. Consequential damages are defined in the California Commercial Code as including: "[2](a) Any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and (b) Injury to person or property proximately resulting from any breach of warranty." Cal. Com. Code § 2715 (West 1964). In Philippine Airlines, supra, the California Court of Appeal held that a limitation of liability that excluded liability for "consequential damages" barred claims of a buyer, such as Apple, seeking indemnity for payments made by it to subpurchasers. Likewise, even under strict construction of the language of section 3.08, it is clear that Samsung is disclaiming its liability for damages arising from breach of warranty claims. Therefore, under the first provision of section 3.08, insofar as Apple's claim in each count of its amended third-party complaint against Samsung arises from the law of breach of warranty, Apple cannot recover, except as expressly permitted elsewhere in the contract.
Section 3.08 continues with the following provision:
[I]n no event shall the liability of Samsung arising in connection with any Product sold hereunder (whether such liability arises from a claim based on contract, warranty, tort or otherwise) exceed the actual amount paid by Apple to Samsung for such Product.
By the quoted provision, Samsung clearly and explicitly limits its liability in any claim based on negligence to an amount not to exceed the actual amount paid by Apple to Samsung for the monitor. Consequently, insofar as Apple's cause of action in each count in its third-party complaint against Samsung arises from the law of negligence, recovery may be had to the extent that Apple's loss does not exceed the actual amount paid by Apple to Samsung for the monitor.
Apart from tort claims, the latter provision of section 3.08 limits Samsung's liability for claims based on "warranty", whereas section 3.07 and the first provision of section 3.08 specifically exclude Samsung's liability for breach of warranty. This inconsistency does not, however, constitute any ambiguity. First, the provision limiting Samsung's liability is conditioned by language reciting that "any provision herein to the contrary notwithstanding." Furthermore, "[u]nder well established principles of contract interpretation, '. . . when a general and particular provision are inconsistent, the latter is paramount to the former.'" Nat'l Ins. Underwriters v. Carter, 17 Cal.3d 380, 386 (1976) quoting California Civil Procedure Code § 1859. As a result, the specific language employed in the first provision of section 3.08, as well as in the first provision of section 3.07, prevails over the more general language, extending the limitation of liability to all types of claims, found within the second provision of section 3.08.
The final provision of section 3.08 recites that: "Nothing contained in this paragraph shall be construed to be an indemnity to Samsung by Apple for Samsung liability, if any, to third parties." In Apple's Memorandum in Opposition to Third-Party Defendants Motion for Summary Judgment, Apple contends that that language suggests that "Apple is not obligated to shoulder Samsung's responsibility for potential liability for the monitor arising from third party claims such as plaintiffs'." (Third-Party P.'s Mem. Opp. Summ. J.). Apple's suggestion, however, is based on its reading the provision independently of the other provisions in section 3.08, a violation of the general rule that, in construing a contract, each clause is to be considered in light of the entire contract. Leo F. Piazza Paving v. Foundation Constr., 128 Cal.App.3d 583, 591 (Cal.Ct.App. 1981). When the final provision of section 3.08 is read together with the first two provisions, there is no ambiguity in the final provision. Rather, there is clear direction that the first two provisions of section 3.08 are not to be construed by Samsung as an agreement by Apple to indemnify Samsung.
ORDER
For the foregoing reasons, it is ORDERED that summary judgment for third-party defendants, Samsung Display Devices Co., Ltd. and Samsung America, Inc., is ALLOWED insofar as each count in Apple's amended third-party complaint is based on the law of warranty and is DENIED insofar as each count in Apple's amended third-party complaint is based on the law of negligence.
Daniel F. Toomey Justice of the Superior Court
DATED: October 11, 1996.