Burton v. Artery Company

Smith, J., delivered the opinion of the Court. We are here presented with the question of whether the applicable statute of limitations to a contract for the sale and installation of a number of trees and shrubs and the sale and placing of a substantial amount of sod is the three year provision in Maryland Code (1974) § 5-101 Courts and Judicial Proceedings Article as to civil actions generally or the four year statute in Code (1957, 1964 Repl. Vol.) Art. 95B, § 2-725 (1) (now, without change, Code (1975) § 2-725 (1) Commercial Law Article) relative to actions “for breach of any contract for sale . . . .” We conclude that this case is properly governed by the latter (Uniform Commercial Code or UCC). Thus, we shall reverse the judgment entered by a trial judge on a motion for summary judgment.

We granted certiorari prior to consideration of this matter by the Court of Special Appeals. Appellant, William G. Burton t/a William Burton Nurseries (Burton), sued Artery Company, Inc., said to be the successor by merger to Artery Communities, Inc. (Artery), and The Artery Organization, Inc., alleged to own all of the stock of Artery Communities, Inc., and to have managed its affairs, claiming nonpayment of a substantial sum due him under a contract dated April 12,1971. Suit was not filed until April 23, 1975, more than three years but less than four years after the alleged due date under the contract, December 31,1971. The contract specified that it was for “Prospect Walk II,” said to have been a construction project at Columbia in ⁹⁶ Howard County.

In the contract Artery was described as “Contractor” and Burton, as “Subcontractor.” It is upon what appears to be a standard form between a building contractor and a subcontractor, with a number of paragraphs eliminated. Schedule A of the contract, appended to it, set forth the scope of the work as to “furnish, supply, provide and deliver all labor, supervision, tools, equipment, plant material and perform all the work and services required for the completion of the landscaping and sod at Prospect Walk II, Columbia, Maryland (92 units — 13 buildings).” The “work and services” were to be performed and the materials supplied “in accordance with the Contractor’s applicable plans, specifications furnished by Kenneth P. Soergel and all tocal governing codes.” Plants and trees were to be guaranteed for a period of one year from the date of installation. Ground cover and flowers were “to be planted as per plans.” Sod was to meet the standards of the State of Maryland “and all local governing codes,” with “20% maximum weed content.” The area in which sod was placed was to be “fine grade[d] to ± 2/10 foot.” It was to “be rolled immediately after installation and watered once, as soon as possible, after the rolling procedure.” At the model site covered in the contract Burton was to set out 18 azaleas of one size, 10 azaleas of a somewhat larger size, and 9 rhododendrons of a specified size. He was to install six trees of three specified varieties, provide certain land cover, and place sod.

At the remaining sites a total of 235 trees of five different varieties and certain specified sizes were to be placed together with 420 shrubs in addition to the placement of sod. The trial judge determined “the contract in question [to be] a ‘services’ contract to which the Statute of Limitations of the Uniform Commercial Code does not apply.” 1J. Poe pleading and Practice § 618 (5th ed. Tiffany 1925) states that “the plea .of limitations seems always to have been regarded as almost an odious defense, and has never been favored by the courts.” Poe then refers to “the universal [Maryland] practice [of] requiring] it to be specially pleaded in all actions except ejéctment, and to be ⁹⁷ filed by the rule day,” as now required by Maryland Rules 342 c 1 (d), 342 c 2 (a), and 342 d 2.

Because our holding here conceivably can have a bearing on other applications of the UCC to contracts such as this, we dare not rest our decision upon the narrow ground that since limitations are not favored we should opt for the less stringent provision. I The term “goods” is defined in UCC § 2-105 (1): “(1) ‘Goods’ means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Title 8) and things in action. ‘Goods’, also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (§ 2-107).” (Emphasis in original.) The official comment states in pertinent part as to § 2-105: “Growing crops are included within the definition of goods since they are frequently intended for sale. The concept of ‘industrial’ growing crops has been abandoned, for under modern practices fruit, perennial hay, nursery stock and the like must be brought within the scope of this Title.” (Emphasis added.) The sod, trees, and shrubs here involved obviously are goods to be severed from realty. The UCC in § 2-107 states in pertinent part: “(1) A contract for the sale of timber, minerals or the like or a structure or its materials to be removed from realty is a contract for the sale of goods within this title if they are to be severed by the seller .... “(2) A contract for the sale apart from the land ⁹⁸ of growing crops or other things attached to realty and capable of severance without material harm thereto but not described in subsection (1) is a contract for the sale of goods within this title whether the subject matter is to be severed by the buyer or by the seller even though it forms part of the realty at the time of contracting, and the parties can by identification effect a present sale before severance. “(3) . . .” The admonition in UCC § 1-102 (1) is that “Titles 1 through 10 . . . shall be liberally construed and applied to promote its underlying purposes and policies.” We have heretofore referred to this statement in Harris v. Bower, 266 Md. 579, 588 , 295 A. 2d 870 (1972), and Plemens v. Didde-Glaser, 244 Md. 556, 562 , 224 A. 2d. 464 (1966).

In Barron v. Edwards, 45 Mich. App. 210 , 206 N.W.2d 508 (1973), the court was faced with the question of whether sod was personalty and thus governed by the UCC or realty to which the statute of frauds would be applicable. There was an oral agreement to sell sod. The seller began a suit to restrain the buyer from removing the sod after the state highway department condemned his farm.

To the buyer’s counterclaim he presented the defense that the contract covered an interest in land and therefore was unenforceable since it was not reduced to writing. The court referred to the official comment to § 2-105 which we have previously quoted. It found support for its ultimate decision in Groth v. Stillson, 20 Mich. App. 704 , 174 N.W.2d 596 (1969), where Christmas trees were held to be growing crops, and Azevedo v. Minister, 86 Nev. 576, 581 , 471 P. 2d 661 (1970), holding hay to be within the meaning of growing crops.

The court said: “Here the sod owed its existence to yearly fertilizing and cultivation by man. It is also significant that plaintiff raised this sod on several prior occasions and apparently treated it as a commercial product. Thus, this sod cannot be ⁹⁹ considered ‘growing grass’ as the plaintiff contends. We therefore hold that the sod in the instant case was personalty.” Id. at 214.

Many years ago Chief Judge McSherry pointed out for this Court in Leonard v. Medford, 85 Md. 666, 671 , 37 A. 365 (1897), that “[i]n Maryland, Massachusetts, Maine, Kentucky and Connecticut, sales of growing trees to be presently cut and removed by the vendee are held not to be within the operation of the fourth section of the Statute of Frauds.” He referred to the opinion by Chief Judge Le Grand in Smith v. Bryan, 5 Md. 141 (1853), which he said “established the law in Maryland to be that a parol sale of growing timber is not within the fourth section of the Statute of Frauds ....” The sale in question was determined to be a sale of goods prior to the enactment in Maryland of the Uniform Sales Act. Sod farms and nurseries are often tremendous commercial enterprises. With the present language of the UCC (including the statement that the sales article should be liberally construed), the official comment, the Michigan decision relative to sod, and the determination by our predecessors that the sale of standing timber was not the sale of an interest in land but one of personalty, we conclude that the sod, trees, and shrubs here involved are goods within the meaning of the UCC. II The four year statute of limitations in § 2-725 is applicable to “(a]n action for breach of any contract for sale .. . .” Accordingly, the question arises as to whether an action to recover sums due for sales is “[a]n action for breach of any contract for sale.” The answer is clearly provided in § 2-709 relative to an action for the price.

The fact that it has been necessary in some instances for courts to speak on the subject, however, would indicate that all litigants have not understood this fact. The parties here do not dispute that an action for the price is an action for breach of the contract for sale. ¹⁰⁰ Pennsylvania was one of the first states to adopt the UCC. For that reason its early opinions under the Code have been examined for guidance. The present question was before the court in Gimbel Bros., Inc. v. Cohen, 46 D. & C. 2d 747, 91 Montg.

Co. L. R. 156 (Pa. 1969). In that case a department store started an action to recover the price of clothing sold on credit. The last purchase was made more than four years but less than six years before suit was instituted. The general statute of limitations in effect in Pennsylvania for actions of debt was six years.

The court reasoned: “First of all, it is quite apparent that the clothing which Mrs. Cohen purchased comes within the definition of ‘goods’ found in section 2-105 (1) of the code. Secondly, each purchase and delivery created a ‘contract for sale’ as that term is defined in section 2-106 (1). Each time Mrs. Cohen received an article of clothing, she promised to pay the price placed upon it by Gimbels. Her failure to do so amounted to a breach of the ‘contract for sale’ she had entered into with Gimbels. “The sole remedy afforded by the code when a buyer fails to make payment for his purchases is an ‘Action for the Price* as defined in section 2-709.* Therefore, plaintiff’s suit is, in effect, a series of section 2-709 ‘Actions for the Price’ of goods.

Section 2-709 is found in part 7, art. 2, of the code. In this same part of the code, which is entitled ‘Remedies,’ appears section 2-725 setting forth the four-year-statute of limitations. The inclusion of both sections in the ‘Remedies’ portion of the code clearly indicates that the limitation contained in section 2-725 is to be imposed upon a seller’s action under section 2-709. “There is another factor which suggests the applicability of the code in matters of this type. If a seller delivers an article which turns out to be defectively manufactured, the buyer can file suit or counterclaim for a breach of warranty under section 2-714.

This remedy, however, is limited by ¹⁰¹ the statute of limitations found in section 2-725. Thus, if Mrs. Cohen had purchased a vacuum cleaner which functioned improperly and damaged her furniture, she might well have refused to pay for it. If she had permitted four years to go by, she would now be without a cause of action., Nevertheless, if a suit brought by Gimbels to recover the unpaid price of the vacuum cleaner were considered to be an ‘action of debt’ carrying with it a six-year-statute of limitations, Gimbels could recover the price and be immune to any counterclaim by Mrs. Cohen. Obviously, fairness can exist only if the same statute limits actions brought by both buyer and seller.

To the same effect see City of Kingsport v. SCM Corporation, 352 F. Supp. 288, 289 (E.D. Tenn. 1972); Hachten v. Stewart, 42 Cal. App. 3d Supp. 1 , 116 Cal. Rptr. 631, 632 (App. Dept., Super. Ct., Los Angeles Co. 1974); Reiss v. Pacific Steel Pool Corp., 73 Misc. 2d 78 , 341 N.Y.S.2d 364, 365 (S. Ct., Spec.

Term, Albany Co. 1973); and Wilson v. Browning Arms Company, 501 S.W.2d 705, 706 (Tex. Civ. App., 14th Dist. 1973). Such holdings are in accord with the comment in 1 W. Hawkland, A Transactional Guide to the Uniform Commercial Code § 1.5201 (1964): “Under the U.S.A., actions for breach of the sales contract are governed by the contract statute of limitations which, in most states, is six years.

Subsection 2-725 (1) shortens this period to four years, apparently under a theory that gives high value to commercial finality. Sellers and buyers must keep their records during the period of the statute of limitations to be able to resist claims that may be made against them. One of the principal merits of a statute of limitations is that it permits the parties to destroy old records. The draftsmen of the Code seem to have had this fact in mind in ¹⁰² reducing the period of limitations from six to four years.” Id. at 271.

We hold that a suit to recover sums due for the sale of goods is a suit for breach of a contract of sale and, accordingly, the four year period of limitations in § 2-725 (1) would be applicable if the contract here in question is one covered by the UCC. Ill Citing Epstein v. Giannattasio, 25 Conn. Sup. 109 , 197 A. 2d 342 (1963), 1 R. Anderson, Uniform Commercial Code § 2-105:10, at 229 (2d ed. 1970), states, “Article 2 does not apply to ‘service’ contracts nor to materials used or supplied in connection with the performance of such contracts. On this basis it has been held that a beauty treatment is a service contract and that material used in the course of the treatment is not subject to Article 2.” In that case the court said, “as the complaint allege[d], the plaintiff asked Giannattasio for a beauty treatment, and not for the purchase of goods.

From such language, it could not be inferred that it was the intention of either party that the transaction be a transaction in goods within the meaning of the code.” The cases cited there relative to the service of food in restaurants as service rather than a sale are in line with the holding of our predecessors in Dining Hall v. Swingler, 173 Md. 490 , 197 A. 105 (1938). Perlmutter v. Beth David Hosp., 308 N. Y. 100 , 123 N.E.2d 792 (1954), has been described as the leading case denying warranty coverage to the recipient of blood. The theory of the case there was that the service function predominated and the transaction was thus not a sale of blood within the meaning of the Uniform Sales Act. R. Nordstrom, Law of Sales § 22, at 46 (1970), criticizes this and similar holdings with the comment that “courts have on-occasion lost sight of the purpose of the scope section [(§ 2-105)] and have read the definition of ‘goods’ as approaching a string of meaningless words.” This approach has been criticized by others.

See, e.g., Comment, Sales and Service Warranties in ¹⁰³ Blood Transfusions, 26 Md. L. Rev. 182 (1966); D. Murray, Under the Spreading Analogy of Article 2 of the Uniform Commercial Code, 39 Fordham L. Rev. 447 , 464-472 (1971); and F. Miller, A “Sale of Goods” as a Prerequisite for Warranty Protection, 24 Bus. Lawy. 847, 849 (1969). Murray and Miller each regard the preferable approach to be that in Jackson v. Muhlenberg Hosp., et al., 96 N. J. Super. 314, 232 A. 2d 879 (Law Div. 1967), rev’d on other grounds, 53 N. J. 138, 249 A. 2d 65 (1969). 1 Murray also approves of the somewhat similar holding in Hoffman v. Misericordia H. of Phila., 439 Pa. 501 , 267 A. 2d 867 (1970). In Jackson the court said: “The Uniform Commercial Code in N.J.S. 12A:2-314 (1), has put to rest the widely criticized holding of Nisky v. Childs Co., 103 N.J.L. 464 , 50 A.L.R. 227 (E. & A. 1927), that the serving of food or drink in a restaurant amounts to a ‘service’ and not a ‘sale’ and bears no warranty of wholesomeness.

See also Sofman v. Denham Food Service, Inc., 37 N.J. 304 (1962), especially the concurring opinion of Justice Schettino. “The rule that food served in a restaurant was not impliedly warranted to be fit for human consumption although food sold in a store was so warranted, had no support in modern concepts of justice. It was an anachronism. It is unthinkable that such a legalism should be revived to avoid holding hospitals and blood banks liable. If these valuable organizations are to be exempted from liability, the immunity should be based upon the true policy consideration and not upon an ¹⁰⁴ irrelevant circumstance.

See Collopy v. Newark Eye and Ear Infirmary, 27 N.J. 29 (1958); N.J.S. 2A:53A-7 to 10, inclusive. “The transfer of human blood for a consideration is a sale. So is its transfusion into the body of a patient when a charge is made for the blood.” Id. at 323-24. J. White and R. Sommers, Uniform Commercial Code § 2-2, at 44 (1972), also states that § 2-201 “does not apply to the rendering of services for a price,” citing National Historic Shrines Foundation, Inc. v. Dali, 4 UCC Rep. Serv. 71 (N.Y. S. Ct., N.Y. Co., Spec.

Term 1967). That case involved an oral agreement by an artist to paint a picture on a television program, which he estimated would be worth $25,000 when completed, and to donate the painting to a non-profit corporation for sale to the public. The court found this to be a contract for rendition of services and not a contract of sale. Other cases holding contracts to be service contracts not within the purview of the UCC include: St. Luke’s Hospital v. Schmaltz, 534 P. 2d 781 (Colo. 1975), involving a blood transfusion where the patient contracted serum hepatitis as a result of defective blood which was furnished.

The court said: “We disagree with the court of appeals and believe the more realistic view of the relationship between a hospital and a patient is not that of a commercial transaction involving a seller and a buyer, wherein a quantity of blood is sold for a price, but rather that the essence of the hospital-patient relationship is one in which * * the patient bargains for, and the hospital agrees to make available, the human skill and physical material of medical science [whole blood for transfusion purposes] to the end that the patient’s health may be restored,’ as expressed in Perlmutter v. Beth David Hospital, supra, and the numerous cases which follow it.” Id. at 784. ¹⁰⁵ Robertson v. Ceola, 255 Ark. 703 , 501 S.W.2d 764 (1973), involved an oral contract for the purchase and installation of certain materials during the construction of a home. The court said: “Even though it be said that the material appellee was to purchase and furnished constitutes goods within the definition of § 85-2-105 and part of appellee’s profit is to be gained on cost plus 15% on the material, nevertheless, the essence of the agreement is a service contract for appellee to install tile in appellant’s home. Unless the principal object of the agreement is for sale of goods, then § 85-2-201 is inapplicable. See Huyler Paper Stock Co. v. Information Supplier Corp., 117 N.J. Super. 353 , 284 A. 2d 568 (1971).” Id. at 705.

In Schenectady Steel Co. v. Bruno Trimpoli, etc., 43 A.D.2d 234 , 350 N.Y.S.2d 920 (S. Ct., App. Div., 3d Dept.), aff'd, 34 N.Y .2d 939, 316 N.E.2d 875 , 359 N.Y.S.2d 560 (1974), the contract was one to furnish and erect structural steel. The court said: “In our opinion the Uniform Commercial Code was not applicable here. The Code applies to transactions involving goods, but its provisions, as with its predecessor, the Uniform Sales Act, are not applicable to either ‘service’ or ‘construction’ contracts (1 Anderson, Uniform Commercial Code, [2d ed.], §§ 2-102:5, 2-105:10 and 2-105:11; see N.Y. Law Rev. Comm. Report [1955], Vol. 1, p. 361.) “If service predominates and the transfer of title to personal property is an incidental feature of the transaction, the contract does not fall within the ambit of the Code, as