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Alloway v. General Marine Industries6/30/1997
opinion. JUSTICE HANDLER filed a separate Concurring opinion in which JUSTICE STEIN joins.
The opinion of the Court was delivered by
Pollock, J.
The primary issue is whether New Hampshire Insurance Co. ("New Hampshire") and its insured, Samuel P. Alloway III ("Alloway") (jointly described as "plaintiffs") may recover from General Marine Industries, Inc. ("GMI") in negligence and strict liability for economic loss caused by a defect in a power boat purchased by Alloway and insured by New Hampshire. Alloway purchased the boat from Mullica River Boat Basin ("Mullica"), a retail boat dealer, and insured it with New Hampshire under a comprehensive general insurance policy. Mullica had purchased the boat from Century Boats ("Century"), an unincorporated division of Glasstream Boats, Inc. ("Glasstream"), the manufacturer. Subsequently, Glasstream went bankrupt, and GMI, formerly known as GAC Partners, P.L. ("GAC"), purchased Glasstream's assets.
Allegedly because of a defective seam in the swimming platform, water seeped into the boat, which sank while docked. New Hampshire paid Alloway under the policy. Alloway then subrogated New Hampshire to his rights, subject to Alloway's claim for the deductible portion of his loss.
Plaintiffs instituted this action to recover for their respective economic losses. The Law Division granted GMI's motion to dismiss, holding that plaintiffs could not recover for economic loss resulting from damage to the boat itself. It held that plaintiffs' only claim was for breach-of-warranty under the Uniform Commercial Code ("U.C.C."), a claim barred by 11 U.S.C.A. § 363 (" § 363") of the Bankruptcy Code. The Appellate Division reversed, holding that plaintiffs could recover in tort for the economic loss and that the Bankruptcy Code did not bar recovery. 288 N.J. Super. 479 (1996). We granted certification, 145 N.J. 372 (1996). We reverse the judgment of the Appellate Division and reinstate that of the Law Division.
I.
From the limited record, the following facts emerge. In October 1989, Glasstream filed a voluntary petition in bankruptcy . Five months later, the Bankruptcy Court directed Glasstream to sell substantially all of its assets to GMI "free and clear of any interest in such property." At some unspecified time, Glasstream made the boat and sold it to Mullica.
On July 14, 1990, Alloway purchased a new thirty-three foot Century Grande XL ("Grande") boat from Mullica. The purchase price was $61,070. Century expressly warranted for twelve months from the date of purchase that the boat was "free from defects in material and workmanship under normal use and when operated according to instructions." Alloway obtained from New Hampshire a comprehensive general insurance policy on the boat.
Three months later, while docked at the Bayview Marina in Manahawkin, New Jersey, the Grande sank. No other property was damaged, and no one sustained personal injuries.
Alloway filed a claim with New Hampshire, which spent $40,106.63 to repair the boat. Alloway, who had a $2,500 deductible under the policy, paid $2,490 towards the repairs. After completion of the repairs, he received a trade-in credit of $38,770 for the Grande on the purchase of a new boat.
Thereafter, Alloway filed a three-count complaint against Mullica and GMI, seeking recovery for his economic loss. In count one, Alloway sought to recover for Mullica's breach of "the manufacturer's warranty" for "repair or replacement of any part found to be defective." Count two alleged a strict-liability claim asserting that Century had manufactured a defective boat for which GMI was liable as Century's succe
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