Kenworth of Indianapolis, Inc. v. Seventy-Seven Ltd.

• Decision Date: 28 September 2018
• Docket Number: Court of Appeals Case No. 49A02-1710-PL-2502
• Citation: 112 N.E.3d 1106
• Parties: KENWORTH OF INDIANAPOLIS, INC., Kenworth of Indianapolis, Inc. d/b/a ITC Acceptance Company, and Paccar Inc., Appellants-Defendants, v. SEVENTY-SEVEN LIMITED, Convey All, LLC, Keller Trucking, Inc., K & K Aggregate, Inc., Huber Transport, LLC, Triple H Trucking, LLC, and Custom Hauling, Inc., Appellees-Plaintiffs
• Court: Indiana Appellate Court

112 N.E.3d 1106

KENWORTH OF INDIANAPOLIS, INC., Kenworth of Indianapolis, Inc. d/b/a ITC Acceptance Company, and Paccar Inc., Appellants-Defendants,

v.SEVENTY-SEVEN LIMITED, Convey All, LLC, Keller Trucking, Inc., K & K Aggregate, Inc., Huber Transport, LLC, Triple H Trucking, LLC, and Custom Hauling, Inc., Appellees-Plaintiffs

Court of Appeals Case No. 49A02-1710-PL-2502

Court of Appeals of Indiana.

Filed September 28, 2018

Attorneys for Appellants: David T. Schaefer, Anthony M. Zelli, Dinsmore & Shohl LLP, Louisville, Kentucky

Attorneys for Appellees: Scott A. Benkie, Benkie & Crawford, Indianapolis, Indiana, Rodney V. Taylor, Hilary A. Barnes, Christopher & Taylor, Indianapolis, Indiana

Crone, Judge.

Case Summary

[1] Kenworth of Indianapolis, Inc., et al. (collectively "the Defendants"),¹ manufactured and sold to Seventy-Seven Limited, et al. (collectively "the Plaintiffs"),² a fleet of dump trucks that vibrated excessively while idling or at specific RPMs. The Defendants were unable to correct the problem within the one-year/100,000-mile basic vehicle warranty period specified in the parties' warranty agreement, and they extended the warranty period to four years/250,000 miles. More than four years after the trucks were delivered, the Plaintiffs filed a complaint against the Defendants asserting claims for breach of warranty and breach of contract. The Defendants filed a motion for summary judgment asserting that the Plaintiffs' causes of action accrued when the trucks were delivered and thus were barred by the warranty agreement's one-year time limit for commencing legal action. The trial court denied the Defendants' motion. In this interlocutory appeal, the Defendants argue that the trial court erred. We disagree and therefore affirm.

Facts and Procedural History³

[2] Paccar Inc. manufactured a fleet of dump trucks that Kenworth of Indianapolis, Inc. ("the Dealership"), sold to the Plaintiffs, who took delivery of the trucks from November 2005 through January 2006. For each truck, the respective buyer signed a warranty agreement that reads in pertinent part as follows:

This is a legal contract between you, Kenworth Truck Company and the selling Kenworth dealer.

Kenworth Truck Company warrants directly to you that the Kenworth vehicle identified below, except for [certain parts and part assemblies warranted by their respective manufacturers, including engines and automatic transmissions], and except for trade accessories, will be free from defects in materials and workmanship during the time and mileage periods set forth in the Warranty Schedule and appearing under normal use and service. This warranty extends only to you, the First Purchaser and applies only to those items which were installed by the Kenworth plant at the time of manufacture as listed.

Your sole and exclusive remedy against Kenworth Truck Company and the selling Kenworth Dealer, arising from your purchase and use of this vehicle, is limited to the repair or replacement of defective materials or workmanship at US and Canadian Authorized Kenworth Class 8 Dealers to the extent of Kenworth Truck Company's obligations under the Warranty Schedule on the reverse side of this Agreement. ....

WARRANTY DISCLAIMER AND LIMITATIONS OF LIABILITY

Except for the above warranty, Kenworth Truck Company and the selling Kenworth Dealer make no other warranties, express or implied, and make NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

It is agreed that Kenworth Truck Company and the selling Kenworth Dealer shall not be liable for incidental or consequential damages including, but not limited to: loss of income, damage to vehicle, attachments, trailers and cargo; towing expenses; attorney's fees and any liability you may have in respect to any other people.

TIME LIMIT ON COMMENCING LEGAL ACTION

It is agreed that you have one year from the accrual of the cause of action to commence any legal action arising from the purchase or use of the vehicle, or be barred forever.

Appellants' App. Vol. 3 at 13 (underlined emphasis replaced by bold emphasis). Pursuant to the warranty schedule, the Defendants agreed to "provide 100% parts & labor for defective material or workmanship" related to the basic vehicle (with certain exceptions) for twelve months or 100,000 miles, "whichever shall occur first." Id. at 14.

[3] Each buyer also signed a buyer's order form with a disclaimer of warranties provision that states,

The seller [i.e., the Dealership] hereby expressly disclaims all warranties, either expressed or implied, including any implied warranty of merchantability or fitness for a particular purpose unless otherwise stated in this document. Seller neither assumes nor authorizes any other person to assume for it any liability in connection with the sale of the item/items.

Id. at 148 (capitalization altered). The form indicates that the truck was sold "with manufacturer[']s standard new truck warranty" and that the purchaser "hereby acknowledges the purchase of this truck as is, with all faults knowingly accepted and without any warranties express or implied, other than as indicated above ...." Id. (capitalization altered).

[4] "Immediately after delivery of the first set of trucks, several of the buyers complained to [the Dealership] that the trucks vibrated excessively while idling" or at specific RPMs. Kenworth of Indianapolis, Inc. v. Seventy-Seven Ltd. , 49A02-1504-PL-249, slip op. at *1, 2016 WL 1158460 (Ind. Ct. App. Mar. 24, 2016) (" Kenworth 1 "), trans. denied . The Dealership "contacted Paccar, who then consulted with the manufacturers of the engine, transmission, and engine mounts, to resolve the vibration problem." Id. "In September 2006 the decision was made to install modified engine mounts. The new mounts initially reduced the vibration to acceptable levels, but the problem reoccurred in 2007." Id. In March 2008, Paccar agreed to extend the "basic vehicle warranty" to four years/250,000 miles. Appellees' App. Vol. 3 at 64; Appellants' App. Vol. 3 at 11. This warranty extension is documented in Paccar interoffice emails, which contain no further details regarding the extension.

[5] Also in 2008, "the Defendants installed a different engine mount that they believed would be more durable. Again, the vibration was initially reduced to acceptable levels." Kenworth 1 , slip op. at *1. By November 2008, however, the vibration problem was reoccurring in several of the trucks. At that point, Paccar agreed to provide free engine mount replacements for as long as the Plaintiffs owned the trucks. Around this time, one of the Plaintiffs, Seventy-Seven Limited, returned eight of the trucks to the Dealership and stopped making payments on them.

[6] In September 2010, the Dealership, through its financing company, ITC Acceptance Company, filed a replevin action against two of the Plaintiffs based on their default on loans obtained to purchase the trucks. On October 4, 2010, the Plaintiffs filed this action against the Defendants, asserting claims for breach of express and implied warranties, breach of contract, constructive fraud, and rescission.⁴ In March 2011, the Plaintiffs amended their complaint to add a claim of estoppel and a claim of nonconforming goods under the Uniform Commercial Code ("UCC"). An additional amended complaint was filed in 2013.⁵ In their answers to the complaints, the Defendants asserted as an affirmative defense that the Plaintiffs' claims were time-barred.

[7] The Defendants filed a motion for summary judgment arguing that the Plaintiffs' claims were barred by the warranty agreement's one-year time limit for commencing legal action and by Indiana Code Section 26-1-2-725 ("Section 2-725"), which is part of Indiana's codification of the UCC. Section 2-725 is entitled "Statute of limitations in contracts for sale" and reads in relevant part as follows:

(1) An action for breach of any contract for sale must be commenced within four (4) years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one (1) year, but may not extend it.

(2) A cause of 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 warranty 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.

....

(4) This section does not alter the law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before IC 26-1 becomes effective.

The Defendants argued that the Plaintiffs' causes of action accrued at tender of delivery and that their complaint was filed long after the one-year limitation period expired.

[8] The Plaintiffs asked the trial court to deny the summary judgment motion, asserting that the Defendants had waived their timeliness argument by failing to raise it in response to a purported cross-motion for summary judgment. The trial court agreed with the Plaintiffs. On appeal, another panel of this Court determined that the Defendants had not waived their timeliness argument and reversed and remanded for further proceedings. Kenworth 1 , slip op. at *10.

[9] On remand, the Defendants filed a renewed motion for summary judgment asserting that the Plaintiffs' complaint was untimely filed. In September 2017, after a hearing, the trial court issued an order denying the motion.⁶ This interlocutory appeal ensued.

Discussion & Decision

[10] The Defendants argue that the trial court erred in denying their summary judgment motion. "The purpose of summary judgment is to terminate litigation about which there can be no factual dispute and which can be determined as a matter of law." Lamb v. Mid Indiana Serv. Co. , 19 N.E.3d 792, 793 (Ind. Ct. App. 2014). "The party moving for summary judgment has the...