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Alloway v. General Marine Industries6/30/1997
ssor. Count three alleged that Glasstream, "negligently manufactured and inspected the boat," that GMI was liable to Century's successor, and that Mullica had failed to discover the defect.
Alloway then assigned his claims to New Hampshire, but retained a claim for the loss in value of the boat. He sought the $2,490 he had paid towards the repair of the boat, "the difference in value between the price paid for the boat and the market value of the boat in its defective condition," attorneys' fees, and costs. Thereafter, plaintiffs filed an amended complaint asserting, in addition to Alloway's original claims, New Hampshire's claim for the cost of repairs.
On October 3, 1991, GMI, as successor to Glasstream, removed the action to the United States District Court for the District of New Jersey, which referred the matter to the Bankruptcy Court. Alloway and New Hampshire filed a proof of claim as unsecured creditors. The Bankruptcy Court then remanded the matter to the Law Division.
The Law Division granted GMI's motion to dismiss for failure to state a cause of action. It relied on Spring Motors Distribs. v. Ford Motor Co., 98 N.J. 555, 489 A.2d 660 (1985), which held that a purchaser could not maintain an action in strict liability for economic loss. It also relied on D'Angelo v. Miller Yacht Sales, 261 N.J. Super. 683, 619 A.2d 689 (1993), in which the Appellate Division held that a consumer who had purchased a yacht that was not as represented could sue the manufacturer under the U.C.C. for breach of warranty, but not in strict liability. According to the D'Angelo court, the U.C.C. provides a consumer with the exclusive remedy for economic loss resulting from the breach of express or implied warranties. Id. at 688. The Law Division reasoned that because plaintiffs sought to recover for economic loss to the boat itself, GMI was not liable as Glasstream's successor.
Because Mullica's insurer was insolvent, New Hampshire dismissed its subrogation claim against Mullica. See N.J.S.A. 17:30A-5, -8 (denying subrogation claims against insured of insolvent insurer). Alloway then settled his claim against Mullica, thereby extinguishing plaintiffs' claims for breach of warranty. Thus, Alloway has already received payment from New Hampshire for the cost of repairs, less the $2500 deductible under his policy, and an undisclosed sum in settlement of his claim against Mullica.
The Appellate Division reversed, relying on Santor v. A & M Karagheusian, Inc., 44 N.J. 52, 207 A.2d 305 (1965), which recognized that a consumer could maintain a strict-liability claim against a manufacturer for loss of value of a defective carpet. According to the Appellate Division, Spring Motors precluded a commercial purchaser, but not a consumer, from recovering in strict liability. 288 N.J. Super. at 486-87. Observing that Spring Motors declined to reconsider Santor, the Appellate Division concluded that "since Santor has not been overruled, we must follow it." Id. at 488. In so holding, the court rejected the Appellate Division's holding in D'Angelo, (supra) , 261 N.J. Super. 683.
The Appellate Division also concluded that plaintiffs could recover against GMI as the successor to Glasstream. The court relied on Ramirez v. Amsted Industries, Inc., 86 N.J. 332, 431 A.2d 811 (1981), which permitted a worker who was injured by a defective power press to maintain a strict-liability action against a defendant that had purchased the assets of the manufacturer of the press. According to the Appellate Division, the right to recover in strict liability against a successor owner should not depend on whether the recovery was for personal injuries or economic loss. 288 N.J. Super. at 49
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