Corvias Military Living, LLC v. Ventamatic, Ltd.

• Citation: 397 P.3d 441,54 Kan.App.2d 169
• Decision Date: 02 June 2017
• Docket Number: No. 116,307,116,307
• Parties: CORVIAS MILITARY LIVING, LLC, and Corvias Military Construction, LLC, Appellants, v. VENTAMATIC, LTD., and Jakel, Inc., Appellees.
• Court: Court of Appeals of Kansas

54 Kan.App.2d 169

397 P.3d 441

CORVIAS MILITARY LIVING, LLC, and Corvias Military Construction, LLC, Appellants,

v.VENTAMATIC, LTD., and Jakel, Inc., Appellees.

No. 116,307

Court of Appeals of Kansas.

Opinion filed June 2, 2017

Charles L. Philbrick, of Rathje & Woodward, LLC, of Wheaton, Illinois, and William J. Bahr, of Arthur–Green, LLP, of Manhattan, for appellants.

James P. Nordstrom and Seth A. Lowry, of Fisher, Patterson, Sayler & Smith, L.L.P., of Topeka, for appellee Ventamatic, Ltd.

David E. Rogers and Daniel J. Buller, of Foulston Siefkin LLP, of Wichita, for appellee Jakel Motors Inc.

Before Bruns, P.J., Hill and Schroeder, JJ.

Bruns, J.:

Corvias Military Living, LLC, and Corvias Military Construction, LLC, (collectively referred to as "Corvias") appeal a summary judgment granted in favor of Ventamatic, Ltd., and Jakel, Inc., by the district court. Corvias originally filed this lawsuit against multiple defendants, alleging that bathroom exhaust fans installed in private housing units constructed for the families of military personnel stationed at Fort Riley were defective. Corvias claimed that a defective motor in the exhaust fans caused two fires and widespread malfunctions. Ventamatic manufactured the exhaust fans, and Jakel made the electrical motors used in the fans.

Prior to the entry of summary judgment, Corvias voluntarily dismissed all of the defendants except for Ventamatic and Jakel. In granting summary judgment to Ventamatic and Jakel, the district court found that the economic loss doctrine barred recovery. Specifically, the district court found that the bathroom exhaust fans and the housing units were integrated systems. In addition, the district court determined that Corvias could not recover under an implied warranty theory because bathroom exhaust fans are not inherently dangerous.

Because we find that the bathroom exhaust fans and the housing units are not part of an integrated system, we conclude that the district court erred in finding that the economic loss doctrine barred Corvias from proceeding on its product liability claim against Ventamatic and Jakel. In light of this conclusion, we do not reach the issue of whether the exhaust fans were inherently dangerous. Accordingly, we reverse and remand this case for further proceedings.

FACTS

Corvias built, owns, and manages the Fort Riley Privatized Family Housing Project. Over the past 10 years, Corvias has constructed a substantial number of private housing units—including houses and townhouses—for the families of military personnel stationed at Fort Riley. Through its subcontractors, Corvias purchased 3,785 "NuVent" bathroom exhaust fans manufactured by Ventamatic. Although the exact number is unclear from the record, electrical motors made by Jakel powered at least some of the exhaust fans. It is undisputed that Corvias is not in privity with either Ventamatic or Jakel.

On June 12, 2012, a fire occurred in one of the housing units at Fort Riley built by Corvias. It is alleged that a defective electrical motor in a NuVent bathroom exhaust fan that had been installed in the unit caused the fire. Several months later, on February 5, 2013, a fire occurred in another housing unit constructed by Corvias. Once again, Corvias alleged that a defective electrical motor in a NuVent bathroom exhaust fan caused the fire. Shortly after the second fire, Corvias disconnected and removed all of the remaining NuVent bathroom exhaust fans that had been installed in the housing units at Fort Riley. Corvias then replaced the NuVent fans with bathroom exhaust fans built by a different company.

Moreover, Corvias retained an expert who opined that the Jakel motor is defective because it has a coil wrapped with a material that is susceptible to catching fire. Similarly, the expert opined that the NuVent fan is defective in its design because the motor coil is exposed to airborne dust that can lead to a fire. Corvias' expert concluded that these defects caused the fires in the two housing units at Fort Riley. In addition, the expert concluded the defects would exist in all of the NuVent bathroom exhaust fans that utilized electrical motors made by Jakel.

On June 11, 2014, Corvias filed an action in Geary County District Court against Ventamatic, Jakel, and several other defendants. Subsequently, Corvias filed an amended petition in which it asserted a product liability claim, claims for breach of express and implied warranties, a quantum meruit claim, and a claim under the Magnuson–Moss Warranty Act, 15 U.S.C. § 2301 (2012). Additionally, Corvias asserted a breach of contract claim against two subcontractors involved in the purchase and installation of the NuVent bathroom exhaust fans. Ultimately, Corvias voluntarily dismissed its claims against all of the defendants except Ventamatic and Jakel.

Ventamatic and Jakel filed motions for summary judgment contending, among other things, that the economic loss doctrine precluded Corvias from recovering damages from them. Ventamatic and Jakel also asserted that Corvias could not pursue an implied warranty claim because bathroom exhaust fans are not inherently dangerous. The district court agreed and granted summary judgment to both Ventamatic and Jakel. Thereafter, Corvias filed a notice of appeal.

ANALYSIS

Standard of Review

On appeal, Corvias contends that the district court erred in granting summary judgment to Ventamatic and Jakel. Corvias argues that the district court erred in finding that its claim for damages against Ventamatic and Jakel was barred by the economic loss doctrine. In addition, Corvias argues that the district court erred in finding that it could not recover damages from Ventamatic under an implied warranty theory.

The well-known standard of review relating to summary judgments was recently summarized in Apodaca v. Willmore , 306 Kan. 103, 392 P.3d 529 (2017) :

" ‘When the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law, summary judgment is appropriate. The district court is required to resolve all facts and inferences that may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, we apply the same rules as the district court.’ " 392 P.3d at 533 (quoting Apodaca v. Willmore , 51 Kan.App.2d 534, 538, 349 P.3d 481 (2015) ).

See also K.S.A. 2016 Supp. 60–256(c)(2).

Furthermore, determining whether the economic loss doctrine applies in a case is an issue of law subject to unlimited appellate review. Rinehart v. Morton Buildings, Inc. , 297 Kan. 926, 931, 305 P.3d 622 (2013) ; see also David v. Hett , 293 Kan. 679, 682–83, 270 P.3d 1102 (2011) ; Koss Construction v. Caterpillar, Inc. , 25 Kan.App.2d 200, 201, 960 P.2d 255, rev. denied 265 Kan. 885, ––– P.2d –––– (1998).

Kansas Product Liability Act

For more than 35 years, the Kansas Product Liability Act, K.S.A. 60–3301 et seq. , has governed all product liability actions, consolidating them into one basis for liability regardless of theory. See L. 1981, ch. 231, sec. 7; David , 293 Kan. at 685, 270 P.3d 1102. In particular, the provisions of the Act apply to actions based on "strict liability in tort, negligence, breach of express or implied warranty, breach of, or failure to, discharge a duty to warn or instruct, whether negligent or innocent, misrepresentation, concealment or nondisclosure, whether negligent or innocent, or under any other substantive legal theory."K.S.A. 60–3302(c). Moreover, "comparative fault applies to all product liability claims regardless of the theory of recovery." Jones v. Tanks Plus , No. 108029, 2013 WL 678368, at *3 (Kan. App. 2013) (unpublished opinion) (citing K.S.A. 60–258 [a]; Forsythe v. Coats Co. , 230 Kan. 553, Syl. ¶ 1, 639 P.2d 43 (1982) ; Kennedy v. City of Sawyer , 228 Kan. 439, 450, 618 P.2d 788 (1980) ).

The Kansas Product Liability Act applies to "any claim or action brought for harm caused by the manufacture, production, making, construction, fabrication, design, formula, preparation, assembly, installation, testing, warnings, instructions, marketing, packaging, storage or labeling of [a] product." (Emphasis added.) K.S.A. 60–3302(c). The Act defines the term "harm" to include property damage, personal injuries, and death. It also includes "mental anguish or emotional harm attendant to ... personal physical injuries, illness or death." K.S.A. 60–3302(d). However, the definition of the term "harm" under the Act does not include "direct or consequential economic loss" caused by a defective product. K.S.A. 60–3302(d).

Economic loss is defined as "loss of use of the defective product, cost of replacing the product, loss of profits to plaintiff's business, or damage to plaintiff's business reputation from use of the product." Elite Professionals, Inc. v. Carrier Corp. , 16 Kan.App.2d 625, 633, 827 P.2d 1195 (1992). Economic loss includes the "loss of the bargain, repair, and replacement cost, loss of profits, and/or goodwill, including diminution in value." In other words, economic loss is those damages that arise as a "result of the failure of the product to perform to the level expected by the buyer, which is the core concern of traditional contract law." Northwest Arkansas Masonry, Inc. v. Summit Specialty Products, Inc. , 29 Kan.App.2d 735, 742, 31 P.3d 982 (2001).

Economic Loss Doctrine

What has become known as the "economic loss doctrine" was judicially created by the California Supreme Court in Seely v. White Motor Co. , 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (1965). Subsequently, the economic loss doctrine was...