Church of the Nativity of Our Lord v. WatPro, Inc., C5-91-99

• Decision Date: 20 August 1991
• Docket Number: No. C5-91-99,C5-91-99
• Citation: 474 N.W.2d 605
• Parties: 15 UCC Rep.Serv.2d 830 The CHURCH OF THE NATIVITY OF OUR LORD, Respondent, v. WATPRO, INC., Respondent, Flag, S.p.A., a/k/a Flag, S.A.S., et al., MacArthur Company, Defendants, Montedison, S.p.A., et al., Appellants.
• Court: Minnesota Court of Appeals

Page 605

474 N.W.2d 605

15 UCC Rep.Serv.2d 830

The CHURCH OF THE NATIVITY OF OUR LORD, Respondent, v. WATPRO, INC., Respondent Flag, S.p.A., a/k/a Flag, S.A.S., et al., MacArthur Company Defendants Montedison, S.p.A., et al., Appellants.

No. C5-91-99.

Court of Appeals of Minnesota.

Aug. 20, 1991.

Review Granted Oct. 11, 1991.

Review Denied Nov. 26, 1991.

Syllabus by the Court

1. Minn.Stat. Sec. 336.2-607 (1990) requires notice of defect only to a buyer's immediate seller and not other sellers in the chain of distribution.

2. A subagent's actions bind the principal in a breach of contract claim.

3. Where an agent's actions toll the statute of limitations, the buyer's action against the principal is not barred.

4. The Consumer Fraud Act applies to all consumers, and may be violated by a

negligent or unintentional misrepresentation.

5. The jury's finding of a "co-venturer" is consistent with the evidence.

Elizabeth Hoene Martin, John D. Docken, Michael R. Docherty, Doherty, Rumble & Butler, P.A., St. Paul, for the Church of the Nativity of Our Lord.

Katherine L. MacKinnon, John T. Chapman, Arthur, Chapman & McDonough, P.A., Minneapolis, for WatPro, Inc.

Harry T. Neimeyer, Stringer & Rohleder, Ltd., St. Paul, for MacArthur Co.

Corey J. Ayling, McGrann Shea Franzen Carnival Straughn & Lamb, Chartered, Minneapolis, Anthony M. Watkins, Mesirov Gelman Jaffe Cramer & Jamieson, Philadelphia, Pa., for appellants.

Considered and decided by KALITOWSKI, P.J., and KLAPHAKE and AMUNDSON, JJ.

OPINION

KLAPHAKE, Judge.

Respondent Church of the Nativity of Our Lord (Nativity) brought this action against Flag, S.p.A., WatPro, Inc. and MacArthur Co. in August 1987 for breach of express warranties, breach of contract, breach of implied warranties of merchantability and fitness for a particular purpose, failure of essential purpose, negligent misrepresentation and violation of the Minnesota Consumer Fraud Law regarding repairs made to Nativity's roof. A default judgment was entered against Flag in January 1988. On August 24, 1989, WatPro served a third-party complaint on Montedison, U.S.A. and Montedison, S.p.A. (collectively Montedison).

At trial, Nativity's motion to allow direct claims against Montedison was granted. At the same time, the trial court allowed WatPro and MacArthur to cross-claim against Montedison and Montedison to bring cross-claims against WatPro and MacArthur. The trial court denied all motions for a directed verdict.

By special verdict, the jury found that WatPro and Montedison breached express warranties and implied warranties of merchantability and fitness for use; that they were liable under theories of breach of contract and negligent misrepresentation; and that they violated the Minnesota Consumer Fraud Act, Minn.Stat. Sec. 325F.69 (1990). The jury further found Montedison liable for misrepresentations to WatPro. The jury also concluded that Flag was an agent of Montedison and WatPro was an agent of Flag. As compensatory damages, the jury awarded Nativity $10,993.22 for roof repairs prior to replacement, $175,558 for roof replacement and $5,700.99 for interior damage caused by leaking.

The trial court denied Montedison's post-trial motions for judgment notwithstanding the verdict or a new trial and amended findings. The trial court granted Nativity's motion for prejudgment interest, costs and attorney fees. Judgment was entered against WatPro and Montedison jointly and severally for the full awards and in favor of WatPro for full indemnity. Montedison appeals from the judgment and order denying its post-trial motions. We affirm.

FACTS

In early 1980, architect Larry Johnson of Voight and Fourre advised Nativity that the roofs on its convent and school needed repairs. Of two possible building contractors, Nativity selected Ampco, Inc. to make the repairs and signed a contract with Ampco on May 8, 1980 (first phase). The contract provided for the use of flagon roofing material, a PVC roofing membrane designed to form a water-tight barrier when placed on a roof. Ampco used flagon SF and flagon C on the Nativity roofing project.

Ampco purchased the flagon from defendant MacArthur Co., the regional supplier. MacArthur, in turn, purchased the flagon from WatPro, the sole distributor of flagon in the United States. WatPro purchased the flagon from Flag, who manufactured and shipped the flagon to WatPro in the United States. Flag manufactured the flagon under Montedison's supervision and control. Montedison was the sole supplier and source of technology to Flag. Montedison, U.S.A. was the wholly-owned subsidiary of Montedison, S.p.A. and coordinated all phases of the marketing and distribution of flagon.

The first phase was completed in August 1980. Following completion of the roof installation, WatPro issued two consecutive five-year guarantees of the flagon material. The guarantees covered the periods 1980 through 1990.

Nativity and Ampco entered into a second contract on April 6, 1982, to repair the flat surfaces of the school building (phase two). This work was completed in July 1982. After completion, WatPro again issued two consecutive five-year guarantees covering the periods 1982 through 1987 and 1987 through 1992.

In December 1980, following the completion of phase one, Nativity representatives discovered a leak in the roof of the convent. Patching was undertaken at the same time the second phase of the reroofing project was completed. Soon after Ampco completed phase two, new leaks were discovered in the roof of the school. The cause of the leaks was determined to be the flagon material.

The roofs continued to shrink, split, crack, and tent through October 1984. Nativity's maintenance staff regularly inspected the roofs to avoid serious interior damage through leakage. Each time Nativity discovered a leak it notified Ampco, MacArthur and WatPro.

In November 1984, Nativity gave WatPro formal written notice of the continuing problem with the flagon and requested that WatPro either replace the flagon or repair it with an accompanying five-year extended guarantee. In response, WatPro authorized emergency repairs and extended the guarantee. Despite WatPro's repairs, however, the roofs continued to deteriorate. In February 1987, WatPro informed Nativity that it would not reimburse Nativity for any additional roof repairs unless Nativity released WatPro from all liability.

Nativity then hired Twin City Testing (TCT) to advise it on whether to replace or repair the roof. Nativity followed TCT's recommendation to remove and replace the flagon with a different roofing material to avoid further interior damage. The reroofing project was completed in August 1987 at a cost of $175,558.15. During the reroofing project, Nativity instituted this action to recover the cost of replacing the roof and other out-of-pocket expenses.

ISSUES

I. Does Minn.Stat. Sec. 336.2-607 (1990) require notice of warranty defect to anyone other than an immediate seller?

II. Did privity of contract exist between Nativity and Montedison?

III. Was Nativity's cause of action against Montedison barred by any applicable statute of limitations?

IV. Were Nativity's claims for negligent misrepresentation and violation of the Consumer Fraud Act preempted by the U.C.C.?

V. Did the trial court err in: 1) allowing Nativity's claim under the Minnesota Consumer Fraud Act to go to the jury; or 2) in awarding attorney fees under the Minnesota Consumer Fraud Act?

VI. Was there sufficient evidence to justify the jury's finding of liability against Montedison?

ANALYSIS

I.

Montedison first argues that the trial court erred in not concluding that the notice of defect provision in Minn.Stat. Sec. 336.2-607(3)(a) (1990) requires notice to a remote manufacturer as well as an immediate seller. It contends that in order to hold a manufacturer liable for a buyer's losses, the manufacturer needs the same protection of timely notice as the buyer's immediate seller. Because this issue presents a pure question of law, this court has de novo review of the trial court's ruling. See A.J. Chromy Constr. Co. v. Commercial Mechanical Servs., Inc., 260 N.W.2d 579, 582 (Minn.1977).

Minn.Stat. Sec. 336.2-607(3)(a) ¹ provides that a buyer must notify a "seller" of a breach of warranty within a reasonable time:

(3) Where a tender has been accepted

(a) the buyer must within a reasonable time after the buyer discovers or should have discovered any breach notify the seller of breach or be barred from any remedy.

Minn.Stat. Sec. 336.2-503(1) (1990) defines "tender" to require the seller to "put and hold conforming goods at the buyer's disposition and give the buyer any notification reasonably necessary to enable the buyer to take delivery." The legislature has defined "seller" as one "who sells or contracts to sell goods." Minn.Stat. Sec. 336.2-103(1)(d) (1990).

The notice requirement in a breach of warranty action serves three purposes: (1) it affords the seller an opportunity to correct any defect; (2) it provides the seller an opportunity to prepare for negotiation and litigation; and (3) it affords the seller a safeguard against stale claims being asserted after it is too late to investigate them. 1 J. White and R. Summers, Uniform Commercial Code Sec. 11-10 at 554-55 (3d ed. 1988). Generally, compliance with the notice requirement is a condition precedent to recovery for a breach of warranty claim under the Uniform Commercial Code. Id. at 554.

The Minnesota legislature abrogated its privity requirement in 1969. 1969 Minn.Laws ch. 621, Sec. 6. Under the new provision, a seller's warranty extends to any person who can reasonably be expected to use or to be affected by the goods and who was injured by the breach, irrespective of privity of contract. Minn.Stat. Sec. 336.2-318 (1990). Prior to the abolition of the privity requirement, the Article 2 warranties ran only from the buyer to the immediate seller. Thus, the term "seller" in Sec. 2-607(3...