Peterson v. Bendix Home Systems, Inc., 81-748.

• Decision Date: 16 April 1982
• Docket Number: No. 81-748.,81-748.
• Parties: Florence E. PETERSON, Respondent, v. BENDIX HOME SYSTEMS, INC., Appellant, Heritage Homes, Inc., Defendant.
• Court: Minnesota Supreme Court

318 N.W.2d 50 (1982)

Florence E. PETERSON, Respondent, v. BENDIX HOME SYSTEMS, INC., Appellant, Heritage Homes, Inc., Defendant.

No. 81-748.

Supreme Court of Minnesota.

April 16, 1982.

Nichols & Kruger, Richard J. Kruger and Katherine A. Constantine, Minneapolis, for appellant.

Taylor Law Firm, David W. Kocur and Thomas F. Meany, Minneapolis, for Peterson.

Considered and decided by the court en banc without oral argument.

SIMONETT, Justice.

Although the jury found the plaintiff purchaser more at fault than the defendant manufacturer on a breach of warranty claim, the trial court ruled that the purchaser could recover the entire damages awarded for loss in value of the product and incidental expenses. The defendant manufacturer appeals this ruling and also claims that the evidence does not support the amount of damages. The plaintiff purchaser, by notice of review, claims the trial court erred in denying her attorneys fees. We affirm on all three issues.

Plaintiff Florence E. Peterson purchased a new mobile home, manufactured by defendant Bendix Home Systems, Inc. (Bendix), from the local dealer, defendant Heritage Homes, Inc. Mrs. Peterson found that she could not live in the unit, claiming that a strong odor emanating from the home caused her to suffer from facial rash, burning eyes, an irritated throat and a persistent cough. After complaining to both the dealer and the manufacturer with unsatisfactory results, Mrs. Peterson sued both defendants, claiming that formaldehyde fumes had made her mobile home uninhabitable. In her complaint, Mrs. Peterson alleged strict liability in tort; negligence in design, construction and distribution; breach of express warranty; and breach of implied warranties of merchantability and fitness for intended purpose. As damages, Mrs. Peterson claimed loss in value of the mobile home, incidental damages incurred in installing the home, and consequential damages consisting of personal injuries, that is, the adverse effect of the home on her health.

At the close of the testimony, the trial court directed a verdict in favor of the dealer, Heritage Homes, Inc., pursuant to Minn.Stat. § 544.41 (1980). The trial court also directed a verdict in favor of the manufacturer Bendix on negligence. In its answers to the special verdict on the remaining questions, the jury found that: (1) the mobile home was not unreasonably dangerous to an ordinary user; (2) Bendix had made and honored an express warranty; (3) Bendix had not breached its implied warranty of fitness for a particular purpose; but (4) Bendix had breached its implied warranty of merchantability.

The jury thus found that Bendix had successfully defended all theories of liability against it except breach of implied warranty of merchantability. The jury was then asked to compare "the combined fault that caused the damages" and answered that Bendix was only 25% at fault while Florence Peterson was 75% at fault. The jury found the difference in value between the mobile home as warranted and as delivered to be $15,000, the incidental damages for installation and utility hookups to be $2,500, and the damages for physical harm suffered by Mrs. Peterson to be $5,000.

Since Mrs. Peterson was more at fault than Bendix, the court correctly ruled she was not entitled to recover the $5,000 damages for harm to her person. Plaintiff does not challenge this ruling on appeal. The trial court further ruled, however, that plaintiff's 75% fault did not defeat her other damage claims and ordered judgment entered in favor of plaintiff and against defendant Bendix for $17,500.

Appellant Bendix argues that, since plaintiff's breach of warranty claim sounds in tort, the plaintiff's contributory fault applies regardless of the kind of loss or harm, whether the damages are general, incidental or consequential. Appellant contends its position is sustained both by the wording of our Comparative Fault Statute and by case law.

I. The Applicability of Comparative Fault.

A. The elements of a breach of warranty action. Originally warranty actions were seen as tortlike breaches of the seller's representations and assurances to the buyer, but their central role in sales law led them to be treated more generally as an element of contract law. Thus, warranties evolved as a unique amalgam of tort and contract law. As warranty began to be used more and more to cover consequential harms caused by defective products, however, the tortlike nature of the actions was increasingly emphasized.

So, in a leading Minnesota case abolishing privity requirements for breach of warranty actions, the tort basis of warranty was used to establish that a buyer could sue a manufacturer for a defective product, even though the buyer's "contract" had been with the seller-dealer and not the manufacturer. Beck v. Spindler, 256 Minn. 543, 99 N.W.2d 670 (1959). Then, in 1978, our comparative negligence statute was amended to include fault, and "fault" was defined as including, among other things, breach of warranty and misuse of product. Minn. Stat. § 604.01, subd. 1a (1980).

To establish a warranty claim the plaintiff must basically prove: the existence of a warranty, a breach, and a causal link between the breach and the alleged harm. An implied warranty of merchantability is defined as requiring that goods be "fit for the ordinary purposes for which such goods are used." Minn.Stat. § 336.2-314(2)(c) (1980). This warranty is breached when the product is defective to a normal buyer making ordinary use of the product. Thus, even if the plaintiff has been harmed, a manufacturer may still be able to show no breach by showing that the buyer was somehow "abnormal" or that the product was not used in an ordinary way and that, consequently, the product was not defective to an ordinary user. If, however, a breach is established, the plaintiff must next prove the alleged harm was caused by the product's defect. If plaintiff's harm was caused by something other than the breach, there is no recovery.

The Uniform Commercial Code provides three types of damages for the kinds of harm caused by a breach of warranty. General damages are the difference in value between the goods as accepted and what they would have been worth as warranted. Minn.Stat. § 336.2-714(2) (1980). Second, incidental damages are those expenses reasonably incurred in receipt and custody of the product. Minn.Stat. § 336.2-715(1) (1980). Third, consequential damages are injuries to person or property proximately resulting from the breach. Minn.Stat. § 336.2-715(2)(b) (1980). In this case, all three kinds of damages were claimed; and the trial court, aware of the parties' differing contentions on the applicability of comparative fault, so designed the verdict form by separating the kinds of damages that the jury's answers could be used in any event.

B. Defenses to the warranty action. We have consistently held that contributory negligence is a defense to a breach of warranty action insofar as consequential damages are concerned. Gardner v. Coca-Cola Bottling Co., 267 Minn. 505, 511, 127 N.W.2d 557, 562 (1964). See Chatfield v. Sherwin-Williams Co., 266 N.W.2d 171, 176 (Minn.1978), where this court stated that "reducing a party's consequential damages by an amount reflecting the extent to which his own conduct caused them appears to be equitable * * *" (emphasis added). Our Comparative Fault Statute, as now amended, makes clear that comparative fault should similarly be a defense to consequential damages in breach of warranty actions.

At issue here, however, is whether comparative fault should also apply to nonconsequential damages. Our prior case law strongly suggests that this is not so.¹ The trial court relied on language in Nelson v. Anderson, 245 Minn. 445, 451, 72 N.W.2d 861, 865 (1955), in ruling for the plaintiff. Only consequential damages were at issue in Nelson, but there we stated in dicta, quoting from dicta in a New York decision, Razey v. J. B. Colt Co., 106 App.Div. 103, 106, 94 N.Y.S. 59, 61 (1905), that:

"Where the plaintiff seeks to recover damages for a breach of a general warranty, which are usually the difference between the value of the thing as it is in fact and as it was warranted to be, the question of negligence does not enter; but, where he seeks to recover consequential damages, he should not be permitted to recover for his own negligence."

When we look at the Comparative Fault Statute, we find the language inconclusive as to whether contributory fault should apply to nonconsequential damages. Subdivision 1(a) simply defines "fault" as including negligent or reckless conduct "toward the person or property of the actor or others * * *." Minn.Stat. § 604.01, subd. 1a (1980). It is helpful, therefore, to refer to the Commission's comments to section 1 of the Uniform Comparative Fault Act from which our state's statute derives:

An action for breach of warranty is held to sound sometimes in tort and sometimes in contract. There is no intent to include in the coverage of the Act actions that are fully contractual in their gravamen and in which the plaintiff is suing solely because he did not recover what he contracted to receive.

12 U.L.A. 35 (Supp.1982).

Such is our case here. As to general damages (the loss in value of the mobile home from its warranted value), Mrs. Peterson is only suing to recover for what she contracted to receive, namely, a habitable mobile home. Her claim in this respect is not to recover for damages to her person or to any other property that might be caused by the defective mobile home; rather her claim is to recover for the mobile home itself, a claim sounding in contract. Bendix argues that plaintiff "failed to pursue her remedies under the Uniform Commercial Code and thus respondent is limited to her breach of warranty claim within the Comparative Fault Statute." We have difficulty understanding this argument. The Comparative Fault Statute does not create any...