Paquette v. Deere and Co.

• Decision Date: 04 September 1998
• Docket Number: No. 97-389.,97-389.
• Citation: 719 A.2d 410
• Court: Vermont Supreme Court
• Parties: Emile and Marjorie PAQUETTE v. DEERE AND COMPANY and Oshkosh Truck Corporation.

719 A.2d 410

Emile and Marjorie PAQUETTE v. DEERE AND COMPANY and Oshkosh Truck Corporation.

No. 97-389.

Supreme Court of Vermont.

September 4, 1998.

David M. Klein of Bauer, Anderson and Gravel, Burlington, for Plaintiffs-Appellants.

Thomas P. Simm of McCormick, Fitzpatrick, Kasper and Burchard, P.C., Burlington, for Defendants-Appellees.

Before AMESTOY, C.J., and DOOLEY, MORSE, JOHNSON and SKOGLUND, JJ.

JOHNSON, Justice.

Plaintiffs appeal the superior court's order dismissing their suit seeking compensation for economic losses incurred when they traded in their allegedly defective motor home. We conclude that plaintiffs' warranty claims were not brought within the relevant limitations period, and that their products liability claims could not be based upon the purely economic losses incurred in this particular case. Accordingly, we affirm the superior court's judgment.

Because judgment was granted on the pleadings in this case, we accept as true all well pleaded factual allegations contained in the complaint and all reasonable inferences that can be drawn from those allegations. See Thayer v. Herdt, 155 Vt. 448, 456, 586 A.2d 1122, 1126 (1990). According to their complaint, plaintiffs purchased a new John Deere Superchief Winnebago on August 2, 1989 for $64,000. Beginning in 1990, plaintiffs began experiencing problems with the motor home resulting from defective electrical wiring. The engine would cut out and stall, which in turn affected the performance of the brakes. Plaintiffs made several attempts to repair the vehicle, but the problems recurred. On September 23, 1994, plaintiffs were involved in an accident as a result of these problems.

Approximately one month after the accident, plaintiffs received a recall notice, dated September 6, 1994, which warned of electrical problems that could result in engine stalling and partial brake failure. The notice asked owners who were experiencing such problems to stop using their motor homes and bring them in for repair. After receiving the notice, plaintiffs had their motor home repaired and continued to use it. Later, while traveling in Florida in March 1995, plaintiffs began having the same problems with the motor home that had previously occurred. Feeling that the vehicle was not safe enough to drive back to Vermont, plaintiffs traded it in for $22,000 and purchased another, less expensive motor home. Plaintiffs claim that they incurred a final loss in excess of $33,000 by having to trade their motor home in at a reduced value due to its defective condition.

In October 1996, plaintiffs filed suit against Deere and Company and Oshkosh Truck Corporation alleging strict products liability, negligent products liability, breach of an implied warranty of merchantability, and breach of an implied warranty of fitness for a particular purpose. The superior court granted defendants' motion for judgment on the pleadings, ruling that (1) self-destruction of the product itself cannot form the basis for products liability or negligence claims; and (2) the statute of limitations had run on the warranty claims. On appeal, plaintiffs argue that the trial court erred in ruling that (1) they were precluded from recovering economic losses pursuant to their products liability claims, and (2) their warranty claims were brought outside the limitations period.

We first consider the warranty claims. Plaintiffs argue that the recall notice sent to them in October 1994 should be construed as a warranty and a new promise reviving prior warranties. In plaintiffs' view, the post-sale representations and promise to repair contained in the notice modified the original contract for the purchase of their motor home, and thus tolled the statute of limitations for their warranty claims.

We find no merit to these arguments. By the time that Deere and Company issued the recall notice in October 1994, more than five years had passed since plaintiffs purchased the Winnebago, and thus the statute of limitations had already run on their warranty claims. See 9A V.S.A. § 2-725(1), (2) (action for breach of contract for sale must be commenced within four years after cause of action has accrued; breach-of-warranty action accrues upon tender of delivery of goods). The recall notice could not have revived warranties that were no longer actionable. Nor did the recall notice, standing alone, expressly or impliedly make any warranties regarding the Winnebago; rather, it merely promised to install a wiring improvement parts kit.

We now turn to plaintiffs' products liability claims. This Court has adopted the doctrine of strict products liability as embodied in Restatement (Second) of Torts § 402A. See Zaleskie v. Joyce, 133 Vt. 150, 155, 333 A.2d 110, 114 (1975). "Under that doctrine, a manufacturer is strictly liable for physical harm or property damages resulting from a defective product that reaches a user without undergoing substantial change." Webb v. Navistar Int'l Transp. Corp., 166 Vt. 119, 126, 692 A.2d 343, 346 (1996); see Restatement (Second) of Torts § 402A(1) (1965) (one who sells any product in defective condition unreasonably dangerous to user or user's property is "subject to liability for physical harm thereby caused to the ultimate user... or to his property") (emphasis added).

Over the years, plaintiffs proceeding under § 402A have sought damages for (1) physical injuries to persons; (2) physical damage to property other than the dangerous product itself; (3) physical damage to the product itself; and (4) consequential damages that involve only commercial or economic loss. Generally, all jurisdictions have allowed recovery for the first two types of injury. Some jurisdictions have allowed recovery for damage to the product itself, though most often only if the loss occurred in the context of a dangerous situation such as an accident. Very few jurisdictions, however, have allowed recovery based on claims of commercial or economic loss. See P. Sherman, Products Liability for the General Practitioner § 10.05, at 287-90 (1981) (general rule is that damages for commercial or purely economic loss are unavailable in strict products liability actions); see also 2 L. Frumer & M. Friedman, Products Liability § 13.11, at 150 (1998) (under traditional and still prevailing rule, economic losses caused by product failure must be pled in warranty or contract, not products liability); 2 M. Madden, Products Liability § 22.23, at 340-41 (2d ed.1988) (majority rule is that economic loss, including damage to product itself unaccompanied by injury to persons or damage to other property, is generally not recoverable in products liability actions); W. Keeton, Prosser & Keeton on Torts § 101, at 708-09 (5th ed.1984) (discussing theories available to recover various types of losses).

The leading case for the majority position is Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (Cal.1965). There, the brakes on the plaintiff's truck failed, resulting in an accident that caused some damage to the truck but did not injure the plaintiff. The plaintiff sought damages for repair of the truck, the purchase price of the truck, and profits lost in his business because he was unable to use the truck. Writing for the majority, Justice Traynor agreed that physical injury to property, including the defective product itself, should be compensable under strict liability in tort, but found that the plaintiff had failed to demonstrate that the alleged defect caused the physical damage to the truck. See id. at 152. As for the economic losses claimed by the plaintiff, the court reasoned that while consumers should not have to bear the risk of physical injury caused by products that manufacturers bring into the stream of commerce, consumers can be fairly charged with the risk that the products they purchase will not match their economic expectations, at least to the extent that the manufacturers have not warranted to that effect. See id. at 151.

In the leading case for the minority position, the New Jersey Supreme Court allowed a plaintiff to seek damages under a theory of strict tort liability for a carpet that had developed lines in it. See Santor v. A & M Karagheusian, Inc., 44 N.J. 52, 207 A.2d 305, 311-13 (N.J.1965). The court opined that the purpose behind the doctrine of strict liability in tort — to ensure that the cost of injuries or damages resulting from defective products is borne by the manufacturers rather than the consumers — applies with equal force even when the product is not dangerous and the damage does not extend beyond the product itself. See id. at 312. In the context of a maritime law case, the United States Supreme Court considered these and other intermediate positions concerning the recoverability of economic losses under a theory of strict products liability. See East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986). In that case, charterers of a supertanker sought damages for repair costs and lost income resulting from a defective turbine engine that ceased functioning while at sea. After surveying the case law, the Court held that a manufacturer in a commercial relationship has no duty to prevent a product from injuring itself, and thus could not be liable for such damages under a theory of strict products liability. See id. at 871, 106 S.Ct. 2295. Stating that damage to the defective product itself "is most naturally understood as a warranty claim," id. at 872, 106 S.Ct. 2295, the Court rejected the intermediate position taken by courts that had adopted a risk-of-harm analysis under which plaintiffs could receive compensation for damage to the product itself depending on "the nature of the defect, the type of risk, and the manner in which the injury arose." Id. at 869-70, 106 S.Ct. 2295.

The reaction to East River has been mixed. Most courts have adopted its holding, even in cases involving consumer...