Waggoner v. Town & Country Mobile Homes, Inc., 64507

• Decision Date: 27 December 1990
• Docket Number: No. 64507,64507
• Citation: 808 P.2d 649,1990 OK 139
• Parties: 13 UCC Rep.Serv.2d 1002, Prod.Liab.Rep. (CCH) P 12,722, 1990 OK 139 Richard L. WAGGONER and Lois A. Waggoner, Appellees, v. TOWN & COUNTRY MOBILE HOMES, INC., a subsidiary of Brigadier Industries Corp., an Oklahoma corporation, a subsidiary of U.S. Homes Manufactured Housing Corp., a New Jersey corporation, and University Mobile Homes, Inc., an Oklahoma corporation, et al., Appellant, and University Mobile Homes, Inc., Appellee.
• Court: Oklahoma Supreme Court

Page 649

808 P.2d 649

13 UCC Rep.Serv.2d 1002, Prod.Liab.Rep. (CCH) P 12,722,

1990 OK 139

Richard L. WAGGONER and Lois A. Waggoner, Appellees, v. TOWN & COUNTRY MOBILE HOMES, INC., a subsidiary of Brigadier

Industries Corp., an Oklahoma corporation, a subsidiary of

U.S. Homes Manufactured Housing Corp., a New Jersey

corporation, and University Mobile Homes, Inc., an Oklahoma

corporation, et al., Appellant,

and

University Mobile Homes, Inc., Appellee.

No. 64507.

Supreme Court of Oklahoma.

Dec. 27, 1990.

Rehearing Denied April 2, 1991.

Certiorari to the Court of Appeals, Division No. 4.

Consumers brought action against dealer and manufacturer in manufacturers' products liability following manufacturer's unsuccessful attempts to remedy condensation within consumers' mobile home. Dealer sought damages from manufacturer for malicious interference with business relationship. Jury awarded consumers actual and punitive damages against manufacturer only and awarded dealer actual damages against manufacturer. Manufacturer appealed and Court of Appeals affirmed.

COURT OF APPEALS OPINION VACATED; JUDGMENT OF TRIAL COURT REVERSED; CAUSE REMANDED WITH INSTRUCTIONS.

Murphy & Murphy by Robert M. Murphy, Jr., Stillwater, for appellant.

Melissa Griner DeLacerda, Stillwater, for appellees, Waggoners.

Winfrey D. Houston, Stillwater, for appellee, University Mobile Homes, Inc.

HODGES, Judge.

This appeal presents an issue of first impression. Did the trial court err by instructing the jury on manufacturers' products liability when a design defect caused only deterioration in the product itself resulting in purely economic loss? We answer in the affirmative and hold that such a claim must be pursued as a warranty action.

There is a second issue. Did the trial court err by denying manufacturer's motion for a directed verdict on dealer's claim of malicious interference with a business relationship? We answer in the affirmative.

On June 26, 1979, Richard and Lois Waggoner (consumers) purchased a mobile home from University Mobile Homes, Inc. (dealer). Consumers chose a model manufactured by Town and Country Mobile Homes, Inc. (manufacturer), which consumers considered to be one of the "Cadillac" mobile homes. Their decision to purchase followed a visit to the factory in Texas where they talked to a representative about an energy package and other options which they eventually chose. The total purchase price was $22,850.

The first winter consumers spent in the home brought hints of problems to come. There was a rumbling noise in the roof when the wind blew and minor spotting on the ceiling tiles which consumers attributed to a leaking roof. Consumers repaired the ceiling tiles. Manufacturer installed metal "rumble strips" which were screwed to the metal roof along the length of the mobile home.

The second winter (1980-1981), the minor spotting returned. Consumers again treated the ceiling tiles with bleach and "a little white shoe polish" and again they attributed the spots to leaks in the roof. They believed the screws securing the rumble strips had caused some additional leaking. To cure this, they applied a cool-coat sealant to the roof.

When the spotting returned the third winter (1981-1982), consumers realized that leaks were not the cause of the problem. They consulted dealer who informed them that other Town and Country homes with the energy package had been experiencing similar problems. Dealer wrote to manufacturer in January, 1982, outlining these complaints.

The actual cause of the ceiling spots was the design of the home's roof which did not allow interior moisture to escape. Once outside temperatures fell below the dew point, condensation collected in the attic and dripped back, spotting the ceiling tiles.

Manufacturer responded to consumers' complaint by installing two power vents to pull air out through the roof of the mobile home to prevent condensation. Manufacturer also hired a repairman to paint the ceiling and seal the roof with cool-coat and membrane cloth.

Unfortunately, the power vents did not prevent the return of the ceiling spots the next winter (1982-1983). Manufacturer told consumers that the home might have to be moved to the factory to have a house-type roof installed. But instead, manufacturer attempted to cure the problem by removing the power vents and installing two "thinking caps." As with the power vents, consumers were assured that the thinking caps would solve the problem.

Each thinking cap consisted of a motorized ventilator mounted through a hole in the roof. The caps were thermostatically controlled to draw air out of the attic. Six interior vents were cut in the ceiling of consumers' home. In theory, moist air was to be drawn from the living quarters, through the attic, and out through the caps on the roof. In reality, the system drew even more moisture into the attic. The moisture condensed before it could be drawn out through the roof.

As a result, the next winter (1983-1984) brought the worst condensation consumers had experienced. Water actually dripped from one of the vents in the ceiling. Consumers decided they could not endure any further "cures". They filed their petition on January 25, 1984.

Both dealer and manufacturer were named as defendants. Consumers sought $30,000 actual damages, as the replacement cost of the home, alleging a design defect and a breach of the express and implied warranties of "habitability" and "proper workmanship." They also sought $50,000 in punitive damages for "misrepresentations ... suffering and harrassment" resulting from failures in attempting to remedy the condensation. Manufacturer cross-petitioned, seeking contribution from dealer for any damages awarded to consumers. Dealer also cross-petitioned, seeking $100,000 actual damages and $100,000 punitive damages for malicious interference with a business relationship.

At trial, the jury was instructed solely upon manufacturers' products liability as to consumers' claim. The jury awarded consumers $22,800 actual damages and $7,200 exemplary damages against manufacturer. Manufacturer failed in its contribution claim against dealer, but dealer was awarded $5,000 actual damages against manufacturer for interference with its business relationships. Addressing only the products liability issue, the Court of Appeals affirmed the awards.

I.

A product can cause personal injury, property damage, and economic loss. Recovery, under the doctrine of manufacturers' products liability, is allowed for personal injury, Kirkland v. General Motors Corp., 521 P.2d 1353 (Okla.1974), and damage to property other than damage to the product itself, Kimbrell v. Zenith Radio Corp., 555 P.2d 590 (Okla.1976) (television set alleged to have caused extensive fire damage to plaintiff's home). This Court has yet to address the question of whether manufacturers' products liability applies to purely economic damages resulting from product deterioration. The question is one of the proper relationship between the Uniform Commercial Code (UCC) and manufacturers' products liability.

An action in manufacturers' products liability is "primarily tortious in nature." Kirkland, 521 P.2d at 1361. Its rationale "is founded upon public interest in human safety." Id. at 1362. "[A] plaintiff who has suffered damages by reason of a defectively manufactured article may recover under the doctrine of Manufacturers' Product Liability all of the damages which were the reasonable consequences of the defective article to the same extent as if the plaintiff's action was based upon negligence." Moss v. Polyco, Inc., 522 P.2d 622, 626 (Okla.1974). This liability is independent of UCC warranty provisions because recovery under manufacturers' products liability arises from a duty to the public rather than from a contractual relationship. Kirkland, 521 P.2d at 1362 (quoting Restatement (Second) of Torts § 402A, comment m). Thus, the parties to a sales contract may not limit a manufacturer's liability for personal injury caused by a product defect. See Moss, 522 P.2d at 627. See also Okla.Stat. tit. 12A, § 2-719(3) (1981).

Recovery under warranty provisions, however, applies to losses flowing from the sales contract. Moss, 522 P.2d at 625-26. Comment 4 to section 2-313 of the UCC notes that "the whole purpose of the law of warranty is to determine what it is that the seller has in essence agreed to sell." Section 2-314 provides that "[u]nless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind." This warranty extends to a buyer's family, household, and guests under section 2-318. The ultimate consumer may maintain an action against both the retailer and the manufacturer to recover the benefit of the bargain. See Old Albany Estates, Ltd. v. Highland Carpet Mills, Inc., 604 P.2d 849 (Okla.1979).

As to damages recoverable in a warranty action, section 2-714 of the UCC provides in part:

(2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.

(3) In a proper case any incidental and consequential damages under the next section may also be recovered.

Consequential damages are defined in section 2-715(2)(b) to include "injury to person or property resulting from any breach of warranty."

Thus, as to personal injury or injury to other property, manufacturers' products liability and the UCC warranty provisions provide parallel remedies. ¹ But as to damage only to the product itself, the two remedies dramatically diverge.

This Court has long held that manufacturers' products liability should be distinguished from contractual liability. "While the UCC does envision allowing recovery...