Biese v. Parker Coatings, Inc.
| Decision Date | 03 November 1998 |
| Docket Number | No. 98-1466,98-1466 |
| Parties | Daniel BIESE, the Checkered Flag Land and Building, Inc. and the Checkered Flag Sports Bar, Inc., Plaintiffs-Appellants, v. PARKER COATINGS, INC., Defendant-Third-Party Plaintiff-Respondent, v. Daniel Biese, d/b/a Daniel Biese Construction Company, Third-Party Defendant. |
| Court | Wisconsin Court of Appeals |
On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Scott D. Metz of Krause, Metz & Snyder of Appleton.
On behalf of the defendant-third-party-plaintiff-respondent, the cause was submitted on the brief of Rod A. Charnholm and Jeffrey T. DeMeuse of Everson, Whitney, Everson & Brehm, S.C. of Green Bay.
Before CANE, C.J., MYSE, P.J., and HOOVER, J.
Daniel Biese, the Checkered Flag Land and Building Inc., and the Checkered Flag Sports Bar, Inc. (Biese) appeal a summary judgment dismissing their negligence action against Parker Coatings, Inc. Parker provided materials for the bar's epoxy floor, which did not perform as promised. Biese claims that the trial court erroneously applied the economic loss doctrine to bar its claim for the negligent provision of services. Because the predominant purpose of the underlying action between Parker and Biese was the sale of goods and any services were incidental, the economic loss doctrine applies to bar the negligence transaction. Therefore, we affirm the judgment.
The underlying facts are essentially undisputed. In July of 1993, Biese contracted with A to Z Epoxy Coatings (Epoxy) to install an epoxy floor at the Checkered Flag Sports Bar. Parker supplied flooring materials to Epoxy, and Epoxy used these materials to install the floor in January and February of 1994 and guaranteed the floor's performance for one year. Unfortunately, the floor did not perform as promised, and Biese encountered problems the first day he used the floor. When attempts to correct the problems without reinstalling the entire floor were unsuccessful, Biese, Parker, and Epoxy met, and Parker and Epoxy agreed to redo the entire floor and provide all labor and materials free of charge. After Epoxy reinstalled the floor, Biese continued to experience problems with the floor and thus filed a negligence action in March of 1996 alleging that Parker negligently provided defective flooring materials and/or incorrect and improper instructions, guidance, and advice to Epoxy for installation of its flooring materials. Biese sought damages for repair and replacement of the defective floor, lost profits, and damage to his business reputation.
In its decision granting Parker's motion for summary judgment, the trial court noted that without a claim of personal injury or physical harm to property other than the defective product itself, Biese's remedy was a breach of warranty claim, not a tort action. It further noted that although there was no privity between Parker and Biese, Wisconsin law supported the application of the economic loss doctrine in the absence of privity between the parties. 1 Biese appealed. Additional facts will be discussed as necessary.
The issue is whether the economic loss doctrine bars a remote commercial purchaser's claim for negligent provision of services against the failed product's manufacturer. Whether the trial court properly granted Parker's motion for summary judgment on this issue is a question of law we review without deference to the trial court, see Gaertner v. Holcka, 219 Wis.2d 436, 445-46, 580 N.W.2d 271, 275 (1998), but we nonetheless value a trial court's analysis. M & I First Nat'l Bank v. Episcopal Homes Mgmt., 195 Wis.2d 485, 496-97, 536 N.W.2d 175, 182 (Ct.App.1995). In determining if the trial court properly granted summary judgment, we apply the same methodology as the trial court. Id. Because summary judgment methodology is well known, 2 we need not repeat it "except to observe that summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Id. (citing § 802.08(2), STATS.).
Biese characterizes the allegation in his complaint that Parker "was negligent in providing incorrect and improper instruction, guidance and advice to Epoxy" for the installation of its flooring materials as one for the negligent provision of services. He therefore reasons that under Hap's Aerial Enters. v. General Aviation Corp., 173 Wis.2d 459, 496 N.W.2d 680 (Ct.App.1992), overruled in part by Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis.2d 395, 416, 573 N.W.2d 842, 851-52 (1998), 3 the economic loss doctrine does not bar his claim. In contrast, Parker contends Biese is limited to a contract action because: (1) he has not alleged personal injury or physical harm to property other than the defective product itself; and (2) the predominant purpose of its transaction with Biese involved the sale of goods and any services were incidental. We agree with Parker and hold that the economic loss doctrine confines Biese's remedies to contract law.
"The economic loss doctrine is a judicially created doctrine providing that a commercial purchaser of a product cannot recover from a manufacturer, under the tort theories of negligence or strict products liability, damages that are solely 'economic' in nature." Daanen & Janssen, 216 Wis.2d at 399, 573 N.W.2d at 844-45 (citing Sunnyslope Grading, Inc. v. Miller, Bradford & Risberg, Inc., 148 Wis.2d 910, 921, 437 N.W.2d 213, 217 (1989)). Economic loss includes both direct and consequential economic loss. See Northridge Co. v. W.R. Grace & Co., 162 Wis.2d 918, 925-26, 471 N.W.2d 179, 181-82 (1991). Direct economic loss encompasses damage based on insufficient product value and may be measured by costs or repair and replacement. Id. at 926, 471 N.W.2d at 181-82; see also Daanen & Janssen, 216 Wis.2d at 400, 573 N.W.2d at 845. Consequential economic damages are indirect losses such as lost profits from the inability to use the defective product. Northridge, 162 Wis.2d at 926, 471 N.W.2d at 182. Simply put, economic loss is damage to a product itself or monetary loss caused by a defective product that does not cause personal injury or damage to other property. See Daanen & Janssen, 216 Wis.2d at 401, 573 N.W.2d at 845.
In Daanen & Janssen, 216 Wis.2d at 401-02, 573 N.W.2d at 845-46, our supreme court held that the economic loss doctrine bars a remote commercial purchaser of a product from recovering in tort from a manufacturer for solely economic losses, even in the absence of privity. Here, Biese is a remote commercial purchaser; Parker is a manufacturer; the parties are not in privity; Biese claims solely economic losses; and Biese does not allege personal injury or physical harm to property other than the defective product itself. Under these circumstances, Biese's remedy for its defective product lies primarily in a breach of warranty claim, not tort. See Northridge, 162 Wis.2d at 926, 471 N.W.2d at 182.
However, Biese filed an action against Parker alleging negligence, not a claim for breach of warranty. While his complaint alleges that Parker was negligent in two respects (providing a defective floor "and/or" negligently providing services), his sole argument is that the trial court erred by applying the economic loss doctrine to bar his claim for negligent provision of services. Although Daanen & Janssen provides that the economic loss doctrine bars a remote commercial purchaser of a product from recovering solely economic losses in tort against a manufacturer, our supreme court expressly did not address whether the doctrine applies with equal force to damages resulting from the provision of services. Id. at 415-16, 573 N.W.2d at 851-52.
Parker argues that under Van Sistine v. Tollard, 95 Wis.2d 678, 684, 291 N.W.2d 636, 639 (Ct.App.1980), and analogous federal case law, the economic loss doctrine bars Biese's claim for negligent provision of services because any services it provided to Biese were incidental to the sale of flooring materials. In Van Sistine, a homeowner and a siding contractor entered into two contracts for improvements to the homeowner's house. Id. at 684-85, 291 N.W.2d at 639. Adopting the reasoning of Bonebrake v. Cox, 499 F.2d 951, 960 (8th Cir.1974), we applied the predominant purpose test to determine whether a mixed contract, one for both goods and services, between a non-commercial party and a commercial party, was subject to the Uniform Commercial Code. To determine whether a mixed contract for goods and services is a sale of goods under the Uniform Commercial Code, ch. 402, STATS., 4 the test is "whether their predominant factor, their thrust, their purpose, reasonably stated, is the rendition of a service, with goods incidentally involved (e.g., contract with artist for painting) or is a transaction of sale, with labor incidentally involved (e.g., installation of a water heater in a bathroom)." Van Sistine, 95 Wis.2d at 684, 291 N.W.2d at 639. In Van Sistine, we looked at the language of the contracts and concluded that the predominant purpose of the transaction was the furnishing of services with an incidental sale of materials because the contract's language was more in accord with services instead of sales. 5 Id. at 684-85, 291 N.W.2d at 639. Therefore, the transaction in Van Sistine was not subject to the U.C.C.
We later extended the predominant purpose test to transactions between commercial parties. In Micro-Managers, Inc. v. Gregory, 147 Wis.2d 500, 508, 434 N.W.2d 97, 100 (Ct.App.1988), we also applied the predominant purpose test to a commercial transaction between an engineering firm and a computer programming company. Based on billing statements reflecting that the charges for custom computer software were mostly for labor, we concluded that because the contract was primarily one for services,...
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