Pratt v. Himel Marine, Inc.

Citations: 823 So. 2d 394; 2002 WL 1350460Docket: 2001 CA 1832

Court: Louisiana Court of Appeal; June 21, 2002; Louisiana; State Appellate Court

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In the case of 823 So.2d 394 (2002), John Paul Pratt, M.D. v. Himel Marine, Inc. and Mercury Marine, the Court of Appeal of Louisiana reviewed an appeal from the defendants, Mercury Marine and Himel Marine, regarding a trial court's judgment that included a jury's verdict in favor of the plaintiff, Dr. John Paul Pratt, in a redhibition case. Mercury Marine also contested the trial court's denial of its peremptory exception related to prescription. The court affirmed part of the trial court's decision, amended some aspects, vacated others, and remanded with instructions.

Dr. Pratt purchased a pre-rigged 28-foot Grady White boat with two Mercury outboard engines for $103,405.87 from Himel Marine in April 1995, intending it as his retirement fishing boat. The starboard engine was manufactured in August 1993, and the port engine in January 1994, both sold to Himel Marine prior to installation. Himel Marine performed various pre-installation repairs on the starboard engine based on service bulletins from Mercury, including changes to the capacitator discharge modules and installation of new drive seals, among other modifications. These repairs were not disclosed to Dr. Pratt at the time of purchase.

After taking delivery, Dr. Pratt encountered multiple issues with the boat and engines. He sought assistance from Ray Himel, the owner of Himel Marine, who referred him to Acadiana Marine for service due to ongoing problems and the absence of a Grady White representative nearby. Further assistance was provided by Norman Pugh, who was better positioned to service the boat given its location.

Dr. Pratt encountered multiple severe issues with his boat, including burnt power heads, chronic engine overheating, generator malfunctions, and electrical problems, leading to extensive repairs and replacements. On February 10, 1999, he filed a lawsuit against Himel Marine and Mercury, asserting the vessel was unseaworthy and unfit for its intended purpose. On February 25, 1999, Himel Marine responded with a cross-claim against Mercury for indemnification regarding defective products. Later, on December 6, 1999, Himel Marine filed a similar claim against Grady White Boats, Inc. 

Mercury attempted to dismiss the case based on the objection of prescription, but the trial court denied this motion multiple times. The trial proceeded to jury trial on December 4, 2001. At trial's conclusion, Grady White moved for a directed verdict, which was granted. The jury ultimately ruled in favor of Dr. Pratt, rescinding the sale of the vessel and finding it redhibitorily defective. They awarded Dr. Pratt $23,450 for expenses and $12,500 for non-pecuniary damages. The jury determined that Himel Marine acted in good faith, attributing 65% of the defectiveness to the engines and 35% to the boat itself. A judgment on March 13, 2001, held Himel Marine and Mercury jointly and severally liable, with respective liabilities of 35% and 65%. Dr. Pratt was also awarded $45,000 in attorney's fees and $8,003.30 in costs.

Himel Marine and Mercury are appealing a judgment. Mercury claims the trial court made several errors: it improperly denied Mercury's prescription exception; the jury wrongly determined that the plaintiff's engines were defective at the time of sale; and the judgment wrongly held Mercury liable for defects in products it neither manufactured nor sold. Himel Marine contends that the trial court erred by not granting it full indemnification as a good faith seller against the judgment, and by holding it responsible for the plaintiff's attorney's fees.

Both Mercury and Himel Marine challenge the trial court's denial of their exceptions of prescription. According to Louisiana Civil Code Article 2534, an action for redhibition against a seller who was unaware of a defect prescribes four years from delivery or one year from discovery of the defect, whichever is shorter. For a seller who knew or should have known of the defect, the prescription period is one year from the defect's discovery. Prescription can be interrupted if the seller attempts to repair the defect, which pauses the time limit until repair attempts are abandoned or completed.

The court must interpret prescription statutes in favor of the claim being extinguished. The jury found that Himel Marine was unaware of any defects when it sold the vessel rigged with the engines in question, which is supported by record evidence.

The claims against Himel Marine are timely if filed within one year of discovering the defect or within four years from the delivery date. Dr. Pratt first became aware of the vessel's engine problems on November 24, 1998, after being informed about service bulletin 96-21 regarding overheating repairs, thus starting the four-year prescriptive period. His claims were filed well within this timeframe, making Himel Marine's exception of prescription on appeal meritless. 

Regarding Mercury's exception of prescription, Dr. Pratt argues that the ongoing issues and repair attempts interrupted the prescription period. He asserts that he was unaware of defects and redesigns of the engines until the litigation process. Citing the doctrine of contra non valentem, which halts prescription when a cause of action is not known or knowable to the plaintiff, he maintains that the trial court rightfully rejected Mercury's exception. 

Dr. Pratt testified to his ignorance of multiple service bulletins from Mercury that addressed defects in the engines prior to his purchase. Notably, he was unaware of service bulletins 94-11 and 93-20, which involved significant repairs to the engines before he acquired them. He was never informed of these repairs and only learned of the service bulletins during the trial. Dr. Pratt expressed a lack of confidence in the engines and stated that had he been aware of the design issues, he would not have purchased them, believing instead that the problems could be rectified through repairs.

Dr. Pratt was unaware until trial that his engines had design defects causing significant overheating issues. Vernon Bacque, Himel Marine's head mechanic, confirmed that the engines struggled to maintain proper prop cooling and that a service bulletin and repair kit were issued by Mercury to address this issue. Repairs were performed on Dr. Pratt's engines before purchase, but Bacque could not definitively say whether customers should have been informed about these repairs. Larry Aranyosi, an expert in service bulletins and repairs, noted that service bulletins are typically issued to rectify problems and indicated that overheating was a common issue with Mercury's three-liter engines. After evaluating Dr. Pratt's engines, he expressed doubt about the potential for effective repairs, citing numerous customer complaints about reliability.

Eric Lamoray, a marine surveyor familiar with Dr. Pratt's boat, described persistent electrical and cooling issues, stating the engines would overheat after short periods of operation despite extensive repairs. He concluded that the ongoing failures indicated a design defect and recommended Dr. Pratt contact the Mercury dealer regarding warranty issues. Lamoray characterized the service bulletin as an acknowledgment of inherent cooling problems with the engines. He deemed the vessel unseaworthy for offshore use with the existing motors. Travis Hayes, a Mercury Marine representative, acknowledged the possibility of defective manufacturing in the engines during his troubleshooting visit in February 1999.

Hayes expressed uncertainty during the trial about whether service bulletin 94-11 effectively addressed engine defects. The record indicates that Dr. Pratt lacked knowledge of significant repairs made to the engines based on Mercury service bulletins prior to purchasing them. He was also unaware of the engines being unrepairable and their inherent design flaws until the legal proceedings began, which supports the application of the doctrine of contra non valentem. Consequently, the trial court correctly determined that the statute of limitations on the plaintiff's claims against Mercury had not expired.

Mercury challenged the jury’s finding that the engines were redhibitorily defective at the time of sale. Redhibitory defects, which render a product useless or significantly diminish its value, entitle a buyer to rescind the sale or reduce the purchase price. The buyer can pursue claims against any seller in the sales chain back to the manufacturer for breach of implied warranty. To succeed in a redhibition claim, the plaintiff must prove: (1) the seller sold the item, which is either completely useless or so flawed that a reasonable buyer would not have purchased it had they known of the defect; (2) the defect was non-apparent at the time of sale; and (3) the seller had an opportunity to repair the defect. A defect is presumed to have existed if it appears within three days post-sale, but later defects do not carry this presumption unless there are indications they predated the sale. The determination of a redhibitory defect is a factual matter, resistant to overturning unless clear error is shown. Damages recoverable due to redhibitory defects depend on the seller's knowledge of the defects; a good faith seller must repair or remedy defects or refund the purchase price with interest and cover reasonable expenses related to the sale and preservation of the property.

A seller aware of defects in the item sold and who fails to disclose them is liable to the buyer for damages, including restitution of the purchase price, recovery of expenses, and reasonable attorney's fees, as outlined in LSA-C.C. art. 2545. Nonpecuniary damages for mental anguish and inconvenience can also be awarded. In this case, a manufacturer is presumed to know of defects in its products, placing it in bad faith when selling a defective item, making it liable for damages under Article 2545. The jury found that the vessel sold by Himel Marine to Dr. Pratt was redhibitorily defective, with sufficient evidence supporting that defects existed at the time of sale. Mercury contends it should not be liable for defects in the vessel, arguing its responsibility should be limited to the engines it manufactured, which were deemed to contribute 65% to the vessel's defectiveness. The trial court rendered a judgment holding Mercury jointly and severally liable for 65% of the total damages, which included pecuniary and non-pecuniary damages as well as attorney's fees. Mercury's argument that it should only be liable for damages directly tied to the engines is noted, but the jury's verdict form required them to assess the defectiveness of the overall vessel, and there were no objections to this form.

The record lacks evidence regarding the specific costs of the Mercury engines or their sale as separate components from the vessel. The evidence demonstrates that the Mercury engines had a dangerous defect, making the entire vessel unseaworthy and unusable for its intended purpose. Citing *Morvant v. Himel Marine, Inc.*, the court supports the view that the boat, motor, and trailer were sold as a single unit, thus collectively deemed defective. The jury's finding of a redhibitorily defective fully-rigged vessel supports the trial court's assessment of fault against Mercury, rendering Himel Marine's arguments without merit.

Himel Marine's first assignment of error claims the trial court wrongly denied full indemnification as a "good faith seller." It also contests the court's granting of Grady White's motion for a directed verdict after evidence was presented. According to Louisiana Code of Civil Procedure article 1810, a party can present evidence even if a directed verdict motion is denied. The trial court has discretion in granting directed verdicts, and such motions are appropriate only when overwhelming evidence favors the movant. If substantial evidence exists against the motion, it should be denied, allowing the jury to decide. The appellate review standard assesses whether reasonable people could not arrive at a different verdict based on the evidence presented.

Under LSA-C.C. art. 2522, a buyer must notify the seller of any redhibitory defects promptly to allow for repairs. Failure to provide timely notice may reduce the warranty if the seller can demonstrate that repairs would have been feasible or less burdensome with timely notification. However, notice is unnecessary if the seller is already aware of the defect. In this case, Grady White only received a complaint about an air conditioner issue, which was addressed by referring the buyer to the manufacturer. Grady White's records indicate the air conditioner was out of warranty when contacted, yet they financed a new water pump installation. Beyond this issue, there is no evidence that Grady White was informed about other defects in the vessel.

According to LSA-C.C. art. 2531, a seller liable for a redhibitory defect can seek indemnification from the manufacturer if the defect was present at the time of delivery. Any contractual attempts to limit this right are ineffective. LSA-C.C. art. 2530 specifies that defects must exist at delivery, with a presumption of existence if they appear within three days. To succeed in an indemnification claim, Himel Marine needed to prove the defects existed at the time of delivery and that losses were due to those defects.

After Grady White delivered the boat, Himel Marine was responsible for rigging it with engines and various accessories, with no evidence showing Grady White was aware of or responsible for any issues with these components. Consequently, Grady White was not given the opportunity to address any alleged defects. The evidence favored Grady White significantly, leading to the conclusion that the trial court correctly granted their motion for a directed verdict.

Regarding indemnification against Mercury, the manufacturer of the engines, the jury identified defects in the 'fully-rigged vessel,' which included numerous issues beyond the engines, such as electrical and generator problems. However, there is no evidence attributing these defects to Mercury.

Mercury was not identified as the manufacturer of specific parts of the rigged vessel, while Himel Marine was responsible for the installation and rigging of the systems. Hence, the assignment of error regarding Mercury's responsibility lacks merit. Regarding Himel Marine's second assignment of error concerning attorney's fees, the jury found that Himel Marine acted as a good faith seller, indicating they were unaware of any redhibitory defects when selling the vessel to Dr. Pratt. Consequently, Himel Marine's obligations were limited to repairing the defect or, if unable, refunding the purchase price with interest and reimbursing reasonable expenses, as per LSA-C.C. art. 2531. Since Himel Marine was deemed a good faith seller, Dr. Pratt cannot recover attorney fees, leading to the decision to vacate the trial court's award of such fees against Himel Marine. However, attorney fees are owed to Dr. Pratt from Mercury, prompting a remand to the trial court for a hearing to determine the appropriate amount. The judgment from March 13, 2001, is affirmed in part, amended in part, vacated in part, and remanded with instructions, while Himel Marine's exception of prescription is denied, and appeal costs are shared between Mercury Marine and Himel Marine, Inc.