Court Opinion

ID: 5086962
Source: CourtListenerOpinion
Date Created: 2021-10-01 14:19:23.034212+00
Date Added: 2024-06-11T08:20:27.684219
License: Public Domain

STEPHENS, Chief Justice,
dissenting.
The majority’s treatment of KRS 355.2-607 does extreme disservice to the stated purposes of the Uniform Commercial Code. The majority asserts that “there is simply an insufficient basis in text or in logic to require peremptory application of a pre-litigation notice rule.” With this, I simply cannot agree.
The statute states “the buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of the breach or be barred from any remedy.” KRS 355.2-607 (emphasis added). The text of the statute itself clearly indicates that there must be notice of breach before any remedy can be pursued. The remedy this consumer undertook was court action. No notice was given to the seller that this action was being undertaken. Therefore, litigation as a remedy is barred pursuant to the statute.
The majority distorts the purpose of this code provision by shifting the analytical focus of this section from the notice requirement to the reasonable time requirement. While this approach enables the Court to reach a result that may be more palatable when considering the facts presented in this case, it does irreparable damage to the Uniform Commercial Code when reviewed in terms of its overall objections. My colleagues suggest that this interpretation enables the consumer who is the victim of a transaction undertaken in bad faith to be assured a proper avenue of recovery. Emphasizing that it is possible this “seller might not have welcomed notice of the *359breach and that he may have intended to frustrate recovery by the purchaser,” the majority utilizes a tempting analytical process to reach a desired result. However, by disposing entirely of the pre-litigation notice requirement, a much larger number of commercial transactions where a breach has occurred, but not in bad faith, are deprived of the protective devices established by the code for all parties to commercial transactions.
It is not necessary to hold that no notice is necessary to ensure an equitable outcome in the instant case if the proper reading of KRS 355.2-607 is made by this Court. When reviewing compliance to this statute, the analysis that should be undertaken is a two step process. First, the Court must determine if a pre-litigation notice has been given. Second, we should ask whether this pre-litigation notice was given within a reasonable time. By employing this two step process, all interested parties are protected.
The first step of the analysis, giving notice, protects the seller from unsuspected litigation, “open[ing] the way for negotiation of a normal settlement.... The purpose of [this] requirement is to enable the seller to minimize damages in some way.” Leibson and Nowka, Kentucky Uniform Commercial Code (2d ed.) § 2.4(b)(2). In recognizing that the Uniform Commercial Code is designed to apply to all consumer transactions involving the sale of goods, not just those undertaken in bad faith, it is imperative that this protection for the good faith seller not be disposed of by this ruling.
At first glance, the second step of the analysis, the reasonable time requirement, appears to provide protection for the seller only. However, this requirement provides a safety net for the consumer when necessary, such as in situations where the statute of limitations may be at issue or where other factual issues suggest a need for a shortened period of time prior to commencement of litigation. What constitutes a reasonable time becomes a factual question to be addressed by the factfinder so long as the first requirement of notice has been met.
In the present case, the consumer could have provided notice prior to filing his complaint but could have proceeded immediately thereafter with court action. The consumer, who was represented by counsel, had no reason not to be aware of the notice requirement as stated in KRS 355.2-607(3). If the seller had presented the issue of reasonable time as a defense, the consumer could have presented the factual situation to be taken into account. The factfinder could have then determined if notice within a reasonable time had been given.
By accepting that this is the proper method of procedure, all parties’ interests in the conflict are protected. All interested parties — consumers and sellers — including those sellers acting in good faith, are provided the benefits of pre-litigation notice as contemplated by the code drafters. Sellers have the opportunity to offer settlement and consumers are potentially able to avoid the expense of litigation as well. Furthermore, the consumer subjected to a bad faith seller can rely upon the determination of what a “reasonable time” should be in his/her case through successful allegation of unfavorable factors once the factfinder establishes there was notice given.
This Court has previously recognized these policy goals when we held that it is “incumbent upon [a buyer] to give notice to [a seller] within a reasonable time after she discover[s] the alleged breach of the implied warranty if she [intends] to sue him.” Leeper v. Banks, Ky., 487 S.W.2d 58, 59 (1972). The rule of law put forth in Leeper directly applies to the case sub judiee and there is absolutely no need to change that holding.
The majority has read too much into the Leeper opinion, stating that because we addressed the reasonable time question in Leeper, this implies that we did not intend to exclude the commencement of litigation as proper notice. I fail to follow this reasoning. In Leeper the question addressed by this Court was whether this notice to another party could serve as notice to the retailer of the can of starch, the party sued in the action. We held it did not constitute notice, so appellant was “barred from any remedy” as required by the statute. There is nothing in Leeper that even minutely suggests the *360only necessary inquiry under § 2-607 is whether some type of notice, commencement of litigation or otherwise, was made within a reasonable time.
We can also ton to the commentary of the Uniform Commercial Code to gain an understanding of the intentions of the drafters of this statute because it provides the structural basis for each provision. It states “the rule of requiring notification is designed not to deprive a good faith consumer of his remedy.” § 2-607 Official Code Comment. The Code commentary recognizes that the reasonable time requirement is the safety valve that ensures a good faith consumer will not be deprived. The commentary states “[a] reasonable time for notification from a retail consumer is to be judged by different standards .... for the rule of requiring notification is designed to defeat commercial bad faith.” Id. The commentary also recognizes that by notifying the seller of a breach, he has the “opportunity to correct any defect or to adjust the matter by negotiation.” Anderson, Uniform Commercial Code (3d Ed.) § 2-607:4. The majority has precluded the possibility that these goals be achieved in either a setting of good faith or bad faith by holding that pre-litigation notice is not necessary.
We can also turn to other states for guidance on this issue. This is a necessary inquiry so we can maintain the needed uniformity among states to ensure that the most beneficial aspects of the Uniform Commercial Code are preserved. These benefits include legal consistency for all participants in interstate commercial transactions as well as providing a uniform system nationwide whereby consumer transactions can be handled outside the courtroom. An overwhelming number of states have held that pre-litigation notice is a condition precedent to an action for breach of warranty. See e.g., Parker v. Bell Ford, Inc., Ala., 425 So.2d 1101 (1983) (notice as required by § 2-607(3)(a) is a precedent to recovery); Lynx, Inc. v. Ordnance Products, Inc., et al., 273 Md. 1, 327 A.2d 502 (1974) (institution of an action by the buyer to recover damages cannot by itself be regarded as a notice of a breach); Quaker Alloy Casting Co. v. Gulfco Industries, Inc., 686 F.Supp. 1319 (N.D.Ill., 1988) (litigation filings alone are unacceptable vehicle for giving notice of breach of warranty); Armco Steel Corp. v. Isaacson Structural Steel Co., Alaska, 611 P.2d 507 (1980) (complaint filed in third-party action against supplier for breach of delivery terms of contract for specially fabricated steel did not satisfy UCC’s notice of breach requirement); Smith v. Stewart, 233 Kan. 904, 667 P.2d 358 (1983) (giving notice of defect is condition in precedent for filing action).
While the majority asserts that there is no need to follow the commonly accepted approach when there is no basis in logic for the accepted rule, I disagree. First, I believe the logic is clear. Second, when an overriding purpose is to ensure uniformity in the law, it becomes that much more important to consider other states’ interpretations of similar laws. For this reason alone, I believe the holding of the majority is destructive. Further, one essential underlying premise of the Uniform Commercial Code, which is to provide a system whereby consumer transactions can be handled outside the courtroom, is dealt a devastating blow by the holding of the majority.
For the foregoing reasons, I dissent.
SPAIN and STUMBO, JJ., join this dissent.