                                                                       Jul 23 2013, 6:19 am




FOR PUBLICATION

ATTORNEY FOR APPELLANT:                        ATTORNEY FOR APPELLEE:

JEFFREY O. MEUNIER                             S. GREGORY ZUBEK
Carmel, Indiana                                Whitham Hebenstreit & Zubek LLP
                                               Indianapolis, Indiana




                            IN THE
                  COURT OF APPEALS OF INDIANA

GARED HOLDINGS, LLC,                           )
                                               )
     Appellant-Plaintiff/Counterdefendant,     )
                                               )
            vs.                                )      No. 49A02-1210-PL-811
                                               )
BEST BOLT PRODUCTS, INC.,                      )
                                               )
     Appellee-Defendant/Counterclaimant.       )


                  APPEAL FROM THE MARION SUPERIOR COURT
                       The Honorable Heather A. Welch, Judge
                         Cause No. 49D12-0909-PL-41784



                                      July 23, 2013


                           OPINION - FOR PUBLICATION


CRONE, Judge
                                     Case Summary

       Gared Holdings, LLC (“Gared”), approached Best Bolt Products, Inc. (“Best

Bolt”), to see whether Best Bolt could supply pulleys for use in basketball goal systems

that Gared manufactures. Gared provided Best Bolt with samples of the pulleys that it

had been using, but also indicated that there were problems with those pulleys. Gared did

not provide detailed specifications to Best Bolt and did not specifically request a

lubricated bushing, a cylindrical part that fits between the wheel and axle to reduce

friction. Best Bolt produced some samples, and Gared had some testing performed on the

pulleys, but did not discover that the pulleys lacked a lubricated bushing. The lack of

lubrication caused the pulleys to seize up soon after the basketball goals were sold.

       Gared sued Best Bolt on several theories, including breach of contract, breach of

the implied warranty of fitness for a particular purpose, and breach of the implied

warranty of merchantability. Best Bolt filed a counterclaim seeking payment for a

second order of pulleys and an order of clevis pins, which Gared had refused to accept.

The trial court ruled in Best Bolt’s favor on each of Gared’s claims and on Best Bolt’s

counterclaim. Gared now appeals.

       Gared had argued that the parties’ contract required Best Bolt to replicate the

samples that Gared provided to Best Bolt, and the trial court rejected that argument. The

evidence favorable to the judgment reflects that Gared informed Best Bolt that it was

having problems with the pulleys that it was using at the time. From this, it is reasonable

to infer that Gared did not want or expect duplicates of the sample pulleys. Regarding

the warranty of fitness for a particular purpose, the trial court found that Gared had not

                                             2
established that it relied on Best Bolt’s skill or judgment in producing a pulley that was

appropriate for use in the basketball goal systems.       The evidence favorable to the

judgment reflects that Gared was aware that the pulleys should have a lubricated bushing

and simply assumed that Best Bolt would include one in its design. We conclude that the

evidence supports the trial court’s judgment on these two issues.

       The trial court concluded that the warranty of merchantability did not apply

because Best Bolt was not a merchant of pulleys. The trial court found that Best Bolt was

a distributor rather than a manufacturer and had made only one sale of pulleys. We

conclude that the fact that Best Bolt was not a manufacturer is not relevant to the issue of

whether it was a merchant. Also, the undisputed evidence shows that Best Bolt made two

sales of pulleys and was willing to continue selling pulleys. We conclude that these facts

indicate that Best Bolt is a merchant with a relatively new product rather than a non-

merchant seller making an isolated sale. Because the evidence is in conflict and the trial

court did not reach the issue, we remand for the trial court to determine whether Best Bolt

breached the warranty of merchantability. Depending on the trial court’s resolution of

this issue, it may also be necessary to reconsider the ruling on Best Bolt’s counterclaim.

Therefore, we affirm in part and remand.

                             Facts and Procedural History

       Best Bolt primarily sells fasteners, such as “bolts, nuts and screws and

miscellaneous hardware items.” Tr. at 115. Best Bolt is a distributor; it does not

manufacture the products that it sells. Sometime in 2006, Curtis Sparks, a salesman for

Best Bolt, noticed that Gared had playground equipment outside its facility and thought

                                             3
that Gared could be a potential customer. Sparks stopped in and introduced himself. He

was directed to Lori Turner, a purchasing manager who is responsible for ordering parts

that Gared uses in the products that they manufacture. Sparks began stopping in every

four weeks in hopes of establishing a business relationship with Gared. Gared eventually

placed orders for cable clamps, clevis pins, and D rings.

       At issue in this case are two orders that Gared placed for pulleys. Gared uses

pulleys in the basketball goal systems that it manufactures. The basketball goals are

designed to hang from the ceiling and can be raised and lowered. The facts favorable to

the judgment reflect that, during one of Sparks’s regular sales calls in 2006, Turner asked

him if Best Bolt could supply pulleys. Turner indicated that their current supplier,

Inventory Sales, was going to raise the price, and she was hoping to find a less expensive

pulley. Turner also indicated that there was a problem with cables slipping off the wheel

and becoming lodged between the wheel and the side plate. Turner provided samples

pulleys in two sizes, #3 and #5. Sparks told Turner, “I’ll see what I can do.” Id. at 129.

Sparks did not tell Turner that neither he personally nor Best Bolt generally had ever sold

pulleys before.

       Sparks requested a drawing, but Turner indicated that they did not have one.

Gared did not provide detailed specifications for the pulleys, but did indicate that the #5

pulleys needed to be rated at 1550 pounds, withstand a standard pull test of 8000 pounds,

and withstand a side pull test of 5000 pounds. At some point during the design process,

Gared also requested that the pulleys be fastened together with nylocks rather than rivets.



                                             4
      Best Bolt decided to source the pulleys through Dakota Engineering, which would

manufacture the pulleys in China. The sample pulleys from Gared were sent to Dakota’s

engineer in China, who sent back a sample. Joe Connerly, the engineering manager for

Gared, examined the samples, measured the diameter, and looked for a proper gap

between the wheel and side plate. He did not take the samples apart because they

“appeared to be correct.” Id. at 191. Although he could not tell for sure without taking

the pulley apart, he believed that the pulley contained a lubricated bushing because there

was a small gap on each side of the wheel between the wheel and the side plate.

However, the sample pulleys did not actually have a bushing.

      Gared then sent the samples to St. Louis Labs, which performed the standard pull

and side pull tests. The standard pull test involves pulling down on the pulley to see how

much weight it takes to destroy the pulley. The side pull test is designed to determine

how much force it takes to pull the pulley apart from the sides. The sample pulleys

exceeded the minimum requirements that Gared had set for each test.

      On June 27, 2007, after receiving the test results, Turner placed an order with Best

Bolt for 4995 #5 pulleys. On April 14, 2008, Turner placed an order for 2000 #3 pulleys

and an additional 5000 #5 pulleys. The purchase order requested that Best Bolt send

samples of each for testing, although it is unclear whether Best Bolt sent the samples and,

if so, whether Gared had any testing done.

      In the fall of 2008, one of Gared’s customers reported that a basketball goal had

fallen part way to the floor. Connerly examined the goal system and determined that the

pulley had stopped turning. Because the pulley was not moving with the cable, the cable

                                             5
eventually became frayed and snapped. Connerly took the pulley apart and realized for

the first time that the pulley did not have a bushing and was not lubricated in any way.

Without any lubrication, the wheel and axle had become “frozen” together. Id. at 194.

Connerly conducted a cycling test on two Best Bolt pulleys, which involves repeatedly

lifting and lowering a load. The pulleys each seized up after twenty-one cycles.

       Gared contacted Best Bolt about the problem, and Best Bolt proposed applying a

spray lubricant to the pulleys. Connerly felt that this solution was inadequate because

there was no guarantee that the spray could be accurately applied to the axle, the spray

would likely need to be applied repeatedly, and the process would require a lot of

manpower. Gared wanted Best Bolt to accept the return of the unused pulleys and pay

for the replacement of the pulleys that had been already been used, but Best Bolt refused.

Concerned that the basketball goal systems incorporating the Best Bolt pulley posed a

safety hazard, Gared decided to replace the pulleys with a more expensive pulley

manufactured by Block Division (“Block”). Gared refused to pay for the second order of

Best Bolt pulleys and also refused delivery of an order of clevis pins.

       On September 10, 2009, Gared filed a complaint against Best Bolt stating five

claims: breach of contract, breach of the implied warranty of merchantability, breach of

the implied warranty of fitness for a particular purpose, breach of express warranty, and

fraud. On November 4, 2009, Best Bolt filed an answer and a counterclaim seeking

payment for the second order of pulleys and the clevis pins.

       A bench trial was held on June 5 through 7, 2012. It was undisputed that Gared

did not specifically request that the pulley have a lubricated bushing. However, Gared

                                             6
attempted to show that a lubricated bushing was a standard or essential component of a

pulley, and therefore a buyer would not typically need to make a specific request for a

lubricated bushing. Connerly testified that he considered pulleys to be an “off-the-shelf”

item that could be purchased from a catalog without needing to provide a drawing. He

testified that a buyer would not have to specify that it have a lubricated bushing or

bearing because “[t]hat’s standard in the industry.” Id. at 189. Connerly stated that the

pulleys that Gared has purchased from suppliers other than Best Bolt have all had

lubricated bushings and did not have problems with seizing up. Connerly testified that a

pulley without a lubricated bushing could work only “[f]or a short period of time,” but

not for the “expected life of the … pulley.” Id. at 190. He stated that the Best Bolt

pulleys started failing less than a year after the basketball goal systems were sold, and he

would expect a pulley to last more than a year. Connerly testified that he had not opted

to perform a cycle test on the pulleys before approving them for purchase because “the

pulleys that … are normally manufactured … it’s a requirement of that pulley to be able

to rotate. So when you purchase a pulley you expect it to be able to rotate and it was

really no reason to do a cycle test at that point in time.” Id. at 188. After the problem

arose with the Best Bolt pulleys, Connerly made a detailed drawing of a pulley “so that if

we chose to go to … another supplier who was not a normal manufacturer of pulley[s]

they would understand the requirements of manufacturing a pulley.”             Id. at 200.

However, when Gared started purchasing pulleys from Block, it did not provide the

drawing to Block because Block had its own drawing.



                                             7
       Turner likewise testified that the pulleys that Gared had purchased from other

manufacturers all had lubricated bushings. She said that at the time that she started

ordering from Best Bolt, Gared did not have a specification sheet for the #5 pulley

because “it was a standard item. There was nothing custom about it….” Id. at 52. She

did not think that it was necessary to specify that the pulleys needed to have a lubricated

bushing because they were an off-the-shelf item and always have a lubricated bushing.

       Kevin Needler, the operations manager of Gared, also characterized pulleys as an

off-the-shelf part. Needler also testified that the pulleys that Gared had purchased from

other manufacturers all had lubricated bushings. He stated that Gared had not had to ask

Inventory Sales or Block to provide a lubricated bushing.

       Gared also presented testimony from Bobby Day, the president of Block. Day has

a B.S. degree in engineering and has designed a pulley. Day testified that he did not ask

Gared to supply a drawing and that Block’s customers typically rely on its catalog. He

characterized the pulley that Block sells to Gared as an off-the-shelf product. While he

agreed that it would be good practice to give a manufacturer a set of requirements, he did

not think that a pulley should be made without a lubricated bushing regardless of what

the requirements were. Day opined that the Best Bolt pulley was “doomed to failure”

because the friction between the metal parts would eventually “cause the effect known as

galling where the metal will grab to the metal and finally it will just completely seize.”

Id. at 273-74. Day testified that he is not aware of any manufacturer that makes a pulley

without a lubricated bushing and that it would not be good engineering or manufacturing

practice to do so.

                                            8
       Alan Jones, the president of Dakota, testified that he knew that the pulleys would

bear a dynamic (moving) load. He acknowledged that the pulleys had failed due to

galling between the wheel and axle, and the problem could have been prevented by a

lubricated bushing. Jones is not an engineer, and he stated that he would not disagree

with Day’s testimony that a lubricated bushing is an essential component of a pulley.

However, he also testified that they did not receive drawings or specifications, that

“every other product we sell is made to a specification,” and that it “is very uncommon to

typical engineering business – to just have an unknown sample.” Id. at 338.

       Dustin Hostetler, the quality manager of Best Bolt, testified that he knew that “if

you had metal on metal it could fail,” and that the purpose of a bushing would be to

prevent that problem. Id. at 361. He was not aware that the pulleys lacked a bushing

until Gared started having problems with the pulleys. However, he also testified that Best

Bolt normally had prints and standards for the items that it sells.

       Best Bolt presented expert testimony from Peter Hylton, an associate professor in

the School of Engineering and Technology at Indiana University Purdue University

Indianapolis. Hylton testified that he had never designed a pulley, but if he were asked to

do so, he would want to know the specifications, such as dimensions and material

properties. In the absence of specifications, he would want to know the “requirements,”

which he defined as “the set of operating characteristics under which the component or

the assembly or subassembly whatever you’re discussing will be operating that defines

what it must be able to do – withstand, that sort of thing.” Id. at 451-52.



                                              9
       Hylton agreed that the Best Bolt pulleys had failed due to galling between the

wheel and axle. He also agreed that it is not possible to tell that the pulleys are not

lubricated without taking them apart. When asked if dynamic testing of the pulleys

would have been appropriate, he said, “I would’ve thought it would’ve been mandatory.”

Id. at 476.

       Hylton testified that he had done some research on the internet and found one

supplier that sold pulleys that could be ordered with or without bushings. He also stated

that he has his students conduct a laboratory experiment involving pulleys, and those

pulleys do not have bushings. He testified that “under certain load – static load or …

very low dynamic loads a non[-]bushed pulley could work just as well as a bushed

pulley.” Id. at 509.

       Gared voluntarily dismissed its fraud claim during the bench trial. On September

21, 2012, the trial court entered a judgment for Best Bolt on Gared’s remaining claims

and on Best Bolt’s counterclaim.      The court’s order included findings of fact and

conclusions thereon. As to Gared’s breach of contract claim, the court’s order states:

       The Court finds that the facts do not establish that there was an oral
       contract for the sale of pulleys which matched the samples provided by
       Turner to Sparks…. Turner and Sparks nor any other representative of
       either company agreed that they would provide pulleys identical to the
       samples furnished by Turner. In fact, Best Bolt furnished samples of what
       it “could do.” Gared agreed that [it] would complete [its] own inspection
       and testing on the samples provided by Best Bolt, as required by Gared
       policy.… [I]t was established that Best Bolt would provide samples of
       what it could supply at a cost that Gared would pay, and Gared would do its
       own inspection and testing to determine if the Best Bolt pulleys would
       work for Gared in its basketball systems.

Appellant’s App. at 17-18.

                                            10
       As to Gared’s claim for breach of the warranty of merchantability, the court’s

order states: “The evidence demonstrated that this was the first and last sale of pulleys by

Best Bolt. In fact Best Bolt was merely the distributor and Gared was aware that Best

Bolt was trying to find a company to manufacture the pulleys at a price acceptable to

Gared.” Id. at 20.

       As to Gared’s claim for breach of the warranty of fitness for a particular purpose,

the court’s order noted that Gared was required to prove three things: (1) that Best Bolt

had reason to know of Gared’s particular purpose; (2) that Best Bolt had reason to believe

that Gared was relying on Best Bolt’s skill and judgment; and (3) that Gared in fact had

relied on Best Bolt’s skill and judgment. The court found that Best Bolt knew that the

pulleys would be used in basketball goal systems. However, the court found that the

evidence was unclear as to the second element and that Gared had not established the

third element. The trial court also rejected Gared’s claim for breach of express warranty.

Having rejected all of Gared’s claims, the trial court found that Gared was not justified in

rejecting the second order of pulleys and the order of clevis pins and therefore entered

judgment for Best Bolt on Best Bolt’s counterclaim. Gared now appeals.

                                Discussion and Decision

       The trial court issued findings of fact and conclusions thereon pursuant to Indiana

Trial Rule 52(A). Our standard of review is well-settled:

               First, we must determine whether the evidence supports the trial
       court's findings of fact. Second, we must determine whether those findings
       of fact support the trial court’s conclusions of law. We will set aside the
       findings only if they are clearly erroneous. Findings are clearly erroneous
       only when the record contains no facts to support them either directly or by

                                            11
        inference. A judgment is clearly erroneous if it applies the wrong
        legal standard to properly found facts.

               In applying this standard, we neither reweigh the evidence nor judge
        the credibility of the witnesses. Rather, we consider the evidence that
        supports the judgment and the reasonable inferences to be drawn therefrom.
        To make a determination that a finding or conclusion is clearly erroneous,
        our review of the evidence must leave us with the firm conviction that a
        mistake has been made.

Hartley v. Hartley, 862 N.E.2d 274, 281 (Ind. Ct. App. 2007) (quoting Gregg v.

Cooper, 812 N.E.2d 210, 214-15 (Ind. Ct. App. 2004), trans. denied).

        Gared argues that the trial court’s findings regarding Gared’s claims for breach of

contract, breach of the implied warranty of fitness for a particular purpose, and breach of

the implied warranty of merchantability are erroneous. Gared also argues that it had a

proper basis for rejecting the second order of #5 pulleys and that the court therefore erred

in its ruling on Best Bolt’s counterclaim insofar as Gared was ordered to pay for the #5

pulleys.1

                                             I. Breach of Contract

        “The elements of a breach of contract action are the existence of a contract, the

defendant’s breach thereof, and damages.”                         Murat Temple Ass’n v. Live Nation

Worldwide, Inc., 953 N.E.2d 1125, 1128-29 (Ind. Ct. App. 2011), trans. denied. Gared

was required to prove these elements by a preponderance of the evidence.                                    Rollins

Burdick Hunter of Utah, Inc. v. Bd. of Trs. of Ball State Univ., 665 N.E.2d 914, 922 (Ind.

Ct. App. 1996).


        1
            Gared does not challenge the trial court’s ruling that it must pay Best Bolt for the #3 pulleys and clevis
pins.

                                                          12
       Gared does not dispute that it did not provide detailed specifications to Best Bolt

and did not specifically request a lubricated bushing. Gared argues, however, that the

parties’ agreement required Best Bolt to match the samples that Gared provided.

       Sparks testified that Turner approached him about providing pulleys:

       A. Well, what happened whenever she asked me about pulleys she had a
       problem with pulleys she was using where the wire rope had slipped out of
       the pulley and lodged between the side and wheel. She said, I got a
       problem – she said I don’t need this. So she said, can you take of this – can
       you find me a source. And I said, yes I think we can find you a source.

       Q. And she gave you [a] sample, didn’t she?

       A. Yes she did.

       Q. And she told you that’s what she needed, didn’t she?

       A. No, she didn’t tell me anything like that.

       Q. Okay what did she tell when she gave me the sample?

       A. She asked me to see what I could do.

Tr. at 118.

       While Gared employees denied that there was a problem with the Inventory Sales

pulleys that they had been using at the time, the trial court rejected this testimony and

found that Gared “wanted to locate a new pulley vendor due to price and quality

problems with the current vendor.” Appellant’s App. at 10. This finding is supported by

Sparks’s testimony.

       Gared faults the trial court for finding that the agreement merely required Best

Bolt to produce a sample within Gared’s price range and that Gared would do its own

testing to determine whether the pulleys would be suitable for use in its basketball goal

                                            13
systems. Gared notes that the testing that was performed was to determine the strength of

the pulley and was not designed to reveal whether the pulley was properly lubricated.

Even if we were to conclude that the trial court improperly relied on the testing that

Gared had performed on the pulleys, that still does not alter the trial court’s valid finding

that Gared was having problems with the Inventory Sales pulleys. From that fact, it is

reasonable to conclude that Gared did not want or expect Best Bolt to replicate the

Inventory Sales pulley. Gared’s argument is a request to reweigh the evidence, which we

will not do.

                II. Implied Warranty of Fitness for a Particular Purpose

       Indiana’s version of the Uniform Commercial Code provides:

       Where the seller at the time of contracting has reason to know any
       particular purpose for which the goods are required and that the buyer is
       relying on the seller’s skill or judgment to select or furnish suitable goods,
       there is, unless excluded or modified under IC 26-1-2-316, an implied
       warranty that the goods shall be fit for such purpose.

Ind. Code § 26-1-2-315.       The implied warranty of merchantability is imposed by

operation of law for the protection of the buyer, and it must be liberally construed in

favor of the buyer. Woodruff v. Clark Cnty. Farm Bureau Coop. Ass’n, 153 Ind. App. 31,

43, 286 N.E.2d 188, 194-95 (1972).

       In an action for breach of the warranty of fitness for a particular purpose, the buyer

must show: “(1) that seller must have had reason to know buyer’s particular purpose, (2)

that seller must have had reason to believe buyer was relying on seller’s skill and

judgment, and (3) that buyer in fact had relied on seller’s skill and judgment.” Paper



                                             14
Mfrs. Co. v. Rescuers, Inc., 60 F. Supp. 2d 869, 881 (N.D. Ind. 1999).2 The trial court

found that Gared proved the first element, that the evidence was unclear as to the second

element, and that Gared had not proven the third element by a preponderance of the

evidence.

         On cross-examination, Connerly was questioned about whether Gared relied on

Best Bolt’s judgment:

         Q. Knowing that your standard operating procedure was to check
         specifications and[/]or a drawing and[/]or a narrative and based upon your
         testimony that you did that in this case and that you tested … the pulleys
         the way you wanted and that you inspected them the way that you wanted
         to, isn’t it a fact that you were not relying on Best Bolt’s judgment as to
         what Gared needed for this Number Five (#5) pulley?

         A. That would be correct.

         ….

         Q. Would you agree that Best Bolt never advised Gared that the Best Bolt
         pulley would do whatever it was that Gared required?

         A. Not to my knowledge.

         Q. In fact Gared made its own independent analysis that the pulleys would
         meet its requirements, isn’t that right?

         A. That’s correct.

Tr. at 240, 243.

         On redirect, Connerly testified as follows:

         2
             Naturally, we are not bound by a federal district court’s interpretation of Indiana law. However, there are
a limited number of cases interpreting Indiana Code Section 26-1-2-315. Both parties cite Paper Manufacturers for
its list of elements, and we agree that it appears to be an accurate summary of the elements that must be proved by
the buyer. See Ind. Code § 26-1-2-315, cmt. 1 (“Under this section the buyer need not bring home to the seller
actual knowledge of the particular purpose for which the goods are intended or of his reliance on the seller’s skill
and judgment, if the circumstances are such that the seller has reason to realize the purpose intended or that the
reliance exists. The buyer, of course, must actually be relying on the seller.”).

                                                          15
       Q. [D]id you ever have any expectation that the Best Bolt pulleys would
       not have a lubricated bearing?

       A. No.

       Q. Or a bushing?

       A. No.

       Q. [D]id you rely on them to provide that?

       A. Yes.

Id. at 254-55.

       Connerly initially testified that Gared did not rely on Best Bolt’s judgment, and

while he later stated that he relied on Best Bolt to provide a lubricated bushing, it is clear

from his testimony as a whole that he knew that the pulley needed to have a lubricated

bushing and assumed that Best Bolt would know that, too. Gared again notes that the

testing that was performed on the pulleys was not designed to show whether the pulley

was properly lubricated. However, the evidence reflects that Gared determined what

testing would be performed and did not rely on Best Bolt to perform any testing. The

drawing that Connerly later produced demonstrates that Gared knew what it needed in a

pulley and was capable of specifying its needs; Gared simply failed to do so. See Adsit

Co. v. Gustin, 874 N.E.2d 1018, 1024-25 (Ind. Ct. App. 2007) (seller of vehicle seat

covers did not breach warranty of merchantability by supplying seat covers that did not

match interior of vehicle where buyer did not provide vehicle’s VIN number or other

information that would enable seller to determine the exact color needed). The evidence




                                             16
favorable to the judgment supports the trial court’s conclusion that Gared failed to

establish that it relied on Best Bolt’s judgment to select a suitable pulley.

                        III. Implied Warranty of Merchantability

       The trial court ruled that the implied warranty of merchantability did not apply

because Best Bolt is not a merchant as that term is defined by Indiana’s version of the

Uniform Commercial Code. Indiana Code Section 26-1-2-314(1) provides: “Unless

excluded or modified (IC 26-1-2-316), a warranty that the goods shall be merchantable is

implied in a contract for their sale if the seller is a merchant with respect to goods of that

kind.” The comments to this section state, “A person making an isolated sale of goods is

not a ‘merchant’ within the meaning of the full scope of this section and, thus, no

warranty of merchantability would apply.” Ind. Code § 26-1-2-314, cmt. 3. Indiana

Code Section 26-1-2-104 defines a “merchant” as “a person who deals in goods of the

kind or otherwise by his occupation holds himself out as having knowledge or skill

peculiar to the practices or goods involved in the transaction.” The comments to this

section state that, in the context of the implied warranty of merchantability, the term

“merchant” is restricted “to a much smaller group than everyone who is engaged in

business and requires a professional status as to particular kinds of goods.” Ind. Code §

26-1-2-104, cmt. 2. At the same time, our cases hold that the implied warranty of

merchantability “is imposed by operation of law for the protection of the buyer and must

be liberally construed in favor of the buyer.” Frantz v. Cantrell, 711 N.E.2d 856, 859

(Ind. Ct. App. 1999).



                                              17
       Regarding Gared’s claim for breach of the warranty of merchantability, the court’s

order states: “The evidence demonstrated that this was the first and last sale of pulleys by

Best Bolt. In fact Best Bolt was merely the distributor and Gared was aware that Best

Bolt was trying to find a company to manufacture the pulleys at a price acceptable to

Gared.” Appellant’s App. at 20. The term “merchant” is not limited to manufacturers,

and Best Bolt does not cite any authority that supports the proposition that a distributor

cannot be a merchant. Furthermore, the court’s order is incorrect insofar as it states that

Best Bolt made only one sale of pulleys. Best Bolt made two sales to Gared, and we also

note that Best Bolt’s vice president testified that Best Bolt would be willing to continue

selling pulleys if it had a buyer.

       Gared argues that if the trial court’s “interpretation of the definition of ‘merchant’

is accepted then a seller such as Defendant which sells a wide variety of industrial

products would get a free pass on its first sale of any item that it sold.” Appellant’s Br. at

13. Although the number or frequency of sales surely is relevant to the question of

whether a seller is a merchant, we are inclined to agree that a small number of sales is not

necessarily conclusive proof that the seller is not a merchant; rather, it could be indicative

that the seller simply has a relatively new product or a limited market for a particular

product.

       Gared argues that this case is similar to Frantz. In that case, a homeowner sued

Joseph Frantz and Frantz Lumber Company over defective shingles that were installed on

his roof. The opinion treats Frantz and the lumber company as a single entity, although

the opinion is somewhat vague as to their relationship and the lumber company’s role in

                                             18
the work that was performed on the roof. However, the ultimate holding appears to be

that the lumber company was found to be a merchant of shingles because it represented

that it sold “all kinds of building material” and appeared knowledgeable about roofing

materials. Frantz, 711 N.E.2d at 859. Similarly, Best Bolt sold a variety of hardware

products, and pulleys are in the same general line of business. On the other hand, Frantz

does not shed much light on the issue of whether a seller who has made only a few sales

of a product may be considered a merchant.

       Frantz is one of only a few Indiana cases to discuss the meaning of the term

merchant; therefore, we find it helpful to look to cases from other jurisdictions that have

addressed the issue. One commentator states:

       A single, isolated transaction is not enough to establish that a merchant
       deals in goods of that kind, but one can be found to be a merchant for this
       purpose if he customarily sells a general line of goods related to the item in
       question, even though that specific item is being sold for the first time.

HAWKLAND’S UNIFORM COMMERCIAL CODE SERIES § 2-314:2 (West 2012) (footnotes

omitted). Wood Products v. CMI Corp., 651 F. Supp. 641 (D. Md. 1986), is cited in

support.

       Wood Products concerned a furnace that was originally designed by James Angelo

to convert sawdust and other wood waste products into charcoal. CMI Corporation

obtained the rights to manufacture the Angelo furnace and sold one to Wood Products, a

company primarily engaged in milling and selling lumber. CMI altered the design of the

furnace to incorporate a larger drum. Wood Products began experiencing problems with

the furnace almost immediately, most of which stemmed from the fact that the drum was


                                             19
too large and too thin. Wood Products sued CMI on several theories, including breach of

the warranty of merchantability. CMI argued that it was not a merchant with respect to

goods of the kind due to “the experimental nature of the furnace.” Id. at 650. The court

disagreed, noting that CMI “was then manufacturing (for the use of one of its affiliates) a

similar furnace and it has manufactured another since.” Id. at 650-51. See also Geo.

Byers Sons, Inc. v. E. Europe Import Export, Inc., 488 F. Supp. 574, 580 (D. Md. 1980)

(company that was trying to establish an American market for East European vehicles

was held to be a merchant of East German motorcycles even though its only other sale at

the time was a single Romanian jeep).

       Best Bolt argues that this case is similar to Fred J. Moore, Inc. v. Schinmann, 700

P.2d 754 (Wash. App. 1985). In that case, the Moore family was in the business of

growing mint for the production of mint oil. The Moores were approached by the

Schinmanns, who wished to buy spearmint roots. The Moores had never previously sold

mint roots, but ultimately agreed to sell roots to the Schinmanns. When the mint roots

turned out to be a mixture of spearmint and peppermint, the Schinmanns sued the Moores

on several theories, including the warranty of merchantability. The court held that the

Moores were not merchants with respect to mint roots because “this was the first and

only sale of roots by the Moores.” Id. at 757. Moore involved a single sale, and there

was no evidence to suggest that the Moores were interested in continuing to sell mint

roots. The case at bar is more similar to Wood Products and Geo. Byers, where the

sellers had made a few sales and there was evidence to suggest that the sellers were

attempting to develop a new market.

                                            20
       We conclude that the trial court erred by focusing on the fact that Best Bolt was a

distributor rather than a manufacturer because that fact is not relevant to the analysis. We

also conclude that the trial court erred by characterizing Best Bolt’s experience with

pulleys as a single sale where the undisputed evidence reflects that Best Bolt made two

sales and was willing to continue selling pulleys if it had a buyer. See McHugh v.

Carlton, 369 F. Supp. 1271, 1277 (D.S.C. 1974) (service station that would procure and

sell recapped tires upon request of customer was a merchant of recapped tires even

though service station did not regularly stock and sell recapped tires). Based on the

authorities that we have examined, we conclude that Best Bolt is a merchant with respect

to pulleys.

       We turn then to whether Best Bolt breached the implied warranty of

merchantability. Indiana Code Section 26-1-2-314(2) provides:

       Goods to be merchantable must at least be such as:

              (a) pass without objection in the trade under the contract description;
              and

              (b) in the case of fungible goods, are of fair, average quality within
              the description; and

              (c) are fit for the ordinary purposes for which such goods are used;
              and

              (d) run, within the variations permitted by the agreement, of even
              kind, quality, and quantity within each unit and among all units
              involved; and

              (e) are adequately contained, packaged, and labeled as the agreement
              may require; and



                                            21
              (f) conform to the promises or affirmations of fact made on the
              container or label if any.

The undisputed evidence establishes that the ordinary purpose of a pulley is to bear a

dynamic load. Several of Gared’s witnesses testified that a lubricated bushing was an

essential part of a pulley, that lubricated bushings were standard in the industry, that it

was unreasonable to make pulleys without lubricated bushings, and that a pulley without

a lubricated bushing would inevitably have a short useful life. On the other hand, Hylton

testified that he was aware of pulleys made without lubricated bushings and opined that

“under certain load – static load or … very low dynamic loads a non[-]bushed pulley

could work just as well as a bushed pulley.” Tr. at 509. Because the evidence is in

conflict and the trial court did not reach the issue, we remand for the trial court to

determine whether Best Bolt breached the warranty of merchantability. Depending on

the trial court’s resolution of this issue, it may also be necessary to reconsider the portion

of Best Bolt’s counterclaim dealing with #5 pulleys.

                                        Conclusion

       We conclude that the trial court’s judgment on Gared’s claims of breach of

contract and breach of the implied warranty of fitness for a particular purpose is

supported by the evidence, and we affirm as to those issues. However, we conclude that

the trial court erred in ruling that Best Bolt was not a merchant. We therefore remand for

the trial court to determine whether Best Bolt breached the implied warranty of

merchantability, and if so, whether that alters the result of Best Bolt’s counterclaim.




                                             22
      Affirmed in part and remanded.

FRIEDLANDER, J., concurs.

ROBB, C.J., concurs with separate opinion.




                                             23
                            IN THE
                  COURT OF APPEALS OF INDIANA

GARED HOLDINGS, LLC,                                )
                                                    )
       Appellant-Plaintiff/Counterdefendant,        )
                                                    )
        vs.                                         )    No. 49A02-1210-PL-811
                                                    )
BEST BOLT PRODUCTS, INC.,                           )
                                                    )
       Appellee-Defendant/Counterclaimant.          )



ROBB, Chief Judge, concurring with separate opinion

       I concur in the majority’s result with respect to Gared’s breach of contract and

implied warranty of merchantability claims. I respectfully dissent, however, from the

resolution of the implied warranty of fitness for a particular purpose claim.

       The implied warranty of fitness for a particular purpose occurs where the seller

has reason at the time of contracting to know of any particular purpose for which the

goods are being purchased and the buyer is relying on the seller’s skill or judgment in

choosing suitable goods for that purpose. See Irmscher Suppliers, Inc. v. Schuler, 909

N.E.2d 1040, 1048n.4 (Ind. Ct. App. 2009). The trial court found that Gared had proved

Best Bolt knew of the particular purpose for which the goods would be used – to raise

and lower basketball backboards. I believe when Gared asked Best Bolt to procure

pulleys and Best Bolt agreed to do so, Gared was relying on Best Bolt to offer a pulley

that would suit this purpose and further, that Gared demonstrated that reliance when it did

                                               24
not test the pulleys for lubrication because, as the majority notes in the discussion of the

implied warranty of merchantability, there was testimony indicating a lubricated bushing

is an essential part of a pulley and is standard in the industry. Non-lubricated bushings

could bear a static load or low dynamic load, but not the load Best Bolt knew these

pulleys would be bearing. Gared gave Best Bolt a sample pulley, and although Gared did

not want an exact replica of that pulley because they were having quality issues with the

cable separating and jamming between parts of the pulley, there were no quality issues

with the lubricated bushing and Best Bolt, offering to procure a suitable replacement,

held itself out to have the ability to judge what would be suitable.

       I would reverse the trial court’s judgment in favor of Best Bolt on the implied

warranty of fitness for a particular purpose claim.




                                             25
