*1
goods article of the ucc. jurisdictions Courts other that have considered whether remedy implied provided for breach of in the ucc remedy universally agreed is the exclusive have that a tort may personal injuries action be maintained to recover for resulting death from defect. involved, personal injury Where or death is not and the loss economic, essentially authority, adopted by one line of most *3 matter, precludes courts that have considered the maintenance action, purchaser of a tort and confines the to an action for ucc, damage breach of under the where the is essen- tially product to the defective sold the seller and no other property damaged. authority permits is A second line of a purchaser product of a defective to maintain a tort action for product regard prop- loss of the defective without to whether erty damaged by other than the defective is also reason of the defect. authority, pur- Under either the established lines of may chaser maintain an action in tort where the defect property. Accordingly, causes to other under either authority, may established line of this action be maintained injury herds, dairy because claim to their purchased milking system. other than the automated years While a tort action must be commenced within three claim, accrual of a the action does not accrue before the plaintiff should have discovered the claim. (1989) App 794; 181 Mich NW2d affirmed. (1990) App 731;
184 Mich
NW2d
affirmed.
Southgate Community School Dist v West Side Construсtion
(1976)
399 Mich
Cholette, Buchanan Perkins & Riley) Alfa-Laval, Inc. for defendant Maxwell, P.C. Callahan, & Petersmarck, Bauer West) (by Howard’s for defendant W. Richard Dairy System, Inc.
Amicus Curiae:
Philip
Simpson
(by
J. Goodman and
Moran
Silverman)
County.
Wayne
G.
Steven
granted
leave to consider
J. We
Griffin,
applicability
cases of the
in these consolidated
recovery
doctrine,”
tort
bars
loss
"economic
and
Uniform
under
to those available
limits remedies
a claim
Code1 where
Commercial
damages
*4
sale of
out of the commercial
arises
plain-
purely
If
economic.
incurred are
and losses
tiffs
warranty
by the doctrine to a
limited
cases are
these
by
governed
its four-
the ucc and
action
seq.
seq.;
et
MSA 19.1101
MCL 440.1101 et
The courts below so held. review we Appeals. and affirm the decisions of the Court of i procedural background The facts and of these very brought Indeed, cases are similar. both were in the Mecosta Circuit Court2 and were considered judge.3 supplementation the same circuit With provided analysis, to be in the course of our we borrow from the concise statement of facts set Appeals. forth in each case the Court of COOPERATIVES, NEIBARGER UNIVERSAL INC V Plaintiffs, operators farm, owners dairy of a contracted with defendant Charles Brinker to in- milking system. According stall a plaintiffs, milking system designed by was defendants Uni- Cooperatives, Inc., Brinker, versal and was begin installed on milking operations Brinker September 1979. that, allege
Plaintiffs milking after the system operation period time, had been in for a their cattle became ill and died or had be sold for beef because of their nonproductivity and unsuita- bility milking animals, as suffered a milk loss of production, experienced mastitis, had severe instances of portion a loss of a of their udders. claim, Consequently, they pre- were reaching vented from potential. their herd alleged Plaintiffs it was not until fall of they 1986 that discovered that the entire vacuum system milking on the equipment had been im- properly designed and brought installed. Plaintiffs 2Although originally case was filed in Montcalm County, parties agreed requested venue, change to and was ordered. 3Honorable Lawrence C. Root. *5 Opinion of the Court 13, 1987, and April on against defendants
suit proceeded theories: breach on three against them warranty, implied warranty, breach of express of 794, 796; 450 App Mich negligence. [181 (1989).] NW2d discovery, filed motions defendants After some arguing disposition, summary that because for plaintiffs’ of commercial sale from the claim arose damages, sought only goods they economic warranty remedy of was a breach their exclusive Further, defen- 2 of the ucc.4 Article action under an action was barred that such contended dants period, four-year limitation code’s case this running begins occurs, "when breach which party’s aggrieved regardless knowl- lack of 440.2725(2); edge MSA MCL of the breach.” 19.2725(2). preferred hand,
Plaintiffs,
the other
on
three-year
liabil-
of limitations
statute
Act,
ity
Judicature
forth in the Revised
actions set
27A.5805(9),
600.5805(9);
arguing
it
that
MSA
MCL
begin
until
reasonably
the cause of
to run
would
discovered,
have
or
should
action was
Concluding
con-
that
ucc
discovered.5
been
expired
period had
its limitation
trolled and that
complaint
filed, the trial court
was
before
disposition
granted
summary
for defendants.
Appeals
appealed,
af-
and the Court
Plaintiffs
finding
the transaction involved
After
that
firmed.
incidentally
services
"a
with
was
sale
damages sought "consisted
involved,” solely
loss,”
the Court concluded
of economic
"plaintiffs’
ucc,
its
remedies fall within
seq
seq.;
19.2101 et
et
MSA
MCL 440.2101
.
27A.5833,
600.5833;
pointed
which
to MCL
MSA
also
Plaintiffs
warranty
damages
on breach of a
provides
based
actions
"[i]n
the breach of
quality
accrues at the time
fitness the claim
reasonably
should be discovered.”
discovered or
HOUGHTON v INC Plaintiffs, farm, operators owners and dairy of a purchased a milking machine system July, *6 1976, from Alfa-Laval, defendant in- Inc. It was according stalled to design Alfa-Laval’s and in- agent, structions its defendant Dairy Howard’s System, Inc. represent Plaintiffs they purchased that sys- tem in Milk hopes of increasing production. milk production, however, despite did not increase numerous service calls from Howard’s and advice inspections and from production several milk agencies and nutritionists. plaintiffs’ The cattle in began experience herd to severe instances of mas- titis, quarter losses of a of their udders and de- production. creased milk Some of the herd became so sick they that died or were sold off for beef due to nonproductivity. problem Another plaintiffs dis- covered following the installation of sys- the new tem was an high unacceptably cell and bacteria count in the milk. that, Plaintiffs also claim due to faulty wiring, stray voltage would enter the sys- injure tem and the cattle and that there were problems with system’s cooling and vacuum systems. allege Plaintiffs it that wаs not until some time in 1984 they pinpoint were able to their problems stemming as from improper installa- tion of the washing machine’s system. Plaintiffs thereupon negligence against filed suit alleging defendants design, installation and maintenance system of the and express breach of implied warranties. App Mich 732-733; [184 (1990).] NW2d 42 As in Neibarger, reasons, for similar granted trial court defendants’ motion for sum- Universal Opinion op the Court Appeals affirmed, disposition. mary The Court plaintiffs’ concluding exclu- "laid remedies subject the four- sively to were the ucc and within running upon began period year limitation milking system Id. at 734. delivery 1976.” appeal granted cases to in both leave We applicability loss the economic consider period. proper limitation as well as doctrine (1991). Mich 928
II Michigan adopted Code Commercial the Uniform passage 174, effective 1962 PA with January purposes of the code 1, 1964.6 The stated "(a) clarify simplify, the law and modernize are (b) permit governing transactions; commercial practices expansion of commercial the continued through par- agreement usage custom, (c) among the the law uniform ties; [and] to make jurisdictions.”7 various goals, the code *7 Article of these
To achieve
relationship
governs
in-
the
between
goods.”8
Article
in
Under
in "transactions
volved
implied
accompanied by
goods
2,
a sale of
merchantability9
and an
and fitness10
of
warranties
negotiation
by
warranty may
express
created
be
by
Thus, under the
of the seller.11
the conduct
goods may
purchaser
recover
defective
code, (the
bargain
between
difference
of the
the benefit
goods
and the value
as delivered
of the
the value
complied
they
goods
have had
would
174,
PA
9991.
6 1962
§
7
19.1102(2).
440.1102(2); MSA
MCL
8
440.2102;
19.2102.
MCL
MSA
440.2314;
19.2314.
MCL
MSA
440.2315; MSA 19.2315:
MCL
440.2313; MSA 19.2313.
MCL
Since the claims in each of these cases arose out of a goods governed sale of ucc, we must determine whether the consequences its strict period limitation may be avoided pleading Where, claims in sounding here, tort. as the claims arise from a commercial transaction in goods and the plaintiff suffers loss, economic only our answer is "no” —such claims are barred economic loss position doctrine. This is consistent with a considerable body law that has developed in this state as well as a majority of other jurisdic- tions.15 doctrine, economic loss stated, simply pro "
vides that
purchaser’s
expectations
'[w]here
a sale are frustrated
because
he
bought
is not working properly, his remedy is said
alone,
be
contract
for he has suffered only
”16
"economic”
losses.’
This doctrine hinges on a
distinction
drawn between transactions
involving
sale of
purposes
commercial
where
expectations
economic
protected
are
by commer-
440.2725;
12 MCL
MSA 19.2725.
440.2715;
13 MCL
MSA 19.2715.
440.2725;
MCL
MSA 19.2725.
15Wade,
liability
products causing physical
Tort
injury
UCC,
(1983):
1, 26,
Article 2
"Although
48 Mo L R
n 87
there is
disagreement
matter,
some
majority
on the
the substantial
rule has
deriving
come to be . . . that economic loss
from a failure of the
perform
implied
in accordance with the
warranties
is not
tort,
negligence
liability.”
actionable
Am Jur
whether
or strict
See also 63A
2d,
Liability,
p
Products
118.
§
Gypsum
Kershaw Co Bd of Ed v United States
302 SC
*8
393;
(1990), quoting Kennedy
Generally
resolving
nеgligence, are better suited for
claims
involving unanticipated
injury, particu
physical
arising
of an accident. Contract
larly those
out
hand,
principles,
generally
on the other
are
more
determining
consequen
appropriate for
claims
have,
have,
or could
tial
agreement.[18]
addressed in their
recognized by
This distinction was also
the court
Corp,
573,
in Miller v United States Steel
F2d
(CA 1990),
Judge
explained
where
Posner
may
that the term “economic loss”
be misnomer:
326, 335;
99 Idaho
In Parish v BF Goodrich
271, 278;
395 Mich
breached tender of while setting, satisfactory in a commercial are inconsis- principles developed tent with the courts in against per- consumer actions manufacturers injury. sonal While most business losses attribut- product during able to a defective four-year period prescribed by often will surface 2-725, consumers § personal longer period injury suffer after a elapsed. time has Levin,
According to Justice the distinction stems from the liability: bases tort and contract concerns, Section 2-725 if only, primarily agreement
claims based on an to the litigation including actions based on warranties — implied respect agreement. from or in of their manufacturer, liability of a not in consumer, has, contrast, dealing direct imposed by regard- been the courts with little or no Opinion op the Court agreement to whether there is an between attempts by some manu- parties the face of accompa- liability in recitals facturers to disclaim place. nying into the market at [Id. 279-280.] developed by courts, then, the individual
As products liability remedy is not consumer’s tort premised upon agreement parties, an between the imposed duty but derives either from a law or *10 policy from considerations which allocate the risk dangerous products and unsafe to the manufac- turer and seller rather than the consumer. Such a policy produc- encourage design
serves to the products. tion of safe hand, transaction,
On the other in a commercial goods opportunity the a sale of have the negotiate specifications, including the terms and warranties, disclaimers, and limitation of reme- product proves faulty dies. parties aWhere to be after the only have contracted sale and the losses policy supporting economic, are products the considerations purpose liability in tort fail to serve the encouraging design production the of safer products.
III explicitly Heretofore, this Court has not ad- However, dressed the economic loss doctrine.19 dur- 19 however, 261, 275; See Ebers v General Chemical 310 Mich recovery 17 (1945), plaintiff NW2d who not tested insecticide which where this Court allowed tort to a pled warranty. breach of We said the real issue was "whether or negligent” selling inadequately was in an [the manufacturer] damaged plaintiff’s Spence fruit trees. In Inc, 120; Masonry Supply, v Three Rivers Builders & 353 Mich (1958), damages plaintiff NW2d 873 facturer of defective cinder blocks used was awarded from the manu in the construction of the plaintiff’s cottages. adoption by resort Both cases were decided before this state of the ucc. recently, Southgate Community More in School Dist v West Side 439 Mich [May- op Opinion the Court Appeals ing past years dozen our Court Michigan law have the federal courts applying loss doctrine regularly invoked economic arises from appropriate cases where conflict In Mc- goals of tort and contract law. disparate Corp, Ghee v General Motors 98 Mich App decision, first such 296 NW2d in SM expressed adopted the Court the rationale Int’l, Inc, Wilson & Co v Smith 587 F2d 1978): (CA 9, nonperforming the suit is between a Where aggrieved injury buyer
seller and an and the damage and the consists of costs of to the themselves profits repair of such or a loss of expected yield the deal to the had been buyer’s it limit buyer, would be sensible to rights provided by to those the Uniform Commer- cial Code. To treat such a breach as an accident disappointment to confuse disaster. Whether complaint liability is cast in terms of strict negligence tort or should make no difference. [Cita- tions omitted.] McGhee,
Since
of this
validity
approach
has
recognized
published
opin-
been
virtually
every
*11
ion apрlying Michigan law to the issue of economic
stemming
goods.
loss
from a
sale of
In
commercial
Hoyle
Sperry
Corp,
A
C
Co v
Rand
App
128 Mich
557, 561-562;
(1983),
304
326
NW2d
the Court
plaintiff’s
affirmed the dismissal
claim of
manufacture,
negligence
design,
in the
and deliv-
ery
hydraulic
motors
to be installed
on oil
tankers,
holding
policies support-
that none of
ing
in the
products
liability law ”would be served
Co,
72;
(1976),
Construction
399 Mich
Even where the
of Appeals
Court
refused to
apply
economic
loss doctrine
to bar
a
claim,
in Auto-Owners Ins Co v Chrysler
plaintiff’s
Corp,
App
129 Mich
This development
in the jurisprudence
of our
recognized
state has been
by federal
apply-
courts
Inc,
Sylla Massey-Ferguson,
ing Michigan
law. In
(ED
660 F Supp
Mich, 1984),
Judge
Harvey explained that
a plaintiff
"when
seeks to
impose
liability
economic losses
tort
only,
law
concerns
longer
no
safety
apply, and
*12
on the unsafe the risk of products rather than to the manufacturer all . . . involved are the consumer. Where businesses, disappears. this rationale commercial Placing particular on any the burden of the loss raising in only business will result that business prices pass along its these costs to consumers. deciding no role in The courts should have light prices, especially its in business should raise among parties’ ability of the to allocate those risks themselves. applied
The economic loss doctrine was also
Products, Inc,
Smith Harvestore
Frey Dairy A O
(ED
1988),
Mich,
Supp
680 F
aff’d 886 F2d
(CA 6, 1989),
Judge
applied
where
Cohn
the rea
of the McGhee
soning
panel
in a case
which the
milk
plaintiffs sought recovery
produc
reduced
profits
tion and lost
caused
defective
allegedly
Noting
silos.
that
waited almost six
suit,
filing
before
he held
years
"summary
judgment
granted
must be
both defendants
on
grounds
expiration
statute of
limitations bars the
and the eco
claims
. . . .”
nomic loss doctrine bars
the tort claims
F Supp
256.20
appeal
Frey Dairy,
Appeals
On
the United States Court of
following question
Circuit certified the
to this Court: "Un
Sixth
law,
Michigan
operate
der
does the economic loss doctrine
to bar tort
sounding
negligence
gross negligence
claims
where the founda
parties’ relationship
only
is contractual
and the
losses
tion
ques
alleged
After we declined to address the
are economic losses?”
tion,
decided
on different
A
charged
consumer should not be
at the will of
the
bearing
manufacturer with
the risk of physical
injury
can, however,
product
when
buys
he
a
on the market. He
fairly charged
be
with the risk that
product
the
tions
Even
liability
expecta-
will not match his economic
agrees
unless the manufacturer
it
that will.
in
negligence,
actions for
a manufacturer’s
damages
is
to
physical injuries
limited
and there is no recovery for economic loss alone.
Steamship Corp
East River
More
recently,
Inc,
Transamerica Delaval
868;
476 US
106 S
Ct
IV We are convinced that the reasoning of those courts which have adopted the economic loss doc- trine compels a similar conclusion on our In part. direction, legislative absence of we believe required such a rule is guide to trial facing courts cases such as those us before which lie at intersection of tort and contract. Accordingly, we hold that plaintiff where a seeks recover Spring Distributors, Co, supra. See Motors Inc v Ford Motor Mich [May- Opinion Court pur- a defective economic loss caused exclusive for commercial chased purposes, ucc, stat- including its remedy provided by ute of limitations. to blur holding only would not serve contrary
A contract, but tort the distinction between Legislature purpose undermine would carefully represents The code adopting ucc. "the economic governing approach considered consumers suppliers between relations were allowed purchaser If a commercial goods.”22 loss, the ucc in tort to recover economic to sue govern disputes, such provisions designed *14 and or elimination of warranties allow limitation to the require notice consequential damages, seller, a suit the time in which such and limit In that filed, avoided. entirely must be could be event, meaningless Article 2 would be rendered River, in East and, Court Supreme stated as supra in a sea "contract law would drown at of tort.” would, in loss doctrine of the economic
Rejection effect, remedy contemplated a create adopted permitting it the ucc Legislature when what may in tort potentially large recovery hand, the other quality.23 a minor defect On be loss doctrine will allow of the economic adoption po- their greater certainty predict sellers incorpo- and to failure liability tential price into the or terms predictions rate those the sale. loss doctrine is consis-
Adoption of the economic purposes stated ucc. tent with the 435 NE2d (Minn, 1981), NW2d [22] Moorman See Superwood Corp 443 (Minn, overruled on other Mfg (1982). 1990). Co v Nat’l v Siempelkamp Corp, Tank grounds Hapka 91 Ill 2d 69, 78; v 311 NW2d Paquin 61 Ill Dec Farms, Opinion op the Court of a tort availability action for economic loss would add "only more confusion in an area al plagued ready with overlapping conflicting and theories of recovery,”24 preclusion while of such actions will clarification, lead to the simplification, and modernization of commercial law called for by 1-102(2)(a). Moreover, because a of other majority § jurisdictions have adopted the economic loss doc trine, our promote decision here will the uniform 1-102(2)(c). for in ity called § In us, the cases before argue that their claims fall within the of products class liability actions 600.2945; 27A.2945,25 defined MCL MSA proper statutes of limitation accrual are provided those by the Revised Judica- Act, 27A.5805(9) ture 600.5805(9); MCL MSA 600.5833; MCL MSA 27A.5833. disagree We for the reasons stated rja Application above. of the to the cases before us would negate effectively Article ucc; application of the economic loss doc- trine ensures that the ucc will remain effective governing commercial rja disputes, while serves govern noncommercial products liability actions.
Having decided that the ucc and the economic *15 loss doctrine reflect the proper approach for reso-
24 Co, suprа. Clark v Int’l Harvester n 17 25 600.2945; MCL MSA 27A.2945: liability any action” "[Products means an action based on legal of equitable theory liability brought or of for or on account injury person property resulting death or to or caused or manufacture, construction, formula, design, from the develop- standards, preparation, processing, ment of assembly, inspec- tion, testing, listing, certifying, warning, instructing, market- ing, advertising, packaging, labeling product of a or a component product. of a 512 439 Mich 530 Opinion the Court claims in the commer- product lution of defective arena, that we application now turn cial to the us. In the Court doctrine cases before the plaintiffs argued that economic Appeals, because not bar their claims loss doctrine does than damage to other asserting property are they Although support is themselves. there does not a tort claim for the view that the ucc bar for plaintiffs to recover seeking where are itself, find in product other we property than that, to the notwithstanding injury these cases herds, dairy damages are plaintiffs’ claimed losses. economic end of loss spectrum,
At one the economic as recov- interpreted permitting doctrine has been property in tort other than ery injury Nat’l Fire Co Union Ins product defective itself. Pittsburgh Whitney Inc, Canada, v & Pratt 107 Co Bd of Ed Kershaw 535; (1991); 815 601 Nev P2d Gypsum Co, v United States 390; 302 396 SC SE2d (1990). recovery Other courts have allowed tort physical damage to the caused itself a defect which a merely "disappointment,” Co, Russell v Ford Motor hazard, safety but also a 587; results Or P2d or which Star Co v Furniture a from "calamitous” event. Pulaski Furniture 171 W Va 297 SE2d (1982). us, In a case similar to those before factually Leasing
Agristor Spindler, 656 F Supp (D SD, 1987), damage court found that herd constituted economic than dairy loss rather purchasers of a feed where it storage system alleged negligently was designed manufactured. claimed spoiled the defective the feed it con- suffering dairy tained and resulted "their herd medically reproductively, production milk *16 531 Opinion of the Court dropping Finding ultimately, and, lost income.” seeking merely that the the Harvestore were "to recover resulting dairy to farm losses their due to the failing perform expected,” as
silo to id. injuries at the court the characterized as recovery loss denied in tort. economic agree. proper requires approach We consid- underlying policies of of eration tract the tort and con- damages.26 law as as of the well the nature The essence of a under is action the ucc product quality expected that the was not of the buyer promised by the seller. the The stan- quality purpose of must dard be defined the of product, intended, uses for it which was agreement parties. many cases, and the of the In perform expeсted failure of the necessarily to as will damage property;27 to other such cause damage contemplation beyond often of agreement. Damage property, to the to it where is the result of a commercial transaction ucc, otherwise within the ambit of should not preclude application of the economic loss doctrine property damage necessarily where such results delivery poor quality. from the of a of Hapka Paquin Farms, In 458 NW2d (Minn, 1990), Supreme Court of Minnesota opined litigation steady "[t]he stream at- tempting qualify exceptional for the treatment damage to other has convinced us that exception represents retreat the common derogation law essence Uniform complete independent Commercial Code: a governance statutory scheme enacted for the of all Gypsum See Kershaw Co Bd Ed v United States n 16 supra; Leasing, App Rptr Pisano v American 146 Cal 3d 194 Cal (1983). 27See, America, e.g., Heights Chicago Dynamit Venture v Nobel of 1986) (a Inc, (CA 7, leaking 782 F2d 723 roof caused water parts apartment building). of an other [May- Mich Opinion of the Court with this agree We transactions.”28 commercial court, Hapka did the noting, as analysis, *17 the compensate to sufficient remedies provides ucc direct, incidental, for defective of a buyer losses, dam- including property consequential and 440.2715; 19.2714, MCL 440.2714; MSA age. MCL рroperty to other damage 19.2715. Where MSA purchased of a the failure by caused was expected, as perform to purposes for commercial of contemplation the damage was within this and of occurrence the agreement, to the the negoti- of subject the have been damage could such parties. the between ations us, the a review of In the cases before two. that the dam reveals depositions and pleadings losses are commercial sought plaintiffs the ages by under, provisions only which can be remedied of the ucc.29 alleged by physical
The other of mastitis and includes instances plaintiffs the death of some caused allegedly illnesses that from the herd culling them or necessitated cattle However, deposi- in his for beef. selling them and that mas- testified tion, Neibarger Darwin plaintiff Plain- dairy farmers. problem titis is a common could that mastitis Houghton testified tiff Charles hand, by were milked even where the cows occur that he was aware testimony his reveals Legislature in modified the rule stated has since The Minnesota 604.10, Stat, Hapka, passage tort recov Minn which allows § goods arising is due to ery damage "from a sale of economic loss goods tangible property . . . but other than the sold goods parties who are sale of between loss that arises from a economic each in tort.” the kind is not recoverable merchants in 103, 107, ZumBerge 481 NW2d n States Power v Northern 1992). (Minn App, upon disposition premised summary the statute of A motion for motion, 2.116(C)(7); deciding governed by such a MCR limitations affidavits, depositions, pleadings, admis court must consider a sions, 2.116(G)(5). parties. documentary MCR evidence filed other Neibarger Opinion op the Court milking system. mastitis could be caused Deposition testimony culling also reveals that part dairy cows was a normal business, Houghtons replace many that twenty-five percent Houghton, problems would as as every year.
of their cows anticipated fact, testified that he system with the new because some cows adapt system would not to the new and would replaced: have to be Viewing complaints light of this testi- mony, apparent damages it is that the suffered plaintiffs properly the nomic the are considered to be eco- loss, quality the result of a defect in the
milking systems they purchased. purchase milking made business decisions to new systems, hoping, Houghton as Charles and Darwin expand testified, the size of their *18 presume, and, thereby herds we increase their expectations incomes. Their commercial were not they experienced met, however, and decreases in production problems. milk and medical Their com- plaints properly by were viewed the courts below attempts profits as to recover for lost and conse- quential damages, compensable losses which are Thus, under the squarely ucc. these actions fall within gov- the economic loss doctrine and are by provisions including erned the ucc, its four-year statute of limitations.
VI argue Plaintiffs apply also that the ucc does not they seeking to these cases because are to recover injuries by provided for by caused the services any defendants, rather than for defect in products provided by the defendants. If such is the injuries case, their did not arise out of a "transac- goods” governed tion in and thus are not ucc. MCL 440.2102; MSA 19.2102. 439 Mich op Opinion the Court applied Appeals cases, of
In both the Court expressed Cox, F2d test Bonebrake (CA 1974), whether contracts 960 for mixed code: to determine governed
goods by the and services are or exclusion is not test inclusion but, mixed, granting they they are whether factor, mixed, predominant their are whether their stated, thrust, reasonably is the purpose, their service, goods incidentally with rendition involved sale, ... a transaction of labor .... incidentally involved Appeals Applying test, this the Court of found goods, question sales of the transactions were governed by the ucc. agree. represents
We The Bonebrake test jurisdictions majority view of the which have logical It is the most considered approach, purpose issue.30 also one allows Article to fulfill its relationships governing the between goods buyеrs in the commercial and sellers of arena. Appeals noted,
As the Court of some courts have its divided a transaction between the components into and allowed a services sought complaint claim outside ucc where the injuries pro recovery caused the services example, vided For H Hirschf defendant. Operating Corp, Colt ield Sons Co v Industries App 720; 309 Mich sought NW2d *19 injuries to recover for caused the man in-ground ner which an railroad and truck scale Appeals, was The of in a installed. Court decision limited to of which it the narrow set facts before governed by it, found that the action was not the Applicability See anno: of UCC 2 to mixed contracts for Article services, goods sale of and 5 ALR4th 505. Opinion op the Court plaintiff’s entirely "because claim ucc is based on in the rendition of services for which deficiencies price separate contract a the contained rather any than on defect the themselves.” Id. at reaching decision, In this the 727. Hirschfield opinion Court relied on the in Dixie Lime & Stone Wiggins App 145; Co Scale Ga 240 SE2d (1977), factually a 323 court similar case which the the
explained "[t]here that is no claim that agreement underlying itself is scale this defective. The furnishing suit for was one the of services and clearly inapplicable.” labor, and the Id. ucc persuade The two referred to decisions do us primarily that the at transaсtions issue here were goods. cases, for services rather than In both the separate products prices contracts included us, however, installation. the In the cases now before purchase agreements included no mention of any separate price service, installation or nor was stated installation or service. The services provided, then, were must be viewed as "inciden- purchase milking tal” system. the contract for the of a prefer approach We the is illustrated those cases in which courts have examined the dealings parties overall thrust of between the to determine the character of one In the transaction. Display, case,
such
Didde-Glaser,
Care
Inc v
Supreme
Inc,
225 Kan
setting which Id. at of Didde-Glaser.” products the advantage 239. Engineer- Corp Pennsylvania Republic Steel In ing Corp, (CA 7, 1986), court the 785 F2d the examining approach similar a employed sale, design, and for the agrеement character of an case, In that the furnaces. of two steel installation underscoring the broad court, "Illinois law noting the need for emphasizing the coverage of ucc id. at transactions,” in commercial uniformity design, engineering the fact held that part a substantial services were purchase agency appli- preclude to was not sufficient of the contract of limitations. its statute of the ucc and cation the Bonebrake test, held that the court Applying Agreement the character predominant "the goods, for the sale of of a contract . . . was that Id. at 184. rendition of services.” not for the It in these cases. is proper is approach The same imagine a commercial difficult to its prior of service require type does not some installation, assembly, design, purchase, whether to avoid were able purchaser If a or manufacture. of one of execution negligent by pleading the ucc Arti- product, the produce required the services A negated. effectively be easily cle could should examine faced with this issue court If the parties. dealings between purpose acquire product, a goal ultimate is purchaser’s a transaction considered contract should be required. incidentally is though even service goods, is to goal ultimate purchaser’s if the Conversely, service, governed by not the contract procure re- ucc, incidentally are though even this service. provision in the quired cases, purpose thrust In these the defendants was contracts plaintiffs’ Opinion op the Court provision design of defendants’ or installation acquire services; rather, intended to goods, milking systems incidentally i.e., re- quired design and installation services. This con- supported by deposition testimony clusion is plaintiffs *21 Neibarger Hough-
Darwin and Charles "bought system ton. testified that he complete” hoped go "just to the barn and everything Houghton turn it on and worked.” purchase viewed the transaction as a of a testifying well, as that defendant Howard was to milking system purchased, install a which he at part, good least in "it because looked like a ma- appears testimony chine.” It thus from the of the plaintiffs goals purchase milking that their were to systems; design whatever or installation services required systems were incidental to those goals. attempts application
Plaintiffs’ to avoid of the by arguing ucc that there was no defect product, poorly designed but that it was or in- stalled, are to no avail.31 At the heart of the complaints in these cases is the fact plaintiffs purchased products proved inade- quate purposes, causing profits for their them lost perhaps, consequential and, losses or damage compensable timely in a suit under the provisions of the ucc.
VII damages sought Since the in these cases are appeal Court, plaintiffs attempt On applica this also to avoid by arguing privity tion of the ucc that there is no of contract between plaintiffs and defendants Universal and Alfa-Laval. We note that this and issue was not Appeals raised in the trial court or in the Court of properly thus is not before us. We also note in each case that plaintiffs allege "agent” the defendant retailer was an manufacturer. 439 Mich Levin, J. Dissenting Opinion resulting sale the commercial from economic losses goods, plaintiffs’ are remedies exclusive proceedings provided by in each the ucc. Because four-year commenced within case were not period provided 19.2725, 440.2725; MSA MCL Accordingly, in each time-barred. the actions are case, peals. Ap- of the Court of we the decision affirm JJ., concurred Riley, Mallett, Brickley, J. Griffin, (dissenting). dairy are J. Levin, They actions recover farmers. seek these injury to herds claimed to have been caused their milking systems pur- by defects in automated chased their the defendant manufacturers from representatives. judge granted sum-
The circuit the defendants disposition, *22 mary Appeals Court of af- firmed.1 question presented plaintiff
The is whether the dairy may for maintain an action in tort farmers majority property exclu- loss. The holds their warranty remedy is an action for breach of sive Code, that an under the Uniform Commercial be aсtion loss, tort cannot maintained at least where loss is deemed to be within expectation the commercial or economic parties.2 dairy farmers commenced these actions delivery years
more than four mated after of the auto- milking systems.3 They press did 1 concerning plaintiffs’ damages. It is nature of There no record appear cows died. does that some 2Ante, pp 520. 3 provides: The ucc 539 Dissenting Opinion by Levin, J. implied warranty claim for breach of under the being apparently ucc,4 it assumed that the four- year statute of limitations for commencement of such an action had expired.5 (1) any An action for breach of contract for sale must be years within 4
commenced
crued.
period
it.
after the cause of action has ac-
By
original agreement
parties'may
reduce the
year
may
of limitation to not less than 1
but
not extend
(2)
occurs, regard-
A cause of action accrues when the breach
aggrieved party’s
knowledge
less of the
breach of
except
lack of
of the breach. A
made,
delivery
occurs when tender of
explicitly
perfor-
that where a warrant
extends to future
discovery
mance of the
breach must await the
the cause of action accrues when the
performance
time of such
440.2725;
breach is or should have been discovered.
MSA
[MCL
19.2725.]
4
Corp,
jury
In Warner v A O Smith
obtained a
verdict
wаrn,
resulting
based on failure to
to the herd
from
feed-storage system.
Appeals
defective
unpublished opinion.
The Court of
affirmed in an
granted
appeal,
This Court
leave to
limited
case,
applies
the issue whether the economic loss doctrine
in the
437
(1991), and,
argued together
Mich 928
instant
as
after the case was
with the
October, 1991,
granting
cases
the order
leave was dismissed
(1992).
improvidently granted,
We would must be a tort action in tort. While an action years four, three, of accrual within commenced claim, accrue before does not the action of the plaintiff the claim. have discovered should I plaintiff dairy relationships between defendant manufacturers/ farmers representatives goods, of arose out of sale milking systems. Manufacturers automated persons goods sought who to confine have sellers product damage to the defect as a result suffer remedy provided implied warranty for breach goods Commercial article of the Uniform the sale of Cod e.6 throughout land have considered
Courts remedy provides the exclusive whether ucc resulting injury personal from a or death agreement to be universal defect. There seems may to recover be maintained that a tort action resulting personal injury from or death defect.7 _ Richter, 545; (Wash, 1913); App
Angell,
v
49 Cal
There are two lines of authority. One line of authority, opinion set forth in an of the originally v White Motor Court, California Supreme Seely Co, 9; (1965), 63 Cal 2d 403 145 adopted P2d r,8 most courts that have considered the matte precludes action, maintenance of a tort and con fines the purchaser to an action for breach of ucc, under where the damage is essentially product the defective sold by the seller and no damaged. other is That view, adopted the United Supreme States in East River v Court Steamship Corp Trans Inc, america Delaval 858; 476 2295; US 106 S Ct (1986). L90 Ed 2d 865
The second line of authority, originally set forth
opinion
Court,
an
Jersey Supreme
New
Inc,
Santor v A & M Karagheusian,
52;
44 NJ
207
(1965),
A2d 305
permits a purchaser of a defective
product
to maintain
a tort action for loss of the
product
defective
regard
without
to whether prop-
Summers,
(2d ed), 11-3, 401,
p
Pennsylva-
Uniform Commercial Code
§
(CA
Corp
Co,
1165,
Caterpillar
nia Glass Sand
Tractor
652 F2d
1168
3, 1981),
Inc,
Steamship Corp
East River
v Transamerica Delaval
476
858, 866;
2295;
(1986),
US
106 S Ct
erty is also dam- other than the defective aged by reason of the defect.9 lines of author-
Under either of the established purchaser may ity, Seely/East Santor, River in tort where the maintain an action defect causes property. to other Accord- authority, ingly, line of under either established *25 may this action be maintained because property injury dairy herds, other claim to their milking system.10 purchased automated than B authority, majority relies, a line of not on 9See, supra, e.g., Pennsylvania Corp, n 7 Glass Sand where buyer permitted for fire of front-end loader was to recover tort loader, resulting design damage defect. purchased product, to the from distinguish personal an action for Those courts thus do not between provides injury an additional remedies. property damage, taking that the ucc not exclusive of other or for the view remedy for defect that is provides: The Restatement any in a condition unreason- One who sells defective
ably dangerous subject ultimate ment property to the user or consumer or to his liability physical thereby harm caused to the to consumer, or to his .... Restate- user [2 Torts, 402A(1), 2d, pp Emphasis 347-348. § added.] Although warranty origin liability, was in its a mаtter of tort generally agreed and it is that a tort action will still lie for its breach, practice it has become so identified in with a contract plaintiff of sale between the ranty recognition tract. There is court from and the defendant that the war- something theory of an to the has become obstacle liability of the strict where there is no such con- nothing prevent any in this Section would treating "warranty” a matter of the rule stated as done, But it the user or consumer. if this is should be recognized ent kind of "warranty” very and understood that the is a differ- usually from those found the sale of goods, subject it and that is not to the various contract rules m, [Id., grown up which have to surround such sales. comment p 355.] choose, dissenting opinion, There is thus no need to in a between authority. the two lines of by Dissenting Opinion Levin, J. prius court, on a of a nisi the United but decision States District Court for the District of South Agristor Leasing Spindler, Supp Dakota, 656 F v (D 1987), SD, of the Minne- and a decision Supreme Hapka Paquin Court, Farms, sota 1990). (Minn, NW2d Agristor, In the court ruled that a tort action profits could be maintained lost claimed malfunctioning by have been caused of a feed- storage system. Hapka,
In a tort the court ruled that action potato could not maintained for to a be field claimed to have been caused the sale of potatoes ring rot; seed infected with the disease spread purchasers’ equip- had bеen farm ment from one field to another.11 Agristor, disagreeing
The court in rather than Seely, approach Seely noted that had majority jurisdictions,12 been followed distinguish sought Seely on the basis that plaintiff Agristor sought primarily to re- *26 profits.13 permanent cases, In cover lost the instant damage property, dairy herd, to other is claimed. 11 justice plaintiffs One dissented on the basis that had suffered property,” to "other and should have allowed to recover been (Yetka, J., pursuant Seely/East Hapka, supra, p
in tort to River. dissenting). 12 Finally, majority jurisdic it is relevant to note that tions that have considered this issue have followed the Califor nia Supreme holding Seely Company. Court’s in v White Motor [Agristor, supra, p 656.] permitted resulting privity “unnecessary ries to cover economic losses.” Among The court noted that "the South Dakota is Signal under the Uniform Commercial from a fire caused the cases cited with for destruction for South Dakota courts to Oil & Gas of a n apparent approval Agristor, supra, p significant supra, explosion Code,” where expand portion of a defective heater. legislature broadly and it is 656. recovery in strict of an oil Agristor, supra, p liability consequently in tort was refinery views theo 439 Mich Dissenting Opinion Levin, J. refusing Hapka, court, allow tort to
In recovery, "the Uniform Commercial held that respect exclusively dam- with must control Code ages involves in a cоmmercial transaction damage only,” where the are the acquire purchasers regularly who commercial product, equal "knowledgeable relatively persons and of bargaining power” It the sellers.14 does as appear cases in the instant buyers experienced regular of automated were or milking systems. remedy Hapka that the ucc
The court said ordinary "something adequate in the less than expressly It reaffirmed consumer transaction.”15 products availability liabil- the ity ranty, of actions for strict negligence, as for breach of war- as well ordinary It in an transaction.16 consumer appears Hapka would have thus the court opposed to the result reached reached a result majority in instant cases had the court presented the instant cases.17 there been 14Hapka, supra, p 688. speaking, Generally a consumer has neither the skill nor the bargaining power negotiate If either warranties remedies. destroys pot coffee causes a fire which a consumer’s a defective home, panoply liability theory to the should be available products liability negligence as consumer —strict as well personal injuries or not accom breach —whether property damage. Emphasis pany the [Id. added.]
16Id. 17Minnesota, Dakota, privity adopted like South had a liberal alternative of the ucc: Minnesota, hand, аdopted on the other has the most liberal Code,
privity so it is alternative of the Uniform Commercial liability unnecessary to "stretch” strict for Minnesota courts are recoverable under war- cover economic losses. Such losses [Agristor, supra, p ranty theories. 656.] *27 out, has, Legislature majority points Minnesota as the The Ante, p following Hapka. n 28. Under the amended its statute Dissenting Opinion Levin, J. II majority that under either the troubled Seely/East authority, River or Santor lines of may actions theory, be maintained under more than one products liability action in tort as well as
a
a
action under the ucc. The drafters of
the ucc were not so
are
troubled.18 Nor
courts
throughout
recovery
the land that have allowed
property.19
tort where there is
to other
purpose
enacting
A
a Uniform Commercial
provide uniformity
Agristor
Code is to
in the law.
Hapka,
majority,
relied on
are distin-
guishable.
Agristor,
permanent
In
there was no
statute,
purchaser
dairy
modified
a
like the
farmers in the instant
cases would be able to recover in tort for economic loss because the
sold,
damage
dairy
tangible
goods
is to
other than the
and the
farmers are not "merchants in
of the kind.”
act,
displaced by
particular provisions
Unless
of this
principles
equity
supplement
provisions.
.
law and
.
.
its
440.1103;MSA
[MCL
19.1103.]
impair
repeal any
regulating
does this article
or
statute
[N]or
consumers,
specified
buyers.
sales to
farmers
other
classes of
440.2102;MSA
[MCL
19.2102.]
particular
following commentary:
Of
interest is the
provisions
only provide
recovery
Do these
for
[Article 2]
imply
recovery
under Article 2 but also
that this
has become
remedy, supplanting any
the sole available
action in tort? It is
provisions
well to recall that
merely declaratory
provisions
for breach of
these two
are not new but are
corresponding
of the common law and the
law,
of the Uniform Sales Act. At common
the action
implied warranty awarding recovery
physical
for
—
injury
consequential damages
on the basis of
side
—existed
putting
dangerous product
side with the tort action for
on the
market,
recovery
physical damages
principal
as the
relationship
basis of the action. The same is true of the
be-
tween the two causes of action under the Uniform Sales Act. If
the Code made no ostensible
change
aspect
in this
the law
respects, why
abruptly
preempt
other
tort action?
should it be held
[Wade,
liability
products causing physical
Tort
UCC,
injury
(1983).]
and Article 2 of the
L R 6
Mo
accompanying
See ns 7 and 8 and
text.
*28
The of the instant refusing recovery cases, for to allow tort loss resulting pur- a one-time of other from equipment, defective is not in accord with chase of the concept underlying uniformity in law ucc.
A
majority
that,
examination,
on
The
cites cases
permit
where,
a tort action
as
maintenance of
damage
property.20
here, there is
to other
Michigan
Appeals cases,
Court of
and federal
Michigan
by
applying
law,
court cases
cited
majority
"regular”
as
invocation
indicative
doctrine,21
of the economic loss
concern factual
purchasers
damage
did not
situations where
suffer
property.22
to other
20Ante,
Pittsburgh
p
530. See Nat’l Union Fire Ins Co of
Pratt &
Canada, Inc,
535;
(1991),
Whitney
recogniz
107 Nev
815 P2d
ing
damage
apartment
complex
by
to an
caused
defective con
tort;
struction materials was recoverable in
Kershaw Co Bd of Ed v
(1990),
Gypsum
390;
recovery
United States
302 SC
building
ceiling plasters.
was caused
acoustical
21Ante, pp 523-527.
Corp,
App
In McGhee v General Motors
98 Mich
296 NW2d
(1980),
purchased goods
injury
claimed was
to the
repair
damage.
Hoyle
In A C
themselves and the costs of
of such
Co v
557, 559;
Sperry
Corp,
App
Band
128 Mich
B support majority’s Seely reliance on as The of the economic loss doctrine23 is mis- its view placed. damage plaintiff sought there to recover allegedly by a to a truck caused defective Seely premised refusal tire. The court its plaintiff in tort on the allow the of caused causation been to recover absence proof damage to truck in fact that the was tire defect.24The court said that had plaintiff
entitled,
would have been
*29
damage
to
in tort
to the
allowed
truck.25
recover
majority’s
The
reliance on East River is also
misplaced.26
plaintiff
sought
The
there
to recover
purchased product,
damage
in tort for
steamship
to the
a
arising
product
turbine,
from
defect—
plaintiff allege
physical injury
that
to
nor did
persons
motors caused
Inc,
property.”
Paty’s,
or other
In Great American Ins Co v
634, 636;
App
damage alleged
154 Mich
damage property was not In to other Supreme rejecting recovery, tort the United States case, "[i]n there no Court observed that this was damage to 'other’ went on Court property.”27 adopt expressed Seely to authority the view line of permits recovery where there is damage to other property.28
c Superwood Corp Siempelkamp Corp29 In cited Supreme the Minnesota Court majority,30 person may held that a damage recover in tort where property
to other arises out defect.31 Co,32 In Clark v Int’l Harvester cited Supreme observed, Court of Idaho majority,33 refusing plaintiff recovery tort, to allow sought "recovery only profits . . . of lost and the repairing replacing allegedly costs of defective adopt Seely The court on to went view parts.”34 allowing recovery tort where there is arising other from defect.35
III *30 appear express whether, It does not absent con- 27 River, supra, p East 867. 28 River, supra, p East 871. 29 1981), (Minn, by Hapka Paquin 311 159 NW2d overruled Farms, supra. 30Ante, 528, p n 23. 31Superwood Corp, supra, p n 29 162. 32Clark, supra. n 8 33Ante, 529, p n 24. 34Clark, supra, p n 8 332. 35 by majority jurisdic We believe the rule advanced by tions and lated the Restatement is sound for the reasons articu Traynor Seely. [Clark, supra, p Justice n 8 334.] Dissenting Opinion Levin, J. damages provision, for recoverable tractual warranty this could such as in a case of breach damages significantly be that would from the differ in a under either tort action recoverable authority.36 Seely/East lines of River or Santor principal significance decision of Court’s injury, personal today may establish, absent be four-year commence- limitations for a statute of arising claiming of action loss ment of an products, at the sale of defective out of within is deemed to be where loss least parties. expectation of the or economic commercial Cavanagh. Boyle, J., C.J., concurred Levin, J. consequential appears recovery for еconomic that in contract It reputation including profits, good will loss of loss of or business loss— beyond resulting proximately a from defective loss
and other direct cost, (loss repair, bargain, replacement cost of economic loss of like) See White neither nor barred the ucc. authorized —is (2d ed), 11-6, Summers, p 409. This § Uniform Commercial Code & text nonprivity majority reports allow that the vast of courts do not purchasers consequential loss. Id. to recover for economic consumer however, have, Michigan applied that law Federal courts have consequential damages, including profits, are lost concluded recoverable Joseph warranty. implied Martin v breach See of (CA 1985), holding whose F2d that farmers Harris cabbage profits of seeds potential were as a result defective reduced corporate producer an supplied by implied for breach of a could recover seed merchantability; Upjohn warranty Labora- Co v Rachelle (CA 6, 1981), tories, Inc, holding F2d that a marketer 1105 clearly pharmaceuticals of breach was entitled to recover on the basis prescription profits implied future from sales of lost drug that was defective. (statute Henszey, Application 2-725 of UCC Section See also limitations) sense?, products liability 9 UCC it make cases—Does consequential damages implying can be LJ under ucc. recovered