Morris v. Osmose Wood Preserving

• Decision Date: 01 September 1994
• Docket Number: No. 63,63
• Citation: 667 A.2d 624,340 Md. 519
• Parties: , 64 USLW 2368, 29 UCC Rep.Serv.2d 170, Prod.Liab.Rep. (CCH) P 14,444 Patty MORRIS et al. v. OSMOSE WOOD PRESERVING et al. ,
• Court: Maryland Court of Appeals

Page 519

340 Md. 519

667 A.2d 624, 64 USLW 2368, 29 UCC

Rep.Serv.2d 170,

Prod.Liab.Rep. (CCH) P 14,444

Patty MORRIS et al. v. OSMOSE WOOD PRESERVING et al.

No. 63, Sept. Term, 1994.

Court of Appeals of Maryland.

Nov. 14, 1995.

Reconsideration Denied Dec. 29, 1995.

Arnold Levin (Fred S. Longer, Levin, Fishbein, Sedran & Berman, Philadelphia, PA); Gary E. Mason (Michael D. Hausfeld, Cohen, Milstein, Hausfeld & Toll, of Washington, DC; Charles A. Schneider of Washington DC; Harold Berger, Janice Siegel, Berger & Montague, P.C., Philadelphia, PA; Steven M. Pavsner Joseph, Greenwald & Laake, P.A., Greenbelt) all on brief; John H. Nethercut, Assistant Attorney General, Consumer Protection Division (J. Joseph Curran, Jr., Attorney General, both on brief), Baltimore, for Petitioner.

Christopher Scott D'Angelo (Montgomery, McCracken, Walker & Rhoads, Philadelphia, PA), H. Patrick Donohue (Armstrong, Donohue & Ceppos, of Rockville, Md. on brief), liaison counsel and for respondent Hoover Universal, Inc.

Read K. McCaffrey (Andrew J. Toland, Patton Boggs, L.L.P. of Baltimore, on brief, for respondent Osmose Wood Preserving, Inc.

Andrew T. Berry (Patrick J. Perrone, McCarter & English, both on brief), Newark, NJ, Phillip C. Jacobson (Andersen, Coe & King, of Baltimore, Md. on brief), for respondent Hoover Treated Wood Products, Inc.

Jack E. McClard, Hunton & Williams, of Richmond, VA, Mark B. Bierbower, Hunton & Williams, of Washington, DC, Benjamin V. Madison, III, Hunton & Williams, of Norfolk, VA, Michael T. Wharton, Debra S. Block, Wharton, Levin, Ehrmantraut, Klein & Nash, P.A., of Annapolis, MD, Michael J. McManus, Warren Lutz, Jackson & Campbell, P.C., of Washington, DC, amicus curiae.

Argued before MURPHY, C.J., and ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI, BELL and RAKER, JJ.

MURPHY, Chief Judge.

Plaintiffs' products liability tort claims in this case seek recovery for purely economic loss associated with the alleged deterioration of plywood in the roofs of their townhouses. The principal issue is whether their claims come within the exception for conditions "presenting a clear danger of death or personal injury," which we adopted in Council of Co-Owners v. Whiting-Turner, 308 Md. 18, 35 n. 5, 517 A.2d 336 (1986). In addition, we must determine whether the plaintiff home buyers may maintain an action under Maryland's Consumer Protection Act against manufacturers or sellers with whom the plaintiffs had no direct contact. Further, we consider whether Maryland's version of the Uniform Commercial Code (UCC) permits plaintiffs' implied warranty claims.

I.

A.

Plaintiffs brought this class action suit to recover from the defendants the cost of replacing roofs that contained allegedly defective fire retardant treated plywood ("FRT plywood"). ¹ According to the complaint, on November 3, 1987, plaintiff Patty Morris purchased a townhouse that had a roof constructed of FRT plywood manufactured by defendant Osmose Wood Preserving (Osmose). On October 23, 1987, plaintiff Richard Mills purchased a townhouse that also had a roof constructed of FRT plywood manufactured by Osmose. On July 11, 1985, plaintiff Michael Karbeling purchased a townhouse that had a roof constructed of FRT plywood manufactured by defendant Hoover Treated Wood Products, Inc. (Hoover Wood). On September 28, 1983, plaintiff Laura Herlihy purchased a townhouse that had a roof constructed of FRT plywood manufactured by defendant Hoover Universal, Inc. (Hoover Universal). ² Plaintiffs allege in their Fourth Amended Complaint that FRT plywood, when exposed to high temperatures, begins an acidic reaction that was designed to stop the spread of fire. It was further alleged that the reaction can occur at temperatures as low as 130 degrees fahrenheit, and roofs can reach temperatures of 180 degrees fahrenheit without the presence of fire. Plaintiffs aver that the chemical reaction "weakens the wood and destroys the bonding between the plywood laminates, thereby causing the wood, among other things, to bow, darken, spot, warp, fracture and otherwise deteriorate and lose strength capacity." This reaction, the plaintiffs claim, will inevitably occur in plywood installed in roofs, and it will occur without regard to ventilation or moisture levels in attics.

The plaintiffs allege in their amended complaint that the plywood in plaintiffs' roofs has undergone this reaction, "significantly weakening the roofs and resulting in substantial impairment of the strength and structural integrity of the roofs, and damaging other components of the roofs in which it is incorporated." Plaintiffs allege, therefore, that the roofs are "unsafe and dangerous" and "at risk of premature failure." They further assert that "[t]here is an immediate threat of injury from walking on the roofs, and also the threat of the roofs collapsing and injuring the occupants within," and that the roofs cannot support "any weight, even a heavy snowfall." ³

According to the complaint, the defendants each had advertised their products as suitable for constructing roofs, when in fact they were not. On March 30, 1986, the American Plywood Association (the Association) informed Hoover Wood of a situation in which its FRT plywood had deteriorated despite adequate ventilation. In April 1987, the Association notified all defendants of the thermal degradation problems associated with FRT plywood. The general public was alerted to the problem in the spring of 1990, most notably by an article on the front page of the New York Times dated April 11, 1990. Plaintiffs allege that they would have become aware of the problem sooner if the defendants had not controlled all information concerning it.

B.

Based on these facts, the fourth amended complaint contained five counts: strict liability, negligence, breach of implied warranties, negligent misrepresentation, and violations of the Maryland Consumer Protection Act, Maryland Code (1975, 1990 Repl.Vol., 1995 Supp.) § 13-101 through § 13-411 of the Commercial Law Article. ⁴ After a hearing on defendants' motions to dismiss, the circuit court dismissed the complaint in its entirety. It ruled that the strict liability and negligence counts were precluded by the economic loss rule, which prohibits a plaintiff from recovering in tort for purely economic losses--losses that involve neither a clear danger of physical injury or death, nor damage to property other than the product itself. The court further ruled that these claims did not come within Maryland's limited exception to the economic loss rule because "[a]t the time of the sale by defendants to the developers, the FRT plywood was not so defective as to present a clear and imminent danger of death or personal injury to the ultimate purchaser of the home." Concerning the implied warranty count, the court stated that all plaintiffs had conceded that their claims were not filed within the four year limitations period contained in Maryland Code (1975, 1992 Repl.Vol.), § 2-725 of the Commercial Law Article, and rejected plaintiffs' argument that the statute of limitations should be tolled because the defendants had fraudulently concealed the cause of action under Code (1973, 1989 Repl.Vol.) § 5-203 of the Courts and Judicial Proceedings Article. Citing the absence of "reliance by the plaintiff[s] on the particular statements" of the defendants, the court dismissed the negligent misrepresentation count. The court also implied, but did not state, that the absence of particular reliance prompted its dismissal of the Consumer Protection Act count. ⁵

The Court of Special Appeals reversed the dismissal of the breach of implied warranty count, and affirmed the dismissals of the other counts. Morris v. Osmose Wood Preserving, 99 Md.App. 646, 639 A.2d 147 (1994). Concerning the tort claims, the court held that the economic loss rule barred recovery. It rejected the plaintiffs' attempts to fit their claims into Maryland's limited exception for severe risk of personal injury, stating: "Mere possibilities ... do not meet the threshold of establishing a clear danger of death or personal injury." Id. at 655-56, 639 A.2d 147.

With respect to the Maryland Consumer Protection Act count, the court held that, while the plaintiffs had alleged sufficient reliance, they could not maintain an action under the Act because the FRT plywood was not consumer goods at the time the defendants sold it to the builders. Id. at 660, 639 A.2d 147. The court stated that "when [the defendants] advertised and sold FRT plywood, they advertised and sold it to commercial buyers for commercial purposes," i.e., "the mass construction of homes." Id. Furthermore, the court held that under the UCC concept of goods, "the FRT plywood ... did not become 'consumer goods' when the houses into which it was incorporated were sold to [the plaintiffs]." Id. at 661, 639 A.2d 147.

As to the implied warranty count, the court pointed out the apparent error in the circuit court's statement that the plaintiffs had conceded that their warranty claims were not filed within the applicable limitations period. The court noted that Morris and Mills purchased their homes in the fall of 1987 and filed their claim in January of 1991, well within the limitations period. Next, the court held that Herlihy and Karbeling had alleged facts sufficient to toll the statute of limitations based on fraudulent concealment. Also, relying on the expansive definition of "seller" in the UCC, the court rejected Osmose's argument that it was not a "seller" under the UCC.

II.

In considering a motion to dismiss filed under Maryland Rule 2-322(b)(2) for "failure to state a claim upon which relief can be granted," a court must assume the truth of all well-pleaded facts and allegations in the complaint, as well as all inferences that can reasonably be drawn from them. Decoster v. Westinghouse, 333 Md. 245, 249, 634 A.2d 1330 (1994); Stone v. Chicago Title Ins., 330 Md. 329, 333, 624 A.2d 496 ...