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Central Washington Refrigeration Inc. v. Barbee

filed: April 11, 1996.

CENTRAL WASHINGTON REFRIGERATION, INC., A SUBSIDIARY OF CENTRAL HEATING & PLUMBING, INC., APPELLANTS,
v.
LES BARBEE D/B/A BARBEE ORCHARDS, DEFENDANT, MCCORMACK ENGINEERING, A WASHINGTON CORPORATION, RESPONDENT.



Appeal from SUPERIOR COURT YAKIMA COUNTY. Superior Court No: 88-2-01719-0. Date filed in Superior Court: 10/22/93. Superior Court Judge signing: MICHAEL LEAVITT.

Philip J. Thompson, Dennis J. Sweeney & Ray E. Munson, concur

Author: Thompson

THOMPSON, J. -- Central Washington Refrigeration, Inc. (Central) appeals the dismissal on summary judgment of its third-party claim against McCormack Engineering (McCormack), manufacturer of a component of a fruit storage refrigeration system that Central installed on Les Barbee's orchard. Central argues it should be permitted to hold McCormack responsible for damages resulting from defects in the system. We affirm.

Central installs controlled atmosphere (CA) refrigeration systems for fruit warehouses. In 1987, Central bid on a CA system for two new cold rooms at Barbee's Yakima County orchard. Central's bid included four McCormack refrigeration coils. David Martin, who handled sales of McCormack equipment, recommended the coils to Central. Barbee accepted Central's bid, and Central then placed an order, through Mr. Martin, for the McCormack coils. Central's order called specifically for equipment that would produce 29.7 tons of refrigeration and 60,000 cfm.

McCormack responded by sending to Central two technical drawings of the coils. McCormack alleges it also sent a sales contract or work order. The parties appear to agree the coils were shipped in August 1987, and Central completed the contract work on September 23, 1987.

Mr. Barbee refused to pay the amount due on Central's contract, apparently because of an ongoing dispute over Central's repairs to unrelated "Sullaire equipment." In February 1988, the parties and their representatives met to discuss payment for Central's work on the new cold rooms, as well as for the Sullaire repairs. During the meeting, Mr. Barbee did not allege the new CA units were defective, and did not dispute the amount he owed Central on that contract. Mr. Barbee tentatively agreed on a payment

schedule for the new CA units, as well as the Sullaire repairs. The parties executed an agreement on August 31, 1988, in which Mr. Barbee agreed to pay $21,187 immediately, leaving a balance of $34,138 to be paid at 11 percent interest from January 1, 1988. Mr. Barbee also executed a promissory note for $34,138 plus interest, to be paid on January 1, 1989. Payment for the Sullaire repairs was to be made in the ordinary course of business.

Central filed this lawsuit on September 29, 1988. Its complaint alleged that, while Mr. Barbee had made the initial payment of $21,187 and had made some payments on the remaining balance and for the Sullaire repairs, he had not made any payments since June 1988. The complaint alleged Mr. Barbee breached a repair contract and an oral contract to pay for the Sullaire repairs, and Mr. Barbee defrauded Central by agreeing to pay the amounts due, inducing Central to release a lien against Mr. Barbee's property. Central amended its complaint in February 1989, adding an allegation that Mr. Barbee had failed to pay on the promissory note.

In response to Central's motion for partial summary judgment, Mr. Barbee filed an affidavit on March 21, 1989. Mr. Barbee stated that, in February 1988 when he agreed to pay for the new CA units, he "had not had the opportunity to fully run and evaluate the entire system with the two new rooms added to it." He stated that he later learned the new CA units were defective, and the cost of correcting the defects would cost him more than he owed Central. Mr. Barbee answered Central's amended complaint and counterclaimed, alleging:

5. The system has been misdesigned and misinstalled by Central Washington Refrigeration and by its employees. The Sullaire compressors have been misdesignated and misinstalled and all repair work done thereunder has been improperly handled.

6. Central Washington Refrigeration has breached its duties of good faith in dealing with this contract, been

negligent in its installation and design of the systems, as well as the repair and installation of the systems, has breached its express warranties given with regard to the instruction and operation of the system, has breached its implied warranty of merchantability and the implied warranty of fitness for the purpose of cooling the apples. These transactions and goods have resulted in damages to the defendant.

Mr. Barbee retained Glenn Ward, a refrigeration expert, to evaluate his system. Mr. Ward concluded there were problems with "Central's design, installation, repair and maintenance at the Barbee facility with regard to the installation of the two CA rooms and the Sullaire compressors . . . ." Mr. Ward stated the problems with the new CA system included "the failure to use sufficient coils and fans in the system to allow proper cooling."

Central argues Mr. Ward's affidavit, dated October 17, 1989, was its first indication there was a problem with the McCormack coils. Central forwarded these allegations to Mr. Martin, who responded that Mr. Ward's allegations "lacked substance." Mr. Martin's response to Central concluded: "I fail to see anything wrong with the selection or application or the unit coolers or the unit cooler fans that would affect 'pull down' or be detrimental to the fruit in the 'hold' condition."

Mr. Barbee filed for bankruptcy in February 1990, effectively halting prosecution of this case until March 1991. In January 1992, Central first learned that Mr. Barbee was claiming crop-loss damages resulting from the allegedly defective CA system. Mr. Barbee moved in March 1992 to amend his counterclaim to include damage to his 1989 apple crop. Mr. Barbee later amended the counterclaim to include as elements of damages "loss of and/or damage to stored apples, lost profits, loss of business reputation and costs associated with defendant filing Chapter 11 bankruptcy. Such damages are believed to be not less than $778,000."

Meanwhile, in May 1992, Central filed the third-party complaint at issue in this appeal. Central alleged that, to

the extent Mr. Barbee's allegations were true, McCormack breached its contract with Central, breached express and implied warranties, and was negligent in its design of the coils. The complaint alleged: "To the extent Central has any liability to Barbee for the damages claimed by Barbee, Central is entitled to contribution and/or indemnity from McCormack." Central also alleged "McCormack made material misrepresentations concerning the design, performance and capabilities of the coils furnished which were false and which were relied upon by Central and others."*fn1

The superior court granted McCormack's motion for summary judgment, and later denied Central's motion for reconsideration.

Central and Mr. Barbee then settled their dispute. Central agreed to pay Mr. Barbee $250,000 and to forgive Mr. Barbee's contract debt, and Mr. Barbee agreed to pay $30,000 for litigation costs incurred by Central. The court approved the settlement as reasonable.

In reviewing a summary judgment order, this court engages in the same inquiry as did the superior court. Our Lady of Lourdes Hosp. v. Franklin County, 120 Wash. 2d 439, 451, 842 P.2d 956 (1993). Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." CR 56(c). The burden is on the moving party to establish its entitlement to judgment as a matter of law, and facts and reasonable inferences from the facts are considered in favor of the nonmoving party. Our Lady of Lourdes Hosp., 120 Wash. 2d at 452.

Here, while most of the details are uncontested, the parties dispute several facts. The most prominent of these is whether ...


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