170 A.D.2d 1013 | N.Y. App. Div. | 1991
Lead Opinion
Order modified on the law and as modified affirmed without costs, in accordance with the following Memorandum: On February 20, 1982, plaintiff’s jewelry store was burglarized, and $138,000 in property was taken. Plaintiff also alleges that, during the course of the burglary, various store fixtures were damaged by the intruders. Honeywell, Inc.’s predecessor, Rochester Central Alarms, Inc., had procured the burglary alarm from Automatic Fire Alarm Company (AFA) in 1976. The burglary alarm had been manufactured by AVCO Corporation. Plaintiff instituted an action in breach of contract against defendant Honeywell, contending that its losses were the result of the failure of the burglary alarm at Honeywell’s central station. Honeywell instituted a third-party action against AFA and AVCO, seeking to shift liability for damages to the third-party defendants on theories of negligence, strict products liability, and breach of express and implied warranties. Plaintiff then initiated an independent action against AFA and AVCO, asserting claims for negligence, strict products liability and breach of implied warranty. AFA cross-claimed against AVCO for contribution. Following joinder of
AVCO is entitled to summary judgment on all claims sounding in negligence and strict products liability. Plaintiff’s losses are purely economic and not recoverable under either theory (see, Schiavone Constr. Co. v Mayo Corp., 56 NY2d 667, revg 81 AD2d 221 on dissenting opn below; Hemming v Certainteed Corp., 97 AD2d 976). Even assuming that plaintiff’s damages were attributable to the burglary alarm, they must be characterized as economic because they resulted only from the failure of the burglary alarm to perform as intended and not from any accidental occurrence (see, Richman v Albert, 127 AD2d 992, lv denied 70 NY2d 745; Antel Oldsmobile-Cadillac v Sirus Leasing Co., 101 AD2d 688, 688-689; Hemming v Certainteed Corp., supra; Fireman’s Fund Am. Ins. Cos. v Burns Elec. Sec. Servs., 93 Ill App 3d 298, 417 NE2d 131). Because plaintiff’s negligence and strict products liability claims must be dismissed, AFA’s cross claim for contribution and Honeywell’s third-party cause of action for contribution must also be dismissed. The existence of tort liability is a prerequisite to any claim for contribution (Board of Educ. v Sargent, Webster, Crenshaw & Folley, 71 NY2d 21, 27-28).
Plaintiff’s third cause of action against AVCO for breach of implied warranty must also be dismissed. Since plaintiff does not seek damages for personal injury, it cannot assert such a cause of action against AVCO because the parties were not in privity (see, UCC 2-318; Butler v Caldwell & Cook, 122 AD2d 559, 560; Pronti v DML of Elmira, 103 AD2d 916; Hole v General Motors Corp., 83 AD2d 715). In addition, a breach of implied warranty claim accrues at the time of delivery. The burglary alarm system was delivered to Honeywell's predecessor in 1976. This cause of action is barred by the four-year statute of limitations (see, Uniform Commercial Code § 2-725).
Finally, Honeywell’s implied indemnification claim against AVCO should not be dismissed. A third-party defendant’s liability for implied indemnification is based upon breach of some duty owed either to the injured party or to the third-party plaintiff (see, Garrett v Holiday Inns, 58 NY2d 253, 259-261; McDermott v City of New York, 50 NY2d 211, 218-219, n 5). Although AVCO owed no contractual duty to plaintiff, it is
All concur, except Balio, J., who dissents in part and votes to modify, in the following Memorandum.
Dissenting Opinion
(dissenting). I agree with the majority’s conclusion that plaintiffs cause of action for breach of implied warranty must be dismissed on the ground that it is time-barred and that it was error to dismiss Honeywell’s third-party cause of action for implied indemnification based upon breach of warranty. I am compelled to dissent, however, because the majority has erroneously determined that the physical damage to plaintiffs property constitutes "economic loss”.
Rochester Central Alarms, Inc., operated a burglary alarm protection service and maintained a central station so it could simultaneously serve multiple customers in the Rochester area. Several months after plaintiff contracted for the protection service, the alarm company purchased the Centrak system equipment manufactured by AVCO Corporation and installed that equipment at its central station. Compatible equipment was installed at the jewelry store. Honeywell then acquired the business of Rochester Central Alarms, replacing existing equipment. Plaintiff alleges that, prior to entering its jewelry store, burglars cut or interrupted telephone lines, causing an electrical signal of an unlawful entry to be transmitted to Honeywell’s central station, and that, by reason of a manufacturing defect in the Centrak equipment at the central station, no audible signal of the break-in was given to a Honeywell employee monitoring the equipment. As a result, no steps were taken to prevent or minimize the physical damage to plaintiffs safe, display cases and fixtures or the theft of jewelry and other merchandise.
Plaintiff, in its bill of particulars, states that the stolen merchandise had a replacement value of $138,103.20, and that the cost of repairing or replacing the safe, display cases and other fixtures damaged during the break-in amounted to
I begin my analysis by acknowledging the general rule that a remote consumer or user has no cause of action sounding in negligence or strict products liability against a manufacturer for economic loss only suffered by reason of a product’s failure to perform as intended (see, Schiavone Constr. Co. v Mayo Corp., 56 NY2d 667, revg 81 AD2d 221 on dissenting opn below; Hemming v Certainteed Corp., 97 AD2d 976). Recovery is permitted, however, for physical damage to person or property (including damage to the product itself) resulting from the malfunction of a product (see, Schiavone Constr. Co. v Mayo Corp., 81 AD2d, supra, at 228; Dudley Constr. v Drott Mfg. Co., 66 AD2d 368). It is settled law that non-user bystanders may recover for damages to their person or property (Codling v Paglia, 32 NY2d 330). Further, the product malfunction need not be the direct cause of injury. Liability may be imposed if the product "defect was a substantial factor in bringing about [the] injury or damages” (supra, at 342), and includes situations where the defect aggravated the nature or extent of the injuries suffered by the plaintiff (see, Bolm v Triumph Corp., 33 NY2d 151; Butler v Pittway Corp., 770 F2d 7). In the subject case, plaintiff, a non-user of the central station equipment, contends that damage to his property was aggravated by the failure of the Centrak equipment to give an audible signal, thereby preventing a response by police to the scene.
Where a plaintiff seeks to recover damages for an injury to the defective product, courts, in determining whether the damage is economic or physical, have considered whether the loss was occasioned by an accidental malfunction due to a manufacturing defect or by the failure of the product to meet the buyer’s expectations (see, e.g., Schiavone Constr. Co. v Mayo Corp., 81 AD2d, supra, at 232-234, distinguishing Dudley
The same conclusion may be reached by considering the nature of economic damage or loss. Economic damages include direct economic loss, i.e., the diminution of value of the product (e.g., loss of the bargain, costs of replacement or repair of the product) and indirect or consequential economic loss (e.g., lost profits, loss of future business opportunities, loss of ability to replace the product) (see, Solimine, Recovery of Economic Damages in Products Liability Actions and the Reemergence of Contractual Remedies, 51 Mo L Rev 977, 979 [1986]; Comment, Product Defects Resulting in Pure Economic Loss: Under What Theory Can a Consumer Recover?, 50 Mo L Rev 625, 626-627 [1985]; see also, Note, Economic Loss in Products Liability Jurisprudence, 66 Colum L Rev 917, 918 [1966]; Note, Manufacturers’ Liability to Remote Purchasers for "Economic Loss” Damages—Tort or Contract?, 114 U Pa L Rev 539, 541 [1966]) or what has been described as "fitness loss” (product’s failure to perform specific task contemplated), "expectation loss” (loss of use of product, loss of valuable deal) and "repair loss” (cost to repair or replace the damaged product) (see, Franklin, op. cit., at 981). Although definitions may differ semantically, the essence of economic loss is that it is occasioned by the failure of the product to perform at the level of performance expected by the buyer, resulting in a loss of the bargain (see, Hemming v Certainteed Corp., 97 AD2d 976, supra). Because " '[economic loss results from the failure
Even assuming that the rationale set forth in Hemming (supra) and Cayuga Harvester (supra) does apply, factual issues exist whether the damage resulted from the failure of the product to satisfy a certain level of performance or an accidental malfunction caused by a manufacturing defect. Plaintiff alleges that one or more components of the Centrak system, including a decoder card, were defective when manufactured, and that, when the alarm was transmitted from the jewelry store, the system suddenly and unexpectedly failed. Plaintiff also alleges that AVCO was negligent in its inspection and testing of the Centrak equipment. AVCO, in moving for summary judgment, was obliged to submit evidentiary materials demonstrating that no triable issue of fact existed regarding these allegations and that it was entitled to judgment as a matter of law (see, Alvarez v Prospect Hosp., 68 NY2d 320, 324). Defendant submitted no direct evidence that the equipment failed to perform due to product deterioration or that it failed to meet plaintiff’s expectations. AVCO attempted to meet its burden of establishing that the equipment was not defective when placed in the stream of commerce by submitting excerpts of EBT testimony to the effect that no defect was discovered during testing before shipment and that the equipment performed properly until the subject incident. This effort clearly was insufficient. The EBT witness was identified simply as an AVCO representative. He did not testify that he personally tested or supervised testing of the subject equipment. His testimony reveals only the company’s custom of testing all equipment before shipment. Defendant failed to
In sum, plaintiff suffered physical damage to its property and merchandise, other than economic loss, and is not precluded from seeking recovery upon the theory of negligence or strict products liability (see, Potsdam Welding & Mach. Co. v Neptune Microfloc, 57 AD2d 993; All-O-Matic Indus. v Southern Specialty Paper Co., 49 AD2d 935, supra; Butler v Pittway
