H. Hirschfield Sons, Co. v. Colt Industries Operating Corp.

• Decision Date: 08 July 1981
• Docket Number: No. 53929,53929
• Citation: 107 Mich.App. 720,309 N.W.2d 714,32 UCC Rep.Serv. 140
• Parties: H. HIRSCHFIELD SONS, COMPANY, a Michigan corporation, Plaintiff-Appellant, v. COLT INDUSTRIES OPERATING CORPORATION, a foreign corporation,Defendant/Third-Party Plaintiff-Appellee, v. John M. MACHALA, individually and d/b/a Tri-State Scale Installation Company, Third-Party Defendant. 107 Mich.App. 720, 309 N.W.2d 714, 32 UCC Rep.Serv. 140
• Court: Court of Appeal of Michigan — District of US

Page 714

309 N.W.2d 714

H. HIRSCHFIELD SONS, COMPANY, a Michigan corporation, Plaintiff-Appellant, v. COLT INDUSTRIES OPERATING CORPORATION, a foreign

corporation,Defendant/Third-Party Plaintiff-Appellee, v. John M. MACHALA, individually and d/b/a Tri-State Scale

Installation Company, Third-Party Defendant.

No. 53929.

107 Mich.App. 720, 309 N.W.2d 714, 32 UCC Rep.Serv. 140

Court of Appeals of Michigan.

July 8, 1981.

[107 MICHAPP 721] Larry E. Kivela, Bay City, for plaintiff-appellant.

[107 MICHAPP 722] Richard G. Smith, Bay City, for defendant/third-party plaintiff-appellee.

John A. Chasnis, Saginaw, for third-party defendant.

Before MAHER, P. J., and ALLEN and CYNAR, JJ.

ALLEN, Judge.

On September 3, 1980, Bay County Circuit Court entered an opinion granting defendant Colt Industries Operating Corporation's (hereinafter defendant) motion for accelerated judgment based upon the running of the four-year statute of limitations as provided in the Uniform Commercial Code, M.C.L. § 440.2725; M.S.A. § 19.2725. Plaintiff appeals as of right.

Plaintiff, an industrial scrap metal processor, contracted with defendant scale manufacturer to purchase a large in-ground railroad and truck scale in 1971. The contract with defendant priced the scale at $16,525 and also contained a price of $12,242 for the installation of the scale. The total price of the contract was.$28,767. The scale was built by defendant which subcontracted the installation to Tri-State Scale Installation Company, the third-party defendant. Installation was completed in April, 1972.

Shortly after the installation of the scale, plaintiff discovered cracks in the surface of the concrete pit which housed the scale. Plaintiff wrote defendant concerning these cracks but was assured the cracks were insignificant. Final payment on the scale was made on July 27, 1972. Over the next six years plaintiff made several calls to defendant reporting that the scale was not weighing accurately. Each time defendant adjusted the scale to plaintiff's satisfaction. When, in 1978, plaintiff was advised by railroad inspectors that the scale was not weighing properly, defendant investigated and [107 MICHAPP 723] discovered that one of the weight-bearing concrete piers in the scale floor had given way. Plaintiff then contacted engineers from one of defendant's competitors who suggested that the initial scale flooring might well be inadequate but that excavation of the scale would be necessary to inspect the scale floor properly. Excavation occurred September 26, 1978, and, as suspected, the concrete pit floor was found to be inadequate. Specifications called for a floor 24 inches thick, but it had been built with only 10 inches of concrete, thus causing collapse of one of the weight-bearing piers. On June 1, 1979, some seven years and two months after the scale's installation, plaintiff filed its bill of complaint.

Plaintiff's complaint proceeds on three theories: breach of express warranty, breach of implied warranty, and negligence. All alleged defects relate to the manner in which the scale was installed. There is no claim that the scale itself was defective. For purposes of defendant's motion for accelerated judgment, GCR 1963, 116.1(5), the court must accept all well-pled allegations and reasonable conclusions therefrom as true. Crowther v. Ross Chemical & Manufacturing Co., 42 Mich.App. 426, 202 N.W.2d 577 (1972), Bielski v. Wolverine Ins. Co., 379 Mich. 280, 150 N.W.2d 788 (1967).

The primary issue before this Court is whether this action is controlled by the Revised Judicature Act, M.C.L. § 600.5833; M.S.A. § 27A.5833 (hereinafter RJA), or by the Uniform Commercial Code, M.C.L. § 440.2725; M.S.A. § 19.2725 (hereinafter UCC). The UCC has a four-year statute of limitations in an action for breach of any contract for sale. In the absence of a specific warranty pertaining to future performance of the goods sold, a UCC cause of [107 MICHAPP 724] 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 warrant 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". M.C.L. § 440.2725(2); M.S.A. § 19.2725(2). The RJA has a six-year statute of limitations in an action for breach of contract. M.C.L. § 600.5807(8); M.S.A. § 27A.5807(8). Importantly, however, "In actions for damages based on breach of a warranty of quality or fitness the claim accrues at the time the breach of the warranty is discovered or reasonably should be discovered". M.C.L. § 600.5833; M.S.A. § 27A.5833.

Defendant contends that the contract between the parties is basically a contract governing the sale of goods subject to the provisions of the UCC, but, if the contract is found to be a contract governing services subject to the RJA six-year period of limitations, the six-year period commenced to run in April, 1972 when plaintiff first noticed cracks in the concrete surface of the pit. Plaintiff argues that the defect is not in the goods sold but in the installation and as such is a service contract governed by the six-year period of limitations. Plaintiff further argues that since neither the pit nor subsurface portion of the scale could be inspected without excavation and since defendant assured plaintiff there was nothing wrong with the pit, the six-year period did not commence to run until September 26, 1978, when excavation was made and the defect was discovered.

The trial court was correct in finding that there is no warranty in the present case which explicitly [107 MICHAPP 725] extended to future performance of the goods. Centennial Ins. Co. v. General Electric Co., 74 Mich.App. 169, 253 N.W.2d 696 (1977); Standard Alliance Industries, Inc. v. The Black Clawson Co., 587 F.2d 813 (CA 6, 1978). Thus, if this action is controlled by the UCC, the statute of limitations commenced to run in April of 1972, when tender of delivery of the scale was made, and the present action would be barred by the running of the four years. However, if the action is controlled by the RJA, a question of fact arises as to when the breach of warranty was discovered or reasonably should have been discovered. Therefore, since there would be a question of fact as to when the cause of action accrued, accelerated judgment based upon the running of the six-year statute of limitations would be improper.

While the question of which period of limitations should control is of first impression in Michigan, ¹ the issue has been addressed in other jurisdictions. A substantially similar case is Dixie Lime & Stone Co. v. Wiggins Scale Co., 144 Ga.App. 145, 240 S.E.2d 323 (1977). In Dixie, as in the present case, the defendant sold the plaintiff a large in-ground scale. The contract between Dixie and Wiggins, like the contract between Hirschfield and Colt, contained separate provisions for the sale of the scale and the installation of the scale. Dixie claimed the installation of the scale to be defective. The Dixie court held: "There is no claim that [107 MICHAPP 726] the scale itself is defective. The agreement underlying this suit was one for the furnishing of services and labor, and the U.C.C. is clearly inapplicable." Id., 324. This is precisely the situation in the present case.

We find the Dixie rationale persuasive. In accord, see Stephenson v. Frazier, Ind.App., 399 N.E.2d 794 (1980). In Stephenson, the plaintiffs bought a modular home from the defendants. The total contract price included the installation of a septic system and construction of a foundation. It was argued that the UCC should govern the entire action. The UCC defines "goods" as:

"all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (article 8) and things in action. 'Goods' also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (section 2107)." M.C.L. § 440.2105(1); M.S.A. § 19.2105(1).

The Stephenson Court held that while the sale of the modular home was covered by the UCC,

"The part of the contract relating to the construction of the foundation and installation of the septic system, however, does not fall within the definition of 'goods.' These contractual provisions were for the performance of services and thus the issues pertaining to them must be determined by common law contract principles." Id., 797.

While respected counsel for defendant acknowledges the validity of Dixie and Stephenson, counsel maintains that the majority rule requires the court to determine whether the contract is predominately[107 MICHAPP 727] for the sale of services or predominately for the sale of goods and to apply the UCC to...