Opinion ID: 894983
Heading Depth: 1
Heading Rank: 4

Heading: Breach of Express Warranty Actions

Text: The Uniform Commercial Code (UCC) governs Medical City's express warranty claim. [3] See TEX. BUS. & COM.CODE § 2.313. However, the UCC sections and comments dealing with remedies for breach of warranty, adopted verbatim in Texas, are silent on the issue of attorney's fees. See, e.g., TEX. BUS. & COM.CODE §§ 2.714-.715 and cmt. (providing for consequential damages to a buyer in a breach of warranty action but failing to indicate in the comment whether attorney's fees are considered either consequential or incidental damages). At least one court has held that attorney's fees may be recovered under the UCC as consequential damages. See Kelynack v. Yamaha Motor Corp., 152 Mich.App. 105, 394 N.W.2d 17, 21 (1986) (allowing attorney's fees as consequential damages). But see Webco Indus., Inc. v. Thermatool Corp., 278 F.3d 1120, 1132 (10th Cir.2002) (rejecting Kelynack in part by concluding that the Michigan Supreme Court would not agree with awarding attorney's fees as an element of consequential damages). Leading commentators conclude, however, that attorney's fees are generally not recoverable as consequential damages on the theory that if the UCC intended to authorize recovery of attorney's fees, it would have done so expressly. See, e.g., 24 RICHARD A. LORD, WILLISTON ON CONTRACTS § 66.67 (4th ed.2001). Although attorney's fees may not qualify as UCC consequential damages, fees may nonetheless be recoverable if authorized by another statute. Thus, as one commentator has noted, if a state has a special statute[ ] that allows recovery of attorney fees in an action based upon a contract relating to the sale of goods [i]t would be appropriate for a court to award attorney fees to a winning warranty plaintiff under such a statute. BARKLEY CLARK & CHRISTOPHER SMITH, THE LAW OF PRODUCT WARRANTIES ¶ 7.07[3][e] (1984) (noting that an Oklahoma statute providing for the recovery of attorney's fees in transactions involving a sale of goods applied to UCC Article 2 transactions). Section 38.001 of the Civil Practice and Remedies Code is such a statute, and because Texas' UCC provisions and the parties' warranties are silent on the issue, section 38.001 provides the only basis for an award of attorney's fees here. We thus examine the nature of the claim to determine whether an express warranty claim is a suit based on an oral or written contract. Carlisle correctly asserts that breach of warranty and breach of contract are distinct causes of action with separate remedies. See, e.g., TEX. BUS. & COM.CODE §§ 2.711, 2.714 (providing remedies for breach of contract and breach of warranty respectively). [4] We held as much in Southwestern Bell Telephone Co. v. FDP Corp., 811 S.W.2d 572, 576 (Tex.1991), when we stated that [t]he UCC recognizes that breach of contract and breach of warranty are not the same cause of action. But while an express warranty is a distinct claim, it is nonetheless a part of the basis of a bargain and is contractual in nature. See TEX. BUS. & COM.CODE § 2.313(a) (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.); see also 3 LARY LAWRENCE, ANDERSON ON THE UNIFORM COMMERCIAL CODE § 2-313:34 (3d ed.2002) (noting that express warranties are part of the basis of contracting). An express warranty is the result of a negotiated exchange, see, e.g., U.S. Pipe & Foundry Co. v. City of Waco, 130 Tex. 126, 108 S.W.2d 432, 434 (1937), and is a creature of contract, 18 WILLISTON ON CONTRACTS § 52:45. Accord Cipollone v. Liggett Group, Inc. 505 U.S. 504, 524 n. 23, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (plurality opinion) (noting that express warranty claims are said to sound in contract rather than in tort and comparing legal definitions of tort and contract). [5] When we ascertain the parties' intentions in a warranty, we look to well-established rules for interpretation and construction of contracts. See Rodriguez v. W.O.W. Life Ins. Soc., 136 Tex. 43, 145 S.W.2d 1077, 1080 (1941). And a breach of express warranty claim, like one for breach of contract, involves a party seeking damages based on an opponent's failure to uphold its end of the bargain. See City of Waco, 108 S.W.2d at 434 (holding a manufacturer liable to the City, despite the absence of a contract between them, because a manufacturer securing the benefit of a sale to a third party and inducing purchase through representations as to its fitness and quality should not then be able to avoid the burdens of the transaction). Moreover, the damages recoverable here support our conclusion that the claim is based in contract. Under the economic loss rule, the nature of the injury helps determine which duty or duties are breached and, ultimately, which damages are appropriate: When the injury is only the economic loss to the subject of a contract itself, the action sounds in contract. Am. Nat. Petroleum Co. v. Transcon. Gas Pipe Line Corp., 798 S.W.2d 274, 282 (Tex. 1990) (quoting Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex.1986)). Here, Carlisle itself invoked the economic loss doctrine when it successfully moved for summary judgment on Medical City's negligence claim. Carlisle's motion asserted: [t]he Warranty is a contract which limits Carlisle's obligations regarding the Roof, and limits Plaintiff's remedies or means of recovery. Medical City's damages were economic injuries based on the defective roof, further demonstrating that its recovery is contract-based. Recognizing that breach of an express warranty is founded on contract thus comports with a party's expectations under the economic loss rule. See Mid Continent Aircraft Corp. v. Curry County Spraying Serv., Inc., 572 S.W.2d 308, 313 (Tex. 1978) (noting that parties may rely on sales and contract law for compensation of economic loss to the product itself.). It is not surprising, then, that we have previously suggested that attorney's fees are recoverable when an express warranty is breached. See PPG Indus., Inc. v. JMB/Houston Ctrs. Partners L.P., 146 S.W.3d 79, 92 (Tex.2004). In PPG, we held that a jury's answers to two express warranty questions would support recovery of actual damages and attorney's fees despite the fact that the warranty claims did not fall under the DTPA. Id. Here, the court of appeals focused on our statement in PPG that attorney's fees . . . were recoverable in contract and warranty long before the DTPA was passed, id. at 89, but concluded that, because PPG involved the assignability of DTPA claims, . . . [the] statement regarding attorney's fees [was] dictum, 196 S.W.3d at 871. [6] We disagree. Although we held that one warranty claim was barred by limitations, we remanded the second for trial and noted that the jury's answers to two warranty questions would support JMB's recovery of actual damages and attorney's fees. PPG, 146 S.W.3d at 92. The only cases to hold that breach of express warranty is not founded on contract for the purposes of an award of attorney's fees are unpersuasive. See JHC Ventures, L.P. v. Fast Trucking, Inc., 94 S.W.3d 762, 769 (Tex.App.-San Antonio 2002, no pet.) (holding that section 38.001(8) does not encompass breach of warranty claims); Harris Packaging Corp. v. Baker Concrete Const. Co., 982 S.W.2d 62, 69 (Tex.App.-Houston [1 Dist.] 1998, pet. denied) (same). In Harris Packaging, the court held that the DTPA's allowance of attorney's fees for express warranty claims demonstrated the Legislature's intent to disallow attorney's fees for an express warranty claim under 38.001. Harris Packaging, 982 S.W.2d at 69. The court reasoned that the DTPA provision would be meaningless if attorney's fees were recoverable without it. Id. But when the DTPA was enacted in 1973, attorney's fees, while recoverable for certain types of contract claims, were not yet broadly authorized for any actions founded on written or oral contracts. Moreover, the DTPA authorized attorney's fees for a broad range of claims, not just warranty actions, characterized as deceptive practices. See TEX. BUS. & COM.CODE §§ 17.50(a),(d). Thus, the inclusion of attorney's fees for warranty claims in the DTPA says nothing about the Legislature's intent to include or exclude express warranties under the 1977 amendment to article 2226. Similarly, both JHC Ventures and the court of appeals below merely noted that the UCC provides distinct remedies for breach of contract and breach of warranty and follow Harris Packaging. 196 S.W.3d at 869; JHC Ventures, 94 S.W.3d at 769. But as noted above, the remedies for these distinct actions can at times be identical. To the extent these cases are inconsistent with our holding today, they are disapproved.