CONTROLLED ENVIRONMENTS v. KEY INDUSTRIAL
| Citation | 670 N.W.2d 771,266 Neb. 927 |
| Decision Date | 31 October 2003 |
| Docket Number | No. S-02-708.,S-02-708. |
| Parties | CONTROLLED ENVIRONMENTS CONSTRUCTION, INC., a California corporation, Appellant, v. KEY INDUSTRIAL REFRIGERATION CO., a California corporation, Defendant, Hill-Phoenix, Inc., a Delaware corporation, Defendant and Third-Party Plaintiff, and Refrigeration Equipment Specialists, Third-Party Defendant, Appellees. |
| Court | Supreme Court of Nebraska |
David S. Houghton and J.P. Sam King, of Lieben, Whitted, Houghton, Slowiaczek & Cavanagh, P.C., L.L.O., Omaha, for appellant.
Mary Kay Frank, Omaha, of Cline, Williams, Wright, Johnson & Oldfather, and Brian W. McGrath and G. Michael Halfenger, of Foley & Lardner, Milwaukee, WI, for appellee Hill-Phoenix, Inc.
Michael A. Nelsen, of Hillman, Forman, Nelsen, Childers & McCormack, for appellee Key Industrial Refrigeration Co.
Controlled Environments Construction, Inc. (CEC), sued Key Industrial Refrigeration Co. (Key) and Hill-Phoenix, Inc., for breaches of contract and warranty arising out of two separate construction contracts to build refrigeration facilities in Omaha, Nebraska, and Minot, North Dakota. Essentially, CEC alleged that Hill-Phoenix sold defective refrigeration equipment to Key and that Key then sold that equipment to CEC for use in the construction projects they were undertaking for Food Services of America, Inc. (FSA). Only the warranty claims arising out of the Minot project are at issue in this appeal.
The district court determined that the Hill-Phoenix warranty extended to future performance and that the breach of warranty was or should have been discovered by CEC by January or February 1994. As such, the court concluded that CEC's warranty claims—filed in July 1998—were barred by the 4-year statute of limitations for the sale of goods, Neb. U.C.C. § 2-725 (Reissue 2001), and entered summary judgments for Hill-Phoenix and Key. CEC appeals.
In June 1992, CEC contracted with FSA to construct a building in Omaha. In June 1993, CEC entered into a second contract with FSA to construct a similar building in Minot. Shortly thereafter, CEC entered into agreements with Key. Under these agreements, Key was to design and provide the refrigeration equipment for the Minot and Omaha projects in accordance with the specifications set out in the contracts between FSA and CEC. As relevant here, Key was to provide a Hill-Phoenix Para-Temp Rack System (Rack System) and associated equipment at each location.
Hill-Phoenix provided a 1-year limited express warranty under which each Rack System was "WARRANTED TO BE FREE FROM DEFECTS IN MATERIAL AND WORKMANSHIP ... FOR A PERIOD OF ONE YEAR." Hill-Phoenix also provided a 4-year extended warranty on compressors. In turn, Key extended the "manufacturer's One (1) year warranty against defects in material and workmanship in parts ... to the owner."
FSA experienced failures of the refrigeration equipment almost immediately upon installation. The cause, nature, and severity of the failures in the Minot system are matters of dispute between the parties. It is clear, however, that for the next few years, CEC, Hill-Phoenix, and Key made repeated attempts to remedy the problems and provide FSA with a properly functioning refrigeration system.
On May 23, 1995, John Vana, the vice president of engineering of Hill-Phoenix, wrote a memorandum to CEC and others. In it, Hill-Phoenix promised to warrant the unit in Minot "for parts for one year with a four year extended warranty on the compressors to be honored," after certain changes were made to the Rack System. When asked in his deposition if Hill-Phoenix was extending a new warranty, Vana stated, "After the work was done we were going to warrant it as if it shipped from the factory," and that it was his "intent to extend the warranty for a year ... from the time all changes were made." CEC contends that within 3 months after receipt of this memorandum, it had completed the changes requested by Hill-Phoenix.
The problems in Minot continued, and in a letter dated February 27, 1996, Hamid Shekarbakht, an employee of Hill-Phoenix, advised Gary Guesman, the president of CEC, that Hill-Phoenix would no longer participate in further attempts to resolve existing or future problems with the Rack System.
On July 16, 1998, CEC sued Hill-Phoenix and Key for breach of contract and breach of warranty based on the problems at the projects in Minot and Omaha. In general, CEC alleged that the refrigeration systems in Minot and Omaha repeatedly malfunctioned. More specifically, CEC alleged that the Hill-Phoenix Rack Systems were defective and that Key and Hill-Phoenix failed to fix the refrigeration systems.
Hill-Phoenix moved for summary judgment on January 19, 1999. By order dated June 1, 1999, the district court found there was no written contract between Hill-Phoenix and CEC, and granted summary judgment for Hill-Phoenix on CEC's contract claim. By the same order, the court found there was a genuine issue of material fact as to whether Hill-Phoenix breached its express limited warranty and the implied warranties of merchantability and fitness for a particular purpose. CEC is not appealing any part of this order.
On August 23, 2000, Hill-Phoenix filed a second motion for summary judgment. The court granted summary judgment for Hill-Phoenix on claims arising out of the Minot project, finding the statute of limitations had run on the warranty claims. The court denied Hill-Phoenix's motion for summary judgment on claims arising out of the Omaha project, finding material issues of fact remained as to whether CEC gave sufficient notice of the breach to Hill-Phoenix.
Key moved for summary judgment on December 13, 2001. The court granted Key's motion for summary judgment in part, finding CEC's causes of action arising out of the Minot project were barred by the statute of limitations. The court denied Key's motion for summary judgment on claims arising out of the Omaha project. On June 24, 2002, the court, finding no just reason to delay entry of a final judgment for some of the disputed claims, issued a final order pursuant to Neb.Rev.Stat. § 25-1315(1) (Cum.Supp.2000) on all of CEC's claims relating to the Minot project. As mentioned previously, only the warranty claims relating to the system in Minot are at issue in this appeal.
CEC assigns, restated and renumbered, that the court erred in (1) concluding that CEC's claims against Hill-Phoenix for breach of express and implied warranties on the Rack System were barred by the statute of limitations pursuant to § 2-725; (2) determining no genuine issue of material fact existed as to when CEC discovered or should have discovered the breach of warranty by Hill-Phoenix; (3) failing to find that Hill-Phoenix provided a new express warranty on or near August 23, 1995; (4) failing to find Hill-Phoenix breached its 4-year warranty on the compressors; (5) determining the contract between Key and CEC was one for the sale of goods, governed by the Uniform Commercial Code; and (6) concluding that CEC's claims against Key for breach of express and implied warranties on the Rack System were barred by the statute of limitations pursuant to § 2-725.
Summary judgment is proper when the pleadings and the evidence admitted at the hearing disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law. Finch v. Farmers Ins. Exch., 265 Neb. 277, 656 N.W.2d 262 (2003).
In reviewing an order for summary judgment, an appellate court views the evidence in a light most favorable to the party against whom the judgment was granted and gives such party the benefit of all reasonable inferences deducible from the evidence. Zannini v. Ameritrade Holding Corp., 266 Neb. 492, 667 N.W.2d 222 (2003).
CEC and Hill-Phoenix agree that the transaction for the Rack System supplied by Hill-Phoenix is governed by the Nebraska Uniform Commercial Code and that the applicable statute of limitations for claims arising out of that sale is § 2-725. The relevant sections of § 2-725 state:
(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one 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.
CEC alleged, and the district court found, that the warranty issued by Hill-Phoenix explicitly extended to future performance, tolling the accrual of the statute of limitations until the breach of warranty was or should have been discovered by CEC. The warranty states, in relevant part:
The existence of future performance warranties has been a highly...
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