Court Opinion

ID: 2794194
Source: CourtListenerOpinion
Date Created: 2015-04-16 07:04:48.022698+00
Date Added: 2024-06-11T11:29:08.212329
License: Public Domain

STATE OF MICHIGAN

                           COURT OF APPEALS

MAEDER BROTHERS QUALITY WOOD                                       UNPUBLISHED
PELLETS, INC.,                                                     April 14, 2015

               Plaintiff-Appellant,

v                                                                  No. 320362
                                                                   Saginaw Circuit Court
HAMMOND DRIVES & EQUIPMENT, INC.,                                  LC No. 13-018549-CK

               Defendant-Appellee.

Before: OWENS, P.J., and JANSEN and MURRAY, JJ.

PER CURIAM.

       Plaintiff appeals as of right the trial court’s order granting defendant’s motion for
summary disposition under MCR 2.116(C)(8) (failure to state a claim on which relief can be
granted) and MCR 2.116(C)(10) (no genuine issue of material fact) in this breach of contract and
warranties case. We affirm.

                                I. FACTUAL BACKGROUND

       Plaintiff purchased a Bliss Pellet Mill in 2006 and second mill in 2008. The machine is
used to transform sawdust and wood chips into pellets that are marketed for heating and power
purposes. The mechanics of both machines required the use of bearings. The written
information that the mill manufacturer provided to plaintiff directed it to use “Timken” bearings.
Neither plaintiff’s president, Richard Maeder, nor its secretary and general manager, Christi
Densmore, could recall if the manufacturer’s instructions stated to only use Timken bearings.
Because the bearings would wear out approximately every 90 days, plaintiff constantly needed to
purchase replacements. The parties stipulated that the cost to plaintiff of purchasing replacement
Timken bearings was approximately $40,000 a year.

       Looking to cut costs, plaintiff, through Densmore, inquired of defendant if it could find a
cheaper bearing that could also do the job consistent with the Timken bearing. Densmore
acknowledged that when she made this request she merely provided defendant with the part
number and gave defendant no further technical specifications. Densmore stated that when
ordering bearings and other parts from defendant in the past, she also had merely provided the
part number. The replacement bearing that defendant provided to plaintiff was manufactured by
a company other than Timken. Densmore acknowledged that the substitute bearing operated

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consistently with the Timken bearings at first. However, plaintiff soon began to experience
problems that resulted in substantial damage to both pellet mills. A subsequent investigation
revealed that the substitute bearings were the cause of this damage because they were made of
softer steel than the Timken bearings.

        Neither Densmore nor Maeder recalled any written contract regarding the purchase of
substitute bearings or any other express statement or writing from defendant on how they would
perform. Maeder further acknowledged that he did not know if defendant’s representative who
handled the purchase had any specialized background or expertise in bearings. He
acknowledged that defendant was not a manufacturer, but simply a distributor.

        Plaintiff filed a four count complaint alleging breach of contract, negligence, breach of
implied warranty, and breach of express warranty. While the complaint did not specifically state
that the claims were based on Michigan’s version of the Uniform Commercial Code (UCC), the
complaint clearly shows that the substance of the allegations concerned a dispute over the
commercial sale of bearings, which are considered a” good” under the UCC.

       Defendant moved for summary disposition, arguing that plaintiff failed to plead the
existence of a contract and that the deposition testimony of Maeder and Densmore showed no
express warranty existed. Defendant also argued that plaintiff’s negligence claim was barred by
the economic loss doctrine, while the implied warranty claim was barred by portions of
Michigan’s product liability law. In plaintiff’s response it alleged that its express and implied
warranty counts were governed by the UCC. At the hearing on defendant’s motion, defendant
claimed that plaintiff could not argue that the UCC applied because plaintiff did not specifically
mention the UCC in its complaint.

        The trial court granted defendant’s motion for summary disposition on all counts of
plaintiff’s complaint. On plaintiff’s breach of contract claim, the trial court determined that the
complaint failed to allege the existence of a contract or, in the alternative, that Maeder testified
that no written contract existed. On plaintiff’s negligence claim, the trial court determined that
the economic loss doctrine precluded plaintiff from asserting a tort action when it sought to
recover only economic damages. On plaintiff’s express warranty claim, the trial court granted
the motion because it determined that both Maeder’s and Densmore’s deposition testimony
showed that no express warranty was ever made. Finally, the trial court granted summary
disposition on plaintiff’s implied warranty claim because it determined that plaintiff failed to
plead a UCC claim or, in the alternative, because plaintiff failed to establish the elements of
either of the two types of UCC implied warranties.

                                 II. STANDARD OF REVIEW

     This Court reviews de novo the trial court’s grant of summary disposition pursuant to
MCR 2.116(C)(8) and (C)(10). Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999).

                                         III. ANALYSIS

      “A motion under MCR 2.116(C)(8) tests the legal sufficiency of the complaint.” Id. at
119. The plaintiff’s factual allegations are accepted as true and the motion may only be granted

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where “no factual development could possibly justify recovery.” Id. “[C]onclusory statements
that are unsupported by allegations of fact on which they may be based will not suffice.” State v
CVS Caremark Corp, 496 Mich 45, 63; 852 NW2d 103 (2014). The court must also accept all
reasonable inferences that can be drawn from the factual allegations as true. Id. “MCR
2.116(I)(5) requires that if summary disposition is appropriate under MCR 2.116(C)(8) . . .
plaintiffs shall be given the opportunity to amend their pleadings, unless the amendment would
be futile.” Granam v Does, 303 Mich App 522, 543; 845 NW2d 128 (2014).

        “A motion under MCR 2.116(C)(10) tests the factual sufficiency of the complaint.”
Maiden, 461 Mich at 120. The court considers affidavits, pleadings, depositions, admissions,
and other evidence in a light most favorable to the non-moving party. Id. “In presenting a
motion for summary disposition, the moving party has the initial burden of supporting its
position by affidavits, depositions, admissions, or other documentary evidence.” Quinto v Cross
& Peters Co, 451 Mich 358, 362; 547 NW2d 314 (1996). Then the burden shifts to the party
opposing the motion “to establish that a genuine issue of disputed fact exists.” Id. “A litigant’s
mere pledge to establish an issue of fact at trial cannot survive summary disposition under MCR
2.116(C)(10).” Maiden, 461 Mich at 121. It is necessary to “set forth specific facts at the time
of the motion showing a genuine issue for trial.” Id.

        “Michigan is a notice-pleading state.” Johnson v QFD, Inc, 292 Mich App 359, 368; 807
NW2d 719 (2011). A complaint must contain “[a] statement of the facts, without repetition, on
which the pleader relies in stating the cause of action, with the specific allegations necessary
reasonably to inform the adverse party of the nature of the claims the adverse party is called on
to defend.” MCR 2.111(B)(1). “[I]t is well settled that [courts] will look beyond mere
procedural labels and read the complaint as a whole when ascertaining the exact nature of a
plaintiff’s claims.” Johnson, 292 Mich App at 368.

        Michigan’s adopted version of Article 2 of the UCC, MCL 440.2102 et seq., governs the
transactions of sale of goods. “[W]here a plaintiff seeks to recover for economic loss caused by
a defective product purchased for commercial purposes, the exclusive remedy is provided by the
UCC . . . .” Neibarger v Universal Coops, 439 Mich 512, 527-528; 486 NW2d 612 (1992).
There is no dispute that the present controversy involves the sale of goods.

        In the present case, the court placed great emphasis on the fact that plaintiff did not
specifically mention the UCC in its complaint, and defendant again argues this point on appeal.
Although true, plaintiff’s complaint does state that the dispute is over bearings it purchased from
defendant. Thus, defendant was on notice that it was being sued by an entity to which it sold
goods and that the subject matter of the suit involved the sale of those goods. This provided
sufficient notice for defendant to know that the case would be governed by Article 2 of the UCC.

                           A. PLAINTIFF’S NEGLIGENCE CLAIM

       Plaintiff states an issue regarding the court’s conclusion that its negligence claim is
barred by the economic loss doctrine but he provides no substantive argument, thereby
abandoning it. Mitcham v City of Detroit, 355 Mich 182, 203; 94 NW2d 388 (1959). In any
event, plaintiff’s claim is barred by the economic loss doctrine. Where “claims arise from a
commercial transaction in goods and the plaintiff suffers only economic loss . . . such claims are

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barred by the economic loss doctrine.” Neibarger, 439 Mich at 520. In the present case it is
clear that plaintiff purchased the bearings for use in a commercial pellet manufacturing
operation. The allegations in its complaint are that the product did not perform as expected and
that plaintiff suffered economic losses as a result. Plaintiff’s remedy, if any, lies exclusively in
contract under the UCC; it cannot obtain a duplicative remedy in tort. Id. at 527-528.

                     B. PLAINTIFF’S BREACH OF CONTRACT CLAIM

        Again, because plaintiff’s complaint clearly states that it involves a commercial purchase
of goods, it is governed by the UCC. Id. at 527-528. Under the UCC, “[a] contract for sale of
goods may be made in any manner sufficient to show agreement, including conduct by both
parties which recognizes the existence of such a contract.” MCL 440.2204. Contracts for the
sale of goods where the price is $1,000 or greater are not enforceable unless there is a “writing
sufficient to indicate that a contract for sale has been made between the parties and signed by the
party against whom enforcement is sought.” MCL 440.2201(1). However a contract that does
not satisfy the writing requirement is enforceable “[w]ith respect to goods for which payment has
been made and accepted or that have been received and accepted under” MCL 440.2606. MCL
440.2201 (3)(c). “[A]n order or other offer to buy goods for prompt or current shipment shall be
construed as inviting acceptance either by a prompt promise to ship or by the prompt shipment of
conforming or nonconforming goods.” MCL 440.2206(1)(b). “Where the buyer has accepted
goods and given notification ([MCL 400.2607(3)]) he may recover as damages for any
nonconformity of tender the loss resulting in the ordinary course of events from the seller’s
breach . . . .” MCL 440.2714(1).

        Defendant argues that no contract existed between the parties “beyond a mere sale of
parts.” Plaintiff alleged that it requested to purchase from defendant bearings that could do the
same job as the Timken bearings but that would cost less, that defendant then delivered bearings
to plaintiff, but that these bearings could not do the job of the Timken bearings. If these
allegations were proven with admissible evidence, they would be sufficient to show that a
contract for the sale of goods existed between plaintiff and defendant for the purchase of
bearings that would perform as well as Timken bearings, and that defendant breached the
contract by delivering bearings that did not do so. Therefore, to the extent the trial court granted
defendant’s motion for summary disposition on plaintiff’s breach of contract count pursuant to
MCR 2.116(C)(8), it committed error.

         However, with respect to defendant’s motion under MCR 2.116(C)(10), defendant
attached the deposition of Densmore, who testified that when she ordered the bearings from
defendant she merely provided defendant with the part number. Densmore also testified that the
replacement bearings plaintiff received from defendant operated consistently with the Timken
bearings at first. That the bearings subsequently failed shows, at most, that their quality, in terms
of longevity, was inferior. This is not a breach of contract and is at most a breach of warranty if
one existed. For the reasons explained below, however, no express or implied warranty existed
in this case.

       Because defendant presented evidence that demonstrated it did not breach its contract
with defendant and because plaintiff failed to present any rebutting evidence, the trial court

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properly granted defendant’s motion with respect to plaintiff’s breach of contract claim pursuant
to MCR 2.116(C)(10).

               C. PLAINTIFF’S BREACH OF EXPRESS WARRANTY CLAIM

        An express warranty is created by “[a]n affirmation of fact or promise made by the
seller,” by “[a] description of the goods,” or by “[a] sample or model which is made part of the
basis of the bargain.” MCL 440.2313(1). Both Maeder and Densmore testified that neither
defendant nor any representative of defendant ever made any express statement to them about
how long the substitute bearings would last or what type of steel the bearings were made of.
Plaintiff presented no admissible evidence to contradict this. While plaintiff argued that an
express warranty existed, it merely attached four pages from Maeder’s deposition to its response
to defendant’s motion, on which we do not find any admissible evidence that any affirmation of
fact or promise was made to him by defendant. Therefore, the trial court did not err in granting
defendant’s motion for summary disposition under MCR 2.116(C)(10) with respect to plaintiff’s
breach of express warranty claims.

               D. PLAINTIFF’S BREACH OF IMPLIED WARRANTY CLAIM

       The UCC describes two types of implied warranties. The first is the implied warranty of
merchantability. MCL 440.2314. The second is the implied warranty of fitness for a particular
purpose. MCL 440.2315. Plaintiff’s complaint does not specify which implied warranty forms
the basis of its claim, but it referred to both types in its response to defendant’s motion for
summary disposition.

                     1. IMPLIED WARRANT OF MERCHANTABILITY

        “[A] warranty that goods shall be merchantable is implied in a contract for their sale if
the seller is a merchant with respect to goods of that kind.” MCL 440.2314(1). “ ‘In general the
question whether a party may be a merchant as that term is used in the UCC is a question of law
for the courts to decide by applying the UCC definition of merchant to the facts in the case.’ ”
Bev Smith, Inc v Atwell, 301 Mich App 670, 681; 836 NW2d 872 (2013) (citation omitted). A
merchant is defined as “a person that deals in goods of the kind or otherwise by the person’s
occupation holds itself out as having knowledge or skill peculiar to the practices or goods
involved in the transaction.” MCL 440.2104. The official comments provide further guidance
on the definition of a merchant for purposes of the implied warranty of merchantability:

               [I]n Section 2-314 on the warranty of merchantability, such warranty is
       implied only “if the seller is a merchant with respect to goods of that kind.”
       Obviously this qualification restricts the implied warranty to a much smaller
       group than everyone who is engaged in business and requires a professional status
       as to particular kinds of goods. . . . [MCL 440.2104, UCC comment 2.]

        Plaintiff alleged that defendant “is engaged and has continuously engaged at all times
relevant to this lawsuit in the business of buying, selling, distributing and handling parts of all
kinds for power transmissions, hydraulic and pneumatic systems and materials for all types of
drives and equipment.” Accepting this allegation as true and all reasonable inferences that can

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be drawn from it, plaintiff has alleged that defendant does “deal[] in goods of the kind or
otherwise by the person’s occupation holds itself out as having knowledge or skill peculiar to the
practices or goods involved in the transaction.” MCL 440.2104. Although the term “bearings”
is not used, the allegation was that defendant is the seller of “parts of all kinds” for machines like
plaintiff’s Bliss Pellet Mill, which would include the bearings in issue. Therefore, to the extent
the trial court granted defendant’s motion for summary disposition on plaintiff’s implied
warranty of merchantability claim under MCR 2.116(C)(8) it committed error.

        However, a motion for summary disposition under MCR 2.116(C)(10) requires more than
just an allegation in the complaint. It is a factual test of the allegation and requires the plaintiff
to produce admissible evidence that would support the allegations. Maiden, 461 Mich at 120.
Again, nothing in the pages of Maeder’s deposition submitted by plaintiff to the court provides
any type of evidence or even any assertion that defendant is a merchant, i.e., a person that deals
in bearing or holds itself out to have knowledge or skill in bearings. Indeed, Maeder testified
that he did not know if defendant’s representative was an expert or what his background in
bearings was. Therefore, the trial court properly determined that defendant was entitled to
summary disposition under MCR 2.116(C)(10) to the extent that plaintiff’s claim addressed the
implied warranty of merchantability.

         2. IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE

       MCL 440.2315 provides as follows:

               Where the seller at the time of contracting has reason to know any
       particular purpose for which the goods are required and that the buyer is relying
       on the seller’s skill or judgment to select or furnish suitable goods, there is unless
       excluded or modified under the next section an implied warranty that the goods
       shall be fit for such purpose.

        Regarding defendant’s motion for summary disposition under MCR 2.116(C)(8), the
question is whether plaintiff pleaded facts in its complaint that if proven true would establish
both that defendant had reason to know of the particular purpose plaintiff was to use the bearing
for and that defendant had reason to know that plaintiff was relying on defendant’s skill or
judgment to select a suitable bearing. Plaintiff does allege that it purchased bearings from
defendant in the past and that it asked defendant to select a cheaper bearing that could do the job.
If proven true, this would establish that defendant had knowledge of the purpose for which
plaintiff would use the bearings.

        However, in order for the warranty of fitness for a particular purpose to apply, plaintiff
was also required to plead facts that, if true, would establish that defendant had knowledge that
plaintiff was relying on defendant’s skill and judgment. Plaintiff does allege that the substitute
bearings were provided “with the affirmative statement and promise by [defendant] to [plaintiff]
that these bearings would perform the same function in the same manner as Timken roller
bearings, but at less cost.” However, all this alleges is that defendant made an express warranty
to plaintiff. It does not allege that defendant had reason to know that plaintiff was relying on
defendant’s expertise. Nowhere in plaintiff’s complaint does it allege that defendant had reason
to know plaintiff was relying on its skill and expertise in bearings.

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       Additionally, it is questionable whether the implied warranty of fitness for a particular
purpose would even apply to a situation like the present case, where the buyer was using the
goods for the ordinary purpose for which they were intended. The comments to the UCC’s
implied warranty of fitness for a particular purpose state:

                 A “particular purpose” differs from the ordinary purpose for which the
         goods are used in that it envisages a specific use by the buyer which is peculiar to
         the nature of his business whereas the ordinary purposes for which goods are used
         are those envisaged in the concept of merchantability and go to uses which are
         customarily made of the goods in question. . . . [MCL 440.2315, UCC comment
         2.]

There is nothing in plaintiff’s complaint or in the depositions that would suggest that plaintiff
intended to use the bearings for something other than the ordinary purpose for which such
bearings were used. Thus, to the extent plaintiff’s implied warranty count is based on the
implied warranty of fitness for a particular purpose, the trial court correctly granted summary
disposition under MCR 2.116(C)(8).

         Affirmed. Defendant, having prevailed on appeal, may tax its costs pursuant to MCR
7.219.

                                                              /s/ Donald S. Owens
                                                              /s/ Kathleen Jansen
                                                              /s/ Christopher M. Murray

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