Spring Motors Distributors, Inc. v. Ford Motor Co.

• Decision Date: 28 March 1985
• Citation: 98 N.J. 555,489 A.2d 660
• Parties: , 53 USLW 2488, 40 UCC Rep.Serv. 1184 SPRING MOTORS DISTRIBUTORS, INC., a corporation, Plaintiff-Respondent, v. FORD MOTOR COMPANY; Clark Equipment Company, a corporation and Turnpike Ford Truck Sales, Inc., a corporation, Defendants-Appellants.
• Court: New Jersey Supreme Court

Page 555

98 N.J. 555

489 A.2d 660, 53 USLW 2488, 40 UCC

Rep.Serv. 1184

SPRING MOTORS DISTRIBUTORS, INC., a corporation, Plaintiff-Respondent, v. FORD MOTOR COMPANY; Clark Equipment Company, a corporation and Turnpike Ford Truck Sales, Inc., a corporation, Defendants-Appellants.

Supreme Court of New Jersey.

Argued April 30, 1984.

Decided March 28, 1985.

J. Michael Nolan, Jr., Morristown, for defendants-appellants Ford Motor Co. and Turnpike Ford Truck Sales, Inc., etc. (Pitney, Hardin, Kipp & Szuch, Morristown, attorneys; J. Michael Nolan, Jr., Gail H. Allyn and Stephen V. Gimigliano, Morristown, on the briefs)

Richard S. Zackin, Newark, for defendant-appellant Clark Equipment Co., etc. (Crummy, Del Deo, Dolan, Griffinger & Vecchione, Newark, attorneys; Richard S. Zackin and John H. Klock, Newark, on the briefs).

Ronald Silber, Elizabeth, for plaintiff-respondent (Krevsky & Silber, Elizabeth, attorneys; Ronald Silber and Marianne Caulfield, Elizabeth, on the briefs).

Cynthia J. Jahn, Asst. Counsel, Trenton, submitted a brief on behalf of amicus curiae New Jersey School Boards Ass'n (Paula A. Mullaly, Gen. Counsel, Trenton, attorney).

Robert C. Billmeier, Trenton, submitted a brief on behalf of amicus curiae U.S. Gypsum Co. (Backes, Waldron & Hill, Trenton, attorneys).

The opinion of the Court was delivered by

POLLOCK, J.

The fundamental issue on this appeal concerns the rights of a commercial buyer to recover for economic loss caused by the purchase of defective goods. More specifically, the question is whether the buyer should be restricted to its cause of action under the Uniform Commercial Code (hereinafter U.C.C. or the Code) or should be allowed to pursue a cause of action predicated on principles of negligence and strict liability. The difference is important because the buyer in the present case instituted its action beyond the four-year period provided by the U.C.C., N.J.S.A. 12A:2-725, but within the six-year period applicable to tort actions, N.J.S.A. 2A:14-1.

The defendants are a motor vehicle manufacturer, its dealer, and a supplier of transmissions. The gravamen of the complaint is that defects in the transmissions, which were installed in commercial trucks, caused the buyer to sustain a loss in the benefit of its bargain and consequential damages. Specifically, the buyer sought recovery for repair, towing, and replacement parts, as well as for lost profits and a decrease in the value of the trucks.

The trial court perceived the matter as sounding in contract and found that the plaintiff had not instituted its action within the four-year period provided by the U.C.C. N.J.S.A. 12A:2-725. In an unreported decision, the court granted summary judgment for defendants. The Appellate Division reversed on the ground that the action was more appropriately characterized as one in strict liability in tort, not contract, and that the six-year period of limitations applicable for tort actions had not expired. 191 N.J.Super. 22, 465 A.2d 530 (1983). We granted defendants' petition for certification. 95 N.J. 208, 470 A.2d 427 (1983).

We hold that a commercial buyer seeking damages for economic loss resulting from the purchase of defective goods may recover from an immediate seller and a remote supplier in a distributive chain for breach of warranty under the U.C.C., but not in strict liability or negligence. We hold also that the buyer need not establish privity with the remote supplier to maintain an action for breach of express or implied warranties. Accordingly, the four-year period of limitations provided by the Code, N.J.S.A. 12A:2-725, not the six-year general statute of limitations, N.J.S.A. 2A:14-1, determines the time within which an action must be commenced against the immediate seller and remote supplier.

I

Because this matter is presented on defendants' motion for summary judgment, we accept as true plaintiff's version of the facts, according that version the benefit of all favorable inferences.

Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58, 61, 417 A.2d 505 (1980). Plaintiff, Spring Motors Distributors, Inc. (Spring Motors), which is in the business of selling and leasing trucks, operates a fleet of 300 vehicles. Spring Motors agreed to purchase from defendant Turnpike Ford Truck Sales, Inc. (Turnpike) 14 model LN8000 trucks made by defendant Ford Motor Company (Ford) at a purchase price of $265,029.80. Turnpike is a Ford dealer, and throughout these proceedings the two defendants have been treated as a single entity.

In the agreement, Spring Motors specified that the trucks should be equipped with model 390V transmissions made by Clark Equipment Company (Clark), a supplier to Ford. Spring Motors specified Clark transmissions because of "excellent service and parts availability on past models" and because of Clark's advertisements and brochures.

At the time of the sale to Spring Motors, Ford issued a form warranty with each truck to

repair or replace any of the following parts that are found to be defective in factory material or workmanship under normal use in the United States or Canada on the following basis: * * * any part during the first 12 months or 12,000 miles of operations, whichever is earlier * * * transmission case and all internal transmission parts (including auxiliary transmission) * * * after 12,000 miles and during the first 12 months or 50,000 miles of operation, whichever is earlier, for a charge of 50% of the dealer's regular warranty charge to Ford for parts and labor. * * * For series 850 and higher trucks, any part of the * * * transmission * * * for the first 12 months or 100,000 miles of operation, whichever is earlier * * *.

The warranty also stated: "To the extent allowed by law, this WARRANTY IS IN PLACE OF all other warranties, express or implied, including ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS." Furthermore, the Ford warranty expressly stated: "Under this warranty, repair or replacement of parts is the only remedy, and loss of use of the vehicle, loss of time, inconvenience, commercial loss or consequential damages are not covered."

The warranty that Clark extended to Ford provided: "WARRANTY. Clark Equipment Company ('Clark') warrants to Buyer Spring Motors took delivery of the trucks in November 1976, and leased them to Economic Laboratories, Inc. (Economic), which used the trucks in cities and on highways for their intended purpose of hauling. Spring Motors, which serviced the trucks during the period of the lease, began experiencing problems with the performance of the Clark transmissions as early as February 1977. The problems persisted, and Spring Motors communicated directly with Clark, writing in October 1977 that it had "had nothing but trouble" with the transmissions. Later correspondence, dated January 26, 1978, confirmed that Clark analyzed the transmissions and found that "the failure in these gear boxes was a result of improper angle degree in the way certain gears were cut," resulting "in additional strain on the actual gear and the mating gear and related shafts." Still later, Spring Motors pointed out that the transmission failures had cost it "several thousand dollars in out of pocket expenses plus many additional thousands of dollars in lost revenues, customer ill will, replacement equipment, etc."

that each new Clark axle, transmission, torque converter and drive train product, and components thereof, shall be free from defects and material and workmanship under normal use and maintenance" for 12 months or 12,000 miles for on-highway vehicles used on highways or 2,000 miles for off-highway equipment. At Clark's option, the warranty could be limited to repairs or replacements. The warranty also stated: "THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES (EXCEPT OF TITLE), EXPRESSED OR IMPLIED, AND THERE IS NO IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CLARK BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES."

Clark provided Spring Motors with replacement parts, but the transmission failures continued. On July 11, 1978, Spring Motors wrote to Clark that in the absence of a satisfactory response by August 1, it would remove and replace the Clark transmissions and "take whatever action is necessary to hold In the complaint, which contained three counts, Spring Motors sought judgment against all defendants for consequential damages: the expenses of towing, repairs, and replacement of parts; lost profits; and decrease in market value of the trucks. The first count asserted that the defendants breached certain express and implied warranties; the second count claimed a violation of the Magnuson-Moss Act, 15 U.S.C. § 2301 to -2312, a claim that Spring Motors no longer pursues; and the third count sought recovery in strict liability and negligence.

                you financially responsible."   Thereafter, on November 1, 1979, Spring Motors and Economic terminated the truck lease and, as part of a settlement, Economic purchased the trucks for $247,580.97.  Four years and one month after the delivery of the trucks, on December 23, 1980, Spring Motors instituted this action
                

The trial court found that a lack of privity barred the action between Spring Motors and Clark and that the four-year period of limitations under the U.C.C., N.J.S.A. 12A:2-725, barred any action against Ford and Turnpike. The Court further found the six-year statute of limitations, N.J.S.A. 2A:14-1, pertaining to tort actions for property damage, inapplicable. Consequently, the trial court dismissed the complaint as to all defendants.

The Appellate Division affirmed the dismissal of the breach of warranty claim in the first count, but reversed the dismissal of the tort claims, without discussing the negligence aspect of the third count. That court concluded that Spring Motors, as a commercial buyer, could maintain its strict-liability claim against all defendants. 191 N.J.Super. at 41, 465 A.2d 530...