Willis Mining, Inc. v. Noggle
509 S.E.2d 731, 235 Ga. App. 747, 38 U.C.C. Rep. Serv. 2d (West) 98 (1998)
Rule of Law:
Under the Uniform Commercial Code (UCC), an implied warranty of merchantability applies to the sale of 'goods' such as granite blocks severed from real estate, protecting buyers against undisclosed latent defects not discoverable through reasonable inspection, unless the warranty is conspicuously disclaimed or modified by trade usage.
Facts:
- Willis Mining, Inc. (Willis) quarried granite, cut it into blocks, and sold these blocks.
- James R. Noggle d/b/a Reliance Granite Company (Noggle) purchased granite blocks from Willis.
- Noggle fashioned the purchased granite blocks into gravestone monuments and sold them to monument dealers, who then made retail sales to the public.
- Within approximately 18 months of sale, monuments made from Willis's granite became discolored.
- The discoloration was due to a latent defect in the granite that was not discoverable until after the granite blocks were cut open, polished, and used.
- Willis refused to reimburse Noggle for the losses Noggle claimed in replacing the discolored monuments.
Procedural Posture:
- James R. Noggle d/b/a Reliance Granite Company (Noggle) filed an action against Willis Mining, Inc. (Willis) and Richard Lee Willis in the trial court (court of first instance), alleging claims including breach of an implied warranty of merchantability under the Uniform Commercial Code (UCC).
- Willis and Richard Lee Willis answered Noggle's complaint, and Willis counterclaimed for amounts it asserted Noggle owed.
- A jury in the trial court awarded $300,000 to Noggle on the warranty claim against Willis.
- The jury found in favor of Willis and Richard Lee Willis on Noggle's remaining claims, and the trial court directed a verdict in favor of Willis on its counterclaim.
- Willis (appellant) filed a motion for directed verdict and a motion for a new trial on the warranty issue, which the trial court denied.
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Issue:
Does an implied warranty of merchantability under the Uniform Commercial Code apply to the sale of granite blocks with latent defects, particularly when the buyer inspected the blocks, and are such blocks considered 'goods' under the UCC?
Opinions:
Majority - Smith, Judge
Yes, an implied warranty of merchantability under the Uniform Commercial Code applies to the sale of granite blocks with latent defects, even if the buyer inspected the blocks, and such blocks are considered 'goods' under the UCC. The court affirmed the trial court's denial of Willis's motions, finding sufficient evidence to support the jury's verdict. The court clarified that a buyer's inspection and reliance on personal judgment is relevant to an implied warranty of fitness for a particular purpose (OCGA § 11-2-315) but not to a warranty of merchantability (OCGA § 11-2-314 (1)). An implied warranty of merchantability, absent a clear, conspicuous written disclaimer or modification by trade usage, course of dealing, or performance (OCGA § 11-2-316 (2), (3)(c)), applies to the sale of goods. The jury was properly instructed on these exceptions and found in Noggle's favor. The court emphasized that undisclosed latent defects are precisely what the implied warranty of merchantability is designed to remedy, protecting buyers against defects not discoverable by exercising caution (Moore v. Berry). The court also rejected Willis's argument that granite blocks are not 'goods' under the UCC because they are not 'manufactured,' stating the test is whether they are 'movable at the time of identification to the contract' (OCGA § 11-2-105 (1)). OCGA § 11-2-107, pertaining to goods severed from real estate, explicitly includes 'mineral,' which encompasses granite blocks. Citing cases like Zepp v. Mayor &c. of Athens and Luedtke Engineering Co. v. Indiana Limestone Co., the court concluded that granite blocks are 'goods' under the UCC, making the agreement subject to Article 2 and the implied warranty of merchantability. Finally, the court applied the 'any evidence' standard for reviewing the denial of a directed verdict and new trial, finding ample evidence in the record to support the jury's verdict regarding the source of the granite, Noggle's expenditures, and lost sales.
Analysis:
This case significantly clarifies the scope of the Uniform Commercial Code's implied warranty of merchantability in Georgia, particularly regarding non-manufactured goods like raw materials. It solidifies that latent defects, even in items like quarried granite, are covered by the warranty, reinforcing buyer protection against non-obvious flaws. By distinguishing between warranties of merchantability and fitness for a particular purpose, the court emphasizes that a buyer's inspection does not automatically negate the merchantability warranty, especially for defects not reasonably discoverable. This precedent provides a clear framework for future disputes involving the sale of natural resources and components in commercial transactions.
