435 N.E.2d 443 (Ill. 1982), 54440, Moorman Mfg. Co. v. National Tank Co.

Docket Nº:54440.
Citation:435 N.E.2d 443, 91 Ill.2d 69, 61 Ill.Dec. 746
Party Name:MOORMAN MANUFACTURING COMPANY, Appellee, v. NATIONAL TANK COMPANY et al., Appellants.
Case Date:February 19, 1982
Court:Supreme Court of Illinois

Page 443

435 N.E.2d 443 (Ill. 1982)

91 Ill.2d 69, 61 Ill.Dec. 746

MOORMAN MANUFACTURING COMPANY, Appellee,

v.

NATIONAL TANK COMPANY et al., Appellants.

No. 54440.

Supreme Court of Illinois.

February 19, 1982.

Page 444

[91 Ill.2d 72] [61 Ill.Dec. 747] Kent R. Schnack, of Loos & Schnack, and John C. Wooleyhan, of Wooleyhan, Nielson & Adams, Quincy, for appellants.

Robert W. Cook, of Schmiedeskamp, Robertson, House, Neu & Mitchell, Quincy, for appellee.

THOMAS J. MORAN, Justice:

On November 1, 1979, the circuit court of Adams County held that plaintiff, Moorman Manufacturing Company (Moorman), could not recover from defendant National Tank Company under the theories of (1) strict liability in tort, (2) misrepresentation and (3) negligence for purely economic losses resulting from an alleged crack in a grain-storage tank. The circuit court dismissed counts I, II and III of plaintiff's complaint (based upon the above tort theories) but found that count IV, based upon breach of express warranty, was not barred by the statute of limitations (section 2-725 of the Uniform Commercial Code (UCC) (Ill.Rev.Stat.1977, ch. 26, par. 2-725)). On [91 Ill.2d 73] appeal pursuant to Supreme Court Rules 304(a) and 308(a) (73 Ill.2d Rules 304(a), 308(a)), the appellate court held that plaintiff could recover for economic loss under the tort theories of strict liability, misrepresentation and negligence. The court also found that plaintiff's tort actions were not barred by the statute of limitations (section 15 of the Limitations Act (Ill.Rev.Stat.1977, ch. 83, par. 16)) and that the storage tank was a product. It reversed the trial court's dismissal of counts I, II and III, but did not rule on the sufficiency of plaintiff's express-warranty allegations under count IV. 92 Ill.App.3d 136, 47 Ill.Dec. 186, 414 N.E.2d 1302.

The issues raised on appeal before us are whether plaintiff can recover for the cost of repairs and loss of use of the tank under the above-named tort theories, and, if so, whether the actions based upon those theories are barred by the applicable statute of limitations, whether the storage tank is a

Page 445

[61 Ill.Dec. 748] product (a requisite to application of strict liability in tort), and whether count IV, based upon express warranty, was barred by the statute of limitations.

On July 26, 1978, plaintiff filed a three-count complaint containing the following allegations. Defendant designed, manufactured and sold storage tanks. In 1966, plaintiff purchased a bolted-steel grain-storage tank from defendant for use at its feed-processing plant in Alpha, Illinois. In the last few months of 1976 or the first months of 1977, a crack developed in one of the steel plates on the second ring of the tank. Count I alleged that the tank was not reasonably safe due to certain design and manufacturing defects. Count II asserted that defendant had made certain representations, which were in fact untrue, in connection with the sale of the tank. Count III accused defendant of negligently designing the tank. On April 9, 1979, plaintiff filed an amendment to the complaint, adding count IV, claiming it had relied upon an express warranty made by the defendant at the time of the sale. In all four counts, plaintiff sought damages representing [91 Ill.2d 74] the cost of repairs and reinforcement as well as loss of use of the tank. The trial court granted defendant's motion to dismiss the first three counts, concluding that the cost of repair and loss of profits or income were economic losses which could not be recovered under the tort theories named in the complaint. The trial court also held that count IV was not barred by the statute of limitations because an express warranty existed which extended to future performance of the tank.

The tort law of products liability stems from the contract cause of action for breach of warranty. In MacPherson v. Buick Motor Co. (1916), 217 N.Y. 382, 111 N.E. 1050, liability in negligence was imposed upon a manufacturer to an ultimate consumer without privity of contract. Subsequently, courts began to hold manufacturers liable for personal injuries without negligence; the theory generally utilized to reach the manufacturers was based upon the law of sales warranty. (See Prosser, The Assault Upon The Citadel, 69 Yale L.J. 1099, 1126 (1960) (Prosser I).) However, recognition of the difficulties facing consumers with respect to items such as notice and privity led most courts to abandon the privity requirement in implied-warranty actions (see Prosser, The Fall Of The Citadel, 50 Minn.L.Rev. 791 (1966) (Prosser II)) and to ultimately abandon the fiction of warranty in favor of strict liability in tort.

This State adopted the tort theory of strict liability in Suvada v. White Motor Co. (1965), 32 Ill.2d 612, 210 N.E.2d 182, to allow a plaintiff to recover from a manufacturer for personal injuries. Suvada, however, did not address the question of whether a consumer could recover under a strict liability in tort theory for solely economic loss. That issue was first addressed in Santor v. A & M Karagheusian, Inc. (1965), 44 N.J. 52, 207 A.2d 305. There, the plaintiff purchased, from a third-party seller, carpeting that had been manufactured by the defendant. After [91 Ill.2d 75] several months, unsightly lines began to appear on the surface of the carpeting. The Supreme Court of New Jersey held that the plaintiff could maintain a breach-of-warranty claim directly against the manufacturer despite the lack of privity between them. In dicta, the court went on to declare that although the strict liability in tort doctrine had been applied principally in connection with personal injuries, the responsibility of the manufacturer should be no different where damage to the article sold or to other property is involved. 44 N.J. 52, 66, 207 A.2d 305, 312.

Several months later, in Seely v. White Motor Co. (1965), 63 Cal.2d 9, 403 P.2d 145, 45 Cal.Rptr. 17, the Supreme Court of California rejected the rationale by which the court in Santor imposed strict liability in tort for economic loss. In Seely, plaintiff purchased a truck manufactured by defendant. After he took possession, Seely discovered that the truck bounced violently. Nine months later, the truck overturned after brake failure, causing damage to the truck but no personal injury to Seely. Plaintiff had the damage repaired and subsequently stopped making his installment

Page 446

[61 Ill.Dec. 749] payments. Defendant repossessed the truck, at which time plaintiff sued on theories of breach of express warranty and strict tort liability, and sought damages for the repair of the truck, for money paid on the purchase price, and for profits lost by virtue of the truck's unsuitability for normal use. The court affirmed the trial court's award to Seely for money paid on the purchase price and for lost profits on the basis of express warranty. The court, however, went on to state that these economic losses are not recoverable under strict liability in tort. (63 Cal.2d 9, 18, 403 P.2d 145, 151-52, 45 Cal.Rptr. 17, 23-24.) The court also declared, in reference to Santor, "Only if someone had been injured because the rug was unsafe for use would there have been any basis for imposing strict liability in tort." (63 Cal.2d 9, 18, 403 P.2d 145, 151, 45 Cal.Rptr. 17, 23.) Thus, [91 Ill.2d 76] the court refused to expand the scope of its opinion in Greenman v. Yuba Power Products, Inc. (1963), 59 Cal.2d 57, 62, 377 P.2d 897, 900, 27 Cal.Rptr. 697, 700, which declared that a manufacturer is strictly liable in tort for a product that has a defect that causes injury to a person.

Subsequent to these two seminal cases in the area, some courts have held a manufacturer liable under the theory of strict liability in tort for solely economic losses. (See, e.g., Mead Corp. v. Allendale Mutual Insurance Co. (N.D. Ohio 1979), 465 F.Supp. 355 (Ohio law); Berg v. General Motors Corp. (1976), 87 Wash.2d 584, 555 P.2d 818; City of La Crosse v. Schubert, Schroeder & Associates, Inc. (1976), 72 Wis.2d 38, 240 N.W.2d 124; Iacono v. Anderson Concrete Corp. (1975), 42 Ohio St.2d 88, 326 N.E.2d 267; Cova v. Harley Davidson Motor Co. (1970), 26 Mich.App. 602, 182 N.W.2d 800.) Most courts, however, have denied recovery under strict liability in tort for solely economic losses. See, e.g., Posttape Associates v. Eastman Kodak Co. (3d Cir. 1976), 537 F.2d 751 (Pennsylvania law); Fredonia Broadcasting Corp. v. RCA Corp. (5th Cir. 1973), 481 F.2d 781 (Texas law); Southwest Forest Industries, Inc. v. Westinghouse Electric Corp. (9th Cir. 1970), 422 F.2d 1013 (Pennsylvania law), cert. denied (1970), 400 U.S. 902, 91 S.Ct. 138, 27 L.Ed.2d 138; Midland Forge, Inc. v. Letts Industries, Inc. (N.D. Iowa 1975), 395 F.Supp. 506 (Iowa law); Arizona v. Cook Paint & Varnish Co. (D.Ariz.1975), 391 F.Supp. 962 (under law of Arizona, California, Hawaii, Texas, or Alaska economic loss is not recoverable in strict liability action), aff'd (9th Cir. 1976), 541 F.2d 226; Cooley v. Salopian Industries, Ltd. (D.S.C.1974), 383 F.Supp. 1114 (South Carolina law); Noel Transfer & Package Delivery Services, Inc. v. General Motors Corp. (D.Minn.1972), 341 F.Supp. 968; Superwood Corp. v. Siempelkamp Corp. (Minn.1981), 311 N.W.2d 159; Nobility Homes of Texas, Inc. v. Shivers (Tex.1977), 557 S.W.2d [91 Ill.2d 77] 77; Morrow v. New Moon Homes, Inc. (Alaska 1976), 548 P.2d 279; Hiigel v. General Motors Corp. (1975), 190 Colo. 57, 544 P.2d 983; Hawkins Construction Co. v. Matthews Co. (1973), 190 Neb. 546, 209 N.W.2d 643; Price v. Gatlin (1965), 241 Or. 315, 405 P.2d 502; Alfred N. Koplin & Co. v. Chrysler Corp. (1977), 49 Ill.App.3d 194, 7 Ill.Dec. 113, 364 N.E.2d 100; Beauchamp v. Wilson (1973), 21 Ariz.App. 14, 515 P.2d 41; Anthony v. Kelsey-Hayes Co. (1972), 25 Cal.App.3d 442, 102 Cal.Rptr. 113; ...

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