Ulgt v. Wheeler Machinery Co., 20070084.

• Decision Date: 12 December 2008
• Docket Number: No. 20070084.,20070084.
• Citation: 2008 UT 84,199 P.3d 949
• Parties: UTAH LOCAL GOVERNMENT TRUST, Plaintiff and Respondent, v. WHEELER MACHINERY CO. and Does 1 through 50, inclusive, Defendants and Petitioner.
• Court: Utah Supreme Court

199 P.3d 949

2008 UT 84

UTAH LOCAL GOVERNMENT TRUST, Plaintiff and Respondent, v. WHEELER MACHINERY CO. and Does 1 through 50, inclusive, Defendants and Petitioner.

No. 20070084.

Supreme Court of Utah.

December 12, 2008.

Scott M. Lilja, Nicole M. Deforge, Salt Lake City, Huey P. Cotton, Los Angeles, CA, for respondent.

Joseph C. Rust, Salt Lake City, for petitioner.

On Certiorari to the Utah Court of Appeals

NEHRING, Justice:

INTRODUCTION

¶ 1 We are asked to determine whether the court of appeals erred in holding that the Utah Product Liability Act's two-year statute of limitations did not apply to the Utah Local Government Trust's claim against Wheeler Machinery Company. We hold that the court of appeals did not apply the correct test for determining whether ULGT's claim was a product liability claim. We therefore reverse and remand for application of the appropriate test.

FACTUAL BACKGROUND

¶ 2 Wheeler Machinery Company contracted with the City of Hurricane for the purchase of two diesel generators to supply emergency power and to supplement the existing electric power supply during periods of peak demand. The initial bid included a list of items Wheeler would provide as part of its "Turn Key" bid. These items included the generators, fuel tanks, all other equipment needed to install the generators, enclosures for the generators, setup of all the supplied items, and testing and commissioning of the entire system. Sometime after awarding the initial bid to Wheeler, the City decided it would house the generators in a larger building, which it would build. As a result of these changes, Wheeler made several oral revisions to its bid.

¶ 3 Wheeler supplied all the materials for the system but paid Richard Carlson, an independent welding contractor, to fabricate the exhaust pipe for the generators. Mr. Carlson also welded the rain caps to the exhaust system when the exhaust system was installed. Although Mr. Carlson's fabrication of the exhaust pipe was paid for by Wheeler, the City had agreed to install the exhaust pipe through the roof, connect it to the mufflers, and attach the rain caps to the exhaust pipe.

¶ 4 The purpose of the rain caps was to prevent moisture from entering the system. To attach the rain caps, Mr. Carlson had to modify them by cutting half an inch off each side so they would fit within the framework supporting the generators' mufflers. This modification was not part of the original plan for installing the generators. Before the modified rain caps were installed, the City performed some work on other parts of the generator system as agreed to in an oral modification of the bid.

¶ 5 About seven months after the generators were installed, a fire in the generator building occurred, causing extensive damage to the City's building and equipment. The modified rain caps were identified as the cause of the fire.

¶ 6 On July 10, 2003, ULGT sued Wheeler.¹ It alleged that "one of the generators sold, supplied, assembled, and installed by Wheeler Machinery Co." caused the fire that damaged the City's property. Wheeler moved to dismiss the lawsuit. Wheeler argued that ULGT's complaint alleged a product liability cause of action and that the complaint had not been filed within the two-year product liability statute of limitations. ULGT amended its complaint and filed a motion in opposition to Wheeler's motion to dismiss. The district court denied Wheeler's motion to dismiss. Wheeler then moved for summary judgment. Wheeler reasserted its claim that ULGT's complaint alleged a product liability cause of action and should be dismissed because it was not filed within the two-year statute of limitations and claimed that it did not control the contractor who installed the rain caps. The district court found that if ULGT's claim had been a product liability claim, it would have been filed too late. For reasons the district court did not explain, the court did not rule on whether the claim actually was a product liability claim. The district court held that Mr. Carlson was acting under the direction of the City and not under the direction of Wheeler and granted summary judgment in favor of Wheeler. ULGT appealed to the court of appeals. On appeal, Wheeler again argued that ULGT's claim was a product liability claim and was barred by the statute of limitations. The court of appeals held that ULGT's claim was not a product liability claim because the installation of the rain caps occurred after the product was placed in the stream of commerce. It also held that there was sufficient evidence to create a question of fact regarding whether the City or Wheeler controlled Mr. Carlson. Wheeler petitioned for certiorari on the issue of whether the court of appeals applied the correct statute of limitations.

¶ 7 We granted certiorari and hold that the court of appeals applied the wrong test for determining whether ULGT's claim stated a cause of action in product liability. The appropriate test for determining whether ULGT's claim sounded in product liability is (1) whether the transaction primarily concerned a product and (2) whether the product was defective when it was sold. We reverse the determination of the court of appeals that ULGT's claim was not a product liability claim and remand for action consistent with this opinion.

STANDARD OF REVIEW

¶ 8 "On certiorari review, we review the decision of the court of appeals, not the decision of the district court." Nolan v. Hoopiiaina (In re Hoopiiaina Trust), 2006 UT 53, ¶ 19, 144 P.3d 1129. Whether the correct statute of limitations was applied is a question of law, which we review for correctness. Id.

ANALYSIS

¶ 9 The product liability statute of limitations states that "[a] civil action under [the Product Liability Act] shall be brought within two years from the time the individual who would be the claimant in the action discovered, or in the exercise of due diligence should have discovered, both the harm and its cause." Utah Code Ann. § 78B-6-706 (Supp.2008). The Product Liability Act does not define what constitutes "a civil action under [the Act]."

¶ 10 Although our statute does not define a product liability action, product liability encompasses all actions seeking money damages for injury to people or property resulting from defective products. See 1 David G. Owen et al., Madden & Owen on Products Liability § 1:5 (3d ed.2000). An action for damages resulting from a defective product can be based on claims of negligence, strict liability, tortious misrepresentation, and breach of warranty. Id. If the facts permit, a plaintiff can choose to bring claims under one or all of these theories in a single action. Slisze v. Stanley-Bostitch, 1999 UT 20, ¶ 8, 979 P.2d 317. Thus, by choosing one of the available legal theories, a claimant does not thereby foreclose bringing the claim under any other theory. Id. Because all of these claims share the common characteristic of arising out of an injury caused by a product, they are often all alleged together.

¶ 11 Although the Product Liability Act does not define a product liability action, section 78B-6-703 provides some insight into the subject in its description of what may or may not be a defective product. The statute states:

In any action for damages for personal injury, death, or property damage allegedly caused by a defect in a product, a product may not be considered to have a defect or to be in a defective condition, unless at the time the product was sold by the manufacturer or other initial seller, there was a defect or defective condition in the product which made the product unreasonably dangerous to the user or consumer.

Utah Code Ann. § 78B-6-703(1) (emphases added). What this statutory language makes clear is that in order to be governed by the two-year statute of limitations, the transaction must concern a product and that product must be defective when it is sold.

¶ 12 Thus, even if ULGT's claim were characterized as a claim for negligent manufacture of a product rather than for strict liability, the claim would still have to be brought within the product liability statute of limitations. See Strickland v. Gen. Motors Corp., 852 F.Supp. 956, 959 (D.Utah 1994). The court of appeals acknowledged the broad application of the product liability statute of limitations, and ULGT agreed that if its claim alleged that negligence caused a product defect, its claim would be governed by section 78B-6-706. Utah Local Gov't Trust v. Wheeler Mach. Co., 2006 UT App 513, ¶ 11, 154 P.3d 175.

¶ 13 Common to all of the claims that can be considered product liability claims is the fact that the damage was caused by a product. The law does not make clear, however, what constitutes a product and how the time of sale of that product is determined. Although the Restatement (Second) of Torts does not define product, the comments to its product liability section contain a list of items that are considered products. Restatement (Second) of Torts § 402A cmt. d (1965). One commentator has suggested that product was undefined in order to encourage and accommodate development of product liability law and to allow for the expansion of what might qualify as a product. David W. Lannetti, Toward a Revised Definition of "Product" Under the Restatement (Third) of Torts: Products Liability, 55 Bus. Law. 799, 808 (2000).

¶ 14 Defining product and sale under the Product Liability Act are issues of first impression for this court. Lacking guidance from our own statutes and cases, we turn for direction to the law of sister states and to other authoritative scholarship on the topic. We will first confront the dilemma of whether the subject of the transaction was a product or a service. Then we will turn to discerning the proper method for ascertaining the time of the sale.

I. TEST FOR DETERMINING WHETHER A PRODUCT WAS THE SUBJECT OF THE TRANSACTION

¶ 15 In product liability actions it is often easy to determine whether a...