Burnham v. Mark IV Homes, Inc.

• Decision Date: 05 November 1982
• Citation: 441 N.E.2d 1027,387 Mass. 575
• Parties: Clyde BURNHAM et al. 1 v. MARK IV HOMES, INC. 2
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1027

441 N.E.2d 1027

387 Mass. 575

Clyde BURNHAM et al. ¹ v. MARK IV HOMES, INC. ²

Supreme Judicial Court of Massachusetts Franklin.

Argued May 7, 1982.

Decided Nov. 5, 1982.

Edward M. Swartz, Boston (Marguerite M. Dolan, Turners Falls and Richard B. Parker, Boston, with him), for plaintiffs.

David Burres, Amherst, for defendant.

Francis X. Bellotti, Atty. Gen., amicus curiae, and John T. Montgomery, Susan H. Frey and John J. Roddy, Asst. Attys. Gen., submitted a brief.

Before HENNESSEY, C.J., and WILKINS, LIACOS, ABRAMS, NOLAN, LYNCH and O'CONNOR, JJ.

LYNCH, Justice.

Clyde Burnham and fourteen other plaintiffs, representing nine households, purchased nine modular homes ³ which had been manufactured by Mark IV Homes, Inc. ⁴ (Mark IV), in a factory in Pennsylvania. The plaintiffs, seeking to recover for negligence, breaches of warranty, and violations of G.L. c. 93A, brought suit against Mark IV. At the close of the plaintiffs' case, the trial judge allowed Mark IV's motion to dismiss the c. 93A claims. ⁵ The jury returned a verdict for the plaintiffs on the remaining counts. The plaintiffs appealed claiming that the judge had erred in dismissing their c. 93A counts. Mark IV also appealed alleging various errors of law. We transferred the case here on our own motion. We affirm the judgment against Mark IV on its counterclaim. We conclude, further, that the exemption relied on by Mark IV, G.L. c. 93A, § 3(1)(b ), does not apply, and consequently remand for further proceedings as to this aspect of the case.

The jury verdict established that Mark IV breached the implied warranty of merchantability. See G.L. c. 106, § 2-314. In the circumstances, that breach was a violation of G.L. c. 93A, § 2. The plaintiffs, therefore, are entitled to recover their reasonable attorney's fees and costs, G.L. c. 93A, § 9(4), which the judge shall determine on remand. We remand the case also for him to determine whether, upon demand, Mark IV refused to grant relief to the plaintiffs in bad faith with knowledge or reason to know that the act or practice complained of violated G.L. c. 93A, § 2, and for him to assess damages if appropriate in accordance with that determination.

1. Background. The evidence tended to prove the following. Eugene Kapper, doing business as Snow's Modular and Mobile Home Sales (Kapper) from his place of business in Winchester, New Hampshire (a few miles north of the Massachusetts border), sold modular homes manufactured by Mark IV as Mark IV's dealer. The plaintiff Stone purchased at least six Mark IV homes from Kapper over a period of several months beginning in November, 1973. He first looked at a model of these homes located on Kapper's lot, and then placed orders for the units to be delivered in Massachusetts. Stone paid a deposit to Kapper's agent, who was located in Massachusetts. Stone had Kapper transport the units to Orange and assemble them on foundations prepared by Stone. Within one year of his first purchase from Kapper, Stone had sold five of the units to other plaintiffs in this action, retaining one for his own use. ⁶ The plaintiffs Heath, Chaisson, and Garbiel purchased their modular units directly from Kapper, after viewing models of those units at Kapper's lot in New Hampshire. These plaintiffs also had Kapper transport their units to sites in Massachusetts and assemble them on foundations here.

At various times within a few months of installation, the roofs of the plaintiffs' units began to leak. During the winter, snow built up on the relatively flat roofs of their units and, since these roofs did not overhang the sides of the units, melted snow ran down their outside walls, saturating the walls and occasionally covering walls, windows, and doors with sheets of ice. Water pipes in some of the units also froze in the winter, allegedly due to improper placement and insulation.

Employees of Kapper and, eventually, the plaintiffs themselves, attempted to solve the leakage problems by applying liquid sealers to some of the roofs. These attempts did not prevent leakage for any significant length of time. Other plaintiffs had new roofs laid over the old, which stopped the leakage. By letters dated September 3, 1975, an attorney representing Stone and the five households that had purchased units from him notified both Kapper and Mark IV of the problems with their units, and of their intention to file suit if those problems were not remedied. Mark IV sent two workmen who made attempts at repairing some of the units by caulking and coating the roofs. The workmen, however, did not replace any of the plaintiffs' roofs. Leakage problems continued, Mark IV declined to make further repairs, and this suit resulted. At trial, Mark IV asserted that the flaws in the plaintiffs' units (at least those involving leakage through the roofs) were the result of improper installation, for which Stone allegedly was responsible in part. ⁷ We will discuss other evidence as it is relevant to the issues raised by this appeal.

2. Exemption from G.L. c. 93A liability. Mark IV based its motion to dismiss the plaintiffs' c. 93A claims solely on its entitlement to the exemption from liability created by c. 93A, § 3(1)(b ). ⁸ Since the judge granted Mark IV's motion without making findings of fact, we assume (with the parties) that he accepted Mark IV's argument. The plaintiffs argue that the judge erred in granting Mark IV's motion. We agree.

The parties stipulated at trial that the only issue raised by the judge's granting of Mark IV's motion to dismiss is whether the transactions and actions complained of by the plaintiffs occurred "primarily and substantially within the commonwealth." G.L. c. 93A, § 3(1)(b )(i ). Section 3(2) states that "the burden of proving exemption from the provisions of this chapter shall be upon the person claiming the exemption." In order to prove its entitlement to the exemption from liability contained in § 3(1)(b ), a defendant in a c. 93A claim must prove, not only that it derives twenty percent or more of its gross revenue from interstate commerce, but also that the "transactions and actions" complained of did not occur "primarily and substantially within the commonwealth." The Legislature's use of the terms "primarily and substantially," precludes, at a minimum, a construction of § 3 that would allow a c. 93A action in every instance in which the defendant's transactions and actions "within the commonwealth" would subject him to the jurisdiction under our long-arm statute, G.L. c. 223A. The facts of the case before us do not require us to define the outer boundaries of those transactions and actions which may be held to have occurred primarily and substantially within the Commonwealth, because the evidence was insufficient to warrant a finding that Mark IV's actions and transactions constituting violations of G.L. c. 93A, § 2, did not occur primarily and substantially within the Commonwealth. ⁹ Accordingly, the judge erred in granting Mark IV's motion to dismiss the plaintiffs' G.L. c. 93A claims.

One of the theories on which the plaintiffs' case was submitted to the jury was that Mark IV had breached the implied warranty of merchantability set forth in G.L. c. 106, § 2-314. The Attorney General, pursuant to the authority granted him by G.L. c. 93A, § 2(c ), has promulgated a regulation declaring that "[i]t shall be an unfair and deceptive act or practice to fail to perform or fulfill any promises or obligations arising under a warranty." ¹⁰ Breach of an implied warranty of merchantability therefore constitutes an unfair and deceptive act or practice under G.L. c. 93A, § 2. Hannon v. Original Gunite Aquatech Pools, Inc., 385 Mass. 813, 821, 434 N.E.2d 611 (1982).

The sales of the modular homes to the plaintiffs constituted "transactions in goods" under G.L. c. 106, § 2-102, because those units were "movable at the time of identification to the contract for sale" and hence are "goods" as defined in c. 106, § 2-105(1). Fuqua Homes, Inc. v. Evanston Bldg. & Loan Co., 52 Ohio App.2d 399, 403-404, 370 N.E.2d 780 (1971). Mark IV does not dispute that it is a merchant with respect to goods of that kind. G.L. c. 106, § 2-314(1). Lack of privity between Mark IV, a manufacturer, and the plaintiffs, is no longer a defense. G.L. c. 106, § 2-318. Mark IV therefore impliedly warranted that the modular home units sold to the plaintiffs would be "fit for the ordinary purposes for which such goods are used" (G.L. c. 106, § 2-314[c ] ), i.e., for residential purposes. See Performance Motors, Inc. v. Allen, 280 N.C. 385, 394, 186 S.E.2d 161 (1972) (mobile home). Based on the evidence introduced at trial, the conclusion was warranted that the modular units manufactured by Mark IV and sold to the plaintiffs were not fit for residential purposes at the time of sale because the roofs of those units were not watertight.

The question dispositive of the plaintiffs' appeal is whether Mark IV presented evidence warranting a finding that its breach of the implied warranty of merchantability did not occur "primarily and substantially within the commonwealth." G.L. c. 93A, § 3(1)(b )(i). The evidence is undisputed that the sales of Mark IV units to the plaintiffs included delivery to sites in Massachusetts and installation on foundations here. As Mark IV's owner's manual makes clear, the defendant intended that delivery and installation of its units would be the responsibility of its dealers. Each of the plaintiffs' units was delivered and installed by Kapper, a dealer of Mark IV units. The sales of the plaintiffs' units could not have been completed until delivery and installation had taken place. The transactions and actions of Mark IV constituting a breach of the implied warranty of merchantability therefore occurred, not only "primarily and substantially," but entirely, in Massachusetts. Hence, the judge erred in holding that Mark IV had met its burden of proving its entitlement...