Great American Products v. Permabond International, a Division of National Starch and Chemical Company ( 2002 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO.03-00-00683-CV
Great American Products, Appellant
v.
Permabond International, a Division of National Starch and
Chemical Company, Appellee
FROM THE DISTRICT COURT OF COMAL COUNTY, 22ND JUDICIAL DISTRICT
NO. C98-504A, HONORABLE DON G. HUMBLE, JUDGE PRESIDING
Appellant Great American Products (AGreat American@) appeals the district court=s
judgment that Great American take nothing in its suit against appellee Permabond International
(APermabond@). Great American sued Permabond on a variety of tort, extra-contractual, statutory, and
contract theories, claiming that Permabond sold defective adhesive which caused certain product failures
and economic losses. The jury failed to find for Great American on any of its tort, extra-contractual, or
statutory theories. Although the jury answered favorably for Great American on certain unconditionally
submitted issues, the jury also affirmatively found that Great American had agreed to be bound by the
warranty disclaimer and limited remedy provisions contained in Permabond=s invoices. Great American
moved for judgment, asking the trial court to disregard the jury=s finding that Great American had agreed to
the warranty disclaimer and limited remedy provisions. Permabond also moved for judgment, asserting that
the jury finding that Great American had agreed to be bound by the warranty disclaimer and limited remedy
provisions rendered immaterial its findings relating to any breach of warranty, breach of agreement,
damages, and attorney=s fees. The trial court rendered judgment that Great American take nothing. After
the court denied its motion for new trial, Great American appealed. We will affirm the judgment of the
district court.
FACTUAL AND PROCEDURAL BACKGROUND
This dispute arises out of the sale of an industrial adhesive by Permabond to Great
American. Great American is a wholesale manufacturer and assembler of various gift items, including
glassware affixed with pewter emblems. Great American uses industrial adhesive to attach pewter emblems
to the glassware. The glassware is then placed under an ultraviolet light which cures the adhesive (UV
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adhesive), permanently affixing the emblem. Great American has claimed to use this process, or one similar
to it, successfully for approximately twelve years prior to the dispute with Permabond.
Permabond is a division of National Starch and Chemical Company (ANational Starch@).
National Starch makes a variety of industrial products that in turn are incorporated into other products.
Permabond manufactures and sells various types of UV adhesive, including the UV adhesive at issue in this
case.
Before the events giving rise to this suit, Great American had purchased and used other
Permabond adhesives for several years. In December 1994, Permabond suggested that Great American
begin purchasing a Permabond UV adhesive. However, after looking at Great American=s operation,
Permabond=s sales engineer told Great American that it did not currently have a suitable product that would
work with Great American=s system.
In late 1995, Permabond informed Great American that it had developed an adhesive
suitable for Great American. According to Great American, Permabond=s representatives consistently
assured Great American that changing to Permabond=s adhesive would not require Great American to
substantially modify its existing manufacturing process. Permabond delivered the adhesive for testing. After
sampling and testing the Permabond adhesive, Great American agreed to purchase it, signing a blanket
order agreement in March 1996.
The blanket order agreement stated in pertinent part that: AAll sales are subject to National
Starch and Chemical Company=s standard terms and conditions as set forth in its invoices.@ According to
Great American, Permabond did not explain those terms and conditions, but simply began shipping the
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adhesive. In response, Permabond contends that during the course of dealing with Great American over the
years, it consistently communicated the fact that Permabond would not and could not be responsible for
damages that Great American might later claim resulted from the use of Permabond=s adhesives.
Furthermore, it claims that this limitation was conveyed in each invoice sent with the purchase of a
Permabond product and that Great American never disputed any of the disclaimers it received from
Permabond.
With each shipment of its adhesive to Great American, Permabond sent a two-sided invoice
that stated the quantity and price on the front and set out the Aterms of sale@ on the reverse side. Among the
terms was a disclaimer of warranty which stated in pertinent part:
1. SELLER HEREBY EXCLUDES ANY AND ALL WARRANTIES,
GUARANTEES, OR REPRESENTATIONS WHATSOEVER, EXPRESS OR
IMPLIED AND EXPRESSLY EXCLUDES ANY AND ALL WARRANTIES AS
TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE . . .
. BUYER ASSUMES RISK FOR RESULTS OBTAINED FROM USE OF
THESE GOODS WHETHER USED ALONE OR IN COMBINATION WITH
OTHER PRODUCTS. SELLER=S LIABILITY HEREUNDER SHALL BE
LIMITED TO REPLACEMENT OF ANY GOODS WHICH ARE NOT OF
SELLER=S STANDARD QUALITY, AND SUCH REPLACEMENT SHALL BE
BUYER=S EXCLUSIVE REMEDY.
As evidenced by the disclaimer, the invoice provided that replacement was the exclusive remedy for
nonconforming adhesive.1
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The invoice also stated:
2. While Seller may from time to time offer recommendations and advice with respect to the
use of its products, it is understood that Buyer, in acting on any such recommendation or
advice does so entirely at its own risk.
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....
9. THE GOODS COVERED BY THIS INVOICE ARE SOLD EXPRESSLY ON THE
CONDITION OF BUYER=S ASSENT THAT THESE TERMS OF SALE,
INCLUDING THE EXCLUSION OF WARRANTIES GOVERN THIS PURCHASE
AND SALE. BUYER=S FAILURE TO OBJECT TO THESE TERMS OF SALE
WITHIN FIVE DAYS AFTER THE DATE OF SELLER=S ACKNOWLEDGMENT
& TERMS OF SALE (IF SUCH AN ACKNOWLEDGMENT WAS MADE TO HIS
ORDER) OR BUYER=S TAKING DELIVERY OF ANY GOODS SUPPLIED
HEREUNDER, WHICHEVER IS SOONER, SHALL CONSTITUTE SUCH
ASSENT.
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Great American timely remitted the payments charged on each invoice. However, Great
American claims it never expressly accepted the Aterms of sale@ on the invoices. Permabond contends the
invoice disclaimer put Great American on notice that Great American would have no recourse for relying on
the recommendations or advice of Permabond, and Great American agreed that its exclusive remedy would
be replacement adhesive.
The parties dispute the extent of the express warranty made to Great American by
Permabond. Great American contends Permabond expressly warranted that the adhesive it supplied would
be suitable for use in Great American=s manufacturing process, without substantial modification, and would
perform satisfactorily if implemented into that process. Permabond contends it made only a limited warranty
that it would provide Great American with its standard quality adhesive.
The blanket order agreement expired on April 30, 1997. Great American continued to
purchase adhesive from Permabond but claims that after the blanket order agreement expired, there was no
expression, either in Great American=s purchase order or in Permabond=s response, and no other evidence
which suggested the parties had continued to be bound by the Aterms of sale@ set forth in the invoices.
Permabond contends that Great American never informed Permabond that it did not consider itself bound
by the warranty exclusion and limited remedy provisions set out on each invoice. Permabond also contends
that the exclusion of warranty provisions and limited remedy provisions in the invoices were part of the
parties= course of dealing and course of performance and were in accord with standard industry practices.
In July 1997, Things Remembered, a customer of Great American, reported that the pewter
emblems on its glass mugs were falling off. The first failures reported by Things Remembered were all
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produced at an Anchor Hocking plant in Ohio, which had been employed to do some of Great American=s
manufacturing while the company relocated to Texas from Illinois. Great American claims that the plant had
just begun using the Permabond adhesive and had used the lighting system that was recommended by
Permabond to properly cure the adhesive. Subsequently, more problems were noted by Great American in
products manufactured at its New Braunfels plant.
After Great American became aware of problems with the UV adhesive, it notified
Permabond. Permabond dispatched representatives to the New Braunfels facility to investigate the
problem. After running tests on the adhesive, Permabond informed Great American that it thought Great
American=s curing light source was inadequate and this was the source of the problem. Great American
claims that Permabond did not acknowledge its earlier assurances that its product was compatible with
Great American=s existing manufacturing process. Furthermore, Great American claims that Permabond did
not explain the Anchor Hocking problems which occurred despite Great American=s use of Permabond=s
preferred fusion-lighting system.
After testing the adhesive, Permabond supplied Great American with an alternative UV
adhesive to address the problems that Great American had experienced. Great American used this
adhesive for a short period, but eventually returned to the original adhesive it used before the Permabond
product.
Great American filed suit in June 1998. The case was tried before a jury. The trial court
submitted the charge proposed by Great American which included the following liability theories: deceptive
trade practices, breach of warranties, breach of contract, fraud, negligent misrepresentation, and negligence.
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As to the deceptive trade practices claims, fraud claims, and negligent misrepresentation claims, the jury
failed to find Permabond liable.
When asked in Question No. 3 and Question No. 4 whether Permabond failed to comply
with any warranty and whether this failure was a producing cause of damages to Great American, the jury
answered affirmatively.2 The questions submitted did not differentiate between express and implied
warranties. For the breach of warranty claim, the jury awarded Great American $70,000 for repair and
replacement expenses and $250,000 in lost profits.
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Question No. 3 of the jury charge was ADo you find that Permabond failed to comply with
any warranty? You are instructed . . . that >failed to comply= means any of the following.@ The question
then listed and defined the following warranties: (1) express warranty; (2) the implied warranty of
merchantability; (3) the implied warranty of fitness for a particular purpose; and (4) the implied warranty of
good and workmanlike performance. Question No. 4 of the jury charge was A Was the failure, if any, of
Permabond to comply with a warranty a producing cause of damages to GAP?@
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In a series of answers to the sub-parts of Question No. 7,3 the jury found that Great
American and Permabond had agreed to the following: (A) Permabond would provide adhesive suitable for
use in Great American=s manufacturing facility, (B) Permabond would provide technical service regarding
adhesive supplied for use in the Great American process, (C) Great American would pay Permabond for
adhesive it supplied that was suitable for use in Great American=s manufacturing facility, and (D) the parties
would be bound by the standard terms and conditions as stated in Permabond=s invoices.
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Question No. 7 of the jury charge was ADid the agreement between GAP and Permabond include any
of the following terms: (A) Permabond would provide adhesive suitable for use in GAP=s manufacturing
facility, (B) Permabond would provide technical service regarding adhesive supplied for use in the GAP
process, (C) GAP would pay Permabond for adhesive it supplied that was suitable for use in GAP=s
manufacturing facility, (D) The parties would be bound by the standard terms and conditions as stated in
Permabond=s invoices.@ The jury answered Ayes@ to each subpart of Question No. 7.
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In Question No. 8,4 which dealt with the breach of contract claim, the jury found
Permabond failed to comply with the terms of the agreement inquired about in Question No. 7. As to the
breach of contract claim, the jury awarded Great American $70,000 for repair and replacement expenses
and $250,000 in lost profits.
Following the return of the jury=s verdict, but before the rendition of judgment, Permabond
moved for entry of judgment in its favor asserting that the jury=s answer to Question No. 7(D), that the
parties were bound by the terms and conditions set forth in the invoices, negated the jury=s findings relating
to the breach of warranty and breach of contract claims because the invoices effectively disclaimed express
and implied warranties. Alternatively, Permabond requested that the court enter judgment non obstante
veredicto (notwithstanding the verdict). See Tex. R. Civ. P. 301.
In response, Great American contended that the jury=s answers required judgment in its
favor. Great American asked the trial court to disregard the jury=s finding that Great American had agreed
to be bound by the standards and terms stated in Permabond=s invoices, which included the warranty
disclaimer and limited remedy provision. It argued that because Permabond had expressly warranted its
goods and services, its attempted disclaimer was ineffective.
The trial court rendered judgment that Great American take nothing. Great American then
moved to modify the judgment and alternatively for a new trial, but the court denied the motion. In five
issues on appeal, Great American contends that: (1) the trial court erred in rendering judgment that Great
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Question No. 8 of the jury charge was A Did Permabond fail to comply with the agreement?@
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American take nothing because the blanket order agreement had expired at the time of the breach and a
proper construction of the verdict entitles Great American to recover damages for both breach of warranty
and breach of contract; (2) even if there were an effective disclaimer of implied warranty, the trial court
erred in not rendering judgment that Great American recover for breach of express warranty, because the
disclaimer was legally inoperative as to the express warranty; (3) even if there were an effective disclaimer
of warranty, the trial court erred in not rendering judgment that Great American recover for breach of
contract, because, as a matter of law, Permabond=s invoices did not disclaim responsibility for breach of the
agreement; (4) even if there were an effective limitation of remedy, the trial court erred in not rendering
judgment that Great American recover damages, because, as a matter of law, the limitation of remedy
provision in Permabond=s invoices failed of its essential purpose; and (5) the trial court erred in not
rendering judgment that Great American recover attorney=s fees awarded by the jury.
DISCUSSION
Breach of Express Warranty
In its second issue, Great American complains that the trial court erred in not rendering
judgment that it recover for breach of express warranty. Great American asserts that the jury=s affirmative
answer to Question No. 3 regarding breach of any warranty necessarily means that the jury found that
Permabond breached an express warranty. We disagree.
The question regarding breach of warranty submitted to the jury states in pertinent part:
Do you find that Permabond failed to comply with any warranty?
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You are instructed in answering this Question that the term Afailed to comply@ means any of
the following:
$ Failing to comply with an express warranty
$ Implied Warranty of Merchantability
$ Implied Warranty of Fitness for Particular Purpose
$ Implied Warranty of Good and Workmanlike Performance
Answer AYes@ or ANo.@
Because of the ambiguous nature of the jury question, one cannot discern whether the jury=s affirmative
answer relates to one or more of the implied warranties or to the express warranty. Based on the plain
meaning of the instruction, an affirmative answer to Aany of the following@ is not a finding of breach of
express warranty.
In order to recover for the breach of an express warranty, a plaintiff must prove: (1) an
express affirmation of fact or promise by the seller relating to the goods; (2) that such affirmation of fact or
promise became a part of the basis of the bargain; (3) that the plaintiff relied upon said affirmation of fact or
promise; (4) that the goods failed to comply with the affirmations of fact or promise; (5) that the plaintiff was
injured by such failure of the product to comply with the express warranty; and (6) that such failure was the
proximate cause of plaintiff=s injury. Morris v. Adolph Coors Co., 735 S.W.2d 578, 587 (Tex.
App.CFort Worth 1987, writ ref=d n.r.e.). Great American had the burden to plead, prove, and submit all
elements but failed to do so. In essence, Great American is asking this Court to deem a finding of breach of
express warranty based on an ambiguous jury submission so as to invalidate the trial court=s judgment. This
we will not do.
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Great American requested Jury Question No. 3, and the trial court submitted it over
Permabond=s objections. The jury answered this question in the affirmative. It is unknown whether the jury
found an express warranty by Permabond. Even assuming the validity of Great American=s argument
regarding express warranties, where a jury=s findings are capable of two constructions and one would
reconcile the findings in favor of the judgment, reconciliation in favor of the judgment that was rendered on
the jury verdict is mandatory. Materials Mktg. Corp. v. Spencer, 40 S.W.3d 172, 176 (Tex.
App.CTexarkana 2001, no pet.). We overrule issue two.
Disregarding Jury Findings
In issues one and three, Great American argues that the trial court erred by disregarding, or
failing to reconcile, certain jury findings in support of the jury=s verdict. Underlying these issues is the
apparent conflict between the jury=s answers to Questions Nos. 3 and 8 (that Permabond breached a
warranty and breached its agreement) and the jury=s answer to Question No. 7(D) (that Great American
agreed to be bound by the standard terms and conditions in Permabond=s invoices).5 As discussed, the
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In issue one, Great American specifically claims that because the blanket order agreement had expired
at the time of breach, the jury findings of breach of warranty and breach of agreement can be reconciled by
construing the answer to Question No. 7(D) as a finding that the parties had once agreed to be bound, but
that the agreement was not in force when the breach occurred. However, that is not how the jury charge
reads. The jury was instructed that the parties had Aentered into an agreement regarding the purchase and
sale@ of the Permabond adhesive. The jury was asked whether that agreement included the agreement to be
bound by the standard terms contained in Permabond=s invoices. In answering Question No. 7, the jury
was directed to consider the parties= course of dealing, usage of trade, and course of performance. There is
nothing in the charge or question that referenced the blanket order agreement. In addition, there is nothing
to indicate the jury was thinking about some prior, expired blanket order agreement when it answered
Question No. 7. In answering Question No. 7(D) affirmatively, the jury expressly found that Great
American had agreed to be bound by the terms and conditions stated in the invoices; therefore, the terms
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standard terms and conditions in Permabond=s invoices disclaimed all warranties and limited Great
American=s remedy to replacement of the glue.
A trial court may disregard a jury=s answers that have no support in the evidence or when
the answers to the questions are immaterial. Southeastern Pipe Line Co., Inc. v. Tichacek, 997 S.W.2d
166, 172 (Tex. 1997); see also Southwestern Bell Tel. Co. v. FDP Corp., 811 S.W.2d 572, 577 (Tex.
1991) (rendering take nothing judgment and holding that limited warranty and limited remedy provision
rendered irrelevant any jury finding regarding lost profits). A question is immaterial when it should not have
been submitted, it calls for a finding beyond the province of the jury, e.g., a question of law, or when it was
properly submitted but has been rendered immaterial by other findings. Id. A trial court may disregard a
finding on an immaterial issue and render judgment on the remaining findings; such a judgment is not
considered a judgment notwithstanding the verdict. Kuenhoefer v. Welch, 893 S.W.2d 689, 692 (Tex.
App.CTexarkana 1995, writ denied).
In the instant case, Permabond filed a motion for judgment in which it urged the trial court to
disregard the jury=s findings of breach of warranty and breach of agreement based on the jury=s affirmative
answer to Question No. 7(D), finding that Great American agreed to be bound by the standard terms and
conditions, i.e., the disclaimer of warranties contained in its invoices. In the alternative, Permabond asked
for a judgment notwithstanding the verdict based on insufficient evidence. The trial court ultimately rendered
final judgment for Permabond that Great American take nothing by its suit.
and conditions in the invoices were found to be part of the parties= agreement.
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We agree with Permabond that the jury=s answer to Question No. 7(D) rendered its
answers relating to breach of warranty immaterial. In answering Question No. 7(D), the jury impliedly
found that Great American agreed to be bound by the standard terms and conditions, including the
disclaimer and limitation of remedy, contained in its sales invoices. Once the jury found that Great American
agreed to be bound by the standard terms and conditions on Permabond=s invoices, the jury=s findings of
breach of warranty became immaterial. A disclaimer of warranty is an affirmative defense. Tex. R. Civ. P.
94; Johnston v. McKinney Am., Inc., 9 S.W.3d 271, 280 (Tex. App.CHouston [14th Dist.] 1999, pet.
denied). An affirmative defense is by its nature Aone of confession and avoidance@ which seeks to establish
an independent reason why the plaintiff should not prevail. Texas Beef Cattle Co. v. Green, 921 S.W.2d
203, 212 (Tex. 1996) (jury=s finding of affirmative defense of justification rendered immaterial finding of
actual malice).
In addition, the jury=s answer to Question No. 7(D) rendered its answer to Question No. 8
immaterial because Permabond expressly provided in its invoices that a buyer=s exclusive remedy for
substandard goods was limited to replacement of the goods. By answering all sub-parts to Question No. 7
in the affirmative, the jury specifically found: (1) Permabond agreed to provide suitable adhesive and
technical service to Great American; (2) Great American agreed to pay Permabond for the adhesive if
suitable; and (3) both parties agreed to be bound by the terms included in Permabond=s invoices. In
answering Question No. 8 affirmatively, the jury found that Permabond had failed to comply with its part of
the agreement, specifically, providing suitable adhesive and technical service to Great American. At the
same time, by finding that the parties agreed to be bound by the terms and conditions of the invoices, the
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jury also found that the remedy for failure to comply with the agreement was limited to replacement of the
defective product.
The record reveals that the issue of disclaimer was addressed throughout the trial, during
closing arguments, and was raised by Permabond in its pleadings below. Permabond=s general manager
testified that Permabond=s disclaimer of warranty and limitation of remedy language was standard in the
chemical industry, or a Ausage of trade.@ Additionally, from the testimony of Great American=s CEO and
purchasing agent, the jury could infer that Great American, based on its prior course of dealing with
Permabond, should have been aware of the disclaimer language contained on Permabond=s invoices and
correspondence. Furthermore, the preface to Question No. 7 of the court=s charge specifically instructed
the jury on course of dealing and usage of trade:
A Acourse of dealing@ is a sequence of previous conduct between the parties to a
particular transaction which is fairly to be regarded as establishing a common basis of
understanding for interpreting their expressions or other conduct.
A Ausage of trade@ is any practice or method of dealing having such regularity of
observance in place, vocation or trade as to justify an expectation that it will be observed
with respect to the transaction in question.
Where an agreement for sale involves repeated occasions for performance by
either party with knowledge of the nature of the performance and opportunity for objection
to it by the other, any course of performance accepted or acquiesced in without objection
shall be relevant to determine the meaning of the agreement.
Finally, we note that Great American requested the charge of which it now complains. In
summary, we hold that the trial court did not err by disregarding the jury=s answers to the breach of
warranty and breach of agreement questions. We overrule issues one and three.
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Limited Remedy Failed of Essential Purpose?
In issue four, Great American urges that, as a matter of law, the limited remedy Permabond
provided in its invoices failed of its essential purpose and that the jury=s inconsistent answers can be
reconciled on this basis. Permabond responds that Great American failed to submit a jury question on the
issue or raise the issue in its pleadings below and thus has waived it on appeal. Great American counters
that its failure to submit a jury question on whether Permabond=s limited remedy failed of its essential
purpose is not fatal to its pursuit of this issue on appeal. See Mercedes Benz of N. Am., Inc. v.
Dickenson, 720 S.W.2d 844 (Tex. App.CFort Worth 1986, no writ). In Mercedes Benz, the court of
appeals considered the issue of whether a limited remedy failed of its essential purpose, reasoning that the
defendant could not complain of the plaintiff=s failure to plead the issue or to submit a jury question on the
issue in the absence of special exceptions to the plaintiff=s pleadings. Id. at 853-54. The court relied on
Roark v. Allen in which the supreme court rejected the appellate court=s determination that the plaintiffs=
petition was insufficient to support the submission of special issues to the jury on the issue of negligence.
663 S.W.2d 804, 809-10 (Tex. 1982). However, unlike the instant case, the Roark plaintiffs submitted a
jury question on the issue of negligence, although they did not plead it specifically in their petition. Id. at
809. In the instant case, Great American not only failed to plead but also failed to submit a jury question on
the issue of whether the limited remedy failed of its essential purpose; therefore, we hold it has waived this
issue on appeal. Tex. R. App. P. 33.1; see also Henderson v. Ford Motor Co., 547 S.W.2d 663, 668-
69 (Tex. App.CAmarillo 1977, no writ).
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Attorney=s fees
In issue five, Great American claims the trial court erred in not rendering judgment on the
jury=s award of attorney=s fees to Great American. To recover attorney=s fees under Section 38.001 of the
Texas Civil Practice and Remedies Code, a party must (1) prevail on a cause of action for which attorney=s
fees are recoverable, and (2) recover damages. See Tex. Civ. Prac. & Rem. Code Ann. ' 38.001 (West
1997); Green Int=l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997) (citing State Farm Life Ins. Co. v.
Beaston, 907 S.W.2d 430, 437 (Tex. 1995)). Great American has neither prevailed on any cause of
action for which attorney=s fees are recoverable, nor has it recovered any damages. Issue five is overruled.
CONCLUSION
Having overruled all of Great American=s issues on appeal, we affirm the judgment of
the district court.
David Puryear, Justice
Before Chief Justice Aboussie, Justices B. A. Smith and Puryear
Affirmed
Filed: October 10, 2002
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