Hiles Co. v. Johnston Pump Co. of Pasadena, Cal.

• Decision Date: 16 February 1977
• Docket Number: No. 8142,8142
• Citation: 93 Nev. 73,560 P.2d 154
• Parties: , 21 UCC Rep.Serv. 568 HILES COMPANY et al., Appellants, v. JOHNSTON PUMP COMPANY OF PASADENA, CALIFORNIA, et al., Respondents.
• Court: Nevada Supreme Court

Page 154

560 P.2d 154

93 Nev. 73, 21 UCC Rep.Serv. 568

HILES COMPANY et al., Appellants, v. JOHNSTON PUMP COMPANY OF PASADENA, CALIFORNIA, et al., Respondents.

No. 8142.

Supreme Court of Nevada.

Feb. 16, 1977.

Breen, Young, Whitehead & Hoy and Milos Terzich, Reno, for appellants.

Julian C. Smith, Carson City, Hibbs & Newton, Cunningham & Williams, Reno, for respondents.

OPINION

BATJER, Chief Justice.

Appellants sought to recover damages for economic losses allegedly caused by deficient equipment leased by respondent Mentzer Detroit Diesel (Mentzer) and a defective product manufactured by respondent Johnston Pump Company (Johnston) and sold by respondent Armstrong Brothers (Armstrong). Here, appellants contend the trial court erroneously granted respondents' motion for summary judgment. We agree and remand the action for trial.

Appellants Harlan Hiles and Roger Hines formed a partnership to raise crops utilizing an irrigation system. To this end, Hiles entered into an agreement with Mentzer to lease, with an option to purchase, a diesel engine to power the pump used in the irrigation system. Further, Hiles hired Armstrong, a dealer for Johnston, to rebowl this pump. On June 1, 1968, Armstrong installed new bowls manufactured by Johnston, but the pump failed to operate properly. The cause of the malfunction was later attributed to missing parts in the bowls.

Due to this defect in the bowls and the alleged failure by Mentzer to supply a proper engine to operate the pump, Hiles, in his name only, filed suit against respondents to recover economic losses on the theories of negligence and breach of warranties. At trial, it became apparent that damages, if any, would be owing to the partnership. However, the trial court, without stating its reasons, denied Hiles' motion to join the indispensable parties, and respondents objected to the admission of all evidence relating to partnership damages. ¹ Faced with these adversities, Hiles stipulated with respondents to dismiss the action without prejudice, and, on April 25, 1974, the trial court entered its order of dismissal.

On June 3, 1974, Hiles Company, Harlan Hiles, and Roger Hines filed suit alleging the identical causes of action previously asserted by Hiles. Johnston moved for summary judgment relying on the affirmative defenses alleged in its answer that the statute of limitations set forth in NRS 104.2725 precluded the action and no privity of contract existed. ² Mentzer and Armstrong orally joined in the motion which the trial court granted after finding no material issue of fact remained. By granting the motion, appellants contend the trial court erred because (1) NRS 104.2725 does not bar the action, and (2) lack of privity of contract does not preclude appellants' action against Johnston.

1. NRS 104.2725 requires that any action for breach of a contract for sale must be commenced within four years after the cause of action accrues. Here, Hiles filed the original suit within this time period, but the second action was not commenced within four years. Thus, the second action must fail unless it falls within the saving clause of the statute which provides: 'Where an action commenced within the time limited by subsection 1 is so terminated as to leave available a remedy by another action for the same breach such other action may be commenced after the expiration of the time limited and within 6 months after the termination of the first action unless the termination resulted from voluntary discontinuance or from dismissal for failure or neglect to prosecute.'

Although appellants commenced the second suit within six months of the dismissal of Hiles' action, respondents argue the saving clause is inapplicable because the original action was 'voluntarily discontinued.' To support this argument, respondents rely on the stipulation in which the parties agreed that the original action be dismissed without prejudice. However, this stipulation was anything but voluntary. The pressure on Hiles was significant; he faced a dismissal with prejudice or an adverse judgment because Hines and the partnership has not been joined. After the trial court denied Hiles' motion to join the indispensable parties, the stipulated dismissal without prejudice with an opportunity to refile naming the proper parties was the only avenue by which appellants could have the matter considered on its merits.

The plea of statute of limitations '. . . is not such a meritorious defense that either the law or the fact should be strained in aid of it, nor should this court indulge in any presumptions in its favor'. Howard v. Waale-C. & Tiberti, 67 Nev. 304, 312, 217 P.2d 872, 876 (1950). We decline to equate 'voluntary discontinuance' to the situation where, in order to maintain a suit, one is forced to dismiss his action so that another can be filed naming indispensable party plaintiffs. Cf. D. & J. Leasing, Inc. v. Hercules Galion Products, Inc., 429 S.W.2d 854 (Ky.1968).

Respondent also assert the saving provision of NRS 104.2725 does not apply where, as here, indispensable party plaintiffs are added in the second action. The statute is silent in this regard. It only requires the first action to be so terminated '. . . as to leave available a remedy by another action for the same breach . . ..' Here, such a remedy is available.

Although NRS 104.2725 saves appellants' action against all respondents, Mentzer nevertheless contends the sales provisions of the uniform commercial code, including NRS 104.2725, should not apply to it because it merely leased equipment to appellants. Under appropriate circumstances, the code's provisions can extend to lease transactions. See e.g., All-States Leasing Company v. Bass, 96 Idaho 873, 538 P.2d 1177 (1975); Owens v. Patent Scaffolding-Div. of Harsco, 77 Misc.2d 992, 354 N.Y.S.2d 778 (1974); Baker v. City of Seattle, 79 Wash.2d 198, 484 P.2d 405 (1971). However whether the Mentzer lease falls within the purview of the uniform commercial code presents a genuine issue of material fact thereby precluding summary judgment on the matter. NRCP 56; Stern v. Jacobson, 90 Nev. 113, 520 P.2d 614 (1974).

2. Respondent Johnston further contends appellants have no recourse against it for economic losses caused by breach of warranties because appellants lack vertical privity of contract with Johnston. ³ Our uniform commercial code, specifically NRS 104.2318, is neutral on the requirement of vertical privity. ⁴ See: Nordstrom, Sales § 91 at 284 (1970). While Johnston relies on Amundsen v. Ohio Brass Co., 89 Nev. 378, 513 P.2d 1234 (1973), and Long v. Flanigan Warehouse Co., 79 Nev. 241, 382 P.2d 399 (1963), to support its contention, those cases dealt with horizontal, not vertical privity and are therefore distinguishable. ⁵

It is well established that vertical privity is not required in actions for personal or property injury caused by defective products. See: 3 Williston on Sales §§ 22--5 to 22--8 (1974); White & Summers, Uniform Commercial Code §§ 11--1 to 11--5 (1972); Nordstrom, Sales § 91 (1970); Annot., 16 A.L.R.3d 683 (1967). However, there is a split of authority concerning the need of privity in actions for the recovery of economic loss. Jurisdictions which require privity express the fear that to hold otherwise might expose manufacturers to unforeseeable losses suffered by remote buyers. However, warranty recovery is limited to the reasonable damages contemplated by the parties and proximately caused by the breach. See: NRS 104.2715.

We perceive no reason to distinguish between recovery for personal and property injury, on the one hand, and economic loss on the other. Cf. Santor v. A & M...