Moorman Mfg. Co. v. National Tank Co.
| Citation | 47 Ill.Dec. 186,92 Ill.App.3d 136,414 N.E.2d 1302 |
| Decision Date | 30 December 1980 |
| Docket Number | Nos. 15894,15973,s. 15894 |
| Parties | , 47 Ill.Dec. 186 MOORMAN MANUFACTURING COMPANY, a corporation, Plaintiff-Appellant-Cross Appellee, v. NATIONAL TANK COMPANY, a corporation, and Combustion Engineering, Inc., a corporation, Defendants-Appellees-Cross Appellants. |
| Court | United States Appellate Court of Illinois |
Robert W. Cook, Schmiedeskamp, Robertson, House, Neu & Mitchell, Quincy, for plaintiff-appellant-cross appellee.
Kent R. Schnack, Loos & Schnack, Quincy, John C. Wooleyhan, Wooleyhan, Nielson & Adams, Quincy, for defendants-appellees-cross appellants.
We hold that recovery may be had for economic loss under the tort theories of strict liability in tort, negligence, and misrepresentation.
On July 26, 1978, Moorman Manufacturing Company filed a three-count complaint claiming that National Tank Company, a wholly owned subsidiary of Combustion Engineering, Inc., designed, manufactured and sold various types of storage tanks. In 1966, the defendants manufactured and sold a particular bolted steel grain storage tank to Moorman for use at its feed processing plant in Alpha, Illinois. All three counts alleged that in the last few months of 1976 or the first months of 1977 a crack developed in one of the steel plates on the second ring of the tank.
Count I (sounding in strict liability in tort ) alleged that the tank was not reasonably safe due to certain design and manufacturing defects. Count II (the misrepresentation count) asserted that the defendants had made certain representations, which were in fact untrue, in connection with the sale of the tank. Moorman purportedly relied upon these representations to its detriment. Count III accused the defendants of negligently designing the tank.
On October 10, 1978, the defendants filed a motion to dismiss all three counts of the complaint, alleging, inter alia, that the cause of action was barred by section 15 of the Limitations Act (Ill.Rev.Stat.1979, ch. 83, par. 16). Following a hearing on defendants' motion, plaintiff filed an amendment to the complaint, adding count IV, claiming that it had relied upon an express warranty made by the defendants at the time of the sale.
In all four counts of the complaint, the plaintiff prayed for damages representing loss of use and cost of repairs and reinforcement of the tank.
On May 15, 1979, the defendants filed an amendment to their motion to dismiss. In this amendment, the defendants claimed that the plaintiff sought only economic loss, which is not available under any tort theory. Additionally, the defendants alleged that count IV was barred by the statute of limitations.
On November 1, 1979, the trial court specifically held that the plaintiff could not recover for purely economic losses under the tort theories advanced by the plaintiff, and that the loss of profits or income and the cost of repair to the tank were economic losses only. The court then dismissed the first three counts. As to count IV, the court found it was not barred by the statute of limitations since an express warranty existed which extended to future performance of the tank.
On motion by the defendants, the trial court entered an order pursuant to Supreme Court Rule 308 (73 Ill.2d R. 308), finding that an immediate appeal of its denial of the defendants' motion to dismiss count IV would materially advance the ultimate termination of the litigation. The trial court also found, under Supreme Court Rule 304(a) (73 Ill.2d R. 304(a)), that there was no just reason for delaying enforcement or appeal of its order dismissing the first three counts of the plaintiff's complaint. We granted the appeal and the appeal was perfected.
On appeal, the plaintiff argues that it should be allowed to recover for economic losses under the tort theories advanced in its complaint. In addition to contesting this issue, defendants assert that the allegations of count IV (express warranty ) were insufficient to invoke the future performance exception to the statute of limitations. (Ill.Rev.Stat.1979, ch. 26, par. 2-725.) The defendants also argue, as an alternative for affirming the trial court's dismissal of the first three counts, that the tort counts were barred by the statute of limitations. Finally, defendants contend that the storage tank in question was not a product and that the doctrine of strict liability in tort was therefore inapplicable.
The capstone question in this appeal is the issue of "economic loss." We bite the bullet. We hold that the plaintiff may recover for economic losses under the tort theories of strict liability in tort, negligence, misrepresentation. Additionally, the plaintiff's tort actions were not barred by the statute of limitations, and the storage tank was a product. We therefore reverse the trial court's dismissal of the first three counts.
We first address the issue of the recovery of economic loss in tort and then address the applicability of the statute of limitations to all four counts.
When a product fails to perform properly, the buyer may incur one or more of three kinds of harm: personal injury, property damage, or economic loss. The term "personal injury" is self-explanatory. Property damage consists of injury to the plaintiff's property other than to the product itself. Economic loss may be either direct or consequential. Direct economic loss occurs when a product damages itself or is unfit for the purpose for which it was sold. Such losses are generally limited to the price of the product. Consequential economic loss consists of an injury extrinsic to the product, such as lost profits or the loss of use of the product. See Note, Manufacturer's Strict Tort Liability to Consumers for Economic Loss, 41 St. John's L.Rev. 401 (1967).
As we observed above, the plaintiff's complaint alleges only economic loss cost of repairs (direct economic loss) and loss of use of the product (consequential economic loss). In dismissing the plaintiff's counts alleging strict liability in tort, negligence, and misrepresentation, the trial court specifically relied upon the Second District's decision in Alfred N. Koplin & Co. v. Chrysler Corp. (1977), 49 Ill.App.3d 194, 7 Ill.Dec. 113, 364 N.E.2d 100. In that case, the plaintiff alleged negligent manufacture and breach of warranty and sought recovery for its expenses in repairing and replacing air conditioning units manufactured by the defendant. The court said the plaintiff's allegation of solely economic loss placed the case within the (49 Ill.App.3d 194, 199, 7 Ill.Dec. 113, 116-117, 364 N.E.2d 100, 103-04.) The court then proceeded to discuss cases which have divided on the question of whether economic loss should be recoverable in strict liability in tort absent any personal injury or property damage. Although the only tort count before it was the negligence count, the Koplin court purported to deny recovery for pure economic loss in any kind of tort action. Thus, the court's discussion is dictum as it relates to strict liability in tort and to misrepresentation.
The only other Illinois case facing the issue of recovery for purely economic loss in a tort action appears to be the First District's decision in Rhodes Pharmacal Co. v Continental Can Co. (1966), 72 Ill.App.2d 362, 219 N.E.2d 726. The plaintiff in Rhodes was a marketer of drugs, cosmetics, and hair beauty products. It sought recovery for damages incurred because aerosol cans manufactured by the defendant had leaked. Without explanation, the court merely stated that the case did not meet the requirements for application of the strict liability in tort doctrine. Since the Rhodes court did not discuss the many policy issues on each side of the question we now face, that opinion is not persuasive, and we do not feel compelled to follow it. Wanderer v. Plainfield Carton Corp. (1976), 40 Ill.App.3d 552, 351 N.E.2d 630.
The debate over whether a cause of action lies in strict liability in tort if the plaintiff is alleging only economic loss began in the mid 1960's. In Santor v. A. and M. Karagheusian, Inc. (1965), 44 N.J. 52, 207 A.2d 305, the court which had led the way in attacking the privity requirement in a breach of warranty action (Henningsen v. Bloomfield Motors, Inc. (1960), 32 N.J. 358, 161 A.2d 69) again broke new ground. The plaintiff in Santor was allowed recovery for loss of the value of carpeting manufactured by the defendants, such loss arising because of unusual indelible lines in the carpeting that became visible soon after installation.
Only a few months after Santor, the California court which had pioneered the strict liability in tort doctrine (Greenman v. Yuba Power Products, Inc. (1962), 59 Cal.2d 57, 27 Cal.Rptr. 697, 377 P.2d 897) came to a conclusion contrary to Santor. In Seely v. White Motor Co. (1965), 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145, the court, in dictum, explained that it would deny recovery under strict liability in tort for economic loss arising from the continuous galloping of a truck manufactured by the defendant.
In the 15 years since Santor and Seely, courts of other jurisdictions have continued to split on whether purely economic loss is recoverable in a strict liability in tort action. We find the arguments in favor of recovery to be highly persuasive.
In a strict liability in tort action, we are concerned with the condition and quality of the product. (Christopherson v. Hyster Co. (1978), 58 Ill.App.3d 791, 16 Ill.Dec. 83, 374 N.E.2d 858.) The right of recovery should not depend upon the nature of the injury or the kind of plaintiff. A manufacturer who has failed to supply a product suitable for the purpose for which it was...
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