Knox v. North American Car Corp.

• Decision Date: 09 January 1980
• Docket Number: No. 78-1114,78-1114
• Citation: 80 Ill.App.3d 683,399 N.E.2d 1355
• Parties: , 35 Ill.Dec. 827, 28 UCC Rep.Serv. 336 Johnnie B. KNOX, Jr., and Irene Peavy Knox, Plaintiffs-Appellants, v. NORTH AMERICAN CAR CORPORATION, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 1355

399 N.E.2d 1355

80 Ill.App.3d 683, 35 Ill.Dec. 827,

28 UCC Rep.Serv. 336

Johnnie B. KNOX, Jr., and Irene Peavy Knox, Plaintiffs-Appellants, v. NORTH AMERICAN CAR CORPORATION, Defendant-Appellee.

No. 78-1114.

Appellate Court of Illinois, First District, Third Division.

Jan. 9, 1980.

Leonard M. Ring, Leonard M. Ring & Associates, Chicago, for plaintiffs-appellants.

Wildman, Harrold, Allen & Dixon, Chicago, for defendant-appellee; Howard T. Brinton, Miles J. Zaremski, William D. Serwer, Chicago, of counsel.

McNAMARA, Justice:

On February 2, 1977, plaintiffs, Johnnie B. Knox and Irene Peavy Knox, filed a two-count complaint against defendant, North American Car Corporation. Plaintiffs sought damages for personal injuries allegedly resulting from a breach of implied warranty under the Uniform Commercial Code. (Ill.Rev.Stat.1977, ch. 26, par. 1-101 et seq.) In Count I, Johnnie Knox sought damages for injuries sustained in an accident which occurred in New Orleans, Louisiana on November 13, 1973. In Count II, Irene Knox sought damages for loss of her husband's consortium. Defendant filed a motion to strike and dismiss plaintiff's complaint on the ground that it was barred by the statute of limitations. The trial court granted defendant's motion, and plaintiffs appeal. The pleadings reflect the following well-pleaded facts.

Defendant is a Delaware corporation having its principal place of business in Chicago, Illinois. It leases boxcars to various railroads and corporations engaged in shipping commodities by rail. On March 1, 1966, North American leased a boxcar to the Hershey Foods Corporation, a Delaware corporation, which lease was in effect at the time of plaintiff's injury. Hershey's duties under the lease consisted of informing defendant of the movement of the boxcar, the dates of loading, the type of commodities shipped, and the boxcar's final destination and routing. Hershey was required to provide defendant with all other information concerning the boxcar received from the various railroad companies or other sources. Defendant received a mileage charge from all railroad companies which used the boxcar. The lease provided that defendant would pay for the maintenance and repair of the boxcar. Hershey was allowed to make only running repairs unless it obtained defendant's written consent. Repairs to the floor of the boxcar would not fall under the category of running repairs.

On May 30, 1973, defendant was notified by Hershey that the floor of the boxcar was damaged and in need of repair. Reading Railroad Company delivered the boxcar to Hershey on October 30, 1973. At that time, there was still a hole in the floor of the boxcar. In its damaged condition, the boxcar was loaded by Hershey employees and consigned to the Great Atlantic & Pacific Tea Company in New Orleans, Louisiana. Plaintiff Johnnie Knox, a Louisiana resident and an A&P employee, was injured on November 13, 1973, when a wheel of the forklift truck he was driving into the boxcar fell into the hole in the floor. On November 19, 1973, the boxcar was repaired.

Plaintiff's suit was based on several provisions of the U.C.C. In requesting recovery under the U.C.C., plaintiffs sought the protection of the four-year statute of limitations applicable to breaches of an implied warranty. (Ill.Rev.Stat.1977, ch. 26, par. 2-725(1).) Plaintiff sought to qualify as third party beneficiary of an implied warranty under sections 2-315 and 2-318 of the U.C.C. which provide:

"2-315. Implied Warranty: Fitness for Particular Purpose.

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified * * * an implied warranty that the goods shall be fit for such purpose.

2-318. Third Party Beneficiaries of Warranties Express or Implied.

A seller's warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this Section."

Defendant's motion to dismiss plaintiffs' complaint alleged their cause of action was barred by the statute of limitations. Defendant maintained that Louisiana law controlled the present action, and the period of limitation for actions involving personal injuries in Louisiana is one year. (La.Civil Code, arts. 3536, 3537 (West).) Defendant argued that, even if Illinois law controlled, the statute of limitations for personal injury actions in Illinois is two years. (Ill.Rev.Stat.1977, ch. 83, par. 15.) It further maintained that the four-year limitations period provided for in the U.C.C. was inapplicable.

The trial court held that Illinois had jurisdiction of the matter and its law governed since defendant had its principal place of business here. The court ruled, however, that the U.C.C. was inapplicable to the case because the lease transaction was not a sale within the provisions of section 2-315 and because plaintiff was not a proper beneficiary under section 2-318. The court found, therefore, that since the four-year period of limitations found in article 2 was inapplicable, plaintiffs' cause of action for personal injuries was barred by the statutory two-year period.

Plaintiffs initially contend that the trial court erred in finding that article 2 of the U.C.C. was inapplicable to the lease transaction here. Citing Heller & Co. v. Convalescent Home (1977), 49 Ill.App.3d 213, 8 Ill.Dec. 823, 365 N.E.2d 1285, plaintiffs maintain that Illinois has joined a growing number of jurisdictions which apply the provisions of article 2 to lease transactions. In Heller, a matter involving an equipment lease of computers, the lessee defended against the lessor's action for rental payments on the ground that the lessor had breached the warranties of merchantability and fitness for a particular purpose imposed by article 2. This court held that article 2 should not be applied in toto to lease transactions. It ruled, however, that certain aspects of those sections dealing with warranties could be applied by analogy. The court stated at p. 219, 8 Ill.Dec. at p. 827, 365 N.E.2d at p. 1289: "(W)e will analogize the provision of Article 2 to equipment leases only when the case involves the same considerations which gave rise to the Code's provisions and the analogy is not rebutted by the specific circumstances of the case." See also Sawyer v. Pioneer Leasing Corp. (1968), 244 Ark. 943, 428 S.W.2d 46; W. E. Johnson Equipment Co. v. United Airlines, Inc. (Fla.1970), 238 So.2d 98; Glenn Dick Equipment Co. v. Galey Constr., Inc. (1975), 97 Idaho 216, 541 P.2d 1184; Hertz Commercial Leasing Corp. v. Transportation Credit Clearing House (1969), 59 Misc.2d 226, 298 N.Y.S.2d 392, rev'd on other grounds, (1970), 64 Misc.2d 910, 316 N.Y.S.2d 585.

Some jurisdictions have held that since article 2 expressly refers to sales, it is never applicable to lease transactions. (DeKalb Agresearch, Inc. v. Abbott (N.D.Ala.1974), 391 F.Supp. 152, aff'd, 5 Cir., 511 F.2d 1162 (1975); Martin v. Ryder Truck Rental, Inc. (Del.Supr.1976), 353 A.2d 581; Mays v. Citizens & Southern National Bank (1974), 132 Ga.App. 602, 208 S.E.2d 614; Bona v. Graefe (1972), 264 Md. 69, 285 A.2d 607.) Other jurisdictions have held that despite its language, article 2 is directly applicable in its entirety to leases. In re Vaillancourt (D.Me.1970), 7 U.C.C.Rep.Serv. 748; Owens v. Patent Scaffolding Co. (N.Y.Sup.Ct.1974), 77 Misc.2d 992, 354 N.Y.S.2d 778, rev'd on other grounds, (1975), 50 A.D.2d 866, 376 N.Y.S.2d 948.

We adhere to the principles enunciated in Heller, and we believe the application of selected provisions of article 2 to leases by analogy is the most well-reasoned approach. Although leases may be as prevalent as sales in the commercial world, they are a distinct type of transaction. Leases may differ significantly from sales in the area of risk of loss and the duties of maintenance and repair. A refusal to apply article 2 directly and in toto to leases avoids the situation in which language particularly applicable to sales must suffer a strained interpretation in order to cover a lease transaction. (See Ill.Rev.Stat.1977, ch. 26, pars. 2-301, 2-312, 2-401.) We thus must examine the present lease transaction to determine whether defendant impliedly warranted that the boxcar would be fit for a particular purpose under section 2-315 and, if so, whether plaintiff, Johnnie Knox, falls within the class of the third party beneficiaries of such warranty under section 2-318.

Plaintiffs rely primarily upon Berry v. G. D. Searle & Co. (1974), 56 Ill.2d 548, 309 N.E.2d 550, for the propositions that the transaction in the present case carried with it an implied warranty under section 2-315 and that Johnnie Knox qualifies as a beneficiary of the warranty under section 2-318. In Berry, plaintiff sought damages for injuries sustained as a result of ingesting an oral contraceptive manufactured by defendant. Our supreme court held that the sale of the contraceptive carried with it an implied warranty under section 2-315. It was further held that even though there was no privity of contract between plaintiff and defendant, a remote manufacturer, plaintiff nevertheless qualified as a beneficiary of the warranty since section 2-318 was neutral on the question of the necessity of privity between parties in the distributive chain and the requirement of privity, in the context of tort liability, had been abolished. Berry is distinguishable, first, because the transaction there was a sale of goods governed directly by article 2. In contrast, we have held that since the present case involves a lease, the provisions of article...