Consolidated Generator-Nevada, Inc. v. Cummins Engine Co., Inc.

• Decision Date: 29 December 1998
• Docket Number: INC,No. 29409,GENERATOR-NEVAD,29409
• Parties: CONSOLIDATEDd/b/a Consolidated Generator Service, A Nevada Corporation, Appellant/Cross-Respondent, v. CUMMINS ENGINE COMPANY, INC., An Indiana Corporation Doing Business in the State of Nevada, Respondent/Cross-Appellant, and Ingersoll-Rand Company d/b/a Ingersoll-Rand Construction Equipment and Sales, A New Jersey Corporation Qualified to do Business in the State of Nevada, Respondent.
• Court: Nevada Supreme Court

Page 1251

971 P.2d 1251

114 Nev. 1304

CONSOLIDATED GENERATOR-NEVADA, INC. d/b/a Consolidated

Generator Service, A Nevada Corporation, Appellant/Cross-Respondent, v. CUMMINS ENGINE COMPANY, INC., An Indiana Corporation Doing

Business in the State of Nevada, Respondent/Cross-Appellant,

and

Ingersoll-Rand Company d/b/a Ingersoll-Rand Construction

Equipment and Sales, A New Jersey Corporation

Qualified to do Business in the State of

Nevada, Respondent.

No. 29409.

Supreme Court of Nevada.

Dec. 29, 1998.

Christensen & Boggess, Las Vegas, for Appellant/Cross-Respondent.

Barker, Brown, Busby, Chrisman & Thomas, Las Vegas, for Respondent/Cross-Appellant, Cummins Engine.

Christopher G. Gellner, Las Vegas, for Respondent Ingersoll-Rand.

OPINION

PER CURIAM.

Appellant Consolidated Generator-Nevada (CGN) rented portable generators (gensets) from Consolidated Generator Service (CGS) shortly after CGN's incorporation in May 1989. The gensets were originally purchased by CGS from Ingersoll-Rand (IR) and they are equipped with Cummins engines. IR and Cummins both have written warranties that exclude express and implied warranties, as well as consequential or incidental damages.

CGN claims to have purchased ten of the gensets from CGS in an agreement memorialized in a letter. CGN also claims to have received transfer of the gensets in February 1990. On May 11, 1990, CGS filed a Chapter 11 Bankruptcy in the Central District of California. IR was listed as a secured creditor and twenty-five IR gensets were listed as security. In January 1991, the bankruptcy court ordered CGS to turn the gensets over to IR. IR tried to recover from CGN the ten gensets CGN claimed to own. Due to a dispute concerning their ownership, the gensets were parked in early 1991. On April 30, 1991, CGN filed a garagemen's lien against IR.

CGN experienced many problems with the gensets before they were parked. Cummins and IR were aware of problems with the gensets, including the fact that the "continuous duty" generators should only be used for stand-by applications. Cummins and IR agreed to certain repairs and replacements. However, the parties dispute the length and coverage of the warranty and additional protection.

CGN filed a complaint against IR alleging: (1) breach of implied warranties; (2) foreclosure of statutory lien and declaratory relief; (3) interference with prospective business advantage; (4) unjust enrichment; and (5) debt due and owing. CGN filed a complaint against Cummins alleging: (1) breach of implied warranties; (2) breach of implied covenant of good faith; (3) breach of express warranty; and (4) unjust enrichment. CGN then filed an amended complaint consolidating the cases that listed all the claims for relief alleged in the IR complaint and added the claim of civil conspiracy.

IR and Cummins filed motions for summary judgment in March 1991. The district court denied both motions by an order dated April 17, 1996. Shortly thereafter, IR filed a motion for rehearing and a motion for summary judgment arguing that the court should apply California law to the warranty claim. Cummins joined in the motions. On May 8, 1996, the district court granted IR's and Cummins' motions as to all of CGN's claims except whether CGN was entitled to recover damages for unreimbursed repair costs to the gensets. The court found that California law applied to the warranty claim and that based on California law, there were no express or implied warranties that applied to the alleged sale of the ten gensets from CGS to CGN.

On May 20, 1996, CGN filed a motion for summary judgment on the issue of repair costs. The court granted CGN's motion for summary judgment and awarded CGN $22,736.96 in repair costs to be paid by Cummins.

CGN filed a timely notice of appeal as to all issues except the repair costs. Cummins cross-appealed the award of repair costs.

Discussion

First, CGN argues that the district court erred in applying California law, rather than Nevada law, to their breach of express and implied warranty claims. In order to determine what state's law to apply in a contract case, this court has adopted the substantial relationship test. Sotirakis v. U.S.A.A., 106 Nev. 123, 125-26, 787 P.2d 788, 790-91 (1990). This court has delineated five factors to consider in determining whether a state possesses a substantial relationship with a contract:

a. the place of contracting,

b. the place of negotiation of the contract,

c. the place of performance d. the location of the subject matter of the contract, and

e. the domicile, residence, nationality, place of incorporation and place of business of the parties.

Williams v. United Services Auto. Ass'n, 109 Nev. 333, 334-35, 849 P.2d 265, 266 (1993) (quoting Sotirakis, 106 Nev. at 126, 787 P.2d at 790). Additionally, the transaction must not violate a strong public policy of Nevada. Id. at 334, 849 P.2d at 266.

The parties disagree as to which contract the Sotirakis test should be applied: (1) the original purchase agreement between CGS and IR; or (2) additional agreements or contracts entered into between CGN and IR or Cummins. We hold that there were no agreements or contracts between CGN and IR or CGN and Cummins on which a warranty claim can be based. Therefore, we conclude that the warranty claims must be based on the original agreement between CGS and IR.

We further hold that in applying the Sotirakis factors to the original agreement, California bears the most significant relationship to the original contract. The contracting took place in California, the contract was negotiated in California, and the contract was performed in California. Although the gensets are now in Nevada, IR does business in Nevada, and CGN is a Nevada corporation, the majority of the factors support the district court's ruling. Additionally, we hold that applying California law to this contract does not violate a strong public policy of Nevada. Thus, we hold that the district court properly applied California law to the warranty claims.

Second, CGN argues that the district court misapplied California law in granting IR's and Cummins' motions for summary judgment as to the breach of express and implied warranty claims. This court reviews a summary judgment order de novo. Walker v. American Bankers Ins., 108 Nev. 533, 536, 836 P.2d 59, 61 (1992). Summary judgment may only be granted when there is no genuine issue of material fact for trial. NRCP 56(c).

California law requires privity for breach of implied warranty of merchantability and breach of implied warranty of fitness claims. Rodrigues v. Campbell Industries, 87 Cal.App.3d 494, 151 Cal.Rptr. 90, 93 (Ct.App.1978). Since CGS was the original purchaser of the gensets and CGN allegedly bought the gensets from CGS, CGN is not in privity with either IR or Cummins. Thus, we hold that no genuine issue of material fact remains for trial and the district court was correct in granting IR's and Cummins' motions for summary judgment as to CGN's implied warranty claims.

California law does not require privity for claims of breach of express warranty when a consumer relies on representations made by a manufacturer in labels or advertising materials. Fundin v. Chicago Pneumatic Tool Co., 152 Cal.App.3d 951, 199 Cal.Rptr. 789, 793-94 (Ct.App.1984). Therefore, the lack of privity between CGN and IR and CGN and Cummins does not preclude CGN from recovering on the breach of express warranty claim. However, IR argues that CGN did not plead the claim of breach of express warranty in either its original complaint or its amended complaint, and therefore, this claim does not apply to IR.

In Hall v. SSF, Inc., 112 Nev. 1384, 1391, 930 P.2d 94, 98 (1996), this court held that defendants were on notice as to the claim of negligent hiring where the complaint stated that "[d]efendants were negligent in failing to adequately train and supervise...." This court noted that "we liberally construe pleadings to place matters into issue which are fairly noticed to the adverse party." Id. (quoting Pittman v. Lower Court Counseling, 110 Nev. 359, 365, 871 P.2d 953, 957 (1994)). We hold that IR was on notice that the issue of breach of express warranty would be litigated because the pleadings, while not expressly stating a claim for breach of express warranty, stated the elements for the claim under the implied warranty cause of action. The complaint alleged that CGN relied upon the "oral and written representations" of IR representatives. Therefore, we hold that the claim of breach of express warranty applies to IR.

Under the California Commercial Code, an express warranty is "[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain." Cal.Com.Code § 2313 (West 1998). The district court found that CGN did not rely on any brochures or literature of IR or Cummins in purchasing the gensets and that, therefore, no genuine issue of material fact existed as to the issue of breach of express warranty. However, there is evidence in the form of an affidavit that CGN's president relied on the "continuous duty" representations made in the Cummins and IR literature in purchasing the gensets from CGS.

IR argues that the district court had a right to disbelieve this evidence because of conflicting statements in depositions and affidavits, citing to Aldabe v. Adams, 81 Nev. 280, 402 P.2d 34 (1965) and Bank of Las Vegas v. Hoopes, 84 Nev. 585, 445 P.2d 937 (1968). However, we conclude that IR's reliance on Aldabe and Hoopes is misplaced. Aldabe and Hoopes are concerned with one party's own conflicting statements being used to create a genuine issue of material fact when no conflict between adversaries exists. That is not the case here because there is a conflict between adversaries. Thus, based on the affidavit, we hold that a genuine...