Western Equipment Co., Inc. v. Sheridan Iron Works, Inc., 5099

• Decision Date: 24 January 1980
• Docket Number: No. 5099,5099
• Citation: 605 P.2d 806
• Parties: 28 UCC Rep.Serv. 356 WESTERN EQUIPMENT CO., INC., a Wyoming Corporation, Appellant (Plaintiff below), v. SHERIDAN IRON WORKS, INC., Appellee (Defendant below), Oil Field Camps, Inc. (Defendant below).
• Court: Wyoming Supreme Court

Page 806

605 P.2d 806

28 UCC Rep.Serv. 356

WESTERN EQUIPMENT CO., INC., a Wyoming Corporation, Appellant (Plaintiff below), v. SHERIDAN IRON WORKS, INC., Appellee (Defendant below) Oil Field Camps, Inc. (Defendant below).

No. 5099.

Supreme Court of Wyoming.

Jan. 24, 1980.

Donald E. Chapin and W. Michael Kleppinger of Crowell & Chapin, P. C., Casper, for appellant.

Cameron S. Walker and Richard R. Wilking of Schwartz, Bon & McCrary, Casper, and E. E. Lonabaugh of Lonabaugh & Vanderhoef, Sheridan, for appellee.

Before RAPER, C. J., and McCLINTOCK, THOMAS, ROSE and ROONEY, JJ.

THOMAS, Justice.

The question raised by this appeal is whether privity of contract is required or is not required in an action by a remote purchaser against a manufacturer to recover an economic loss. The district court held that privity of contract is required, and it granted a summary judgment to the manufacturer. We shall hold that privity of contract is not necessary in such an action. The summary judgment must be reversed and the cause remanded to the district court for trial in accordance with the views expressed in this opinion.

We first identify the dramatis personae as follows:

Sheridan Iron Works, Inc. (hereinafter referred to as Sheridan) This firm engaged in the business of steel fabrication. It manufactured and sold two water tanks to be mounted on heavy-duty trucks which were to be used in the hauling of water in the oil fields.

Oil Field Camps, Inc. (the principal in the corporation was Michael L. Stone, and for convenience this party will hereinafter be referred to as Stone since this was apparently a one-man operation) Stone bought the water tanks from Sheridan and resold them. He was the primary source of information furnished to Sheridan relative to the specifications for the water tanks.

Western Equipment Co., Inc. (hereinafter referred to as Western) Western bought the water tanks from Stone. Western furnished two heavy-duty trucks upon which the water tanks were mounted at Sheridan.

O. L. Speer and Les Morris d/b/a O. L. Speer Water Service (for convenience hereinafter referred to as Speer) Speer bought the heavy-duty trucks with the water tanks mounted thereon from Western. It was Speer's purpose to devote these two units to the hauling of water for oil field operations.

This sequence of transactions is illustrative of the usual process of distribution of manufactured goods to the ultimate consumer. The process normally involves a series of purchases and resales prior to the goods reaching the ultimate consumer.

Rather promptly after Speer put the two trucks to use in its business of hauling water the tanks which had been mounted on the trucks by Sheridan began to fail dramatically. They leaked in a number of places, and depending upon the length of the haul route the loss of water during the journey could be quite substantial. Speer was "run off" one job because of the failure of the tanks. Complaint was made by Speer to Western and Western contacted Stone. At the request of Western, Stone got in touch with Speer and told Speer to fix the tanks and he would see that the bill was paid. Sheridan was notified of the failure of the tanks, and agreed to the repair of the tanks by Speer. Sheridan paid the repair bill for the initial repairs, and Stone contributed one-half of that amount to Sheridan.

These repairs were not successful, however, and Speer continued to experience difficulty with the tanks. Western ultimately replaced the water tanks by purchasing other tanks from a different supplier. Western then brought this action against Oil Field Camps, Inc. (Stone) and Sheridan Iron Works, Inc. Recovery was sought for the cost of the new tanks in the amount of $10,200; the cost of installation and incidental costs in the amount of $5,000; the cost of repairs made by Western and Speer in the amount of $1,200.38; and loss of time and profits in the amount of $10,000. The theories of recovery asserted by Western are breach of express warranty and implied warranties of fitness and merchantability. The loss sought to be recovered was "an economic loss," which has been very ably defined by the Supreme Court of Idaho as follows:

" * * * Economic loss includes costs of repair and replacement of defective property which is the subject of the transaction, as well as commercial loss for inadequate value and consequent loss of profits or use. See, e. g., J. White & R. Summers, Uniform Commercial Code, 329-35 (1972); W. Prosser, Torts, § 101 (4th ed. 1971); Note, 'Economic Loss in Products Liability Jurisprudence,' 66 Colum.L.Rev. 917 (1966); Comment, 114 U.Pa.L.Rev. 539, 541 (1966). * * * " (Footnote omitted.) Salmon Rivers Sportsman Camps, Inc. v. Cessna Aircraft Company, 97 Idaho 348, 544 P.2d 306, 309-310 (1975).

The express warranty apparently asserted by Western is based not upon any express contractual language but arguably arises out of conduct pursuant to § 34-21-230, W.S.1977. While not an issue expressly argued in previous cases before this court, the circumstances involved in Kure v. Chevrolet Motor Division, Wyo., 581 P.2d 603 (1978), and Colorado Serum Company v. Arp, Wyo., 504 P.2d 801 (1972), lead to a conclusion that privity is not required in an action by a remote purchaser against a manufacturer based upon an express warranty. The facts encompassed in the record in this case, however, do not lend themselves well to a theory of express warranty, and we treat this case as one in which recovery is sought upon implied warranties of merchantability and fitness for a particular purpose.

As expressed by Western in its brief:

"1. The one issue on appeal is whether summary disposition of the claim asserted by Western Equipment Company, Inc., against Sheridan Iron Works, Inc., was proper pursuant to the provisions of Rule 56, Wyoming Rules of Civil Procedure. The issue, of course, involves two subissues:

"a. Whether there exist any genuine issues of material fact as between Western Equipment Company, Inc., and Sheridan Iron Works, Inc.

"b. Whether Sheridan Iron Works, Inc., is entitled to a judgment as a matter of law by virtue of a lack of privity between Western Equipment Company, Inc., and Sheridan Iron Works, Inc."

The summary judgment was granted by the district court based upon a legal conclusion which made any other genuine issues of fact immaterial. The district court in the judgment appealed from held:

"4. There is no privity of contract between the Plaintiff and the Defendant Sheridan Iron Works, Inc., and, for that reason, said Defendant is entitled to judgment as a matter of law; * * * "

The legal dynamics of the problem here posed are quite interesting. We have identified three matters of significance which lead to our conclusion that no privity of contract is required in an action based upon theories of breach of implied warranties of fitness for a particular purpose and merchantability in which a remote purchaser seeks to recover from a manufacturer an economic loss which the purchaser sustained. Without ascribing any rank of significance these factors are:

1. A definite divergence of opinion in other jurisdictions as to whether privity should or should not be required in such actions. Examples of cases in which privity is required are: Koellmer v. Chrysler Motors Corp., 6 Conn.Cir. 478, 276 A.2d 807, cert. denied 160 Conn. 590, 274 A.2d 884 (1970); General Motors Corp. v. Halco Instruments, Inc., 124 Ga.App. 630, 185 S.E.2d 619 (1971); Salmon Rivers Sportsman Camps, Inc. v. Cessna Aircraft Co., 97 Idaho 348, 544 P.2d 306 (1975); Oliver v. City Builders, Inc., Miss., 303 So.2d 466 (1974); Hupp Corp. v. Metered Washer Service, 256 Or. 245, 472 F.2d 816 (1970); and City of LaCrosse v. Schubert, Schroeder & Associates, Inc., 72 Wis.2d 38, 240 N.W.2d 124 (1974). Examples of cases in which privity is not required are: Morrow v. New Moon Homes, Inc., Alaska, 548 P.2d 279 (1976); Manheim v. Ford Motor Co., Fla., 201 So.2d 440 (1967); Lang v. General Motors Corp., N.D., 136 N.W.2d 805 (1965); Hiles Co. v. Johnston Pump Co., Nev., 560 P.2d 154 (1977); Kassab v. Central Soya, 432 Pa. 217, 246 A.2d 848 (1968); and Nobility Homes of Texas, Inc. v. Shivers, Tex., 557 S.W.2d 77 (1977).

2. The unique provision in the Wyoming statute relating to third-party beneficiaries of warranties. Our statute reads as follows:

§ 34-21-235. Third party beneficiaries of warranties express or implied.

"A seller's warranty whether express or implied extends to any person who may reasonably be expected to use, consume, or be affected by the goods and who is injured by breach of the warranty. A seller may not exclude or limit the operation of this section."

The editorial board comment to § 2-318, Uniform Commercial Code, suggests the following alternatives for this provision:

"Alternative A

"A seller's warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.

"Alternative B

"A seller's warranty whether express or implied extends to any natural person who may reasonably be expected to use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.

"Alternative C

"A seller's warranty whether express or implied extends to any person who may reasonably be expected to use, consume or be affected by the goods and who is injured by breach of the warranty. A seller may not exclude or limit the operation of this section with respect to injury to the person of an individual to whom the warranty extends. As amended 1966." 1A U.L.A., p. 52 (1976).

It is to be noted that the...