Morrow v. New Moon Homes, Inc.
| Decision Date | 26 March 1976 |
| Docket Number | No. 2206,2206 |
| Citation | 548 P.2d 279 |
| Parties | 19 UCC Rep.Serv. 1 Joseph R. MORROW and Nikki Morrow, Appellants, v. NEW MOON HOMES, INC., and Golden Heart Mobile Homes, Inc., Appellees. |
| Court | Alaska Supreme Court |
Peter J. Aschenbrenner, Aschenbrenner & Savell, Fairbanks, and D. Rebecca Snow, Johnson, Christenson, Shamberg and Link, Inc., Fairbanks, for appellants.
Patrick T. Brown, Rice, Hoppner & Hedland, Fairbanks, for appellees.
Before RABINOWITZ, C. J., and CONNOR, ERWIN, BOOCHEVER, and BURKE, JJ.
This appeal raises questions concerning personal jurisdiction over, and the liability of, a nonresident manufacturer of a defective mobile home that was purchased in Alaska from a resident seller.
In October of 1969, Joseph R. and Nikki Morrow bought a mobile home from Golden Heart Mobile Homes, a Fairbanks retailer of mobile homes. A plaque on the side of the mobile home disclosed that the home had been manufactured in Oregon by New Moon Homes, Inc. The Morrows made a down payment of $1,800, taking out a loan for the balance of the purchase price from the First National Bank of Fairbanks. The loan amount of $10,546.49, plus interest of 9 percent per year, was to be repaid by the Morrows in 72 monthly installments of $190.13 each.
At the time of the purchase, the Morrows inspected the mobile home and noticed that the carpeting had not been laid and that several windows were broken. Roy Miller, Golden Heart's salesman, assured them that these problems would be corrected and later made good his assurances. Miller also told the Morrows that the mobile home was a 'good trailer', '. . . as warm as . . . any other trailer.' After the sale, Miller moved the Morrows' mobile home to Lakeview Terrace, set it up on the space the Morrows had rented, and made sure that the utilities were connected. Then the troubles started.
On the first night that the mobile home's furnace was in use, the motor went out and had to be replaced. The electric furnace installed by the manufacturer had been removed by someone who had replaced the original with an oil furnace. The furnace vent did not fit, and consequently the 'stove pipe' vibrated when the furnace was running. Subsequent events showed the furnace malfunction was not the primary problem with the mobile home.
About four days after the mobile home had been set up, the Morrows noticed that the doors did not close all the way and that the windows were cracked. The bathtub leaked water into the middle bedroom. In March of 1970 when the snow on the roof began to melt, the roof leacked. Water came in through gaps between the ceiling and the wall panels, as well as along the bottom of the wallboard. A short circuit developed in the electrical system; the lights flickered at various times. When it rained, water came out of the light fixture in the hallway. Other problems with the mobile home included the following: the interior walls did not fit together at the corners; the paneling came off the walls; the windows and doors were out of square; the door frames on the bedroom doors fell off and the closet doors would not slide properly; the curtains had glue on them; and the finish came off the kitchen cabinet doors.
Despite all these problems, the Morrows continued to live in the mobile home and make the loan panyments. Golden Heart Mobile Homes was notified many times of the difficulties the Morrows were having with their mobile home. Roy Miller, the Golden Heart salesman with whom the Morrows had dealt, did put some caulking around the bathtub, but otherwise he was of little assistance. Finally, sometime before April 1, 1970, Nikki Morrow informed Miller that if Golden Heart did not fix the mobile home the Morrows wanted to return it. Miller said the Morrows would '(h)ave to take it up with the bank.' Subsequently, Golden Heart went out of business.
The First National Bank of Fairbanks was more sensitive to the Morrows' plight. Upon being informed by the Morrows that they intended to make no further payments on the mobile home, bank personnel went out and inspected the home several times. In addition, on May 27, 1970, the bank wrote to New Moon Homes, Inc. in Silverton, Oregon. Its letter informed New Moon of the problems the Morrows were having wth their New Moon mobile home and asked whether New Moon expected to send a representative to Fairbanks since Golden Heart, the dealer, was no longer in business. Apparently, New Moon did not respond to the bank's letter.
A short time later the Morrows' counsel wrote a letter to New Moon Homes notifying New Moon that the Morrows intended to hold the company liable for damages for breach of implied warranties. About a month later the Morrows separated, with Nikki Morrow continuing to live in the mobile home. She continued to make payments to First National because she 'couldn't afford Alaskan rents.' Nikki Morrow eventually moved out of the mobile home but made no effort to sell or rent it because she considered it 'not fit to live in.' In October of 1971 the Morrows filed this action against both New Moon Homes and Golden Heart Mobile Homes, alleging that defendants had breached implied warranties of merchantability and fitness for particular purpose in manufacturing and selling an improperly constructed mobile home. The complaint further alleged that New Moon 'is a foreign corporation doing business in the State of Alaska.' Although the record does not disclose the method by which New Moon was informed of the pending action, apparently the Morrows served a copy of the summons and complaint upon the Commissioner of Commerce, who forwarded the papers to New Moon in Oregon. 1 In its answer New Moon inter alia raised the 'affirmative defenses' of lack of personal jurisdiction and improper service of process.
The case was tried in July of 1973. No attorney appeared on behalf of Golden Heart Mobile Homes, but the Morrows proceeded to present their evidence against New Moon because they were looking primarily to the manufacturer for recovery. The Morrows offered the testimony of four witnesses which tended to identify the mobile home in question as a New Moon home. 2 Neither side presented any evidence concerning New Moon's business connections with Alaska or the circumstances under which the New Moon mobile home came into Golden Heart's possession. The superior court granted the Morrows a default judgment against Golden Heart, but dismissed their claim against New Moon 'for both failure of jurisdiction and failure of privity of contract.' The Morrows then appealed from that portion of the superior court's judgment which dismissed their claim against New Moon.
The heart of this appeal concerns the remedies which are available to a remote purchaser against the manufacturer of defective goods for direct economic loss. The superior court held that the Morrows had no legal claim against New Moon because they were not in privity of contract with New Moon. The first argument advanced here by the Morrows amounts to an end run around the requirement of privity. The Morrows contend that their complaint asserted a theory of strict liability in tort. They further argue that they should have prevailed irrespective of any lack of privity of contract between New Moon and themselves, because lack of privity of contract is not a defense to a strict tort liability claim. It is true that in Bachner v. Pearson, 479 P.2d 319 (Alaska 1970), we held:
that implied warranty and strict products liability are sufficiently similar to require that a complaint worded in terms of the former theory should be deemed to raise a claim under the latter theory. 3
Thus, although the Morrows' complaint sounded in breach of implied warranties, it also raised a strict liability claim if such a claim is legally cognizable against New Moon.
In Clary v. Fifth Avenue Chrysler Center, Inc., 454 P.2d 244 (Alaska 1969), Alaska adopted the Greenman v. Yuba Power Products, Inc., 4 rule of strict products liability, which provides that
(a) manufacturer is strictly liable in tort when an article he places on the market, knowing that it is to be used without inspection for defects, proves to have a defect that causes injury to a human being. 5
By its terms the Greenman formulation applies only when the defective product causes personal injury. Since the Morrows did not sustain any personal injuries which were caused by the defects in their mobile home, strict liability is seemingly unavailable to them in the instant case. However, the Morrows argue that strict liability should nonetheless apply in the situation where a consumer sues a manufacturer solely for economic loss attributable to the manufacturer's defective product. This precise contention presents a question of first impression in Alaska.
The issue whether strict liability in tort should extend to economic loss has prompted no small amount of discussion in legal journals. 6 The two leading judicial opinions are probably Santor v. A. and M. Karagheusian, Inc., 44 N.J. 52, 207 A.2d 305 (1965), and Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (1965). In the former case, Santor purchased from a retailer certain carpeting manufactured and advertised by Karagheusian. Almost immediately after the carpet was laid, Santor noticed an unusual line in it. As the pile wore down, the line became worse and two additional lines appeared. Since the retailer had gone out of business, Santor sued the manufacturer for damages for breach of the implied warranty of merchantability. In a unanimous decision, the Supreme Court of New Jersey held that the plaintiff, as the ultimate purchaser of defective carpeting, could maintain an action against the manufacturer on either of two theories, breach of implied warranty of reasonable fitness or strict liability in tort. Privity of contract was not necessary in order to pursue either theory, although damages were limited to loss of value of the...
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