Szajna v. General Motors Corp.

• Citation: 503 N.E.2d 760,115 Ill.2d 294,104 Ill.Dec. 898
• Decision Date: 19 December 1986
• Docket Number: No. 61614,61614
• Parties: , 104 Ill.Dec. 898, 1986-2 Trade Cases P 67,381, 2 UCC Rep.Serv.2d 1268 John L. SZAJNA, Appellant, v. GENERAL MOTORS CORPORATION, Appellee.
• Court: Supreme Court of Illinois

Page 760

503 N.E.2d 760

115 Ill.2d 294, 104 Ill.Dec. 898,

1986-2 Trade Cases P 67,381,

2 UCC Rep.Serv.2d 1268

John L. SZAJNA, Appellant, v. GENERAL MOTORS CORPORATION, Appellee.

No. 61614.

Supreme Court of Illinois.

Dec. 19, 1986.

Rehearing Denied Jan. 30, 1987.

William R. Jentes, Garrett B. Johnson, J. Andrew Langan, Robert J. Kopecky, and Michael P. Foradas, Kirkland & Ellis, Chicago, for General Motors Corp.; Louis H. Lindeman, Jr., General Motors Corp., Detroit, Mich., of counsel.

Richard J. Friedman, Highland Park, John F. O'Meara, Chicago, for John L. Szajna; Leoris & Cohen, Highland Park, of counsel.

Justice RYAN delivered the opinion of the court:

The plaintiff, John L. Szajna (Szajna), filed a suit in the circuit court of Cook County against the defendant, General Motors Corporation (GM), on his own behalf and on behalf of all others who bought 1976 Pontiac Venturas which were equipped with Chevette transmissions. Szajna sought damages based solely on economic loss alleged to have resulted from receipt of the "inferior" Chevette transmission. Count I of his second amended complaint is based on an alleged breach of implied warranty under section 2--314 of the Uniform Commercial Code (UCC) (Ill.Rev.Stat.1975, ch. 26, par. 2-314) and section 110(d) of title I of the Magnuson-Moss Warranty--Federal Trade Commission Improvement Act (Magnuson-Moss) (15 U.S.C. sec. 2310(d) (1976)). Count II is based on an alleged breach of express warranty under section 2-313 of the UCC (Ill.Rev.Stat.1975, ch. 26, par. 2-313). Count III alleges common law fraud. The trial court granted GM's motion to strike and dismiss the second amended complaint. Szajna elected to stand on his complaint and filed a motion to reconsider. The trial court denied the motion to reconsider and dismissed the second amended complaint with prejudice. The court did not determine whether the suit could be maintained as a class action. The appellate court affirmed. (130 Ill.App.3d 173, 85 Ill.Dec. 669, 474 N.E.2d 397.) We granted Szajna's petition for leave to appeal (94 Ill.2d R. 315).

In reviewing the appellate court's affirmance of the trial court's decision to grant GM's motion to strike and dismiss Szajna's second amended complaint, we must accept as true all well-pleaded facts and all inferences which can be reasonably drawn from those facts. Browder v. Hanley Dawson Cadillac Co. (1978), 62 Ill.App.3d 623, 629, 20 Ill.Dec. 138, 379 N.E.2d 1206.

The following allegations were common to all three counts of Szajna's second amended complaint. In August 1976, he bought a 1976 Pontiac Ventura from Seltzer Pontiac, Inc. (Seltzer), in Chicago. Seltzer, as agent for GM, gave Szajna a folder which contained two warranties: one entitled a "Limited Warranty On 1976 Pontiac Car" and another entitled "1976 Pontiac Passenger Car Emission Control System." It was alleged that both warranties were made by GM to Szajna. It was also alleged that thousands of the cars sold as 1976 Pontiac Venturas, including Szajna's, were equipped with Chevette transmissions; that the use of Chevette transmissions in Pontiac Venturas necessitates higher amounts of repairs and that they have shorter service lives than do transmissions ordinarily used in Pontiac Venturas because the Chevette transmission was designed for use in a lighter weight car; that use of the Chevette transmission in Pontiac Venturas lessens the value of the cars; and that Szajna paid $375 to have the transmission in his car replaced.

The following allegations were also common to all three counts. GM manufactured, labeled and made available through its Pontiac Division the 1976 Pontiac Ventura. GM designed and engineered a transmission specifically for the 1976 Pontiac Ventura. "Through its brochures, parts catalogues and repair manuals, as well as through the release of automobile news and information from its public relations department," GM "advised the expert observers, testers and reporters of the nature of the '1976 Pontiac Ventura' model as including the transmission designed for that size of car." The public and Szajna, in buying the cars, relied on the experts and on GM for any noteworthy information on GM cars not readily observable. No information was given to the public or the experts that some of the 1976 Pontiac Venturas were equipped with Chevette transmissions.

Count I of Szajna's second amended complaint alleges breach of implied warranty under section 2-314 of the UCC. It alleges that 1976 Pontiac Venturas equipped with Chevette transmissions were not merchantable because they "would not pass without objection in the trade" under the contract description; "were not of fair average quality within the description, did not run within the variations permitted by the agreement of even kind and quality and did not conform to their labels" as Pontiac Venturas. (See Ill.Rev.Stat.1975, ch. 26, pars. 2-314(2)(a), (b), (d), (f).) (The "description" referred to above was the name 1976 Pontiac Ventura.) Count I also alleges that the failure by GM to deliver 1976 Pontiac Venturas as warranted rendered them nonconforming goods for which Szajna and other purchasers could revoke acceptance (Ill.Rev.Stat.1975, ch. 26, par. 2-608) or receive damages (Ill.Rev.Stat.1975, ch. 26, par. 2-714).

Szajna also alleges in count I breach of implied warranty pursuant to section 110(d) of Magnuson-Moss, which provides that a consumer who is damaged by the failure of a supplier or warrantor to comply with any obligation under an implied warranty may bring suit for damages and other legal and equitable relief in any court of competent jurisdiction in any State. 15 U.S.C. sec. 2310(d)(1) (1976).

In dismissing count I of Szajna's second amended complaint, the trial court entered the following conclusions of law. First, privity of contract is a prerequisite in Illinois to a suit for breach of implied warranty alleging economic loss. Second, Magnuson-Moss, in permitting recovery for breach of implied warranty, incorporates State-law privity requirements. (15 U.S.C. sec. 2301(7) (1976).) Third, no privity of contract existed between Szajna and GM. Fourth, the limited written warranty extended by GM, although running to the ultimate purchaser, did not give rise to the implied warranty of merchantability. The appellate court, in essence, adopted the trial court's conclusions of law. It was of the opinion, however, that while Szajna and GM "were in privity for purposes of the provisions in the express limited warranty, they were not in privity for purposes of implied warranties, which were specifically disclaimed by the express warranty." Szajna v. General Motors Corp. (1985), 130 Ill.App.3d 173, 177, 85 Ill.Dec. 669, 474 N.E.2d 397.

Szajna urges this court to abolish the privity requirement in suits for breach of an implied warranty when a plaintiff seeks to recover for economic loss. In Suvada v. White Motor Co. (1965), 32 Ill.2d 612, 210 N.E.2d 182, this court held that lack of privity of contract was no longer a defense in a tort action against the manufacturer in a products liability case. In Suvada this court abandoned the concept of implied warranty in tort and followed the holding of the California court in Greenman v. Yuba Power Products, Inc. (1962), 59 Cal.2d 57, 377 P.2d 897, 27 Cal.Rptr. 697, and the position taken in Restatement (Second) of Torts section 402A (1965). This court imposed liability on the theory of strict liability in tort. Later, in Berry v. G.D. Searle & Co. (1974), 56 Ill.2d 548, 309 N.E.2d 550, this court considered an implied warranty of the fitness of a product for a particular purpose under section 2-315 of the UCC (Ill.Rev.Stat.1965, ch. 26, par. 2-315). After considering the language of section 2-318 of the UCC and this court's prior decisions, it held that privity is of no consequence when a buyer who has sustained personal injury predicates recovery against a remote manufacturer on the theory of implied warranty. (Berry v. G.D. Searle & Co. (1974), 56 Ill.2d 548, 558, 309 N.E.2d 550.) Although Berry involved recovery under the UCC, the action was one for personal injury, not economic loss.

We need not trace in detail the development of the retreat from the strict privity requirement as it relates to implied warranty and the theories upon which recovery, in the absence of privity, has been allowed. That has been the subject of numerous articles. Its discussion further here would be needless repetition. Dean Prosser appears to have spear-headed the attack on implied-warranty privity in two oft-cited articles. (Prosser, The Assault Upon the Citadel (Strict Liability to the Consumer), 69 Yale L.J. 1099 (1960) (hereafter referred to as Assault ); Prosser, The Fall of the Citadel (Strict Liability to the Consumer), 50 Minn.L.Rev. 791 (1966) (hereafter referred to as Fall ).) Although Prosser favored abolition of the privity requirement and indeed the concept of implied warranty in a broad area, he nonetheless favored the contractual nature of implied warranty and its privity requirement when recovery for economic loss was sought. (See Fall, 50 Minn.L.Rev. 791, 820-23 (1960).) Much more has been written on the historical development of this subject. See Edmeades, The Citadel Stands: The Recovery of Economic Loss in American Products Liability, 27 Case W.Res. 647 (1977); Special Project, Article Two Warranties in Commercial Transactions, 64 Cornell L.Rev. 30, 67-68, 263-65 (1978); Note, Economic Losses and Strict Products Liability: A Record of Judicial Confusion Between Contract and Tort, 54 Notre Dame Law. 118 (1978); see also Privity of Contract as Essential in Action Against Remote Manufacturer or Distributor for Defects in Goods not Causing Injury to Person or to Other Property, Annot., 16 A.L.R.3d 683 (1967); J. White & R. Summers, Uniform Commercial Code sec. 11-2, at 399-401 (2d ed. 1980); 3 R. Anderson, Uniform Commercial Code secs. 2-314:92 through 2-314:100, at...