CATERPILLAR FINANCIAL SERVICES CORPORATION, Plaintiff-Appellee, v. HAROLD TATMAN AND SON‘S, ENTERPRISES, INC., ET AL., Defendants/Third-Party Plaintiffs-Appellants, v. VERMEER MIDWEST, INC., ET AL., Third-Party Defendants-Appellees.
Case No. 14CA3449
IN THE COURT OF APPEALS OF OHIO FOURTH APPELLATE DISTRICT ROSS COUNTY
RELEASED: 11/20/2015
[Cite as Caterpillar Fin. Servs. Corp. v. Harold Tatman & Son‘s Ents., Inc., 2015-Ohio-4884.]
Hoover, P.J.
APPEARANCES:
Michael L. Benson, Benson & Sesser, LLC, Chillicothe, Ohio, for defendant/third-party plaintiff-appellant Harold Tatman and Son‘s Enterprises, Incorporated.
Joel E. Sechler, Carpenter Lipps & Leland LLP, Columbus, Ohio, and Melissa R. Stull (pro hac vice), Soule & Stull LLC, Minneapolis, Minnesota, for third-party defendant-appellee Vermeer Manufacturing Company
Hoover, P.J.
{¶1} Defendant/third-party plaintiff-appellant, Harold Tatman and Son‘s Enterprises, Incorporated (“Tatman and Son‘s“), appeals the judgment of the Ross County Court of Common Pleas, which dismissed Tatman and Son‘s second amended third-party complaint for failure to state a claim for which relief can be granted, as to the claims asserted against third-party
I. Facts and Procedural History
{¶2} In May 2009, Tatman and Son‘s purchased a Vermeer Horizontal Grinder, Model HG8000, from Vermeer Heartland, Incorporated (“Heartland“), formerly doing business as Vermeer of Southern Ohio, for a total purchase price of $762,823.80, inclusive of trade-ins, fees, warranties, and finance charges. Tatman and Son‘s financed the purchase through Vermeer Midwest, Incorporated (“Midwest“), which later assigned its rights and responsibilities under the financing contract to Caterpillar Financial Services Corporation. Tatman and Son‘s warrantied and registered the grinder with Vermeer, the purported manufacturer of the grinder. Vermeer provided a written one-year or 1,000-hour warranty, which expressly disclaimed all implied warranties. Caterpillar, Incorporated (“Caterpillar Corporate“) and Heartland provided warranties for the grinder‘s engine.
{¶3} On November 8, 2012, Caterpillar Financial Services Corporation initiated a breach of contract and replevin action against Tatman and Son‘s, and Douglas Tatman, Dwayne Tatman, and Delbert Tatman, individually, alleging that Tatman and Son‘s had defaulted under the terms of the financing contract and that the individuals had breached their personal guarantees of the loan.
{¶4} In November 2013, after having filed two prior third-party complaints, Tatman and Son‘s, Douglas Tatman, Dwayne Tatman, and Delbert Tatman, filed their second amended third-party complaint (hereinafter the “complaint“) in the trial court against Midwest, Caterpillar
{¶5} In count one of the complaint, Tatman and Son‘s alleges that Vermeer, among others, breached “express written warranties“. In count two, Tatman and Son‘s alleges that Vermeer, among others, breached implied warranties. The third count of the complaint does not assert any claims against Vermeer. In count four, Tatman and Son‘s alleges that Vermeer, among others, were unjustly enriched. Finally, in the fifth and sixth counts respectively, Tatman and Son‘s alleges that Vermeer‘s attempts to repair the grinder were negligent and that the grinder was a “defective product“.
{¶6} Vermeer moved for dismissal of the claims asserted against it pursuant to
II. Assignment of Error
The trial court erred in granting Third-Party-Defendant/Appellee, Vermeer Manufacturing Company‘s, Motion for Judgment on the Pleadings (sic) because construing all material allegations in the Complaint in favor of the Defendants-Appellants, Defendants-Appellants would be entitled to relief.
III. Standard of Review
{¶8} As an initial matter we note that Tatman and Son‘s, in its appellate brief, mistakenly refers to Vermeer‘s motion to dismiss as a motion for judgment on the pleadings. Vermeer‘s motion was clearly identified as a motion to dismiss for failure to state a claim, pursuant to
{¶9} Because it presents a question of law, we review a trial court‘s decision regarding a motion to dismiss independently and without deference to the trial court‘s determination. See Roll v. Edwards, 156 Ohio App.3d 227, 2004-Ohio-767, 805 N.E.2d 162, ¶ 15 (4th Dist.); Noe v. Smith, 143 Ohio App.3d 215, 218, 757 N.E.2d 1164 (4th Dist.2000). “A motion to dismiss for failure to state a claim upon which relief can be granted is procedural and tests the sufficiency of the complaint.” State ex rel. Hanson v. Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 548, 605 N.E.2d 378 (1992). A trial court may not grant a motion to dismiss for failure to state a claim upon which relief may be granted unless it appears “beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery.” O‘Brien v. Univ. Community Tenants Union, Inc., 42 Ohio St.2d 242, 327 N.E.2d 753 (1975), syllabus; see also Taylor v. London, 88 Ohio St.3d 137, 139, 723 N.E.2d 1089 (2000). Furthermore, when considering a
IV. Law and Analysis
A. Count One - Express Written Warranty
{¶10} First, we must determine whether Tatman and Son‘s claim for breach of express written warranty under count one of the complaint is a claim upon which relief may be granted. While not entirely clear, it appears that Tatman and Son‘s claims that Vermeer breached the written warranty it provided by failing to repair or replace the grinder.
{¶11} Tatman and Son‘s claim for breach of express written warranty is governed by the Uniform Commercial Code (“UCC“) as adopted by Ohio,
(1) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
(2) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
(3) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
{¶12} In addition, numerous Ohio courts have recognized that there need not be privity to impose liability for breach of an express warranty. Bobb Forest Prods., Inc. v. Morbark Industries, Inc., 151 Ohio App.3d 63, 2002-Ohio-5370, 783 N.E.2d 560, ¶ 51 (7th Dist.), citing Rogers v. Toni Home Permanent Co., 167 Ohio St. 244, 147 N.E.2d 612 (1958), paragraph three of the syllabus; Chic Promotion, Inc. v. Middletown Sec. Sys., Inc., 116 Ohio App.3d 363, 368, 688 N.E.2d 278 (12th Dist.1996); Johnson v. Monsanto Co., 3d Dist. Paulding No. 11-02-02, 2002-Ohio-4613, ¶ 14; Hahn v. Jennings, 10th Dist. Franklin No. 04AP-24, 2004-Ohio-4789, ¶ 23. Thus, a manufacturer can be held liable by a purchaser for breach of an express warranty even though there is no privity between the two parties. Johnson at ¶ 14.
{¶13} Ohio UCC law also allows parties to limit the type of remedies available for breach of warranty.
{¶14} Vermeer argues that the express written warranty has expired, and that the complaint therefore fails to plead an actionable breach. For its part, Tatman and Son‘s argues in its appellate brief that it is not restricted by the time limits of the written warranty because that warranty is not the only basis of its claim. Specifically, Tatman and Son‘s argues that “[a]s will come out in discovery, numerous promises were made as to the quality and reliability of the [grinder] at purchase, as well as numerous promises that were made at the time of the [grinder‘s] failure and alleged repair.” [App. Brief at 9.]
{¶15} Here, the express written warranty provided by Vermeer, as alleged by Tatman and Son‘s and attached to the complaint, states as follows:
Vermeer Corporation (hereinafter “Vermeer“) warrants each new Industrial product of Vermeer‘s manufacture to be free from defects in material and workmanship, under normal use and service for one (1) full year after initial purchase/retail sale or 1000 operating hours, whichever occurs first. This Limited Warranty shall apply only to complete machines of Vermeer‘s manufacture, parts are covered by a separate Limited Warranty.
{¶16} We find that the one-year limit of the warranty bars Tatman and Son‘s claim for breach of express written warranty. The express terms of the warranty state that it is valid for one-year from the original purchase date. Tatman and Son‘s bought the grinder in May 2009 and did not allege any problems with the product until June 2010. Thus, the express written warranty clearly expired by the time the grinder failed.
B. Count Two - Implied Warranty in Contract
{¶18} Tatman and Son‘s second count of its complaint alleges breach of implied warranties. Specifically, the count alleges that Vermeer impliedly warranted that the grinder would be merchantable and substantially free of defects and non-conformities in both material and workmanship, and that Vermeer breached those warranties by providing a grinder that was defective and not fit for its ordinary purpose. Vermeer contends that the breach of implied
{¶19} Under Ohio law, implied warranty claims can be brought under both contract law and tort law. Johnson, 2002-Ohio-4613, at ¶¶ 11, 26. Here, it is not clear from the complaint whether Tatman and Son‘s is advancing a breach of implied warranty claim under the UCC, or through tort law. In this section of our decision, we explore whether the complaint alleges a valid claim under Ohio contract law.
{¶20}
(B) Subject to division (C) of this section, to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. * * *
{¶21} Furthermore, in order to sustain a contract-based breach of implied warranty claim, the parties must be in privity. “[L]ongstanding Ohio jurisprudence provides that purchasers * * * may assert a contract claim for breach of implied warranty only against parties with whom they are in privity.” Curl v. Volkswagen of Am., Inc., 114 Ohio St.3d 266, 2007-Ohio-3609, 871 N.E.2d 1141, ¶ 26; see also Johnson, 2002-Ohio-4613, at ¶¶ 11-12 (the UCC‘s implied warranty of merchantability and implied warranty of fitness are not enforceable against manufacturers who are not in privity with the purchaser).
C. Counts Two, Five, and Six - Implied Warranty in Tort/Strict Liability and Negligence
{¶23} Tatman and Son‘s complaint alleges a variety of tort claims. For instance, in count five of the complaint Tatman and Son‘s claims that Vermeer was negligent in its “repair/replacement/installation of the Machine and/or engines inside the Machine“. For this negligence claim, Tatman and Son‘s “must show the existence of a duty, a breach of that duty, and that the breach of that duty proximately caused the plaintiff‘s injury.” Cincinnati v. Beretta U.S.A. Corp., 95 Ohio St.3d 416, 2002-Ohio-2480, 768 N.E.2d 1136, ¶ 18, citing Jeffers v. Olexo, 43 Ohio St.3d 140, 142, 539 N.E.2d 614 (1989).
{¶24} Additionally, Tatman and Son‘s complaint brings claims for breach of implied warranty in tort and “defective product“.1 Count six of Tatman and Son‘s complaint alleges that
{¶25} ” ‘Implied warranty in tort’ is a common-law cause of action that imposes liability upon a manufacturer or a seller for breach of an implied representation that a product is ‘of good and merchantable quality, fit and safe for its ordinary intended use * * *.’ ” White v. DePuy, Inc., 129 Ohio App.3d 472, 478, 718 N.E.2d 450 (12th Dist.1998), quoting 76 Ohio Jurisprudence 3d, Products Liability, Section 39, at 470 (1987). A claim for breach of implied warranty in tort requires the showing of the following elements: (1) “the existence of a defect;” (2) “the defect was present at the time the product left the hands of the manufacturer; and” (3) “the plaintiff‘s injury was directly and proximately caused by the defect.” Johnson, 2002-Ohio-4613, at ¶ 26, citing Crow v. Parker, 3d Dist. Allen No. 1-99-13, 1999 WL 446438 (June 29, 1999). The parties do not need to be in privity in order to bring a breach of implied warranty in tort claim. Lonzrick v. Republic Steel Corp., 6 Ohio St.2d 227, 218 N.E.2d 185 (1966), paragraph one of the syllabus. “Moreover, a breach of implied warranty in tort claim is within an entirely separate body of law from that applied under the UCC.” Johnson at ¶ 26. And because “implied warranty in tort is not a matter of contract, * * * contractual provisions disclaiming implied warranties and limiting liability to repair and replacement do not affect [a] claim based upon implied warranty in tort.” Avenell v. Westinghouse Elec. Corp., 41 Ohio App.2d 150, 156, 324 N.E.2d 583 (8th Dist.1974).
The LaPumas do have a common-law claim against Collinwood. In Iacono v. Anderson Concrete Corp. (1975), 42 Ohio St.2d 88, 71 O.O.2d 66, 326 N.E.2d 267, this court allowed a plaintiff to recover against a concrete supplier for damage to the plaintiff‘s new driveway. In Iacono, small, round holes formed in the plaintiff‘s driveway soon after a contractor completed installing it, and the plaintiff brought suit against the contractor and the supplier for the damage to the driveway itself. Despite the lack of privity between the plaintiff and the supplier, this court held that the plaintiff could maintain a tort action against the supplier based upon a theory of breach of implied warranty. While the imperfections to the driveway in the present case concern its color, we do not find that that significantly distinguishes this case from Iacono. Therefore, the LaPumas may pursue a claim of breach of implied warranty against Collinwood.
Id.
{¶27} Vermeer, in its appellate brief, relies upon the Ohio Supreme Court‘s decision in Corporex, supra, for its proposition that “the economic-loss rule bars recovery in tort for purely economic losses sustained by a commercial buyer because commercial parties ‘must be allowed to bargain freely to allocate the risks attendant to their undertaking, including the possibility of purely economic damages.’ ” [Amended App. Brief at 13], quoting Corporex at ¶ 11. A review of the Corporex decision, however, indicates that Vermeer‘s proposition of law is misplaced.
Because the underlying duties are created by a contract to which DSI is not a party, no tort action lies in DSI‘s favor. Instead, DSI, the project owner, retains its right to file a breach-of-contract claim against Corporex, the contractor, for damages permitted under its contract, and Corporex may, in turn, recover any damages against Shook, the subcontractor, permitted by the subcontract.
Id. at ¶ 11.
{¶30} Furthermore, at least one Ohio appellate court has extended a breach of implied warranty in tort cause of action to commercial plaintiffs, holding that: “[A] consumer, commercial or not, can maintain a claim for breach of implied warranty/strict liability against a manufacturer, not in privity, for purely economic loss[.]” Ohio Dept. of Adm. Servs. v. Robert P. Madison Internatl., Inc., 138 Ohio App.3d 388, 397, 741 N.E.2d 551 (10th Dist.2000); but see Apostolos Group, Inc. v. BASF Constr. Chems., LLC, 9th Dist. Summit No. 25415, 2011-Ohio-2238, ¶ 16 (holding that a breach of implied warranty in tort cause of action for purely economic loss resulting from defective products is not available to commercial buyers). The Tenth District Court of Appeals stated that it could find “no basis for distinguishing between so-called commercial and noncommercial buyers.” Id. at ¶ 396. The court further noted that no distinction was necessary because “the doctrine of implied warranty is designed to protect ‘consumers’ who are not in privity of contract.” Id.
{¶31} Here, Tatman and Son‘s is a consumer who is maintaining tort claims against a manufacturer, not in privity, for purely economic loss. Thus, Tatman and Son‘s tort claims alleging purely economic harm fall into the category of claims described in LaPuma. Moreover, agreeing with the rationale set forth in Robert P. Madison, we see no reason to treat Tatman and Son‘s, a commercial consumer, differently than noncommercial consumers. Accordingly, based
{¶32} We further note that the Ohio Products Liability Act (“OPLA“) does not preempt Tatman and Son‘s common law tort claims. While it has been determined that
D. Count Four - Unjust Enrichment
{¶34} Finally, count four of Tatman and Son‘s complaint contains a claim for unjust enrichment. Unjust enrichment occurs when a person “has and retains money or benefits which in justice and equity belong to another.” Hummel v. Hummel, 133 Ohio St. 520, 528, 14 N.E.2d 923 (1938). An unjust enrichment claim is intended ” ‘not to compensate the plaintiff for any loss or damage suffered by him but to compensate him for the benefit he has conferred on a defendant.’ ” Johnson v. Microsoft Corp., 106 Ohio St.3d 278, 2005-Ohio-4985, 834 N.E.2d 278, ¶ 21, quoting Hughes v. Oberholtzer, 162 Ohio St. 330, 335, 123 N.E.2d 393 (1954). To effectively raise an unjust enrichment claim, a plaintiff must allege: ” ‘(1) a benefit conferred by a plaintiff upon a defendant; (2) knowledge by the defendant of the benefit; and (3) retention of the benefit by the defendant under circumstances where it would be unjust to do so without payment.’ ” Hambleton v. R.B. Barry Corp., 12 Ohio St.3d 179, 183, 465 N.E.2d 1298 (1984), quoting Hummel at 525.
{¶35} The Ohio Supreme Court has held that in order for a plaintiff to confer a benefit on a defendant, an economic transaction must exist between the parties. Microsoft at ¶ 22. For instance, in Microsoft the Court found that the plaintiff had not conferred a benefit on the defendant, even though the parties were bound by an end-user licensing agreement, because the plaintiff did not directly purchase goods from the defendant. Id.
V. Conclusion
{¶37} Based on our review of the complaint, we conclude that Tatman and Son‘s failed to state a valid cause of action against Vermeer under counts one (express written warranty) and four (unjust enrichment) of the complaint. Moreover, insofar as Tatman and Son‘s breach of implied warranty claim under count two of the complaint relies upon Ohio contract law, we also conclude that the count fails to state a valid claim. However, as indicated above, Tatman and Son‘s has stated valid causes of action in counts five (negligence) and six (defective product/breach of implied warranty in tort) of its complaint. And insofar as Tatman and Son‘s breach of implied warranty claim under count two of the complaint relies upon Ohio tort law, we conclude that the count raises a claim upon which relief may be granted. We also reiterate that count three of the complaint does not state any claims against Vermeer. Accordingly, we sustain Tatman and Son‘s sole assignment of error in part, and overrule it in part. The judgment of the trial court is affirmed in part, and reversed in part. We remand this case for proceedings consistent with this opinion.
JUDGMENT AFFIRMED IN PART, REVERSED IN PART, AND CAUSE REMANDED.
It is ordered that the JUDGMENT IS AFFIRMED IN PART AND REVERSED IN PART and that the CAUSE IS REMANDED for proceedings consistent with this opinion. Defendant/Third-Party Plaintiff-Appellant and Third-Party Defendant-Appellee shall equally divide the costs herein taxed.
The Court finds that reasonable grounds existed for this appeal.
It is ordered that a special mandate issue out of this Court directing the Ross County Court of Common Pleas, to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
Harsha, J. and McFarland, A.J.: Concur in Judgment and Opinion.
For the Court
BY:
Marie Hoover
Presiding Judge
NOTICE TO COUNSEL
Pursuant to Local Rule No. 14, this document constitutes a final judgment entry and the time period for further appeal commences from the date of filing with the clerk.