Arell's Fine Jewelers, Inc. v. Honeywell, Inc.

• Decision Date: 01 February 1991
• Docket Number: No. 2,No. 1,1,2
• Citation: 170 A.D.2d 1013,566 N.Y.S.2d 505
• Parties: ARELL'S FINE JEWELERS, INC., Respondent, v. HONEYWELL, INC., Defendant and Third-Party Plaintiff-Respondent. Automatic Fire Alarm Company, Inc., Third-Party Defendant-Respondent, and Avco Corporation, Third-Party Defendant-Appellant. ActionARELL'S FINE JEWELERS, INC., Respondent, v. AUTOMATIC FIRE ALARM COMPANY, INC., Respondent, and Avco Corporation, Appellant. Action
• Court: New York Supreme Court — Appellate Division

Page 505

566 N.Y.S.2d 505

170 A.D.2d 1013

ARELL'S FINE JEWELERS, INC., Respondent, v. HONEYWELL, INC., Defendant and Third-Party

Plaintiff-Respondent. Automatic Fire Alarm

Company, Inc., Third-Party Defendant-Respondent,

and

Avco Corporation, Third-Party Defendant-Appellant.

Action No. 1.

ARELL'S FINE JEWELERS, INC., Respondent, v. AUTOMATIC FIRE ALARM COMPANY, INC., Respondent, and Avco Corporation, Appellant. Action No. 2.

Supreme Court Appellate Division,

Fourth Department.

Feb. 1, 1991.

Connors, Corcoran, Hall & Meyering by Roger Avery, Rochester, for appellant.

Harris, Beach & Wilcox by Joyce Parker, Rochester, for third-party plaintiff-respondent, Honeywell, Inc.

Culley, Marks, Corbett, Tanenbaum, Reifsteck & Potter by Cheryl Heller, Rochester, for respondent, Arell's Fine Jewelers, Inc.

Fulreader, Rosenthal, Sullivan, Clifford, Santoro & Kaul, Rochester, for third-party defendant-respondent, Automatic Fire Alarm Co.

Before DILLON, P.J., and BOOMER, PINE, BALIO and LOWERY, JJ.

MEMORANDUM:

On February 20, 1982, plaintiff's jewelry store was burglarized, and $138,000 in property was taken. Plaintiff also alleges that, during the course of the burglary, various store fixtures were damaged by the intruders. Honeywell, Inc.'s predecessor, Rochester Central Alarms, Inc., had procured the burglary alarm from Automatic Fire Alarm Company (AFA) in 1976. The burglary alarm had been manufactured by AVCO Corporation. Plaintiff instituted an action in breach of contract against defendant Honeywell, contending that its losses were the result of the failure of the burglary alarm at Honeywell's central station. Honeywell instituted a third-party action against AFA and AVCO, seeking to shift liability for damages to the third-party defendants on theories of negligence, strict products liability, and breach of express and implied warranties. Plaintiff then initiated an independent action against AFA and AVCO, asserting claims for negligence, strict products liability and breach of implied warranty. AFA cross-claimed against AVCO for contribution. Following joinder of issue, AVCO moved to dismiss the complaint, third-party complaint and cross claim asserted against it on the ground that they failed to state a cause of action (CPLR 3211[a][7] and for summary judgment (CPLR 3212) on the ground that the damages sought were not recoverable upon the liability theories alleged against it. Supreme Court denied AVCO's application in its entirety.

AVCO is entitled to summary judgment on all claims sounding in negligence and strict products liability. Plaintiff's losses are purely economic and not recoverable under either theory (see, Schiavone Constr. Co. v. Mayo Corp., 56 N.Y.2d 667, 451 N.Y.S.2d 720, 436 N.E.2d 1322, revg. 81 A.D.2d 221, 439 N.Y.S.2d 933 on dissenting opn. below; Hemming v. Certainteed Corp., 97 A.D.2d 976, 468 N.Y.S.2d 789). Even assuming that plaintiff's damages were attributable to the burglary alarm, they must be characterized as economic because they resulted only from the failure of the burglary alarm to perform as intended and not from any accidental occurrence (see, Richman v. Albert, 127 A.D.2d 992, 513 N.Y.S.2d 46, lv. denied 70 N.Y.2d 745, 519 N.Y.S.2d 966, 514 N.E.2d 386; Antel Oldsmobile-Cadillac, Inc. v. Sirus Leasing Company, Inc., 101 A.D.2d 688, 688-689, 475 N.Y.S.2d 944; Hemming v. Certainteed Corp., supra; Fireman's Fund Amer. Ins. Cos. v. Burns Electronic Security Servs., Inc., 93 Ill.App.3d 298, 48 Ill.Dec. 729, 417 N.E.2d 131). Because plaintiff's negligence and strict products liability claims must be dismissed, AFA's cross claim for contribution and Honeywell's third-party cause of action for contribution must also be dismissed. The existence of tort liability is a prerequisite to any claim for contribution (Board of Educ. of Hudson City School Dist. v. Sargent, Webster, Crenshaw & Folley, 71 N.Y.2d 21, 27-28, 523 N.Y.S.2d 475, 517 N.E.2d 1360).

Plaintiff's third cause of action against AVCO for breach of implied warranty must also be dismissed. Since plaintiff does not seek damages for personal injury, it cannot assert such a cause of action against AVCO because the parties were not in privity (see, UCC 2-318; Butler v. Caldwell & Cook, Inc., 122 A.D.2d 559, 560, 505 N.Y.S.2d 288; Pronti v. DML of Elmira, Inc., 103 A.D.2d 916, 478 N.Y.S.2d 156; Hole v. General Motors Corp., 83 A.D.2d 715, 442 N.Y.S.2d 638). In addition, a breach of implied warranty claim accrues at the time of delivery. The burglary alarm system was delivered to Honeywell's predecessor in 1976. This cause of action is barred by the four-year statute of limitations (see, Uniform Commercial Code 2-725).

Finally, Honeywell's implied indemnification claim against AVCO should not be dismissed. A third-party defendant's liability for implied indemnification is based upon breach of some duty owed either to the injured party or to the third-party plaintiff (see, Garrett v. Holiday Inns, 58 N.Y.2d 253, 259-261, 460 N.Y.S.2d 774, 447 N.E.2d 717; McDermott v. City of New York, 50 N.Y.2d 211, 218-219, n. 5, 428 N.Y.S.2d 643, 406 N.E.2d 460). Although AVCO owed no contractual duty to plaintiff, it is possible that some warranty duty was owed by it to Honeywell. In this regard, there are unresolved factual issues, i.e., whether AVCO made direct and public representations in sales literature to Honeywell's predecessor (see, Randy Knitwear v. American Cyanamid Co., 11 N.Y.2d 5, 226 N.Y.S.2d 363, 181 N.E.2d 399; County of Chenango Ind. Dev. Agency v. Lockwood Greene Engrs., 114 A.D.2d 728, 730, 494 N.Y.S.2d 832; All-O-Matic Inds. v. Southern Specialty Paper Co., 49 A.D.2d 935, 374 N.Y.S.2d 331) and whether AFA was an agent for Honeywell's predecessor in interest (see, Utica Observer Dispatch v. Booth, 106 A.D.2d 863, 483 N.Y.S.2d 540). Thus, Supreme Court properly denied so much of AVCO's motion seeking dismissal of Honeywell's cause of action for implied indemnification.

Order modified on the law and as modified affirmed without costs.

All concur, except BALIO, J., who dissents in part and votes to modify, in the following Memorandum.

BALIO, Justice, dissenting:

I agree with the majority's conclusion that plaintiff's cause of action for breach of implied warranty must be dismissed on the ground that it is time-barred and that it was error to dismiss Honeywell's third-party cause of action for implied indemnification based upon breach of warranty. I am compelled to dissent, however, because the majority has erroneously determined that the physical damage to plaintiff's property constitutes "economic loss".

Rochester Central Alarms, Inc., operated a burglary alarm protection service and maintained a central station so it could simultaneously serve multiple customers in the Rochester area. Several months after plaintiff contracted for the protection service, the alarm company purchased the Centrak system equipment manufactured by AVCO Corporation and installed that equipment at its central station. Compatible equipment was installed at the jewelry store. Honeywell then acquired the business of Rochester Central Alarms, replacing existing equipment. Plaintiff alleges that, prior to entering its jewelry store, burglars cut or interrupted telephone lines, causing an electrical signal of an unlawful entry to be transmitted to Honeywell's central station, and that, by reason of a manufacturing defect in the Centrak equipment at the central station, no audible signal of the break-in was given to a Honeywell employee monitoring the equipment. As a result, no steps were taken to prevent or minimize the physical damage to plaintiff's safe, display cases and fixtures or the theft of jewelry and other merchandise.

Plaintiff, in its bill of particulars, states that the stolen merchandise had a replacement value of $138,103.20, and that the cost of repairing or replacing the safe, display cases and other fixtures damaged during the break-in amounted to $6,636.86. Plaintiff also seeks $2,000,000 for the loss of future business. The majority concludes that all of plaintiff's damages "must be characterized as economic because they resulted only from the failure of the burglary alarm to perform as intended and not from any accidental occurrence". I am unable to agree with this determination for two reasons: physical damages suffered by a non-user bystander by reason of the malfunction of a product do not constitute economic loss and, even assuming that the majority's analysis is applicable, AVCO failed to negate the existence of factual issues whether the equipment failed to perform as intended or whether the equipment accidentally malfunctioned due to a manufacturing defect.

I begin my analysis by acknowledging the general rule that a remote consumer or user has no cause of action sounding in negligence or strict products liability against a manufacturer for economic loss only suffered by reason of a product's failure to perform as intended (see, Schiavone Constr. Co. v. Elgood Mayo Corp., 56 N.Y.2d 667, 451 N.Y.S.2d 720, 436 N.E.2d 1322, revg. 81 A.D.2d 221, 439 N.Y.S.2d 933 on dissenting opn. below; Hemming v. Certainteed Corp., 97 A.D.2d 976, 468 N.Y.S.2d 789). Recovery is permitted, however, for physical damage to person or property (including damage to the product itself) resulting from the malfunction of a product (see, Schiavone Constr. Co. v. Elgood Mayo Corp., 81 A.D.2d, supra, at 228, 439 N.Y.S.2d 933; John R. Dudley Constr. v. Drott Mfg. Co., 66 A.D.2d 368, 412 N.Y.S.2d 512). It is settled law that non-user bystanders may recover for damages to their person or property (Codling v. Paglia, 32 N.Y.2d 330, 345 N.Y.S.2d 461, 298 N.E.2d 622). Further, the product malfunction need not be the direct cause of injury. Liability may be imposed if the product "defect was a substantial factor in bringing about [the] injury or damages" (id., at 342, 345 N.Y.S.2d 461, 298 N.E.2d 622), and includes situations where the defect...