Bracey v. Monsanto Co., Inc.

823 S.W.2d 946, 1992 Mo. LEXIS 11, 1992 WL 12578

• Court: Supreme Court of Missouri
• Decided: January 28, 1992
• Docket: 73301
• Status: Published

Opinions

BLACKMAR, Judge.

This case comes to the writer on recent reassignment, after a sinuous history in the appellate courts. This opinion makes use of some of the ideas, research and phraseology of draft opinions by other judges.

The plaintiffs sued for breach of warranty, following their purchase and use of a herbicide known as Lasso. The defendant filed a lengthy motion to dismiss. The trial court sustained this motion without specifying a reason and dismissed the petition with prejudice. The Court of Appeals, Southern District, remanded the case in order to permit the plaintiffs to amend their petition. Both parties then moved for transfer to this Court, the plaintiffs advising that they elected to stand on the petition as filed. We retransferred the case by order, directing the court of appeals to consider the merits of the appeal. That court then reversed and remanded for further proceedings. We again granted transfer because of the importance of the issue of the validity of a limitation on the right to recover damages for breach of warranty in a contract for the sale of goods governed by the Uniform Commercial Code, Chap. 400.2, RSMo 1986. We now reverse and remand, for reasons differing substantially from those adduced by the court of appeals.

The petition has two counts, Count I charging breach of express warranty and Count II breach of implied warranty. The plaintiffs are tenants of land in New Madrid and Pemiscot Counties, on a “cropyield” arrangement. Their petition states that they purchased 95 pounds of Lasso, a herbicide manufactured by the defendants, from an intermediate supplier; that the product did not conform to the defendant manufacturer’s representations; and that as a result the plaintiffs’ crop yield was greatly diminished. The petition specifically charged that the limitation of warranty described below “causes the warranty to fail of its essential purpose,” borrowing the phraseology of £ 400.2-719(2), RSMo 1986, a part of the Uniform Commercial Code. The petition is lacking in detail as to the precise failures of conformity to representations and the cause of the diminished crop yield. The plaintiffs took a substantial risk by electing to stand on the petition without amendment, but we find it minimally sufficient to present the issues we now consider.

The motion to dismiss is prolix, containing 17 paragraphs as to Count I and 14 as to Count II. The defendant also filed an alternative motion for more definite statement, on which a ruling was unnecessary once the motion to dismiss was sustained. This unruled motion should now be ruled on remand. The motion to dismiss asserts various substantive and procedural grounds for dismissal, but the defendant has not sought to justify the bulk of these in the briefing. We perceive no fatal procedural flaws in the petition, and so limit our consideration to the matters briefed.

An order dismissing a petition with prejudice is erroneous if the petition, reasonably construed, sets forth any theory supporting recovery.¹ Tested by this standard, the ruling of the trial court is clearly in error because the challenged warranty seeks only to limit damages and not to preclude all recovery. But the plaintiffs seek damages substantially in excess of the limitation, and so we must consider the issue of validity.

Necessary Parties

We deal first with a procedural issue. The defendant asserts in the motion to dismiss that there may be a want of “necessary parties” because the rights of the plaintiffs and their landlords are not clearly defined in the petition. This point is advanced in the briefing as an additional reason supporting the trial court’s ruling.

Failure to join a necessary party, however, is not ground for dismissal. Rule 52.06. There is a recognized distinction between an “indispensable party,” without whose presence a case may not be maintained, and a “necessary party,” who should be made a party in order that there may be a complete determination of the controversy at hand, but whose presence is not essential to a determination of the issues between the parties.² If it is claimed that necessary parties who are subject to the processes of the court are not present, the remedy is not by a motion to dismiss but rather by motion to add the parties deemed to be necessary. Rules 52.06 and 55.27(a)(7). If the defendant is of the opinion that it may be subjected to multiple recovery if the landlords are not made parties, it may move to bring them in. Rules 52.04(a) and 57.

If the facts stated are true, moreover, the plaintiffs are entitled to recover the full damages allowable for the breach of warranty. They purchased and used the product. There is no showing of a contractual relation between the landlords and the supplier of the herbicide. It is of no moment to the defendant that the plaintiffs might be obliged to account to others for any part of their recovery, (if, indeed, they are so obliged, about which we express no opinion).

Unconscionability

The “LIMIT OF WARRANTY AND LIABILITY” attacked as unconscionable reads as follows:

This company warrants that this product conforms to the chemical description on the label and is reasonably fit for the purposes set forth in the complete Directions for Use label booklet (“Directions”) when used in accordance with those Directions under the conditions described therein. NO OTHER EXPRESS OR IMPLIED WARRANTY OF FITNESS FOR PARTICULAR PURPOSE OR MERCHANTABILITY IS MADE. This warranty is also subject to the conditions and limitations stated herein. Buyer and all users shall promptly notify this company of any claims whether based in contract, negligence, strict liability, other tort or otherwise.

******

THE EXCLUSIVE REMEDY OF THE USER OR BUYER AND THE LIMIT OF THE LIABILITY OF THIS COMPANY OR ANY OTHER SELLER FROM ANY AND ALL LOSSES, INJURIES OR DAMAGES RESULTING FROM THE USE OR HANDLING OF THIS PRODUCT (INCLUDING CLAIMS BASED IN CONTRACT NEGLIGENCE, STRICT LIABILITY, OTHER TORT OR OTHERWISE) SHALL BE THE PURCHASE PRICE PAID BY THE USER OR BUYER FOR THE QUANTITY OF THIS PRODUCT INVOLVED, OR, AT THE ELECTION OF THIS COMPANY OR ANY OTHER SELLER, THE REPLACEMENT OF SUCH QUANTITY, OR, IF NOT ACQUIRED BY PURCHASE, REPLACEMENT OF SUCH QUANTITY IN NO EVENT SHALL THIS COMPANY OR ANY OTHER SELLER BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES.

The buyer and all users are deemed to have accepted the terms of this LIMIT OF WARRANTY AND LIABILITY which may not be varied by any verbal or written agreement.

Section 400.2-719, RSMo 1986, is part of the Uniform Commercial Code, adopted in Missouri in 1963. It authorizes contractual modifications or limitations of remedies for breach of warranty, in the following terms:

(1) Subject to the provisions of subsections (2) and (3) of this section and of section 400.2-718 on liquidation and limitation of damages,

(a) the agreement may provide for remedies in addition to or in substitution for those provided in this article and may limit or alter the measure of damages recoverable under this article, as by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of nonconforming goods or parts; and

(b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.

(2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this chapter.

' (3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.

Any such modifications or limitations, then, are expressly subject to being tested for unconscionability. This brings into play another UCC section; 400.2-302, RSMo 1986. Section 400.2-302, reading as follows:

(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.

The petition does not allege unconsciona-bility in express terms. It takes notice of the limitation provisions and charges that this limitation “causes the warranty to fail of its essential purpose,” thus invoking the provisions of § 400.2-719(2). Subsection (3) of Section 719 states that a limitation of remedy may be invalid if it is unconscionable. We conclude, nevertheless, that the purpose of the action is to challenge the limitation, and that challenges under Subsection (2) and Subseciton (3) must be considered.

There has been much discussion of the interrelation between Subsections (2) and (3)3 Subsection (3) appears to permit the parties to a commercial transaction to agree on the allocation of the risk of failure of the product. To complete the picture, § 400.2-316 permits the total exclusion of express and implied warranties, by conspicuous contract provisions. Because of the inadequacy of the record before us, we resist the temptation to comment further about the interrelation of the several code sections. The questions should be first addressed by the trial court on remand.

Subsection (1) of § 400.2-302, RSMo 1986, calls for a finding “as a matter of law,” and so the question of unconsciona-bility is for the court to decide, and not a jury issue.⁴ Under Subsection 2 of § 400.2-302, this finding is to be based on evidence, rather than being decided on the pleadings, and § 400.2-719(3) cautions that “limitation of damages where the loss is commercial” is not prima facie unconscionable. The defendant, by filing a motion to dismiss, does not waive any procedural rights it would otherwise have.⁵ Thus the issue of unconscionability cannot be decided adversely to a defendant who does not have the opportunity to present to the trial court such evidence as it thinks appropriate. The present defendant expressly claimed this right in its brief filed with this Court.

Our cases give little guidance on the subject of unconscionability. In Oldham’s Farm Sausage Co. v. Saleo, Inc., 633 S.W.2d 177 (Mo.App.1982), the court upheld the trial court’s refusal to enforce a limitation of liability in connection with the sale of a machine. It concluded that the limitation of remedy could be found to be unconscionable under § 400.2-719(3) because it was set out in fine print on the back side of the signature page of a lengthy contract. The plaintiffs do not claim that the limitation provisions here involved were inconspicuous or that they were unaware of them. The Oldham court also held, without extended discussion, that a “repair or replace” limitation excluding consequential damages did not provide a “minimum adequate remedy” for damages arising out of the constant and long-term malfunctioning of a machine that the seller made futile efforts to correct and that caused substantial damage to the user’s product. Thus, borrowing the terminology frequently used by analysts and commentators, see Note 8, infra, the court found both procedural and substantive unconscionability. Without a more adequate record we cannot say that that case is factually close to this one or how helpful it is in resolving the ultimate issues in the case.

The term “unconscionability” is not defined by statutory language. We do not think that, at this point, we should prescribe detailed ground rules for the trial court’s decision on remand. In traditional Missouri “instructionese,” it might be said that the statutory provisions give the trial court a “roving commission.” Further expostulation should await the development of the evidence. The statute mentions the “commercial setting, purpose and effect” of the questioned contract terms. The parties on remand may develop the record as they think wise.

We deem it not inappropriate, however, to suggest available sources of guidance. The drafters of the Uniform Commercial Code accompanied their product with comments, which, however, are not a part of the Code.⁶ Commentators have sought to fill the void created by this general language.⁷ It is suggested that there are procedural and substantive aspects of un-conscionability, the former relating to the formalities of the making of the contract and the latter to the specific contract terms.⁸ Quotations about contractual limitations on damages for warranties in connection with herbicides have been in the courts frequently. Several state courts of last resort have held the limitations to be valid and not unconscionable.⁹ At least one state Supreme Court disagrees.¹⁰ Most of these cases have been appealed after trial.¹¹ There is a paucity of detail about the evidence considered by the several trial courts on the unconscionability issue. The statutory language leaves it to the litigants to develop the record. We have no occasion at this point to endorse any particular decision from another jurisdiction.

We note also that, if the trial court finds unconscionability, it has very broad discretion in further proceedings. According to § 400.2-302(1), RSMo 1986, it may refuse to enforce the contract (which would obviously be inappropriate here). It may also enforce the remainder of the contract, free from the provisions deemed to be unconscionable. Or it may limit the application of the offending clause in order to avoid an unconscionable result. The parties of course may address the trial court as to how a finding of unconscionability, if made, is to be implemented.

The judgment is reversed. The case is remanded for further proceedings.

ROBERTSON, C.J., and COVINGTON, HOLSTEIN, BENTON and THOMAS, JJ., concur. RENDLEN, J., dissents in separate opinion filed.

1 . See Asaro v. Cardinal Glennon Memorial Hospital, 799 S.W.2d 595 (Mo. banc 1991).

2 . See generally Rules 52.04(a) and (b) discussing necessary and indispensable parties. See also 15 Wheaton, Missouri Practice § 52.04(a)-1 (1976); 7 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1604 (2d ed. 1986).

3 .See G. Fahlgren, Unconscionability: Warranty Disclaimer and Consequential Damages, 20 St. Louis U.L.J. 435, 456-459 (1976); E. Samuels, The Unconscionability of Excluding Consequential Damages Under the Uniform Commercial Code When No Other Meaningful Remedy Is Available, 43 U.Pitt.L.Rev. 197 (1981); Note, The Enforceability of Contractual Clauses Excluding Sellers from Liability for Consequential Damages Under Section 2-719 of the Uniform Commercial Code, 58 Wash.U.L.Q. 317 (1980); G. Wallach, The Law of Sales Under the Uniform Commercial Code, par. ll.ll(2)(b), 11-61-62 (1981); B. Clark & L. Smith, The Law of Product Liability, par. 804(2)(a) at 8-56 (1984); R.W. Murray Company v. Shatterproof Glass Corp., 758 F.2d 266 (8th Cir.1985).

4 . See § 400.2-302(1), RSMo 1986; see, e.g., Funding Systems Leasing Corporation v. King Louie International, Inc., 597 S.W.2d 624 (Mo.App.1979).

5 . Rule 67.02 states:

[t]he filing of such motion [to dismiss] does not constitute a waiver of defendant’s right to offer evidence.

See abo Walker v. DePaul Hospital, 682 S.W.2d 156 (Mo.App.1984), holding that a motion to dismiss is the "proper procedural tool to challenge a petition_” Id. at 158, citing Morgan v. Morgan, 555 S.W.2d 378 (Mo.App.1977).

6 . See Groppel Company, Inc. v. U.S. Gypsum Co., 616 S.W.2d 49 (Mo.App.1981) (UCC comments are appropriately considered for guidance but do not constitute binding authority).

7 . See generally Leff, Unconscionability and the Code — The Emperor’s New Clause, 115 U.Pa. L.Rev. 485 (1967); J. Spanogle, Analyzing Un-conscionability Problems, 117 U.Pa.L.Rev. 931 (1969); see also Note 3, supra.

8 . Leff, supra, at 487. See Funding Systems Leasing Corporation v. King Louie International, Inc., 597 S.W.2d 624 (Mo.App.1979).

9 . See Southland Farms, Inc. v. Ciba-Geigy Corporation, 575 So.2d 1077 (Ala.1991); Kleven v. Geigy Agricultural Chemicals, 303 Minn. 320, 227 N.W.2d 566 (1975). Accord Monsanto Agricultural Products Company v. Edenfield, 426 So.2d 574 (Fla.Dist.Ct.App.1982); Slemmons v. Ciba-Geigy Corporation, 57 Ohio App.2d 43, 385 N.E.2d 298 (1978).

10 . See Durham v. Ciba-Geigy Corporation, 315 N.W.2d 696 (S.D.1982), affirming a finding of unconscionability. See abo Johnson v. Monsanto Company, 303 N.W.2d 86 (N.D.1981), in which a trial court’s finding of unconscionability was not challenged.

11 . See, e.g., Durham, 315 N.W.2d at 697, and Kleven, Til N.W.2d at 568, each affirming a finding of validity of the limitation. In South-land Farms, the Supreme Court of Alabama appears to have sustained a limitation without hearing, in responding to questions submitted by a United States Court of Appeals.