Garcia v. Texas Instruments, Inc.

Decision Date17 December 1980
Docket NumberNo. B-9484,B-9484
Citation20 A.L.R.4th 900,610 S.W.2d 456,24 Tex.Sup.Ct.J. 12
Parties, 30 UCC Rep.Serv. 401 Richard Y. GARCIA v. TEXAS INSTRUMENTS, INC.
CourtTexas Supreme Court

Leon Crum, Dallas, Thomas Black, San Antonio, for petitioner.

Thompson & Knight, David R. Noteware, Dallas, for respondent.

STEAKLEY, Justice.

This is a products liability case involving personal injuries resulting from an alleged breach of implied warranty under the Uniform Commercial Code.

During the period of August 16, 1974, to January 31, 1975, Texas Instruments, Inc., the Respondent, sold and delivered various quantities of concentrated sulfuric acid to the Mostek Corporation, the employer of our Petitioner, Richard Y. Garcia. On February 18, 1975, Garcia was moving cartons of acid from one location to another. The cartons, constructed of fiberboard, each contained four one-gallon glass containers. While carrying one of the cartons, Garcia tripped and fell, breaking a container and suffered severe acid burns.

On October 18, 1978, approximately three years and eight months after the accident, Garcia instituted suit against Texas Instruments for damages for personal injuries alleging a breach of the implied warranty of merchantability under Section 2.314 of the Texas Uniform Commercial Code 1 arising out of the sale of acid from Texas Instruments to Mostek Corporation. Garcia alleged that the acid was not merchantable in that it was not adequately contained, packaged and labeled and was not fit for the use for which it was intended. In the alternative, Garcia alleged that he was a third party beneficiary of the contract between Mostek and Texas Instruments. The pleadings cast the suit solely as a breach of implied warranty. No theory of recovery based on tort was alleged. Texas Instruments filed a general denial and a motion for summary judgment which alleged that Garcia's lawsuit was barred by Tex.Rev.Civ.Stat.Ann. art. 5526(4) (Supp.1980), 2 the two year statute of limitations for personal injuries, and that Garcia was not entitled to maintain an action under the warranty provisions of the Code because he was not a party to the sales contract between Texas Instruments and Mostek Corporation. In his response to the motion for summary judgment, Garcia argued that his suit was not barred by limitations because a personal injury action based on the breach of an implied warranty arising out of a sale of goods is governed by Section 2.725(a), 3 the Uniform Commercial Code four year statute of limitations. The trial court granted the motion for summary judgment and rendered judgment for Texas Instruments.

The Court of Civil Appeals affirmed the judgment of the trial court. The Court of Civil Appeals held that in the absence of a contractual relationship between the injured party and the supplier of the product causing injury, i. e., privity, a personal injury action based upon a breach of implied warranty under the Code is governed by Article 5526, the general statute of limitations applicable to personal injuries rather than the four year statute set forth in Section 2.725 of the Code. 598 S.W.2d 24. We disagree.

On appeal to this Court, Garcia argues that the Code expressly authorizes a cause of action for personal injuries and therefore his action is governed by the statute of limitations contained in the Code. Further, Garcia contends that the thrust of the holding of the Court of Civil Appeals is that the adoption of strict liability in tort relegated persons suffering product caused injuries to tort remedies exclusively. Garcia argues that this Court in its adoption of Section 402A Restatement (Second) of Torts in McKisson v. Sales Affiliates, Inc., 416 S.W.2d 787 (Tex.1967), did not abrogate the statutory remedies given by the Code regardless of whether products liability law would be simplified by requiring personal injury claims to be pursued exclusively in negligence and strict liability in tort. Finally, Garcia contends that imposing a requirement of privity before allowing an injured party to maintain a products liability action based on breach of warranty is contrary to the current trend of the law.

Texas Instruments replies that the gravamen of the complaint determines the applicable statute of limitations. Accordingly, it concludes that the present case is governed by the tort statute of limitations because a personal injury action based on a breach of implied warranty was considered at common law to lie in tort. Further, Texas Instruments emphasizes that at the time of the enactment of the Uniform Commercial Code, a consumer, in order to recover for losses caused by defective products, had to rely upon the implied warranty of fitness created by public policy as articulated in Decker & Sons v. Capps, 139 Tex. 609, 164 S.W.2d 828 (1942). Texas Instruments proposes that the Code provisions on personal injury were not intended to create a new statutory cause of action, but merely saved the existing common law remedy from elimination. The adoption of strict liability in tort eliminated the need to resort to the implied warranty created by public policy in order to recover for injuries caused by defective products. Texas Instruments argues that not only did the adoption of strict liability in tort abolish the common law implied warranty remedy, it also abrogated the cause of action for personal injuries existing under the Code because the Code and common law remedies were identical. Therefore, Texas Instruments concludes that a cause of action for personal injuries resulting from a breach of warranty does not exist under the Uniform Commercial Code even when the suit is between parties in direct privity of contract, but that such remedies lie solely in tort.

The Uniform Commercial Code recognizes that a cause of action may be based on both express and implied warranties and as to the latter may be based on the warranty of merchantability, § 2.314, and the warranty of fitness, § 2.315. We also note that neither the Code's express warranty, § 2.313, nor the Texas Deceptive Trade Practices Consumer Protection Act, §§ 17.41 to 17.63, are before us here. 4 The warranty of merchantability § 2.314, is the only Code warranty provision here under review.

The question before this Court is essentially two-fold. The threshold question is whether a cause of action exists under the Uniform Commercial Code for personal injuries resulting from the breach of an implied warranty of merchantability. If this question is answered in the negative, then Garcia's remedies for his injuries lie solely in tort, and his cause of action is barred by Article 5526, the two year personal injury statute of limitations. If we determine that Garcia is entitled to maintain a personal injury claim under the implied warranty provisions of the Code, we must then decide to what extent, if any, privity operates as a defense to the maintenance of this action. If lack of privity prevents Garcia from maintaining an action based on the Code it would follow that the Code statute of limitations is inapplicable and his suit is barred by Article 5526(4).

The following statutory provisions in addition to Article 5526 and § 2.725(a), set out at footnotes two and three respectively, are pertinent to the disposition of this cause:

§ 2.314. Implied Warranty: Merchantability; Usage of Trade

(a) Unless excluded or modified (Section 2.316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.

(b) Goods to be merchantable must be at least such as

(1) pass without objection in the trade under the contract description; and

(2) in the case of fungible goods, are of fair average quality within the description; and

(3) are fit for the ordinary purposes for which such goods are used; and

(4) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and

(5) are adequately contained, packaged, and labeled as the agreement may require; and

(6) conform to the promises or affirmations of fact made on the container or label if any.

(c) Unless excluded or modified (Section 2.316) other implied warranties may arise from course of dealing or usage of trade.

§ 2.715. Buyer's Incidental and Consequential Damages

(a) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.

(b) Consequential damages resulting from the seller's breach include

(1) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and

(2) injury to person or property proximately resulting from any breach of warranty.

Prior to the enactment of the Code, the majority of jurisdictions treated a personal injury action based on a breach of implied warranty as a tort action for purposes of the statute of limitations. R. Hursh & H. Bailey, American Law of Products Liability 2d § 17.11 at 82 (1975). Under this approach, the Court, without concern for the form of the action, looked to the type of damage, i. e., personal injury or property loss, and the nature of the duty breached, i. e., one expressed in the agreement of the parties or one implied in law, in determining whether to apply the tort or contract statute of limitations.

Despite the Code's stated objective of establishing uniformity among the various jurisdictions concerning commercial transactions and their ramifications, § 1.102(b)(3), the...

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