Genetti v. Caterpillar, Inc., S-99-813.

Citation261 Neb. 98,621 N.W.2d 529
Decision Date26 January 2001
Docket NumberNo. S-99-813.,S-99-813.
PartiesRobert GENETTI and Sherrie Genetti, Appellees, Cross-Appellants, and Cross-Appellees, v. CATERPILLAR, INC., a Delaware corporation, Appellant and Cross-Appellee, and General Motors Corporation, a delaware corporation, Appellee, Cross-Appellant, and Cross-Appellee.
CourtSupreme Court of Nebraska

Aaron A. Clark, of McGrath, North, Mullin & Kratz, P.C., Omaha, and Mark L. Tripp, of Bradshaw, Fowler, Proctor & Fairgrave, P.C., for appellant Caterpillar.

Terry R. Wittler, of Cline, Williams, Wright, Johnson & Oldfather, Lincoln, for appellee General Motors.

Gregory C. Scaglione, Omaha, and Thomas F. Ackley, of Koley Jessen, P.C., Omaha, for appellees Robert and Sherrie Genetti.

HENDRY, C.J., and CONNOLLY, GERRARD, McCORMACK, and MILLER-LERMAN, JJ.

CONNOLLY, J.

After the engine in their truck failed four times, Robert Genetti (Genetti) and Sherrie Genetti brought suit against Caterpillar, Inc., and General Motors Corporation for breach of express warranty under the Uniform Commercial Code (U.C.C.) and relief under the "Manufacturer's Warranty Duties" statutes (Warranty Act), also known as the "lemon laws," Neb. Rev.Stat. § 60-2701 et seq. (Reissue 1998). The engine was manufactured by Caterpillar, and the truck was manufactured by General Motors. A jury awarded damages against both parties for breach of express warranty and found that General Motors was also liable under the Warranty Act.

After the verdict, the district court initially ordered the Genettis to make an election of remedies, but later dismissed the Warranty Act claim, finding that a claim under the Warranty Act was in equity and determining that the Genettis had an adequate remedy at law under the U.C.C. The primary questions on appeal are (1) whether a specific defect must be proved under the U.C.C. and the Warranty Act; (2) whether an action under the Warranty Act is an action at law or in equity; and (3) whether an election of remedies must be made when an action is brought, stating theories of recovery both under the Warranty Act and for breach of express warranty under article 2 of the U.C.C.

I. BACKGROUND

On February 26, 1996, the Genettis, who are in the business of delivering furniture nationwide, bought a new 1996 GMC truck and trailer from Omaha Truck Center, Inc. The truck was manufactured by General Motors and was equipped with a model 3116 diesel engine manufactured by Caterpillar. The model 3116 engine is generally described as a medium-duty engine. The purchase price for the truck was $97,043, and the Genettis took possession around March 8. The warranties issued by General Motors and Caterpillar stated that the truck was warranted for 3 years or 150,000 miles. From the time of purchase, it was serviced only through General Motors and Caterpillar dealerships.

Following a series of problems with the engine, the Genettis brought suit against both Caterpillar and General Motors seeking relief for breach of express warranty under the U.C.C. and relief under the Warranty Act. In their operative petition, the Genettis prayed for an order requiring Caterpillar and General Motors, jointly and severally, to replace the truck with a comparable vehicle with similar features or to accept the return of the truck from the Genettis and refund the full purchase price along with the sales tax and licensing and registration fees. The Genettis also sought general damages and an award of attorney fees and costs.

In their amended answers, Caterpillar and General Motors raised as affirmative defenses that (1) the Genettis' claim was barred by the express terms of the warranties; (2) the use and market value of the truck was not substantially impaired; and (3) the nonconformities alleged were the result of abuse, neglect, or unauthorized modifications or alteration of the truck by the Genettis.

Genetti testified that he had 18 years of experience in driving, operating, and maintaining diesel engines and that it was his custom to check daily for engine problems such as leaking fluids. Furthermore, the truck was serviced according to the schedule provided by General Motors.

1. FIRST ENGINE FAILURE

Genetti testified that one of his drivers called him on September 23, 1996, and reported that the truck had a sudden loss of power and that a white vapor had suddenly come out of the tailpipe. The driver had pulled to the side of the road immediately, and Genetti had instructed him to have the truck towed to the nearest General Motors dealership. The dealership where the truck was towed told Genetti that the problem was a complete engine failure due to bad pistons and valves and a cracked block. The record shows that the dealership found coolant leaking from the engine. The truck was repaired by disassembling the engine, replacing the block, and reassembling the engine with some new parts, some remanufactured parts, and some original parts.

2. SECOND ENGINE FAILURE

Genetti testified that the truck broke down again on October 30 or 31, 1996. The driver called Genetti and told him that, like the first breakdown, the truck had experienced a sudden loss of power. The driver pulled over immediately and made arrangements for the truck to be towed to the nearest Caterpillar dealer. The dealership informed Genetti that a valve and piston had failed in the engine and that the repair work would be covered by the warranty. According to Genetti, he discussed the possibility of receiving a new engine with Wayne Allen Mohr, the service manager at the facility where the truck was repaired. Genetti stated Mohr informed him that the chances of getting a new engine paid for under the warranty were slim to none and that he was never offered a new engine by Mohr at any time. Mohr, however, testified that he sought and received authority to put a new engine in the truck, and a repair record shows a notation on it to that effect. Mohr did not specifically state whether the new engine was authorized to be entirely paid for under the warranty. Mohr also testified that he felt it was an adequate and proper remedy to repair, instead of replace, the engine. The truck was repaired with a remanufactured cylinder head group and turbo charger, and the pistons and rings were replaced. The truck was out of service for approximately a week while being repaired.

3. THIRD ENGINE FAILURE

The third failure occurred on January 2, 1997, outside of Salt Lake City, Utah. Genetti testified that he was driving and that he was accompanied by John T. Seeley, an employee. Like the other breakdowns, the truck suddenly lost power and a white vapor came out of the exhaust. The truck was towed to a Caterpillar service center, and after a day or two, Genetti was told that there had been a complete engine failure. Genetti then called Caterpillar and informed them that he wanted a new engine. Caterpillar authorized the replacement of the engine under the warranty. There is conflicting evidence in the record regarding how many original parts from the truck were put back onto the new engine after it was installed. Ervin A. Stepanek, the expert witness for the Genettis, testified that the turbo and other items would not be replaced but would be taken off the old engine and put back onto the new one. Gary G. Valbert, an expert for Caterpillar, testified that a new engine would include a turbo, but some General Motors components from the old engine would be put back onto the new one. The record does not specifically show which component parts were replaced and which were reused. During the time the engine was being replaced, Genetti was required to rent several trucks in order to complete his deliveries.

4. FOURTH ENGINE FAILURE

Seeley was driving the truck when the fourth failure occurred in March 1997. Seeley testified that he was driving over a mountain pass when he noticed that the truck lost power and that the temperature gauge was higher than normal. Seeley did not observe a sudden puff of smoke like he had noticed during the third breakdown, but he did observe some smoke. Seeley continued to drive the truck until the gauge indicated that the engine was warmer than it should be and then pulled over to the side of the road to allow it to cool down. After the truck had cooled down, Seeley checked the coolant level, found it to be about half full, and added more coolant. Seeley then waited for the truck to completely cool down before starting to drive again. After Seeley began to drive again, the truck continued to overheat. Seeley testified that he had to stop and allow the truck to cool down "quite a few" times.

Seeley testified that once the truck got over the mountain pass, it was still running a little warm, but was also running all right. Seeley finished his deliveries and started back to Nebraska. When Seeley attempted to return to Nebraska, the truck began overheating again. Seeley took the truck to a General Motors dealership in Commerce City, Colorado. On the way to the dealership, Seeley stopped to add coolant to the truck and allow it to cool down. During one stop, Seeley observed that the truck was leaking coolant. Seeley did not allow the truck to overheat to the point where the temperature gauge went into the "red zone" for more than a couple of seconds during any of the overheating incidents.

When Seeley arrived at the dealership, an employee of the dealership told Seeley to park the truck and leave it running. After 20 to 45 minutes had passed, an employee told Seeley to turn the truck off because it would be a while before the dealership could look at it. Genetti was later informed that Caterpillar had determined that the truck had been allowed to overheat and that it was not going to honor the warranty. Genetti was also told that the repairs would cost approximately $12,000, but Genetti did not authorize the repairs because he could not afford to pay for them. The dealership, however, repaired the truck using...

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