Smith v. Navistar Intern. Transp. Corp.
| Decision Date | 29 April 1992 |
| Docket Number | No. 90-2717,90-2717 |
| Citation | 957 F.2d 1439 |
| Parties | , 17 UCC Rep.Serv.2d 84 Jeary K. SMITH, Plaintiff-Appellant, v. NAVISTAR INTERNATIONAL TRANSPORTATION CORPORATION, Navistar Financial Corporation and J. Merle Jones & Sons, Incorporated, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Fred R. Harbecke (argued), Chicago, Ill. and David Bikoff, Indianapolis, Ind., for plaintiff-appellant.
Arthur L. Klein (argued), Sally Y. Mengo, and Hal R. Morris, Arnstein & Lehr; and Richard K. Wray, Nathanson & Wray, Chicago, Ill., for defendants-appellees.
Before COFFEY, MANION and KANNE, Circuit Judges.
Plaintiff-appellant Jeary Smith appeals the district court's grant of partial summary judgment in favor of the defendants after determining that Smith was not entitled to consequential or incidental damages resulting from a defective truck purchased from the defendants. Smith also appeals the district court's judgment in his favor for the purchase price of the truck. We affirm.
Plaintiff-appellant, Jeary Smith brought this action charging the Navistar International Transportation Corporation ("Navistar"), Navistar Financial Corporation ("Navistar Financial") and J. Merle Jones & Sons, Inc. ("Jones"), a truck dealer, located in Ottawa, Illinois, with breach of warranty on the purchase of a truck. 1 In 1984, Smith, an independent owner-operator of long distance trucks, decided to purchase a new truck, and Smith requested a list of sixteen options and/or components on the truck. After discussing the proposed purchase with several dealers, Smith decided to buy the Navistar semi-tractor truck Model 9370 as specified, from Jones (a Navistar authorized dealership), on November 7, 1984. Smith signed a Retail Order at the time of purchase which included the following warranty:
"International Harvester Company's [now Navistar] Promise to You. We promise to you, the first user purchaser, that we will replace or repair any part or parts of your new International motor vehicle which are defective in material or workmanship without charge for either parts or labor during the first year or 12,000 miles of operation, whichever occurs first.
* * * * * *
What You Must Do. We recommend that you bring the vehicle back to the dealership where you purchased it; however, if you are in transit or have moved, take it to the most convenient authorized International Truck Dealer.
* * * * * *
THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE, ALL OTHER REPRESENTATIONS TO THE FIRST USER PURCHASER, AND ALL OTHER OBLIGATIONS OR LIABILITIES, INCLUDING LIABILITY FOR INCIDENTAL AND CONSEQUENTIAL DAMAGES ON THE PART OF THE COMPANY OR THE SELLER."
(Capitalization in original). 2 At the time of purchase, Smith negotiated an installment purchase agreement with Navistar Financial, which provided for sixty monthly payments of $1,595.34. The contract also contained a provision reciting that Navistar Financial was not responsible for any warranties on the truck beyond those offered by Navistar.
Upon delivery of the truck Smith received an Owner's Limited Warranty booklet which in pertinent part read:
"International Harvester [now Navistar] will repair or replace any part of this vehicle which proves defective in material and/or workmanship in normal use and service, with new or ReNewed parts, for the first twelve months from new vehicle delivery date or for 50,000 miles (90,000 Km), whichever occurs first, except as specified under 'What is Not Covered.' "
On the second page of the Owner's Limited Warranty booklet are additional warranty disclaimers:
These disclaimers are similar to those disclaimers set forth in the Retail Order that Smith signed when executing the bill of sale.
Some nine days after Smith's purchase of the truck, he experienced problems with the truck's braking system. On no fewer than ten separate occasions between November 7, 1984 and April 1985, Smith brought the truck to authorized Navistar dealers for repairs. Thus, the truck was out of service for a period of forty-five days. 3 Smith alleges that throughout the period of repair, the defendants were aware that he had a contract with one firm that he relied upon for his business and that if he was unable to operate his truck he would lose the contract. Notwithstanding Smith's dissatisfaction with the number and frequency of the alleged defects, Smith continued to use the truck during the problem time period and eventually ran up some 48,488 miles on it. On June 6, 1985, Smith sent a letter to the three named defendants expressing his intention to revoke his contract based upon his dissatisfaction with the final repair effort. At this same time Smith ceased making installment payments on the truck.
Almost two years later, on May 4, 1987, Smith brought suit against the defendants Navistar and Jones for their alleged breach of express and implied warranties, and breach of contract in the truck purchase and also against the defendant Navistar Financial. Navistar Financial in turn filed a counterclaim seeking to hold Smith liable on the financing contract. 4 After extensive discovery, the defendants moved for summary judgment, and on January 27, 1989, the district court denied defendants' motion for summary judgment on the issue of liability, but granted defendants' motion as to damages in an opinion reported at 714 F.Supp. 303 (N.D.Ill.1989). The practical effect of this order was to limit the amount of damages a jury could award to $19,527.70, the amount Smith had paid for the truck prior to the revocation of his acceptance. After repeated attempts by the defendants to pay Smith the full amount of damages Smith was entitled to under the district court ruling, the defendants presented a motion, pursuant to Rule 1 of the Federal Rules of Civil Procedure, offering to have judgment entered against them in the amount of $19,527.70. Over the plaintiff's objection, the court granted the defendants' motion for judgment and entered a judgment against the defendants on February 28, 1989. Some nine days after entry of judgment in favor of the plaintiff, the plaintiff moved the court to reconsider the summary judgment of January 27, 1989. The district court denied the plaintiff's motion for reconsideration in an opinion reported at 744 F.Supp. 832 (N.D.Ill.1990). Smith appeals.
The plaintiff-appellant Smith raises the following issues on appeal: (1) Whether the district court erred in deciding that Smith was not entitled to consequential damages he allegedly sustained as a result of the failure of the limited warranty of repair or replacement; and (2) Whether the district court erred in entering judgment for the plaintiff in the amount which Smith paid for the truck upon the motion of the defendants pursuant to Rule 1 of the Federal Rules of Civil Procedure.
Illinois law applies in this diversity action, and the transaction is governed under Article 2 of the Uniform Commercial Code. 5 The plaintiff Smith argues that, because this is a diversity action, the district court was required to determine the applicable law of the State of Illinois when determining whether the plaintiff was entitled to consequential damages. The plaintiff contends that because, "the Illinois Supreme Court has not addressed the issue in question, the district court was required to use the predictive approach [and i]n applying this approach, the district court disregarded the sole Illinois appellate decision on point and chose a resolution having no basis in Illinois law."
Our review of the district court's grant of partial summary judgment in favor of the defendants is de novo: "[W]e must decide whether the record shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Dribeck Importers v. G. Heileman Brewing Co., 883 F.2d 569, 573 (7th Cir.1989) (citations omitted). In its denial of partial summary judgment, the district court cited two conflicting cases which dealt with the issue of whether consequential damages could be awarded when a limited warranty failed to provide the protection the buyer expected. The first of these cases was a decision of an intermediate appellate court, Adams v. J.I. Case Co., 125 Ill.App.2d 388, 261 N.E.2d 1 (4th Dist.1970). The second was a decision of this court, AES Technology Systems, Inc. v. Coherent Radiation, 583 F.2d 933 (7th Cir.1988). Smith in essence argues that the district court erred in granting partial summary judgment because it chose to follow AES rather than Adams. However, federal courts are not bound by the decision of a lower state court unless the state's highest court in the jurisdiction whose law governs the diversity action has ruled on the matter. White v. United States, 680 F.2d 1156, 1161 (7th Cir.1982); D'Acquisto v. Washington, 640 F.Supp. 594, 619 (N.D.Ill.1986).
Smith's signature on the Retail Order would ordinarily constitute an effective waiver of any right to recover incidental and...
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