Alloway v. General Marine Industries

Samuel P. Alloway III (plaintiff) owned a power boat manufactured by Century Boats (Century), an unincorporated division of Glasstream Boats, Inc. (Glasstream). Alloway purchased the $61,070 boat from retailer Mullica River Boat Basin (Mullica) (defendant) and insured the boat with New Hampshire Insurance Co. (New Hampshire) (plaintiff). Century provided a 12-month warranty that the boat was free from defects in material and workmanship. Three months later, due to a defective seam in the swimming platform, water seeped into the boat, and it sank while docked. No one was injured, and no other property was damaged. New Hampshire paid Alloway $40,107 to repair the boat. Glasstream went bankrupt and sold its assets to General Marine Industries, Inc. (GMI) (defendant), formerly known as GAC Partners, P.L. (GAC). Alloway and New Hampshire (collectively, Alloway) sued Mullica and GMI to recover for their economic losses—the cost of repair and for the boat’s lost value on trade-in—claiming breach of warranty, strict liability for a defective product, and negligent manufacture and inspection. Alloway assigned his rights to New Hampshire. GMI moved to dismiss, which the trial court granted, holding that recovery for economic loss was barred, and the only allowable claim, breach of warranty under the Uniform Commercial Code (UCC), was barred by the bankruptcy code. The claims against Mullica were dismissed or settled, which eliminated claims for breach of warranty. The appellate division reversed, allowing recovery in tort. The New Jersey Supreme Court granted certification.