Sunnyslope Grading, Inc. v. Miller, Bradford and Risberg, Inc.

Decision Date27 March 1989
Docket NumberNo. 87-1978,87-1978
Citation437 N.W.2d 213,148 Wis.2d 910
Parties, 8 UCC Rep.Serv.2d 652, Prod.Liab.Rep. (CCH) P 12,088 SUNNYSLOPE GRADING, INC., Plaintiff-Appellant, v. MILLER, BRADFORD AND RISBERG, INC., Defendant, Hein-Werner Corporation, Defendant-Respondent.
CourtWisconsin Supreme Court

Steven J. Lownik, argued, T. Michael Schober, and Schober & Radtke, S.C., New Berlin, on briefs (in court of appeals), for plaintiff-appellant.

Trevor J. Will, argued, Michael G. McCarty, and Foley & Lardner, Milwaukee, on brief (in court of appeals), for defendant-respondent.

STEINMETZ, Justice.

The issue in this case is whether a commercial purchaser of construction equipment, which is covered by a manufacturer's warranty, has a cause of action against the manufacturer in negligence or strict liability to recover lost profits and the costs of repairing the equipment when the manufacturer did not breach its warranty and the equipment failure did not cause personal injury or damage to other property. We only address the question of whether damages to the product itself and economic losses flowing therefrom are recoverable in tort when a warranty exists in a commercial setting, and we reserve comment on the question of whether a warranty can limit amounts recoverable due to damage to property other than the product itself.

The trial court found that based on the undisputed facts no tort claim existed for the recovery of lost profits or the cost of repairs, and that Hein-Werner Corporation's motion for summary judgment was warranted. Sunnyslope Grading, Inc. acknowledges that summary judgment is appropriate; however, it argues that the trial court applied an incorrect rule of law. The plaintiff appealed this decision to the court of appeals. The court of appeals certified the case to this court pursuant to sec. 809.61, Stats. We affirm the decision of the trial court.

Sunnyslope is a grading and excavation contractor. The company does trenching, backfilling, finish grading and site work for office buildings, factories and small streets. Previously, Sunnyslope specialized in digging basements and foundations for residential construction. Sunnyslope owns numerous pieces of construction equipment, including backhoes, bulldozers, loaders, dump trucks, rollers and a grader.

Hein-Werner which is based in Waukesha, Wisconsin, formerly manufactured construction equipment, including the C-14B backhoes at issue in this case. Defendant Miller, Bradford and Risberg, Inc. (MBR) was a dealer for Hein-Werner construction equipment. MBR gave a warranty to Sunnyslope that the backhoes in question would be "merchantable." 1 MBR moved for summary judgment contending that it had not breached its warranty. The trial court found that factual issues existed whether MBR's warranty was breached and denied MBR's motion for summary judgment. Sunnyslope's claim against MBR for breach of warranty remains pending in the circuit court and therefore MBR is not a party to this appeal.

At various times Sunnyslope owned three Hein-Werner C-14B backhoes. The first C-14B was purchased in March, 1976, but traded in on a third C-14B. The second C-14B was leased from MBR in May of 1977. In December of 1977, Sunnyslope purchased the leased C-14B backhoe and still owns and uses it.

The third C-14B backhoe was also purchased in December of 1977. It replaced the first C-14B. In June of 1982, the third C-14B itself was traded to a company in Rockford, Illinois, for a D-8 bulldozer which is not a Hein-Werner machine.

Hein-Werner also extended to each purchaser of a C-14B a written manufacturer's warranty. 2 The warranty limited Hein-Werner's obligation to fixing defects for a period of six months or 1,000 hours of use, whichever occurred first. The warranty was specifically "limited to the replacement ... of such parts as shall appear to Company ... to have been defective in material or workmanship under normal storage, use and service." The warranty also limited Hein-Werner's liability by stating: "Company shall not be liable for any other cost or damages, whether direct, incidental or consequential, including but not limited to, any injury, or loss or damage resulting from the use or loss of use of any of Company's products."

At various times after December, 1977, certain parts on Sunnyslope's C-14B backhoes broke or wore out. These failures did not cause any personal injury nor did they damage any property other than the backhoes themselves. Hein-Werner repaired those failures which were covered under its warranty. Sunnyslope acknowledges that the repairs covered by the warranty were corrected by MBR or Hein-Werner, and it accepted those repairs under the warranty.

Sunnyslope is seeking damages for additional replacement parts, labor charges, down-time expenses and lost profits associated with repairs not covered by the warranty that it incurred. Because the warranty specifically excluded these damages, Sunnyslope brought the action against Hein-Werner in tort. Regardless of whether the warranty was breached, Sunnyslope argues there exists an independent and additional duty upon which to base this action in tort. The trial court found that on these facts Sunnyslope could not recover such damages on either the tort theory of negligence or strict liability.

The facts are undisputed in this case. The question of whether Wisconsin law allows recovery under these facts is a question of law which is reviewed by this court without giving deference to the trial court's determination. First Nat. Leasing Corp. v. Madison, 81 Wis.2d 205, 208, 260 N.W.2d 251 (1977).

An analysis of Wisconsin case law indicates that under the facts of this case a cause of action does not exist either in negligence or strict liability, and we decline to expand upon this precedent. Furthermore, the reasoning of relevant federal cases indicates this holding is more appropriate than that posed by Sunnyslope.

Hein-Werner offered a warranty to the purchasers of its products. The warranty specified that Hein-Werner would do certain things for purchasers and would not do certain other things. There was a warranty in effect between the parties and evidence of this was Sunnyslope's accepting repairs under it. As previously noted, Sunnyslope implicitly acknowledged the validity of the warranty when it accepted repairs under the warranty. Because they were parties to an enforceable warranty, Sunnyslope and Hein-Werner were in privity. Privity is nothing more than the relationship between the parties to a contract and follows from the fact that a contract exists. See Paulson v. Olson Implement Co., Inc., 107 Wis.2d 510, 517, 319 N.W.2d 855 (1982). Since this warranty created privity between Sunnyslope and Hein-Werner, the limitations of the warranty were available. The risk of damages flowing from a failure of this product was specifically allocated to the parties by the warranty.

The Uniform Commercial Code--Sales, ch. 402, Stats., sets forth the rights and remedies which govern a transaction between two commercial parties of relatively equal bargaining power. In holding that contract principles should be applied in determining the parties' rights in this case, we view sec. 402.719(3) as persuasive. Section 402.719(3) states: "Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not." We agree with the weight of authority which supports the proposition that the legislative protections granted by the Uniform Commercial Code are not to be buttressed by tort principles and recovery. Spring Motors Distributors v. Ford Motor Co., 98 N.J. 555, 489 A.2d 660, 673 (1985). The duty to provide a product which functions to certain specifications is contractual. If a commercial purchaser wants a machine of higher quality, better durability or one with a better warranty, the purchaser is free to negotiate in the marketplace.

Sunnyslope relies on La Crosse v. Schubert, Schroeder & Asso., 72 Wis.2d 38, 240 N.W.2d 124 (1976). In La Crosse, the plaintiff had a roof installed which was manufactured by Kaiser Aluminum and installed by a general contractor. The roof leaked and a portion of it blew off thereby requiring replacement of the entire roof. The plaintiff asserted claims for breach of warranty, negligence and strict liability. Although no personal injury resulted, the plaintiff sought recovery for the cost of repair of the roof eaves damaged by the defective roof and for the cost of replacement of the roof itself under the theory of strict liability. Id. at 44, 240 N.W.2d 124. No claim was made for economic losses.

The La Crosse court held that the city could not advance a breach of warranty cause of action against Kaiser because it was not in privity of contract with Kaiser. Id. at 41-42, 240 N.W.2d 124. It was not alleged that Kaiser gave an express warranty to the plaintiff in conjunction with the roof and therefore this court found that Kaiser had no "direct contractual relationship" with the plaintiff. Id. at 42, 240 N.W.2d 124. The city had not contractually accepted an allocation of the risk of loss through a warranty and did not have the opportunity to recover under warranty theories when the product proved unsuitable. Absent any contractual allocation of the risk, the court held that "[d]amages to other property and to the product itself are recoverable in a cause of action based on strict liability in tort." Id. at 44, 240 N.W.2d 124. However, the application of this language must be limited to the facts of the La Crosse case and therefore only applies to cases in which there is no warranty or contract between the parties. Any additional reliance upon the language of the La Crosse opinion is inappropriate. Today we...

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