Sheehan v. Morris Irr., Inc., s. 16482

• Decision Date: 08 August 1990
• Docket Number: 16491,Nos. 16482,s. 16482
• Citation: 13 UCCRep.Serv.2d 145,460 N.W.2d 413
• Parties: 13 UCC Rep.Serv.2d 145 Harvey D. SHEEHAN and Andrea L. Sheehan, as Trustees (Debtors-in-Possession) of the Chapter 11 Estate of Harvey D. Sheehan and Andrea L. Sheehan, d/b/a J.E.S. Farms, Plaintiffs, v. MORRIS IRRIGATION, INC. and Johnson Bros., Company, Defendants and Third-Party Plaintiffs/Appellants. UNITED PACIFIC INSURANCE CO., Defendant, v. TKD, INC., f/k/a Johnston Pump Co., Inc., Third-Party Defendants, and Reinke Manufacturing Co., Third-Party Defendant/Appellee.
• Court: South Dakota Supreme Court

Page 413

460 N.W.2d 413

13 UCC Rep.Serv.2d 145

Harvey D. SHEEHAN and Andrea L. Sheehan, as Trustees

(Debtors-in-Possession) of the Chapter 11 Estate

of Harvey D. Sheehan and Andrea L.

Sheehan, d/b/a J.E.S. Farms, Plaintiffs, v. MORRIS IRRIGATION, INC. and Johnson Bros., Company,

Defendants and Third-Party Plaintiffs/Appellants.

UNITED PACIFIC INSURANCE CO., Defendant, v. TKD, INC., f/k/a Johnston Pump Co., Inc., Third-Party

Defendants,

and

Reinke Manufacturing Co., Third-Party Defendant/Appellee.

Nos. 16482, 16491.

Supreme Court of South Dakota.

Argued Sept. 12, 1989.

Decided Aug. 8, 1990.

Mark F. Marshall of Bangs, McCullen, Butler, Foye & Simmons, Rapid City, for defendant and third-party plaintiffs/appellant.

John Simko of Woods, Fuller, Shultz & Smith, Sioux Falls, for third-party defendant/appellee Reinke.

AMUNDSON, Circuit Judge.

Morris Irrigation, Inc. (Morris) appeals from an order granting summary judgment in favor of Reinke Manufacturing Inc., (Reinke) on Morris' ¹ third-party action against Reinke. We affirm.

Morris is, and was at all times relevant to this appeal, in the business of designing, selling, and installing center pivot irrigation systems in central South Dakota. Morris, along with its joint venturer, Johnson Brothers Company, contracted with Harvey D. Sheehan and Fred Schafer, d/b/a Sheehan and Schafer, a partnership (Sheehan), for the design and construction of an 89 center pivot irrigation system on Sheehan's 12,000 plus acre ranch in Hughes and Sully counties in South Dakota. The contracts were negotiated and executed during the last part of 1979 and early 1980. The parties were represented by counsel in the negotiations, preparation, and signing of the contracts.

Morris was an authorized dealer of Reinke irrigation products. The center pivots were purchased from Reinke's stock and integrated into the irrigation system by Morris. The type of center pivots employed in the Sheehan system were selected by Morris from Reinke's inventory. There were no special design specifications for the center pivots. Sheehan and Reinke executed a separate sales contract for each center pivot. The center pivots and component parts were delivered to the Sheehan project by Reinke and then assembled by Morris.

The Sheehan-Morris contract provided in paragraph 8 that Sheehan would receive the benefit of all manufacturers' warranties covering any components installed into the irrigation system. Morris assigned all such warranties to Sheehan under this same provision.

The irrigation system was placed in operation during the 1980 and 1981 irrigation season. All center pivots were installed in the system by September 26, 1980. A portion of the system had been made operational prior to this date pursuant to the terms of the parties' contract.

As could be expected in a project of this magnitude, numerous problems were encountered in the system's operation. Pat Tracey, who was involved in the project since its inception as either the operator of the system or as farm manager, testified that the end guns on the pivots began plugging up during the 1980 and 1981 growing seasons. He stated that this plugging problem escalated over time and by 1982, fifty percent of the end guns were affected. Sheehan and Morris were both aware of this end gun problem. Sheehan testified that he referred all warranty problems to Morris; however, neither Sheehan nor Morris notified Reinke of the end gun problem prior to the commencement of the lawsuit.

Another problem encountered with the pivots was with alignment. Reinke was notified of the alignment problem in 1981 and replaced some microswitches on the pivots in an attempt to correct the problem. In 1982, Reinke decided to replace all microswitches. This work on the pivots was performed by Reinke pursuant to the warranty given on each center pivot.

Sheehan encountered other problems with the irrigation system including pumping and design inadequacies. These are mentioned to show that the center pivots were not the sole or only reason for Sheehan commencing this action after filing for protection in the bankruptcy court. The trial court granted summary judgment in favor of Reinke on the ground that the contract between Sheehan and Reinke was a contract for the sale of goods and therefore subject to SDCL 57A-2-725(1), the Uniform Commercial Code's statute of limitations in contracts for sale. ²

On appeal Morris contends that its third-party cause of action for indemnity or contribution is not barred by the statute of limitations in SDCL 57A-2-725(1). During the pendency of this appeal, Morris assigned its rights under its third-party claim to Sheehan. Upon notice of the assignment, Reinke filed a motion to dismiss the appeal for various reasons which we concluded were without merit. The parties were allowed to present oral argument to the court. During the argument, counsel for the parties stipulated that this court could review and consider all documents and transcripts of depositions which had been developed during discovery, whether or not the trial court had relied upon them in its consideration of the summary judgment motion.

The established standard of review of the grant or denial of summary judgment is:

In reviewing a grant or a denial of summary judgment under SDCL 15-6-56(c), we must determine whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. Groseth Intern., Inc., v. Tenneco, Inc., 410 N.W.2d 159, 164 (S.D.1987). The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. Wilson v. Great Northern Ry. Co., 83 S.D. 207, 212, 157 N.W.2d 19, 21 (1968). The nonmoving party, however, must present specific facts showing that a genuine material issue for trial exists. Ruane v. Murray, 380 N.W.2d 362, 364 (S.D.1986). Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper. Weatherwax v. Hiland Potato Chip Co., 372 N.W.2d 118, 120 (S.D.1985); Ruple v. Weinaug, 328 N.W.2d 857, 859-60 (S.D.1983).

Pickering v. Pickering, 434 N.W.2d 758, 760-61 (S.D.1989).

The trial court found that the sale by Reinke was a sale of goods within the meaning of the Uniform Commercial Code. The record discloses that the contract between Sheehan and Reinke was predominantly for the sale of the goods listed on each separate contract. See, Jandreau v. Sheesley Plumbing & Heating Co., 324 N.W.2d 266 (S.D.1982). The parties to this appeal have not argued that this finding by the trial court was in error. As such, the contracts and warranties were covered by the statute of limitations for contracts for sale.

In discussing the purpose of the limitation provisions of a statute similar to SDCL 57A-2-725, the Colorado Supreme Court stated:

The purpose of the limitation provisions of section 4-2-725 is

[t]o introduce a uniform statute of limitations for sales contracts, thus eliminating the jurisdictional variations and providing needed relief for concerns doing business on a nationwide scale whose contracts have heretofore been governed by several different periods of limitation depending upon the state in which the transaction occurred.

U.C.C. Sec. 4-2-725, Official Comment. Section 4-2-725 thus 'takes sales contracts out of the general laws limiting the time for commencing contractual actions and selects a four-year period,' which is 'within the normal commercial record-keeping period,' as the most appropriate to modern business practice. Id. The intended effect of section 4-2-725, therefore, is to provide sellers with a definite and uniform starting and termination date for possible warranty liability on a contract of sale--the starting date being the date of tender of delivery except where the warranty extends to future performance--even though such rule might be somewhat disadvantageous to the buyer because of the buyer's lack of awareness of a breach. See Dart Industries, Inc., v. Adell Plastics, Inc., 517 F.Supp. 9 (S.D.Ind.1980); 5 R. Anderson, Uniform Commercial Code Sec. 2-725:4 (1984).

Persichini v. Brad Ragan, Inc., 735 P.2d 168, 176 (Colo.1987).

This uniform law, codified at SDCL 57A-2-725, was adopted by the South Dakota Legislature in 1966 and amended in 1982. This is a statute of repose which sets a fixed period after the running of which actions are barred. Chipperfield v. Woessner, 84 S.D. 13, 166 N.W.2d 727 (1969). SDCL 57A-2-725 is a statute which is intended to provide for ultimate repose in transactions in the specific area of sales.

Morris claims SDCL 57A-2-725 does not apply to an indemnity claim such as the claim filed in the third-party complaint. This court has at no time addressed this issue, and there is a split of authority on the issue in other courts. Indemnity claims have been held to be barred by Uniform Commercial Code Sec. 2-725 (U.C.C. Sec. 2-725) in Georgia, Utah, Illinois and Idaho. See PPG Industries, Inc. v. Genson, 135 Ga.App. 248, 217 S.E.2d 479 (1975); Perry v. Pioneer Wholesale Supply Co., 681 P.2d 214 (Utah 1984); Anixter Bros., Inc. v. Central Steel & Wire, 123 Ill.App.3d 947, 79 Ill.Dec. 359, 463 N.E.2d 913 (1984); Farmers Nat. Bank v. Wickham Pipeline, 114 Idaho 565, 759 P.2d 71 (1988).

In Farmers Nat. Bank, supra, the court was considering a summary judgment dismissing a third-party complaint that third-party plaintiff claimed was for indemnification. The court, in holding the specific U.C.C. statutory limitation controlling, held:

The absolute language of I.C. Sec. 28-2-725 indicates a legislative intent that all actions based on breach of contract for the sale of goods be brought, if at all, within four years of the delivery of the goods. This interpretation is further...