Cooley v. Big Horn Harvestore Systems, Inc.

• Decision Date: 24 June 1991
• Docket Number: No. 88SC420,88SC420
• Citation: 813 P.2d 736
• Parties: 14 UCC Rep.Serv.2d 977 Robert COOLEY and Rita Cooley, d/b/a Cooley Dairy; Donald Weed; Ben Konishi, D.V.M.; Pamela Ann Konishi; Mark Konishi; and Jeffrey Konishi, Petitioners and Cross-Respondents, v. BIG HORN HARVESTORE SYSTEMS, INC., a Colorado corporation, and A.O. Smith Harvestore Products, Inc., a Delaware corporation, Respondents and Cross-Petitioners.
• Court: Colorado Supreme Court

Page 736

813 P.2d 736

14 UCC Rep.Serv.2d 977

Robert COOLEY and Rita Cooley, d/b/a Cooley Dairy; Donald

Weed; Ben Konishi, D.V.M.; Pamela Ann Konishi;

Mark Konishi; and Jeffrey Konishi, Petitioners and Cross-Respondents, v. BIG HORN HARVESTORE SYSTEMS, INC., a Colorado corporation, and A.O. Smith Harvestore Products, Inc., a

Delaware corporation, Respondents and Cross-Petitioners.

No. 88SC420.

Supreme Court of Colorado,

En Banc.

June 24, 1991.

Rehearing Denied July 15, 1991.

Wood, Ris & Hames, P.C., E. Gregory Martin, Denver, Wilfred R. Mann, Boulder, for petitioners and cross-respondents.

Richard J. Banta, Bernard W. Messer, Englewood, for respondent and cross-petitioner Big Horn Harvestore Systems, Inc.

The Law Firm of Michael S. Porter, Michael S. Porter, Wheat Ridge, Frances A. Benedetti, Wray, for respondent and cross-petitioner A.O. Smith Harvestore Products, Inc.

Justice KIRSHBAUM delivered the Opinion of the Court.

In Cooley v. Big Horn Harvestore Systems, Inc., 767 P.2d 740 (Colo.App.1988), the Colorado Court of Appeals affirmed in part and reversed in part a judgment entered on a jury verdict in favor of the petitioners and cross-respondents, plaintiffs at trial, and against respondents and cross-petitioners, defendants at trial. Having granted certiorari to consider the propriety of the Court of Appeals decision, we affirm in part, reverse in part, and remand the case with directions.

I

In July 1980, plaintiffs Robert Cooley and Rita Cooley executed two agreements with defendant Big Horn Harvestore Systems, Inc. (hereinafter Big Horn), in connection with their purchase of a Harvestore automated grain storage and distribution system for use in their dairy operation. Big Horn is an independent distributor of Harvestore systems pursuant to agreements with defendant A.O. Smith Harvestore Products, Inc. (hereinafter AOSHPI), the manufacturer of the Harvestore system. ¹ The Cooleys purchased the Harvestore The Harvestore system is designed to enhance the nutritional quality of cattle feed by means of an in-silo fermentation process. An essential feature of the system is its asserted ability to limit oxygen contact with the feed, thus facilitating long-term storage of grain. The Harvestore silo itself is composed of glass-fused-to-steel panels. The silo also features breather bags which expand or contract to equalize the pressure inside and outside the silo no matter how frequently outside temperature patterns might vary. Because the oxygen exchange takes place completely within the breather bags, damaging oxygen contact with the feed is limited. During the two years prior to the sale, Big Horn provided the Cooleys with numerous promotional materials prepared by AOSHPI, including films, videotapes, pamphlets, and a book explaining the Harvestore system.

                system to improve the efficiency and productivity of their dairy.  Plaintiffs Donald Weed;  Ben Konishi, D.V.M.;   Pamela Konishi;  Mark Konishi;  and Jeffrey Konishi are owners of cows placed in the Cooleys' dairy herd pursuant to an agreement obligating the Cooleys to care for and feed the cows in return for the right to retain the proceeds of sale of milk produced by those cows
                

In early 1981, the Cooleys began to feed their herd with grain stored in the Harvestore system. Shortly thereafter, the health of the herd began to deteriorate and milk production substantially declined. The Cooleys informed Big Horn of these developments, and over the succeeding eighteen months Big Horn representatives made repairs to the structure, gave advice to the Cooleys concerning feed ratios, and assured the Cooleys that the system was functioning properly.

The health of the cows continued to deteriorate. Some died, and the Cooleys ultimately sold the remainder of the herd in 1983. The plaintiffs then filed this action against Big Horn and AOSHPI seeking damages based on claims of breach of implied warranties of merchantability and fitness for a particular purpose, breach of express warranties, breach of contract because of the failure of essential purpose of a limited remedy of suit for breach of warranty to repair or replace any defective part thereof (hereinafter referred to as the "failure of essential purpose" claim), negligence, deceit, and revocation of acceptance. ²

Prior to the commencement of trial, the trial court entered summary judgment in favor of the defendants and against the plaintiffs on all claims of breach of implied warranties and breach of express warranties. The claims alleging revocation of acceptance and deceit were also dismissed by the trial court. The jury was instructed solely on the claim against AOSHPI and Big Horn for failure of essential purpose of the warranty and on a claim against Big Horn for negligence in recommending improper nutritional programs.

The jury returned a verdict in favor of the plaintiffs and against Big Horn on the negligence claim in the total amount of $87,723.77. The jury also returned a verdict in favor of the plaintiffs and against both Big Horn and AOSHPI in the amount of $245,077.26 on the failure of essential purpose claim. In special verdict forms, the jury assigned seventy-five percent liability to Big Horn and twenty-five percent liability to AOSHPI on the failure of essential purpose claim. The jury also found Big Horn ninety percent negligent and the Cooleys ten percent negligent on the negligence claim. The trial court therefore reduced the amount of damages recoverable On appeal, the Court of Appeals affirmed the negligence verdict against Big Horn but reversed the failure of essential purpose verdict against AOSHPI and Big Horn. The court held that the plaintiffs were barred from asserting their failure of essential purpose claim because AOSHPI was entitled to receive timely notice of the claim pursuant to section 4-2-607(3)(a), 2 C.R.S. (1973), of the Colorado Commercial Code (hereinafter the Code) and the plaintiffs did not give such notice to AOSHPI. The court reversed the failure of essential purpose verdict against Big Horn on the ground that the purchase agreement limited Big Horn's responsibility to proper installation of the Harvestore system and the evidence did not establish any failure of installation. ³ Observing that it could not determine what factors were considered by the jury in its calculations of damages on the negligence claim, and determining that the plaintiffs were entitled to recover damages for economic loss on their negligence claim, the Court of Appeals remanded the case for a new trial on the issue of the amount of damages attributable to Big Horn's negligence.

on the negligence claim to the sum of $78,951.40. The trial court also determined that the award of damages returned by the jury on the negligence claim duplicated a portion of the award of damages returned on the failure of essential purpose claim. The trial court ultimately entered judgment for the plaintiffs and against Big Horn and AOSHPI in the amount of $245,077.26.

We granted the plaintiffs' petition for certiorari and the defendants' cross-petitions for certiorari to consider the following issues: whether section 4-2-607(3)(a), 2 C.R.S. (1973), requires notice to a remote manufacturer as a condition precedent to the initiation of a breach of contract claim based on the failure of essential purpose doctrine; whether evidence of specific defects in material or workmanship is essential to a failure of essential purpose claim; whether a contractual disclaimer of consequential damages is rendered invalid by the establishment of a failure of essential purpose claim; whether an exculpatory clause was sufficient to disclaim negligence in providing nutritional advice; whether the record contains sufficient evidence to establish the plaintiffs' claim of negligent nutritional advice; and whether the case should be remanded for retrial on the issue of damages. ⁴

II

The Court of Appeals held that a commercial buyer seeking recovery from a manufacturer for a breach of contract claim resulting in property damage alone must, pursuant to the provisions of section 4-2-607(3)(a), 2 C.R.S. (1973), give the manufacturer timely notice of the claimed breach as a condition precedent to any recovery. The plaintiffs contend that they complied with the notice provisions of the statute by giving timely notice of their failure of essential purpose claim to Big Horn. We agree with the plaintiffs' contention.

Section 4-2-607(3)(a), 2 C.R.S. (1973), provides that "[w]here a tender has been accepted: (a) [t]he buyer must within a reasonable time after he discovers or should have discovered any breach, notify the seller of breach or be barred from any remedy...." This provision serves as a condition precedent to a buyer's right to recover for breach of contract under the statute. Palmer v. A.H. Robins Co., 684 P.2d 187, 206 (Colo.1984). The question of what constitutes a reasonable time is dependent on the circumstances of each case. White v. Mississippi Order Buyers, Inc., 648 P.2d 682 (Colo.App.1982). The parties agree that the plaintiffs gave timely notice to Big Horn of their claim but did not directly notify AOSHPI of such claim.

The notice provision of section 4-2-607(3)(a) serves three primary purposes. It In Palmer v. A.H. Robins Co., 684 P.2d 187, this court construed the statute's notice provision in the context of a product liability action. In Palmer, a consumer injured through use of a defective intrauterine device sought recovery for damages against the manufacturer of the product, A.H. Robins Co. Although the plaintiff, prior to initiating litigation, notified the immediate seller, her doctor, of the fact that she allegedly sustained injuries as a result of defects in the product, she did not so notify Robins. Robins argued that the plaintiff's claims against it should be dismissed for failure to comply with section 4-2-607(3)(a).

provides the seller with an opportunity to correct defects, gives the...