Court Opinion

ID: 9711470
Source: CourtListenerOpinion
Date Created: 2023-08-26 04:32:42.156111+00
Date Added: 2024-06-11T18:23:05.281399
License: Public Domain

YETKA, Justice
(dissenting).
I dissent. Because of the damage to “other property” present in this case, I *689would, based on the rule set forth in Superwood Corp. v. Siempelkamp Corp., 311 N.W.2d 159, 162 (Minn.1981), reverse the court of appeals and remand for a new trial on the negligence theories of recoyery asserted by appellants.
This case involves the complex and confusing area of the law where contract and tort overlap. The conceptual difference between contract and tort has been cogently described by Dean Prosser as follows:
The fundamental difference between tort and contract lies in the nature of the interests protected. Tort actions are created to protect the interest in freedom from various kinds of harm. The duties of conduct which give rise to them are imposed by the law, and are based primarily upon social policy, and not necessarily upon the will or intention of the parties. They may be owed to all those within the range of harm, or to some considerable class of people. Contract actions are created to protect the interest in having promises performed. Contract obligations are imposed because of conduct of the parties manifesting consent, and are owed only to the specific individuals named in the contract.
W. Prosser, Handbook of the Law of Torts § 92, at 613 (4th ed. 1971) (footnote omitted). In Superwood, this court, in an effort to balance the competing interests protected by the law of contract and tort, adopted the rule followed by a majority of jurisdictions1 and limited tort recovery of economic losses in commercial transactions to situations involving personal injury or damage to “other property.” See Superwood, 311 N.W.2d at 162; Minneapolis Soc’y of Fine Arts v. Parker-Klein Assoc. Architects, Inc., 354 N.W.2d 816, 819 (Minn.1984).
The Superwood rule has been followed in an unbroken line of decisions of this court without so much as a hint that the language allowing tort recovery for damage to “other property” was merely dicta or that it unnecessarily limited the rights and remedies provided by the Uniform Commercial Code. See Minneapolis Soc’y of Fine Arts, 354 N.W.2d at 819-20; S.J. Groves and Sons Co. v. Aerospatiale Helicopter, 374 N.W.2d 431, 433 (Minn.1985); Valley Farmer’s Elevator v. Lindsay Bros., 398 N.W.2d 553, 555 (Minn.1987); see also Gates Rubber Co. v. Irathane Sys., 710 F.2d 501, 502 (8th Cir.1983) (reversing, based on Superwood, the trial court’s dismissal of a claim). The Minnesota Legislature has also acquiesced in the balance drawn in Superwood. I see no legal or public policy reason to abandon the Superwood rule in favor of the analysis offered by the majority.
The rationale for the Superwood rule was that, unless limited to situations involving personal injury or damage to other property, tort liability in commercial transactions would “emasculate” certain provisions of the Uniform Commercial Code. Superwood, 311 N.W.2d at 162; Minneapolis Soc’y of Fine Arts, 354 N.W.2d at 819. I dissented in Superwood because I believed that there was no basis for the contention that imposing liability for negligence would “emasculate” the rights and remedies provided under the UCC. I still believe that the duties of conduct imposed upon merchants by the law of negligence are not so onerous that this court should relieve them of responsibility. In view, however, of the majority’s treatment of Superwood, I feel compelled to emphasize several additional points.
The law of products liability developed because of recognition that the law of warranty did not adequately protect buyers of products. See East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 866, 106 S.Ct. 2295, 2299, 90 L.Ed.2d 865 (1986). The law of products liability in Minnesota is made up of three distinct theories of recovery: warranty, *690negligence, and strict tort liability. Steenson, The Anatomy of Products Liability in Minnesota: The Theories of Recovery, 6 Wm. Mitchell L.Rev. 1, 7-20 (1980), cited with approval in Superwood, 311 N.W.2d at 161 n. 5. The primary burden of the law of products liability is imposed on sellers and manufacturers because they are in a better position to minimize or eliminate the risk of losses caused by defective products. See East River Steamship, 476 U.S. at 866-67, 106 S.Ct. at 2299-2300. While this rationale may be less compelling in cases based on strict liability, nowhere is it more appropriate than in cases involving personal injury or damage to property other than the product containing the defect caused by the seller’s failure to exercise reasonable care, i.e., negligence. The instant case presents an appropriate situation in which to distinguish between negligence and strict tort liability theories of recovery rather than abandoning the “other property” prong of Superwood and its progeny.
The majority suggests that the UCC preempts the entire field of tort law. Majority Op. at 688. The majority, however, cites no decision in which a court has held that the UCC pre-empts the law of negligence in a case involving damage to other property. In Spring Motors Distrib., Inc. v. Ford Motor Co., 98 N.J. 555, 489 A.2d 660 (1985), the New Jersey Supreme Court carefully summarized and analyzed the area of the law where UCC rules and tort law intersect. Id. at 565-71, 489 A.2d at 665-68. In concluding that a commercial buyer may not resort to strict liability or negligence theories in order to recover “economic loss,”2 the court distinguished cases involving property damage and reasoned that the policies underlying tort law and the UCC favor restricting a commercial buyer to an action for breach of warranty. Id. at 577-78, 489 A.2d at 671-72. In so doing, the New Jersey Supreme Court basically adopted the reasoning of the majority of courts that have considered this issue and our Superwood decision. Id. at 581, 489 A.2d at 673 (citing, among others, Superwood ).
It is worth noting that the Spring Motors court treated strict liability as conceptually distinct from negligence. In analyzing the negligence claim, the court concluded that the seller’s duty of care “generally stops short of creating a right in a commercial buyer to recover a purely economic loss.” Id. at 579, 489 A.2d at 672; see also Franklin, When Worlds Collide: Liability Theories and Disclaimers in Defective-Products Cases, 18 Stan.L.Rev. 974, 983-86 (1966) (concluding that the UCC is not intended to exclude negligence from its remedial scheme). In the present case, the integrity of the UCC could be preserved by a similarly careful analysis of the elements of a negligence claim and the applicable defenses in the context of a commercial transaction.
Rather than emasculate the remedies provided in the UCC, imposing liability for damage to “other property” caused by the seller’s failure to exercise reasonable care would encourage sellers to take the steps suggested by the code in order to avoid or limit their exposure to liability. Sellers could take advantage of the freedom of contract provided under the UCC and expressly, specifically, and conspicuously limit remedies available. Alternatively, sellers could exercise reasonable care in order to minimize whatever liability was not effectively disclaimed or limited. This court should not, based on hypothetical bargaining behavior, supply the missing disclaimers or limitations of liability. At a minimum, the court should require some evidence that the parties actually negotiated the risk of loss resulting from the seller’s negligence. See Consumers Power Co. v. Curtiss-Wright Corp., 780 F.2d 1093, 1096-97 (3rd Cir.1986) (citing Spring Motors ).
If this court must hypothesize as to the bargaining behavior of “sophisticated parties,” it should at least be consistent about its “expectations.” If these parties are as *691sophisticated as the majority suggests, this court should presume that the parties were aware of the Superwood rule and intended the liability imposed by it, like the law of implied warranty, to be a part of their contract unless effectively disclaimed or limited. Contrary to the majority’s implied pre-emption analysis, Minn.Stat. § 336.1-103 (1988) provides that, “unless displaced by the particular provisions of this chapter,” the principles of law and equity supplement the UCC. Rather than displacing the law of negligence, Minn.Stat. § 336.2-719(1)(b) (1988) provides that remedies specified in a limitation-of-remedies agreement are exclusive only if the parties expressly agree that they are exclusive. It is well settled that parties to a contract can limit their liability for their own negligence. See, e.g., Independent School Dist. No. 877 v. Loberg Plumbing & Heating Co., 266 Minn. 426, 434, 123 N.W.2d 793, 798 (1963). There is nothing in the record which indicates that the parties intended that either party would be exonerated from liability for damage caused by any party’s negligence. Accordingly, subject to the threshold requirements of Superwood, recovery under tort law should be available.
The majority’s response to the “steady stream” of Superwood cases will cause a flood of litigation in this area. There are sure to be cases relating to the scope of the definitions of “commercial transaction” or “sophisticated parties.” In light of the majority’s expansive definition of dicta, it will not be long before this court is asked to abandon the personal-injury prong of the Superwood rule in cases involving “sophisticated parties.” It is likely that, soon, it will be argued that the majority’s discussion of the “panoply-of-liability theory” available to aggrieved consumers should also be disregarded.
By ignoring precedent since Superwood, the majority decision creates more uncertainty. In the absence of an express agreement between the parties, the right to recover damages in cases involving damage to the purchaser’s other property should not turn on the status of the purchaser as a sophisticated commercial party but, instead, on whether the seller was negligent. In the present case, it would create far less uncertainty to modify Superwood so as to shield merchants from liability without fault, i.e., strict liability, rather than exonerate all negligent merchants in response to a judicially perceived threat to the efficacy of the code. If the law of negligence must be displaced in order to preserve the integrity of the code, the Minnesota Legislature, in the manner suggested by Minn. Stat. § 336.1-103 (1988), is the proper branch of government to make whatever changes are necessary by amending the pertinent provisions of the code. At the very least, if this court feels compelled to make such unforeseeable changes in the law of products liability, it should make them prospectively in order to avoid prejudicing unfairly those who, in negotiating contracts, were entitled to rely on an unbroken line of decisions by this court. See Hoff v. Kempton, 317 N.W.2d 361, 363 (Minn.1982).
In summary, under Superwood, there is no tort liability for the damage to the potato crop grown with the defective seed. This is economic loss relating to the product itself and is, therefore, subject to the terms of the parties’ contract. There is, however, potential liability3 for the damage caused to the separate crop grown in the separate fields planted with the non-defective seed because, as conceded by the majority, this is unmistakably “other property.” As a result, I believe that appellants were entitled to jury instructions on the negligence theories asserted and that the trial court abused its discretion by failing to give them; therefore, I would reverse and remand for a new trial.

. See National Crane Corp. v. Ohio Steel Tube Co., 213 Neb. 782, 786, 332 N.W.2d 39, 42 (1983). Some courts that follow this majority rule define "economic loss” as "damages for inadequate value, costs of repair and replacement of the defective product or consequent loss of profits — without any claim of personal injury or damage to other property." (Emphasis added) (citation omitted). See also Jones & Laughlin Steel Corp. v. Johns-Mansville Sales Corp., 626 F.2d 280, 284 (3d Cir.1980).

. The Spring Motors court defined "economic loss” as including the loss of the benefit of the bargain and indirect losses such as lost profits, but not including a claim for physical harm to person or property. Id. 98 N.J. at 566, 489 A.2d at 665-66.

. It may very well be that a properly instructed jury would find that, in the present case, the seller was not negligent.