Court Opinion

ID: 9548061
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:56:54.80735+00
Date Added: 2024-06-11T15:18:26.056850
License: Public Domain

BISTLINE, Justice,
dissenting.
Earlier I concurred in the opinion authored by Justice Bakes. Now, after rehearing, I am persuaded otherwise. As I read the district court’s decision, a copy of which is appended, it is predicated upon Salmon Rivers Sportman Camps, Inc. v. Cessna Aircraft Co., 97 Idaho 348, 544 P.2d 306 (1975). I now fully agree with the views earlier expressed by Chief Justice Donaldson and Justice Huntley that Salmon Rivers should be overruled, and so vote.
Unless I misread Judge Schroeder’s opinion, he would not have granted the summary judgment if Salmon Rivers had not been in place. If, as it appears, there are three votes to overrule that case, the summary judgment should be reversed and the case remanded to the district court for reconsideration.
*342APPENDIX
IN THE DISTRICT COURT OF THE FOURTH JUDICIAL DISTRICT OF THE STATE OF IDAHO, IN AND FOR THE COUNTY OF ADA
STATE OF IDAHO, Plaintiff,
vs.
MITCHELL CONSTRUCTION COMPANY, a corporation, and ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a Surety, Defendants.
and
MITCHELL CONSTRUCTION COMPANY, a corporation, Third-Party Plaintiff,
vs.
g.j. SPRUTE AND COMPANY, THE NEOGARD CORPORATION, LINTON, INC., and FOAM SYSTEMS, INC., Third-Party Defendants.
Case No. 74095
Filed Dec. 9, 1982
MEMORANDUM OPINION AND ORDER
The above-named matter is before the court upon Neogard Corporation’s motion for summary judgment on the third-party complaint of Mitchell Construction Company. The Neogard Corporation supplied the roofing materials to Linton, Inc., which subcontracted with Mitchell Construction to apply the Neogard system. Mitchell Construction seeks to recover from Neogard on express and implied warranty theories and in tort.
This court previously held that the State of Idaho seeks to recover only economic loss from Mitchell Construction; which in turn seeks reimbursement from the third-party defendants for any liability it may have to the State of Idaho. The decision in Clark v. International Harvester Co., 99 Idaho [326] 327 [581 P.2d 784] (1978), establishes that a seller cannot be held liable for purely economic loss under either negligence or strict liability theory. Thus, Neogard’s motion for summary judgment should be granted on the theories of negligence and strict liability.
If Mitchell Construction can establish privity of contract with Neogard, the existence and breach of an implied warranty of fitness or merchantability constitute questions of fact. If not, summary judgment for Neogard is proper because under Salmon Rivers Sportman Camps, Inc., v. Cessna Aircraft Co., 97 Idaho 348 [544 P.2d 306] (1975), there can be no recovery based on implied warranty for purely economic loss unless the parties are in privity of contract.
The affidavit of Reginald Chapman shows that the Neogard Corporation sold roofing products to Linton, Inc., but made no sales directly to Mitchell Construction. A copy of the contract between Linton, Inc., and Mitchell Construction is attached to the affidavit. That agreement provides that Neogard would furnish Linton with materials and supervisory services. Linton was required to apply and maintain the Neogard materials according to certain specifications. Provision was made for allocating the cost of repairs between the parties to the contract. Also attached is the agreement between Mitchell Construction as general contractor and Linton, Inc., as subcontractor. By that agreement Linton was to apply a urathane roof system in accord with the plan specifications. There was no contract between the Neogard Corporation and Mitchell Construction. However, if Mitchell can show that Linton was acting as an agent for Neogard, the requisite privity would be established.
The record shows that the Neogard Corporation and Linton, Inc., are separate business entities. Their business relationship on the subject construction project was governed by the applicator agreement *343which described Linton as an independent contractor. The record shows that Linton acted independently of Neogard in signing the contract with Mitchell Construction, even though an employee of Neogard was instrumental in bringing them together. All of the parties were aware of the functions each of these businesses would serve on the project. There is nothing in the record to show that Neogard held out Linton to be an agent. Rather, the record shows that representatives of Mitchell Construction knowingly contracted with Linton, Inc., as subcontractor, which in turn would buy Neogard materials. Since there was no contract between Mitchell Construction and the Neogard Corporation and the record does not support a finding of agency, there was no privity between those parties. The cause of action on the theory of implied warranty fails.
Whether privity of contract is required for recovery of economic loss on the theory of breach of express warranty has not been decided by the Idaho Supreme Court. This footnote appears in Salmon Rivers Sportsman Camps, Inc., v. Cessna Aircraft Co., 97 Idaho 348, 352 [544 P.2d 306] (1975):
“3. Dictum exists in B.B.P. Ass’n., Inc. v. Cessna Aircraft Co., 91 Idaho 259, 264, 420 P.2d 134, 139 (1966), which suggests that privity of contract is not a prerequisite to liability for breach of express warranty is an action to recover economic loss. The issue in that case, however, focused upon the propriety of service of summons on a foreign corporation. The dictum, moreover, does not specify whether the liability absent privity would be in tort or contract. This court, in an appropriate case, shall address the issue directly.”
This court is now faced with deciding whether privity is required to recover economic loss for breach of an express warranty.
As previously noted, the court in Salmon Rivers found that privity of contract is essential to recovery of economic loss in a contract action for breach of implied warranty. The court, in making this finding, stated the following:
“This conclusion primarily is founded upon the commercial nature of such an action and upon the legal principle that a contract, even including its implied terms, only arises from an agreement between two or more parties. We reach this conclusion irrespective of the Uniform Sales Act or the Uniform Commercial Code.” Id. at 354 [544 P.2d 306].
This statement seems equally applicable to an action for breach of express warranty.
The court also stated the following in Clark v. International Harvester Co., 99 Idaho 326 [581 P.2d 784] (1978), quoting from Seely v. White Motor Co., [63 Cal.2d 9], 403 P.2d 145 (1965):
“[A manufacturer] can appropriately be held liable for physical injuries caused by defects by requiring his goods to match a standard of safety defined in terms of conditions that create unreasonable risks of harm. He cannot be held for the level of performance of his products in the consumer’s business unless he agrees that the product was designed to meet the consumer’s demands. A consumer should not be charged at the will of the manufacturer with bearing the risk of physical injury when he buys a product on the market. He can, however, be fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will.” 99 Idaho at 334 [581 P.2d 784],
Thus, the privity requirement has been imposed by the court to allocate risks between the buyer and the seller of a product. Absent a contract between the two, the court has decided that the seller should not be responsible for a failure of the product to function as the consumer expected unless he suffered personal injury or property damage. This leaves the consumer with recourse against the party with whom he did contract and that middleman with *344recourse against the seller with whom he in turn contracted.
The difference between express and implied warranties under the code is that the subject matter of express warranties is defined by the parties and is, therefore, basically unlimited. Under I.C. § 28-2-313, an express warranty by the seller can arise in the following ways applicable to the subject transaction:
“(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.
(b) 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.”
The sections under which implied warranties arise, I.C. § 28-2-314 and 315 specify the subject matter of those warranties. There is no other difference which calls for distinctive treatment on the privity issue.
Neogard Corporation in part relies on I.C. § 28-2-318, which provides as follows:
“A seller’s warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty.”
Neogard asserts that a privity requirement has been eliminated only as this section permits. But Comment 3 to the section states:
“This section expressly includes as beneficiaries within its provisions the family, household, and guests of the purchaser. Beyond this, the section is neutral and is not intended to enlarge or restrict the developing case law on whether the seller’s warranties, given to his buyer who resells, extend to other persons in the distributive chain.”
As noted above, in Salmon Rivers the Idaho Supreme Court did not rely on I.C. § 28-2-318 in requiring privity for recovery of economic loss for breach of implied warranty. It appears that the Supreme Court’s decision regarding privity in implied warranty actions is also applicable to express warranty actions. As previously noted, Mitchell Construction has failed to controvert Neogard’s showing that the two were not in privity of contract.
Therefore, Neogard’s motion for summary judgment is granted.
Dated this 8 day of December, 1982.
/s/ Gerald F. Schroeder
District Judge