STATE FARM MUT. AUTO. v. Ford Motor Co., 98-CA-00031-COA.

• Decision Date: 09 March 1999
• Docket Number: No. 98-CA-00031-COA.,98-CA-00031-COA.
• Citation: 736 So.2d 384
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY (Subrogee of James E. Penton, Jr.) and James E. Penton, Jr., Appellants, v. FORD MOTOR COMPANY and Dearman Ford, Inc., Appellees.
• Court: Mississippi Court of Appeals

736 So.2d 384

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY (Subrogee of James E. Penton, Jr.) and James E. Penton, Jr., Appellants, v. FORD MOTOR COMPANY and Dearman Ford, Inc., Appellees.

No. 98-CA-00031-COA.

Court of Appeals of Mississippi.

March 9, 1999.

H. Benjamin Mullen, Deidre Lamppin Colson, Pascagoula, Attorneys for Appellants.

Curtis Van Breland, Tylvester Otis Goss, Gregory K. Davis, Jackson, Attorneys for Appellees.

BEFORE THOMAS, P.J., COLEMAN, AND SOUTHWICK, JJ.

THOMAS, P.J., for the Court:

¶ 1. State Farm Mutual Automobile Insurance Company and James E. Penton, Jr. appeal the circuit court's summary judgment dismissal of their claims against Ford Motor Company, raising the following issues as error:

I. THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF FORD MOTOR COMPANY ON APPELLANTS' STRICT LIABILITY AND NEGLIGENCE THEORIES OF RECOVERY FOR THE DESTRUCTION OF PENTON'S VEHICLE WHICH WAS CAUSED BY A DEFECTIVE REAR SEAL.

II. THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF FORD MOTOR COMPANY REGARDING ITS BREACH OF ITS EXPRESS WARRANTY AGAINST DEFECTIVE FACTORY-SUPPLIED MATERIALS OR WORKMANSHIP.

III. THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF FORD MOTOR COMPANY ON THE ISSUE OF BREACH OF IMPLIED WARRANTY OF MERCHANTABILITY.

¶ 2. We affirm in part and reverse and remand in part.

FACTS

¶ 3. On August 18, 1994, James E. Penton, Jr. purchased a used 1994 Ford Thunderbird from Dearman Ford, Inc. At the time of purchase, the vehicle had approximately 19,250 miles on it. A new vehicle limited warranty was issued covering the 1994 Ford Thunderbird. Penton purchased the car primarily for his wife, although he also drove it.

¶ 4. About a month after purchase, Penton began noticing smoke coming from the vehicle after driving it. Penton assumed the car was leaking oil. Sometime in late September or early October 1994, Penton brought the car into the Dearman Ford for service. He informed the dealership that the car was leaking oil. Penton was told the repair shop was closed, and an appointment was scheduled to effectuate the repairs. Penton's wife later brought the car back to the dealership at the appointed time but was told she did not have an appointment. A new appointment was made for November 3, 1994.

¶ 5. On the morning of the November 3, 1994, Penton was driving the car when he hit "a coon or something in the road." Penton noticed the smell of something burning and pulled the car off the road. When Penton popped the hood he could see fire coming from the engine. The fire eventually engulfed the entire car causing damages in the amount of $16,588. At the time of the fire the vehicle had approximately 23,000 to 25,000 miles on it. ¶ 6. After paying his $250 deductible, Penton was compensated for his loss by State Farm in the amount of $16,338. State Farm sought recovery of the amount it paid to Penton from Ford Motor Company and Dearman Ford. Penton sought recovery of his $250. The claims of State Farm and Penton were premised on theories of strict liability and negligence in tort, breach of an express warranty¹, and breach of an implied warranty of merchantability.

¶ 7. On February 12, 1997, Ford filed a motion for summary judgment on all claims levied against it. Dearman Ford did not pursue a motion for summary judgment. In its summary judgment motion Ford argued that the claims for strict liability and negligence in tort were prohibited by the economic loss doctrine and Mississippi's products liability statute. Ford further alleged that the claim for breach of an express warranty was barred due to the exclusion in the warranty for damage caused by fire. Finally, it alleged any claim for breach of an implied warranty was barred due to the mileage of the vehicle. A hearing was held taking up the motion on September 18, 1998. The motion was granted dismissing all claims against Ford, and this appeal ensued.

STANDARD OF REVIEW

¶ 8. We conduct a de novo review of the record to determine whether the trial court properly granted a motion for summary judgment. Nationwide Mut. Ins. Co. v. Garriga, 636 So.2d 658, 661 (Miss. 1994); Pace v. Financial Sec. Life, 608 So.2d 1135, 1138 (Miss.1992); Short v. Columbus Rubber & Gasket Co., 535 So.2d 61, 63 (Miss.1988). The de novo review includes looking at the evidentiary matters and viewing them in the light most favorable to the party against whom the motion has been made. Nationwide Mut. Ins. Co., 636 So.2d at 661. The movant has the burden of proving that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Daniels v. GNB, Inc., 629 So.2d 595, 599 (Miss.1993). "Summary judgment is appropriate if the evidence before the Court—admissions in the pleadings, answers to interrogatories, depositions, affidavits, etc.—shows there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law." Rockwell v. Preferred Risk Mutual Ins. Co., 710 So.2d 388, 389 (Miss.1998) (citing Newell v. Hinton, 556 So.2d 1037, 1041 (Miss.1990)).

ANALYSIS

I.

THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF FORD MOTOR COMPANY ON APPELLANTS' STRICT LIABILITY AND NEGLIGENCE THEORIES OF RECOVERY FOR THE DESTRUCTION OF PENTON'S VEHICLE WHICH WAS CAUSED BY A DEFECTIVE REAR SEAL.

¶ 9. Ford asserts that any claims by State Farm and Penton premised on theories of strict liability and negligence are barred by the economic loss doctrine and Miss.Code Ann. § 11-1-63 (Supp.1998) (product liability actions; conditions for liability; what constitutes defective product). Ford argues that the only damages claimed by State Farm and Penton are economic damages to the product itself, and therefore, under the economic loss doctrine these damages may only be pursued under some type of breach of warranty theory. Although Ford does not cite any Mississippi cases applying this doctrine, it does cite two Mississippi federal court cases East Mississippi Electric Power Association v. Porcelain Products Co., 729 F.Supp. 512 (S.D.Miss.1990) and Lee v. General Motors Corp., 950 F.Supp. 170 (S.D.Miss.1996). Ford further contends that Miss.Code Ann. § 11-1-63 (Supp. 1998) is consistent with this doctrine as it exempts from its coverage actions based upon commercial damage to the product itself.

¶ 10. We are faced with a case of first impression as our supreme court has never addressed the question of applying the economic loss doctrine. Although we are not constrained to follow the precedent of the federal court cases cited, we are certainly at liberty to agree with them. We hold that State Farm and Penton's strict liability and negligence claims are barred under the economic loss doctrine as the only damage sustained was to the product itself.

¶ 11. As the court in East Mississippi noted "[t]he overwhelming majority of courts that have confronted the issue have concluded that a plaintiff who suffers only economic loss as the result of a defective product may have no recovery in strict liability or negligence, though such damage may be pursued under a breach of warranty theory of liability." East Mississippi, 729 F.Supp. at 514. The economic loss doctrine was first espoused in Seely v. White Motor Co., 63 Cal.2d 9, 403 P.2d 145, 45 Cal.Rptr. 17 (1965). Id. The doctrine established in Seely was eventually embraced and adopted by the United States Supreme Court in an admiralty decision, East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 871, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986). Id. at 515. Since the United States Supreme Court's decision in East River the majority of jurisdictions have applied and followed the Seely rationale. Lee, 950 F.Supp. at 174.

¶ 12. Seely and its progeny enumerate three basic reasons for not allowing recovery in tort when only economic damages are sought to be recovered. Id. "First, tort law would subsume contract law, secondly the manufacturer's exposure would be too greatly expanded, and thirdly the increased costs to the ultimate consumer would be too great." Id. Allowing recovery in tort under circumstances essentially commercial in nature would not further the purpose of strict liability, a doctrine developed to ensure that the costs of injuries resulting from defective products are borne by the manufacturers who produce such products as opposed to the ultimate consumer. East Mississippi, 729 F.Supp. at 517. Although the economic loss doctrine prohibits recovery in tort for damage to the product itself, that does not mean that consumers who suffer loss or damage to only the product itself are without recourse. Contract law and the law of warranty are well suited to handle controversies in which commercial purchases do not live up to the expectations of the consumer. Id.

¶ 13. The economic loss doctrine is also consistent with Mississippi's products liability statute. Miss.Code Ann. § 11-1-63 (Supp.1998) states in its pertinent part:

In any action for damages caused by a product except for commercial damage to the product itself:

(a) The manufacturer or seller of the product shall not be liable if the claimant does not prove by the preponderance of the evidence that at the time the product left the control of the manufacturer or seller:

(i) 1. The product was defective because it deviated in a material way from the manufacturer's specifications or from otherwise identical units manufactured to the same manufacturing specifications, or

2. The product was defective because it failed to contain adequate warnings or instructions, or 3. The product was designed in a defective manner, or

4. The product breached an express warranty or failed to conform to other express factual representations upon which the claimant justifiably relied in electing to use the product; and

(ii) The defective condition rendered the product unreasonably dangerous to the user or consumer; and

(iii) The defective and

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