### IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON
MAX E. PASS, SR., as Administrator of the Estate of Max E. Pass, Jr., deceased, and SHIRLEY WILLIAMS, as Administ ratix of the Estate of Martha N. Pass, deceased, v. SHELBY AVIATION, INC.

Interlocutory Appeal from the Circuit Court for Shelby County No. 91874-6 T.D. D. J. Alissandratos, Chancellor, Sitting by Interchange

No. W1999-00018-COA-R9-CV - Decided April 13, 2000

This is an interlocutory appeal in a breach of warranty case. The plaintiffs’ decedents were killed in an ai rplane cra sh. The estates sued the aviation company that performed the annual inspection on the airplane, on a theory of breach of warranty . The trial court denied the defendant’s motion to dismiss, holding that the tr ansaction was sub

ject to the warra

nty provisions of Article 2 of the Uniform Commercial Code. Permission for interlocutory appeal was granted on this issue. We reverse, utilizing

the predominant pu

rpose test to

determine if a

mixed transaction of goods and services is subject to the Uniform Commercial Code, and holding that the tran saction in t his case was predominantly

the provision of a s

ervice, not subje

ct to the warrant

y provisions o

f the UCC

. Tenn. R. App. P. 9; Judgm ent of the Circuit

Court is Reverse

d and Remanded.

J UDGE H OLLY K. L ILLARD delivered the opinion of the court, in which J UDGE A LAN E. H IGHERS and J UDGE D AVID R. F ARMER joined.

R. Alan Pritchard, Memphis, Tennessee, for the appellant, Shelby Aviation, Inc.

Gary K. Smit

h and Bryant C . Witt, Memphis, Tennessee, for the appellees, Max E. Pass, Sr. and Shirley Williams.

OPINION

This breach of

warranty case arises out of the crash of a sing le engine Piper airplane owned andpiloted by Max E. Pass, Jr. (“Mr. Pass”). On April 15, 1994, Mr. Pass and his wife, Martha N. Pass (“Mrs. Pass”), departed in the aircraft from Plant City, Florida, bound for Clarksville, Tennessee. Somewhere over A labama the couple flew in

to turbulence. Mr

. Pass lost control of the aircraft, and the plane crashed

to the ground outside of Opelika, Alabama. Neither Mr. nor Mrs. Pass survived the crash.

The Defendant/Appellant in this case, Shelby Aviation, Inc. (“Shelby Aviation”), is a fixed base operator that services aircraft at Charles Baker Airport in Millington, Tennessee. On December1 Th e statute of limitations for bringing an action for breach of a contract for sale under

Article 2 of the UCC is four years from the date the cause of action accrues. Tenn. Code Ann. § 47- 2-725 (1). A cause

of action accru

es when the brea

ch occurs, and a

breach of warr

anty occurs when tender of delivery is made. Tenn. Code Ann. § 47-2-725 (2).

-2- 29, 1993, approximately four and a half months prior to the flight in which he was killed, Mr. Pass took his airplane to She

lb y Aviation fo r inspection and service. In servicing the aircraft, Shelby Aviation replaced both rear wing attach point brackets (a lso called “attach point fittings”) on the plane.

Three and one half y ears after the

crash, Max E. Pass, Sr

., father o f Max Pass, Jr. and administrator

of his estate, and Shirley Williams, mother of M artha N. P ass and administratrix of her estate, filed su

it against Sh

elby Aviation. The lawsuit alleged that the rear wing a ttach point brackets sold and installed by Shelby Aviation were de fecti ve because they

lacked the bolts necessary to secure them to th

e airplane. The

Plaintiffs assert

ed claims again

st the De fendant for breach of co mmo n la w war rant y, and for breach of express and implie

d warranties und

er Article 2 of the Uniform Commer

cial Code (“UCC”) , which governs the sale of good

s. 1 T he Plaintiffs’ complaint alleged that the Defendant’s employees “fa iled to provide and install the bolts necessary to secure the rear wing attach point brackets to the fuselage of the a ircr aft,” that the missing bo lts “resulted in a failure of bo

th wings to withst

and the torq ue routinely applied to an aircraft during turbulence,” and that as consequence the right wing separated

from the aircraft in flight, causing Mr. Pass to lose control and the airplane to crash.

On January 28, 1998, Shel byAviation filed a motion to dismiss, under Tennessee Rule of Civil Procedure 12.06, asserting that the Plaintiffs failed to state a claim upon which relief can be granted. Shelby

Aviation contended that the transaction with Max Pass, Jr. had been primarily for the sale of services, rather than of goods, and that consequently the transaction was not covered by Article 2 of the Uniform Commercial Code. Shelby Aviation further contended that all common law warranties had been subsumed into the UCC upon its adoption in Tennessee.

After the Plaintiffs filed their response to its motion to dismiss, Shelby Aviation filed a reply to t he Plaintiffs’ response, which included the affidavit of Shelby Aviation presiden t, Jo e McElmurray

(“McElmurray”). In this affidavit, McElmurray stated that Mr. Pass had broug

ht his plane to Shelby Aviation for an annual inspection, which was required by regulations of the Federal Aviation Administration; that all parts replaced on the plane were installed pursuant to the requirements

of the annual inspection; and that the parts sold had not come from stock maintained by Shelby Aviation but instead had been ordere d specifically for Mr. Pass’ airplane.

On September 28, 1998, the t rial c ourt denied Shelby Aviation’s motion to dismiss. On October 21, 1998,

Shelby Aviat

ion filed a motion fo

r permission to file

an interlocutory

appeal of the trial court’s denial of its motion to dismiss. On January 28, 1999, the trial court issued an order granting Shelby Aviation’s motion for permission to file an interlocutory appeal. The trial court’s order states, in r

elevant part:-3-

The transaction between Mr. Pass and Shelby Aviation involved both the rendering of services and the sale of good s. P laintiffs’ Complaint was filed December 12, 1997, alleging breach of Article 2 warranties. I n response, Defendant

filed a Motion to Dismiss under Tenn. R. Civ. P. 12.02(6). Defendant contends that the transaction at issue is not covered by Article 2. This Court denied Defe ndant’s Motion to Dismiss. The determinative issue and the issue to be appealed is whether the transaction between Mr. Pass and Shelby Aviation is governed by Article 2.

On March 9, 1999 th

is Court granted

Defendant’s ap

plication for inte

rlocutory a

ppeal.

On appeal, Shelby

Aviation raises three issues: 1) whether the trial court erred in denying Shelby Aviation’ s motion t o dismiss the Plaintiffs’ claims for breach of express and implied warranties under the UCC on the basis that the mixed transaction between it and Max Pass, Jr. was notgove rned b y the UCC unde r the predominant

factor test; 2) w

hether the trial c

ourt erred in denying Shelby Aviation’s motion to dismiss the Plaintiffs’ claim for breach of common law warranty on the basis that

such warranty was subsumed into Article 2 of the Uniform Commercial Code upon Tennessee’ s adoption of the UCC ; and 3) whether t he trial court er

red in denying Shelby Aviation’s motion to dismiss the Plaintiffs’ claims for breach of implied and express warranties under Article 2 of the UCC on the basis that such warranties were effectively disclaimed by Shelby Aviation.

Since the trial court’s decision to deny Shelby Aviation’s motion to dismiss was predicated

on not just on the pleadings, but the “entire record in the cause,” we treat the trial court’s denial of Shelby Aviation’s motion as the denial of a motion for summary judgment. Tenn. R. Civ. P. 12.02; See Adams TV of Memphis v. C omCorp of Tenn. , 9 69 S.W.2d 917, 920 (Tenn. Ct. App. 1997)(motion to dismiss converted to motion for summary judgment when trial judge considered matters outside the pleadings). A motionfor summary judgment is appropriately granted only upon a showing that there are no genuine issues of material fact and that the party moving for summary judgment is entitled to judgm

ent as a matter of

law. Tenn. R. Civ. P. 56.04. The pa rty moving for summary judgment bears the burden of demonstrating that no genuine issue of material fact exists. Bain v. Wells , 936 S.W.2d 618, 622 (Tenn. 1997). Since only questions of law are involved, there is no presumption of

correctness regarding a tri al court's grant or denial of summary judgment. Id. Therefore, our review of the trial court’s denial of Shelby Aviation’s motion for summary judgment is de novo on the record before this Court. Warren v. Estate of Kirk , 954 S.W.2d 722, 723 (Tenn. 1997).

Shelby

Aviation first arg

ues that it is entitle

d to judgment as a matter of law on the Plaintiffs’ claims for breac h of t he express and implied warranties of Article 2 of the UCC because the transaction between it and Max Pass, Jr. was not subject to Article 2. Shelby Aviation contends that the c ontract between it and Max Pass was one predominantly for service, rather tha n the sale of goods, and as such, falls outside of the UCC. The Plaintiffs assert tha t the co ntract was predominantly

for the sale of goods, and therefore subject to the express and implied warranties on the sale of goods provided by Article 2 of the UCC.-4-

Article 2 of the Uniform Com

mercia l Code, a dopted by Te

nnessee, gove

rns the sale of g

oods. Many contracts, however, like the one at bar, involve a mixture of b o th goods and services. The problemin such “mixed” tra nsactions is to

determine whethe

r Article 2 gove

rns the contract

. Most jurisdictions follow one of two di fferent approa

ches to address th

e problem. Neibarger v. Universal Cooperatives, Inc. , 486 N.W.2d 612, 622 (Mich. 1992). The first approach, sometimes called the “gravamen

test,” looks to that p

ortion of the tran

saction upon which

the compla

int is based, to determine if it involved goods or services. In re Trailer and Plumbing Supplies
, 578 A.2d 343, 345 (N.H. 19 90); Anthony Pools v. Sheenan , 455 A.2d 434, 441 (Md. 1983). The other approach, known as the “predomina nt factor” or “p

redominant purpos

e test,” looks at th

e tr ansaction as a whole to determine wh ether its predominant purpose was the sale of goods or the provision of a service. Insul-Mark Midwest, Inc. v. Modern Materials, Inc. , 612 N.E.2d 550, 554 (Ind. 1993). In Hudson v. Town and Country T rue Value Hardware , 666 S.W.2d 51 (Tenn. Ct. App. 1984), a mixed transaction involving a contract for the sale of both goods and real estate, Tennessee elected to follow the predominant factor approach, f inding i t “preferable to adopt a test that views the transaction as a whole.” Id. at 54.

The predominant factor test, as applied to a mixed transaction of g oods and ser vices, was described by the Eighth Circuit

Court of Appeals in Bonebrake v. Cox , 499 F.2d 951 (8 th Cir. 1974):

The test for inclusion or exclusion [in the U.C.C.] is not whether they [contracts] are mixed, but granting that they are mixe d, whether their predominant fac

tor, their thrust, their purpose, rea sonably stated, is the rendition of services with goods incidentally

involved (e.g. contract

withartist for painting) or is a transaction of sale, withlabor incidental

ly involved (e.g., installation of a water heater in a bathroom).

Id. at 960.

Under the predominant factor test, the transaction between Shelby Aviation and Mr. Pass is examined to determine whether its pred ominan t purpose was the sale of goods or the sale of services. If it

was pre dominantly a contract for the sale of goods, it falls under the UCC, and the warranty provisions of Article 2 apply. If it was pred omi nan tly a contract for service, it falls outside the UCC, and the warranty provisions of Article 2 are inapplicable.

In order to

determine whether the

predominant purpose of a mixed transaction is the sale of goods or the provision of a service, we examine the language of the pa rties’ contract, the nature of the business of the supplier of the goods and services, the reason the parties entered into the contract (i.e. what each barg

ained to receive

), and the respe

ctive amounts

charged under the contract for goods andfor services. Ogden Martin Sys. of Indianapolis, Inc. v. Whiting Corp.
, 179 F.3d 523, 530-31 (7 th C ir. 1999 )(citing Insul-Mark Midwest, Inc. v. Modern Materials, Inc. , 612 N.E.2d 550, 555 (Ind. 1993)); Coakley & Williams, Inc. v . Shatterproof Glass Co

rp. , 70 6 F.2d 456, 460 (4 th Cir. 1983). None of these factors alone i s dispositive. BMC Industries, Inc. v. Barth Industries, Inc.
, 160 F.3d 1322, 1330 (11 th Cir. 1998). The party seeking application of the UCC bears the burden of proof to show that the predominant purpose of the contract was the sale of goods. Insul-Mark
, 612-5-

N.E.2dat 555; Northwestern Equipment, In c. v. Cudmore
, 312 N.W.2d 347, 351 (N.D. 1981). The Indiana Supre

me Court describe

s the analys

is:

To determine whether

the predominant thrust of a mixed contract is to provide services or goods, one loo ks first t o th e language of the contract, in light of the situation of the parties and the surrounding circumstances. Specifically one looks to the terms describing the performance of the parties, and the words used to describe the relationship betw

een the parties.

Beyond the contractual

t erms t hemselves, one looks to the circumstances of the parties, and the primary reason they

entered into the contract. One also considers the final product the purchaser bargained to receive, and whether

it may be described as a good or a service.

Fin all y, one examines the costs involved for the goods and services, and wheth erthe purchaser was charged only for a good, or a price based on both goods andservices. If the cost of the goods is but a small portion of the overall contract price, such fact would increase the likelihood that the services portion predomina tes.

Insul-Mark , 612 N.E.2d at 555 (citations omitted).

In this case, S helby Aviat ion argues that t

he predominant fa

ctor, thrust and pu

rpose of its transaction with Mr. Pass was the sale of services, with the sale of goods incidentally involved. Shelby Aviation notes the language in the invoice, which refers to the plane being broug htin fo r “repair” and “100 hour inspe ction.” Shelby

Aviation also

observes that the

nature of its busin

ess is primarily service. The Pl

aintiffs arg ue tha t the p redom inant facto r was t he sal e of goo ds. In analyzing the costs of the goods and ser vices, the Plaintiffs arg

ue that the cost to in

stall the parts should be inc luded within the cost of the parts. If it is, the Plaintiffs assert that 75% of the total amount charged by Shelby A viation was for the sale of goods.

The written document evidencing the transaction is the invoice prepared by Shelby Aviation. The invoice ispreprinted

with a handwritten description of repairs performed and parts used. In the top left hand corner, blocked off from the rest of the writing, is a preprinted paragraph that states that the owner isauthorizing “the following repair work to be done along with the necessary ma terial.” On the top right hand

side, under a heading entitled “Description,” the box stating “annual 100 hour periodic inspection” is checked. On the left side of the invoice, beneath the authorization for repair, is a section entitled“Part number and description” with a handwritten list of the parts used and the amount charged for each. The right hand lower side of the pag e, under the heading “Service Description” lists the service performed and the amount charged. Fin all y, the bottom left corner of the page contains a block for “owner’s signature” acknowledging “acceptance of r epaired plane.” As

a whole, the invoice clearly emphasizes the repair and inspection aspect of thetransaction, indicating that the predominant purpose was the sale of service, with the sale of goods incidental to that service.2 A tally of the separate charges on the invoice Shelby Aviation prepared for Max Pass, Jr. reveals that Mr. Pass was charged $654.37 for parts, and $1,132.50 for services. Plaintiffs pointout that this does not add up to the tot al amount of the invoice, and th

at Shelby Aviation a

pparently overcharged

Max Pass by $375 by adding the inspection charge twice when it talliedthe total bill.

-6- We must also consider the natureof Shelby Aviation’s business. The Plaintiffs’ complaint assertsthat Shelby Aviation i s “in the b usiness of maintenance, service, storage, and upkeep of aircraft.” Shelby Avi ation’s preside nt stated in his aff idavit that the par

ts sold to Mr. Pass in conjunction with the service performed onhis ai rplan e were o rdere d spec ifica lly for his ai rplan e. In addition, the invoice indicates that one part installed bythe defendant, the right engine mag, was supplied by Mr. Pass. Shelby A viation argues t

hat if it were primarily

in the business of se

lling parts, rather than service, it w

ould not have perm

itted a customer to

supply his own

part to be installed. Overall, the nature of

Shelby Aviat

ion’s business appe

ars to be service

rather than the s

ale of parts. It is also clear that Mr. Pass took the plane to Shelby Aviation primarily to have a servic e performed, i.e., the annual inspection. What the purchaser sought t o procure when h e entered into the contract is a strong indication of the predominant

purpose of the contract. See Stafford v. Int’l Harvester

Co., 6 68 F. 2d 142, 147 (2 nd Cir. 1981)(“unde rlying nat ure of a hy

brid transaction

is determinedb y refer

ence to the purpose with which the customer contracted with the defendant”); Northwestern Equipment Inc. v. Cudmore , 312 N.W.2d 347,349 (N. D. 1981)(“Bonebrake test looks to the predominant purpose or thrust of the contract as it would exist in the minds of reasonab l e parties”). In Neibarger v. Universal Cooperative s, Inc. , 48 6 N.W.2d 612, 622 (Mich. 1992), the Michigan Suprem

e Court describe

d its analysis

of the purpose of

the parties’ dea

lings: If the purchaser’s ultimate goal is to acquire a product, the contra ct should be

con sidereda transaction in goods, even though service is incidentally requir ed. Con vers ely, if the purchaser’s ult imate goal is to procure a service, the contract is not governed by the UCC, ev

en th oug h goods are incidentally required in the provision of this service.

Id

. Thus, the “final p

roduct” Mr. Pass “

bargained to

receive” appears to be the annual inspection of his airplane. Insul-Mark , 612 N.E.2d at 555.

The last factor to be considered is the respective amounts charged under the contract for goods andservices. By

adding the labor

charge to insta

ll the parts sold to th

e cost of the part

s themselves, the Plaintiffs calculate that 75% of the amount Shelby Aviation charged is attributable to the sale of goods rather than service. The Plaintiffs cit e no case law in support of this method of calculation. In deed, at least one case appears to indicate that the cost of labor for installing parts would not be includedin the cost of the goods for purpose of a scertaining the

predominant purpo

se of the contrac

t. See Ogden Martin Systems of I ndianapolis, Inc. v. Whi

ting Corp. , 179 F.3d 523, 531 (7 th Cir. 1999). If the cost of labor

i s not considered part of the cost of goods, the percentage of the invoice attributable to goods is 37%. 2

Regardless of how the percentage of the cost of goods is calculate d, viewing the transaction as a whole, we must conclude that the predominant pu

rpose of the transaction was the provision of-7-

a service rather than the sale of goods. The language o f t he invoice, the nature of the defendant’s business, and the purpose for which Max Pass took his airplane to Shelby Aviation all indicate that service was the predominant factor in the transaction. Even where the cost of goods exceed the

cost of the services, the pr

edominant purpose

of the contract m

ay still be deemed the provision of service where the other factors support such a finding. See Northwestern Equipment, Inc. v. Cudmore , 312 N.W.2d 347, 351 (N.D. 1981). Therefore, we hold that the transaction between Shelby Aviation and Max Pass, Jr. was predom inantly a contract for s

ervice, with the s

ale of goods inc

identally involved. As such, it is not subje

ct to the warranty

provisions of Artic

le 2 of the UCC. Shelb

y Aviation is entitled to judgment as a matter of law on the Plaintiffs’ UCC breach of warranty claims.

Shelby Aviation also argues on appeal that the trial court erred in fa i ling to grant Shelby Av iation’s motion for summary judgment on the Plaintiffs’ claim for breach of common law

warr ant y, on the basis that al l common law warr

anty claims w

ere subsumed into

the UCC upon its adoption in Tennessee. In addition, She lby Aviation a

sserts that the trial court erred in failing to grant Shelby Aviation’s motion to dismi ss on the basis that Sh elby Aviatio

n disclaimed all wa

rranties. However, the trial court’s order granting

the Defendant’ s mot ion for permission to file an interlocutory

appeal clearly states that

“the determinative issue and the issue to be appealed is whether the transaction betw

een Mr. Pass

and Shelby Aviation

is governed by Article 2,” which is addressed above. Consequently, we decline to consider issues bey ond the sco pe of the issue certified for interlocutory appeal

by the trial c

ourt. See Milligan v. George , No. 01A01-9609-CH-00406, 1997 WL 39138, at * 3 (Tenn. Ct. App. July 9, 1997)(scope of interlocutory appeal is restricted to issues certified by the trial court and accepted

by appellat

e court); See also Montcastle v . Baird , 723 S.W.2d 119, 122 (Tenn. Ct. App. 1986).

The decision of the trial court denying Shelby Aviation’s motion for summary judgment on the UCC breach of warranty claims is reversed, and the c ase is remanded

to the trial court for further proceedings consistent with this Opinion. Costs on appe al are equally taxed to Appellees, Max E. Pass, Sr. and Shirley Williams, for which execution may issue, if necessary

.

HOLLY KIRBY LILL

ARD, J. ALAN E. HIGHERS, J

. DAVID R. FARMER, J.