Alfred N. Koplin & Co., Inc. v. Chrysler Corp.

• Decision Date: 10 June 1977
• Docket Number: No. 75-260,75-260
• Citation: 7 Ill.Dec. 113,364 N.E.2d 100,49 Ill.App.3d 194
• Court: United States Appellate Court of Illinois
• Parties: , 7 Ill.Dec. 113, 22 UCC Rep.Serv. 644 ALFRED N. KOPLIN & COMPANY, INC., Plaintiff-Appellee, v. CHRYSLER CORPORATION, Airtemp Division, Defendant-Appellant.

Page 100

364 N.E.2d 100

49 Ill.App.3d 194, 7 Ill.Dec. 113, 22

UCC Rep.Serv. 644

ALFRED N. KOPLIN & COMPANY, INC., Plaintiff-Appellee, v. CHRYSLER CORPORATION, Airtemp Division, Defendant-Appellant.

No. 75-260.

Appellate Court of Illinois, Second District, First Division.

June 10, 1977.

Vescelus, Perry & Pollard, John T. Perry, Wheaton, for defendant-appellant.

Donald J. Novotny, Berwyn, for plaintiff-appellee.

GUILD, Presiding Justice.

Defendant Chrysler Corporation Airtemp Division appeals from a judgment for the plaintiff, Alfred N. Koplin & Co., Inc., entered upon a jury verdict in an action for damages resulting from the breakdown and failure of two air-conditioning units manufactured by Chrysler. We conclude that the jury verdict is, on this record, not sustainable on the basis of breach of warranty because an express warranty by its terms both excluded liability and included a valid disclaimer of warranty. We also resolve an issue of first impression in this jurisdiction in determining that no action may be maintained in tort (negligent manufacture was here alleged) where only "economic loss" is involved. There being no basis for the verdict rendered below, the judgment of the circuit court of DuPage County is reversed.

I.

Plaintiff filed an amended complaint against Chrysler, the manufacturer of the units, Specialty Products Equipment Corporation, the supplier of the units, and Acitelli Heating and Piping Co., Inc., the installer. At the end of plaintiff's case the trial court directed verdicts in favor of Specialty Products and Acitelli. Plaintiff has not cross-appealed. The trial court denied Chrysler's oral motions for a directed verdict made at the close of plaintiff's case and at the close of all the evidence.

Count I of plaintiff's amended complaint alleges a breach of warranty, ¹ Count II alleges negligence, ² and Count III merely alleges that the second unit had to be replaced and repaired at a cost of $16,403. All of Koplin's alleged damages are based upon "economic" losses incurred in the repairing and replacing of the Chrysler units.

The jury returned a verdict for Koplin in the amount of $24,188 and answered two special interrogatories. The answer to the first interrogatory indicated that the defendant had made an express warranty to the plaintiff in connection with the sale of the air-conditioning equipment involved in the case; the second answer stated that neither the plaintiff nor his agents or employees were guilty of contributory negligence with respect to the breakdown of the equipment. ³

In its brief and argument Chrysler contends that the trial court erred in denying its motions for a directed verdict, and in denying its post-trial motion for judgment notwithstanding the verdict. It argues that plaintiff failed to prove that it negligently manufactured the product. Chrysler further argues that the units failed due to faulty installation, inadequate maintenance and improper adjustment of the machine controls. Koplin responds that the evidence of defendant's negligent manufacture was sufficient to support the jury verdict.

II.

Koplin's case against Chrysler was apparently submitted to the jury on two theories, breach of warranty and negligence. ⁴ In its answer to the first special interrogatory the jury found that Chrysler made an express warranty to Koplin. Our examination of the record and exhibits indicates that the express warranty found by the jury must be based upon the warranty card found in the exhibit file. The warranty as indicated on the warranty card from Chrysler Airtemp covers the equipment for twelve months after start-up or eighteen months from shipment, whichever comes first. The original unit was installed June 10, 1969. On June 15, 1971 this unit failed. The second unit was installed either August 10, 1971, as indicated by the warranty card, or September 1, 1971 as stated in plaintiff's complaint. This unit failed in June 1973. The warranty thus, by its own terms, is not effective in binding Chrysler as to either unit because the warranty period had expired as to both. Moreover, the warranty card contains an effective disclaimer of the warranties of merchantability and fitness for a particular purpose. ⁵ In view of this disclaimer there is no support for the jury verdict on the basis of an implied warranty of merchantability or fitness for a particular purpose. We thus conclude that the jury's verdict, if supportable, was based solely on negligence theory, a fact apparently recognized by the parties, as the presence or lack of evidentiary support for the jury determination that Chrysler was negligent is the sole basis of argument on appeal.

III.

In recent years the law governing the liability of a manufacturer to a purchaser of goods with whom he has not dealt personally has undergone great change. This change, occasioned by the gradual recognition of increased legal responsibility of a manufacturer for the consequences of his enterprise, has involved a revolution in terms of the legal theories employed to describe the liability of the manufacturer to the purchaser. Traditional legal thought has from the outset divided the lines of legal theory in this area of the law into two primary branches, that of torts, and that of contract. In his treatise on torts Prosser describes the distinction between tort theory and contract theory as follows:

"The fundamental difference between tort and contract lies in the nature of the interests protected. Tort actions are created to protect the interest in freedom from various kinds of harm. The duties of conduct which give rise to them are imposed by the law, and are based primarily upon social policy, and not necessarily upon the will or intention of the parties. They may be owed to all those within the range of harm, or to some considerable class of people. Contract actions are created to protect the interest in having promises performed. Contract obligations are imposed because of conduct of the parties manifesting consent, and are owed only to the specific individuals named in the contract. Even as to these individuals, the damages recoverable for a breach of the contract duty are limited to those reasonably within the contemplation of the defendant when the contract was made, while in a tort action a much broader measure of damages is applied." Prosser, Torts § 92, at 613 (4th ed. 1971).

The theories available to a consumer suing a manufacturer with whom he has not dealt have varied from express and implied warranty (contract theory) to negligence and misrepresentation (tort theory) and more recently strict liability in tort. ⁶ No single approach has been uniformly adopted by the courts, and counsel, faced with the task of assessing and characterizing a litigant's legal position, is often faced with a nettlesome quandary.

Plaintiff in this case chose to employ negligence theory in seeking to impose liability on defendant. ⁷ Negligence theory requires plaintiff to establish that defendant owed him a duty, breached such duty, and that such breach was the cause of damage. In products liability cases, such as this case, it is extremely difficult for plaintiff to establish a failure to exercise due care (breach) on the part of a defendant with whom he had had no personal dealings. It is such difficulty, typical of a products liability case, which led to the development of the doctrine of strict liability in tort, a doctrine which avoids the difficulties in establishing breach. See 2 Frumer and Friedman, Products Liability, § 16A. Plaintiff in this case, having chosen to sue in negligence, was faced with the difficulties attending such theory. It is thus not surprising that the argument on appeal is concerned with whether or not the proofs at trial sustain a finding of negligence.

In approaching resolution, we find that this case falls within the narrow range of situations dividing tort theory from contract theory. This is so because the loss suffered by plaintiff in this case was "economic" loss damage suffered to two air conditioner units which had been purchased from defendant manufacturer as opposed to damage suffered from physical harm to the person or property. "Economic" loss or harm has been defined as

"damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits without any claim of personal injury or damage to other property * * *."

Note, "Economic Loss in Products Liability Jurisprudence," 66 Colum.L.Rev. 917, 918 (1966)

and also

" * * * diminution in the value of the product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold."

Note, "Manufacturers' Liability to Remote Purchasers for 'Economic Loss' Damages Tort or Contract?" 114 U.Pa.L.Rev. 539, 541 (1966)

"Economic" loss as in this case may be contrasted with "physical harm" as referred to in, e. g., Restatement 2d, Torts, §§ 395, 402A and 402B. ⁸ The line of demarcation between physical harm and economic loss in our view reflects the line of demarcation between tort theory and contract theory.

We do not find it necessary to undertake an examination of the evidence introduced at trial in view of our conclusion that a manufacturer's liability is not sustained where a plaintiff seeks recovery from a manufacturer in tort theory for "economic" losses. ⁹

Two cases of seminal significance in determining whether a manufacturer may be liable in tort for "economic losses" are Santor v. A and M Karagheusian, Inc. (1965), 44 N.J. 52, 207 A.2d 305, and Seely v. White Motor Company (1965), 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145. In Santor plaintiff purchased carpeting manufactured by defendant from a third party distributor. The carpeting proved defective. Plaintiff sued defendant manufacturer, originally contending that the carpet was defective. Later an additional paragraph was added charging a breach of implied warranty of...