Meier v. Alfa-Laval, Inc.

• Decision Date: 18 April 1990
• Docket Number: INC,No. 88-1755,ALFA-LAVA,88-1755
• Citation: 454 N.W.2d 576
• Parties: Edward M. MEIER and Evadine Meier, Appellants, Joseph Meier, Karen Meier, and Mark Meier, Plaintiffs, v.and Kramer Brothers Dairy Supply, Inc., Appellees.
• Court: Iowa Supreme Court

Page 576

454 N.W.2d 576

Edward M. MEIER and Evadine Meier, Appellants Joseph Meier, Karen Meier, and Mark Meier, Plaintiffs, v. ALFA-LAVAL, INC. and Kramer Brothers Dairy Supply, Inc., Appellees.

No. 88-1755.

Supreme Court of Iowa.

April 18, 1990.

Rehearing Denied May 23, 1990.

Tom Riley and David J. Smith of Tom Riley Law Firm, P.C., Cedar Rapids, for appellants.

Robert D. Houghton and Diane Kutzko of Shuttleworth & Ingersoll, P.C., Cedar Rapids, and Ludwig B. Gartner, Jr. and Gerard Nolting of Faegre & Benson, Minneapolis, Minn., for appellee Alfa-Laval.

Gene Yagla and John A. Stitely of Lindeman & Yagla, Waterloo, for appellee Kramer Brothers Dairy Supply, Inc.

Considered by HARRIS, P.J., and SCHULTZ, LAVORATO, SNELL and ANDREASEN, JJ.

SCHULTZ, Justice.

This is an action by dairy farmers against the manufacturer and dealer of a milking machine system for damages to their dairy operation caused by that system. On July 26, 1977, Edward and Evadine Meier contacted a dairy equipment dealer, the partnership of Kramer Brothers Dairy Supply, and purchased a new milking machine system manufactured by defendant Alfa-Laval, Inc. (Alfa). The system had four milking units. In 1978 the Meiers added two new units from the same dealer and manufacturer. Later that year the dealership changed from a partnership to a corporation, Kramer Brothers Dairy Supply, Inc., with the partners as the principal shareholders. The corporation sold the Meiers six replacement milking units in 1979 and continued to service and repair their dairy operation.

Plaintiffs assert that the milking system was defective because the motorized pump which produced the vacuum needed to run the system was inadequate. They presented evidence of problems caused by "fall-offs and squawking" from that portion of the unit attached to the cows' teats. They claimed that these abnormalities occurred when the system was installed but increased when the two units were added in 1978. They claimed that the inadequate vacuum caused their dairy herd to suffer continual mastitis, an inflammation of the mammary glands which reduces milk production and causes long-term damage to the cows.

Plaintiffs commenced this action in 1985 against the incorporated dealer and the manufacturer, claiming breach of an oral contract, breach of the implied warranty of fitness for a particular purpose, negligence in designing and installing the system, and negligent misrepresentation. Defendants pled the affirmative defenses of comparative fault and the statute of limitations.

The trial court denied a pretrial motion for summary judgment, and the action was tried to a jury. The court dismissed the negligence claim growing out of the installation of the system and the claims of other members of the Meier family against the defendants. The court instructed the jury to consider the Kramer Brothers partnership and corporation as one entity. As to the claim against the manufacturer, the jury was instructed that its responsibility was derivative and that plaintiffs had to prove that Kramer Brothers was Alfa's agent. The court submitted the three remaining theories of liability and the defenses based on comparative fault and agency on special verdict forms. The court further instructed the jury that the statute of limitations defense was valid unless plaintiffs established by clear and convincing evidence that defendants were equitably estopped from raising it. The jury also was required to return special verdict forms on the issue of estoppel.

The jury found for the plaintiffs on each issue and apportioned fault by attributing sixty-seven percent to defendants and thirty-three percent to plaintiffs. The court entered a judgment against both defendants after reducing the damages by the amount of plaintiffs' fault.

Defendants filed a motion for judgment notwithstanding the verdict, which was overruled, and a motion for a new trial, which was granted. The court ruled that it had erred when it instructed the jury to treat the partnership and corporation as one entity.

Plaintiffs appeal the ruling granting a new trial. Each defendant cross-appeals. We hold that the trial court erred in failing to grant defendants' motions for directed verdicts based on their claims of insufficient evidence to generate a jury issue on equitable estoppel and negligent misrepresentation. This determination is fatal to plaintiffs' claims, and we need not discuss other issues on appeal. Consequently, we reverse the ruling of the trial court and remand for an order dismissing plaintiffs' action.

I. Statute of Limitations. This action was brought on May 14, 1985. All parties concede that the relevant statute of limitations for the commencement of the action was five years. See Iowa Code § 614.1(4) (1985).

In response to defendants' assertion of the statute of limitations defense, plaintiffs claim the benefit of the discovery rule and the doctrine of equitable estoppel. The court rejected the discovery rule, ¹ and this ruling is not at issue on appeal. The court did submit the issue of equitable estoppel to the jury, which found that the dealer did "make repairs and assurances so that plaintiffs did not file their lawsuit within the statute of limitations ... five years from installing the additional two milking units." Based on this special verdict, the court concluded that defendants were estopped from raising the statute of limitations as a defense.

All parties concede that under proper circumstances equitable estoppel is one of the recognized defenses to the application of the statute of limitations. See Beeck v. Aquaslide 'N' Dive Corp., 350 N.W.2d 149, 157 (Iowa 1984); Coachman Indus. v. Security Trust & Sav. Bank, 329 N.W.2d 648, 650 (Iowa 1983). The party seeking an exception to the expiration of the limitations period has the burden of proving the exception by clear and convincing evidence. Beeck, 350 N.W.2d at 157. The grounds for equitable estoppel are as follows: (1) The defendant has made a false representation or has concealed material facts; (2) the plaintiff lacks knowledge of the true facts; (3) the defendant intended the plaintiff to act upon such representations and (4) the plaintiff did in fact rely upon such representations to his prejudice. Coachman, 329 N.W.2d at 650.

On appeal, the defendants claim that their motions for directed verdicts and their objections to an instruction on the issue of equitable estoppel should have been sustained. When viewed in the light most favorable to the plaintiffs the trial court must find the evidence sufficient as a matter of law to sustain the allegation. Rodgers v. Baughman, 342 N.W.2d 801, 804 (Iowa 1983).

In its rulings during trial and on posttrial motions, the court relied upon the theory of repair estoppel combined with defendants' assurances to conclude a jury issue was present. It fashioned its instruction to require proof that the dealer had made alterations or repairs to the milking system after installation and had additionally made written or verbal assertions that plaintiffs' system would operate as warranted or contracted. Defendants attack the theory of repair estoppel and also maintain that the verbal assurances do not trigger a fact question on equitable estoppel.

We first turn to the issue of repair estoppel. This theory is an offshoot of the doctrine of equitable estoppel. Estoppel is triggered when false representations induce the plaintiff into inaction to his detriment under the statute of limitations. Whether repairs can serve as the equivalent of misrepresentations is an issue of first impression for our court.

Cases from other jurisdictions which address the issue of repair estoppel are not in accord. One view is that repairs to damaged property accompanied by consumer reliance tolls the period of limitations. Mason v. County of Mobile, 410 So.2d 19, 21 (Ala.1982); Ashley v. Volkswagen of Am., Inc., 380 So.2d 702, 707 (La.Ct.App.1980). In City of Birmingham v. Cochrane Roofing & Metal Co., 547 So.2d 1159, 1167 (Ala.1989), the Alabama court limited the application of the doctrine by requiring a standard of reasonable reliance.

There are other jurisdictions which hold that while repairs alone are not sufficient, repairs and assurances that the remedies have cured or shall cure the defect will interrupt the limitations period. Southern Cal. Enters., Inc. v. D.N. & E. Walter Co., 78 Cal.App.2d 750, 178 P.2d 785, 788 (1947); Ranker v. Skyline Corp., 342 Pa.Super. 510, 516, 493 A.2d 706, 709 (1985). Bowman v. Oklahoma Natural Gas Co., 385 P.2d 440, 445 (Okla.1963).

Many jurisdictions do not recognize that repairs and assurances will either toll or estop the enforcement of the limitations period. Triangle Underwriters v. Honeywell, Inc., 604 F.2d 737, 743 (2d Cir.1979); Bobo v. Page Eng'g Co., 285 F.Supp. 664, 667 (W.D.Pa.1967), aff'd, 395 F.2d 991 (3d Cir.1968); Zahler v. Star Steel Supply Co., 50 Mich.App. 386, 390, 213 N.W.2d 269, 270 (1973); Neal v. LaClede Gas Co., 517 S.W.2d 716, 719 (Mo.Ct.App.1974); Bishop-Babcock-Becker Co. v. Jennings, 245 S.W. 104, 105 (Tex.Civ.App.1922). In Neal the Missouri court stated that the proof supporting estoppel must be absolute and unequivocal. 517 S.W.2d at 719. It rejected an estoppel claim based on repeated efforts to repair and assurances of a successful operation. Id.

Still other cases cite evidence of a party's additional positive efforts beyond repairs and assurances which result in the failure to bring a timely action. Dillon County School Dist. v. Lewis Sheet Metal Works, Inc., 286 S.C. 207, 219, 332 S.E.2d 555, 561-62 (Ct.App.1985) (in addition to repairs and assurances defendants indicated litigation would not be required), cert. dismissed, 343 S.E.2d 613 (1986); see also Beckenstein v. Potter & Carrier, Inc., 191 Conn. 150, 159, 464 A.2d 18, 23 (1983) (repairs not sufficient unless there is evidence repairs were made in order to avoid lawsuit and party actually...