Baker v. DEC Intern.

• Decision Date: 13 August 1996
• Docket Number: Docket No. 178000
• Citation: 553 N.W.2d 667,218 Mich.App. 248
• Parties: , 30 UCC Rep.Serv.2d 1118, Prod.Liab.Rep. (CCH) P 14,719 Gerald M. BAKER and Eleanor S. Baker, Plaintiffs-Appellants, v. DEC INTERNATIONAL and Tri County Dairy Equipment, Inc., Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 667

553 N.W.2d 667

218 Mich.App. 248, 30 UCC Rep.Serv.2d 1118,

Prod.Liab.Rep. (CCH) P 14,719

Gerald M. BAKER and Eleanor S. Baker, Plaintiffs-Appellants, v. DEC INTERNATIONAL and Tri County Dairy Equipment, Inc. Defendants-Appellees.

Docket No. 178000.

Court of Appeals of Michigan.

Submitted July 1, 1996, at Lansing.

Decided Aug. 13, 1996, at 9:05 a.m.

Released for Publication Sept. 27, 1996.

Reber, Greer, Schuiteman, Stariha & Greer, P.C. by Paul L. Greer, Fremont, for Gerald M. and Eleanor S. Baker.

Bremer, Wade, Nelson, Lohr & Corey by William M. Bremer and Phillip J. Nelson, Grand Rapids, for DEC International.

Fraser Trebilcock Davis & Foster, P.C. by Peter L. Dunlap and Brian D. Herrington, Lansing, for Tri County Dairy Equipment, Inc.

Before MURPHY, P.J., and O'CONNELL and M.J. MATUZAK, ^* JJ.

O'CONNELL, Judge.

Plaintiffs appeal as of right from an August 3, 1994, order of the Ingham Circuit Court granting defendants summary disposition on the basis that plaintiffs' claim for breach of implied warranty of merchantability was untimely under the four-year period of limitation provided in the Uniform Commercial Code, M.C.L. § 440.2725; M.S.A. § 19.2725. We reverse and remand the case to the trial court.

On May 11, 1989, plaintiffs, commercial dairy farmers, entered into a contract with Tri County Dairy Equipment, Inc., for the purchase of a milking system. The component parts were purchased from DEC International, the manufacturer. The contract called for a ten percent down payment, sixty percent of the purchase price on "delivery," and thirty percent at "finish." Plaintiffs paid Tri County sixty percent of the purchase price on July 31, 1989. Tri County thereafter installed the milking system.

The parties dispute whether installation was completed and the system was operational on September 8 or September 12, 1989. Plaintiffs claim installation was completed on September 12, 1989, and that the system was tested, approved, and licensed for commercial operation by the Michigan Department of Agriculture on that day. Defendants contend that the system was installed and ready for operation on or before September 8, 1989, and that operation of the system was demonstrated for plaintiffs at that time.

Plaintiffs filed suit on September 10, 1993, claiming that the milking system was defective. Plaintiffs' complaint included claims of breach of warranty of merchantability, breach of warranty of fitness for a particular purpose, fraud, and breach of duty to warn. DEC moved for summary disposition, arguing that plaintiffs' breach of warranty of merchantability claim was barred by the four-year period of limitation of the UCC M.C.L. § 400.2725(2); M.S.A. § 19.2725(2). DEC claimed that tender of delivery of the milking equipment occurred on July 31, 1989. Tri County also filed a motion for summary disposition, arguing that the milking system was installed and ready for operation no later than September 8, 1989, and, therefore, plaintiffs' suit was untimely.

The trial court granted defendants summary disposition with regard to plaintiffs' breach of warranty of merchantability claim, holding that the statute of limitations began to run on July 31, 1989, when tender of delivery occurred. The trial court also granted defendants summary disposition with regard to plaintiffs' claims of breach of warranty of fitness for a particular purpose and breach of duty to warn. Defendants subsequently moved for summary disposition of plaintiffs' fraud claim, which was granted by the trial court. ¹

On appeal, plaintiffs argue that the four-year period of limitation provided by the UCC commenced on September 12, 1989, when the milking system was installed and ready for operation and had been approved by the Department of Agriculture. They claim that component parts of the system were delivered to their property from time to time as the system was installed and, therefore, the time of delivery presents a question of fact for the jury's consideration.

DEC maintains that tender of delivery occurred on July 31, 1989, when plaintiffs paid Tri County sixty percent of the purchase price due on "delivery" under the contract. DEC asserts that the contract between plaintiffs and Tri County did not require that the equipment sold by DEC must first be assembled and installed by Tri County before delivery will be deemed to have occurred, that the assembled milking system must first be tested before delivery will be deemed to have occurred, that any performance standards must be met, or that the milking system must be examined and accepted by plaintiffs or certified for commercial use by the Department of Agriculture before delivery will be deemed to have occurred. Even if the equipment was not delivered to plaintiffs on July 31, 1989, DEC contends, plaintiffs have not effectively contested the fact that the equipment was delivered to them by September 8, 1989, at the very latest, the date by which the system was installed and its operation was demonstrated for plaintiffs. Similarly, Tri County argues that final "installation," "approval," "testing," or "acceptance" is not relevant to determining when "tender of delivery" occurs under the UCC and that plaintiffs presented no competent evidence to dispute that the equipment was installed and operational by September 8, 1989.

We believe that the trial court erred in determining that tender of delivery of the milking equipment occurred on July 31, 1989, and believe that a question of fact remains regarding the date the system was installed. Therefore, defendants were not entitled to summary disposition and the trial court's order is reversed.

When reviewing a motion for summary disposition under MCR 2.116(C)(7), a court must accept as true the plaintiff's well-pleaded factual allegations and construe them in the plaintiff's favor. Huron Tool & Engineering Co. v. Precision Consulting Services, Inc., 209 Mich.App. 365, 376-377, 532 N.W.2d 541 (1995). The court must look to the pleadings, affidavits, or other documentary evidence to determine whether there is a genuine issue of material fact. Id. at 377, 532 N.W.2d 541. If no facts are in dispute, and reasonable minds could not differ regarding the legal effect of those facts, whether the plaintiff's claim is barred by the statute of limitations is a question for the court as a matter of law. Id. However, if a material factual dispute exists such that factual development could provide a basis for recovery, summary disposition is inappropriate. Id.

Article 2 of the UCC applies to transactions in goods. M.C.L. § 440.2102; M.S.A. § 19.2102. The component parts of the milking system are "goods" as defined in the UCC. See M.C.L. § 440.2105(1); M.S.A § 19.2105(1); Neibarger v. Universal Cooperatives, Inc., 181 Mich.App. 794, 800, 450 N.W.2d 88 (1989), aff'd 439 Mich. 512, 486 N.W.2d 612 (1992). The period of limitation for lawsuits involving transactions in goods is set forth in M.C.L. § 440.2725, M.S.A. § 19.2725, which provides in pertinent part:

(1) An action for breach of any contract for sale must be commenced within 4 years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than 1 year but may not extend it.

(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.

Therefore, absent an express warranty extending to future performance of the goods, Cambridge Plating Co., Inc. v. Napco, Inc., 991 F.2d 21, 20 UCC Rep.Serv.2d 739 (C.A. 1, 1993), an action for breach of warranty under the UCC must be commenced within four years of tender of delivery of the goods.

"Tender of delivery requires that the seller put and hold conforming goods at the buyer's disposition." M.C.L. § 440.2503(1); M.S.A. § 19.2503(1). Despite the language "conforming goods," the term has been used to refer to goods offered in fulfillment of a contract even if there is a defect when the goods are measured against the specific contract obligations. See Comment 1, M.C.L. § 440.2503(1); M.S.A. § 19.2503(1). Thus, even delivery of nonconforming goods may constitute tender of delivery. H. Sand & Co., Inc. v. Airtemp Corp., 738 F.Supp. 760, 766 (S.D.N.Y., 1990), modified 934 F.2d 450 (C.A. 2, 1991); Long Island Lighting Co. v. Transamerica Delaval, Inc., 646 F.Supp. 1442, 1455 (S.D.N.Y., 1986). See also Home Ins. Co. v. Detroit Fire Extinguisher Co., Inc., 212 Mich.App. 522, 525, n. 2, 538 N.W.2d 424 (1995) ("Under the UCC's statute of limitations, an action accrues when the nonconforming goods are delivered.").

DEC delivered the equipment to Tri County on July 26 and July 28, 1989, and plaintiffs paid Tri County sixty percent of the purchase price due on "delivery" under the contract on July 31, 1989. DEC's conclusion that tender of delivery must therefore have occurred on July 31, 1989, is without merit. In Huron Tool, supra at 377-378, 532 N.W.2d 541, this Court rejected the defendants' claim that the plaintiff's tender of full payment should be deemed tantamount to completion of the contract where the contract merely stated that the last payment was due upon completion of installation. The Court found that the defendants read too much into the terms as defined in the contract and that their interpretation would penalize the purchaser who prepays and would reward delay. Id. at 378, 532 N.W.2d 541. The fact that plaintiffs paid Tri County sixty percent of the purchase price on July 31, 1989, is not determinative of when tender of delivery occurred.

Plaintiffs' contract with Tri County called for the sale and installation of the...