Court Opinion

ID: 9548059
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:56:54.798379+00
Date Added: 2024-06-11T15:18:26.038802
License: Public Domain

HUNTLEY, Justice,
dissenting.
I dissent on two bases.
First, I concur with the reasoning expressed in the concurring opinion of Justice Donaldson to the effect that the continued validity of Salmon Rivers, 97 Idaho 348, 544 P.2d 306 (1975), is questionable — the requirement in Salmon Rivers, of privity *339in implied warranty for economic loss did not make sense when the decision was written and its application has resulted in substantial injustice to many litigants. We should simply overrule that case at this time.
The difficulties inherent in the reasoning process used to justify the continued validity of Salmon Rivers is concisely stated in the appellant’s brief as follows:
Additionally, the Alaska decision of Morrow v. New Moon Homes, Inc., 548 P.2d 279 (Alaska 1976), provides an excellent example of the prevailing privity requisite analysis. Like the Clark decision, the Morrow court rejected recovery of economic loss in tort theories, but astutely divided the term “economic loss” into the categories of “direct economic loss” and “consequential economic loss”. The court quoting from a Note found in 66 Columbia Law Review 917, 918 (1966), summarized the distinction as follows:
“Direct economic loss may be said to encompass damage based on insufficient product value; thus, direct economic loss may be ‘out-of-pocket’ — the difference in value between what is given and received — or ‘loss of bargain’ — the difference between the value of what is received and its value as represented. Direct economic loss also may be measured by cost of replacement and repair. Consequential economic loss includes all indirect loss, since its [sic] loss of profits resulting from inability to make use of the defective product.”
It should be noted that the Salmon Rivers decision also relied upon the same Columbia Law Review Note entitled “Economic Loss In Products Liability Jurisprudence”. Justice Rabinowitz writing the opinion for the Morrow court, then concluded:
“The fear that if the implied warranty aetion is extended to direct economic loss, manufacturers will be subjected to liability for damages of unknown and unlimited scope would seem unfounded. The manufacturer may possibly delimit the scope of his potential liability by use of a disclaimer in compliance with A.S. 45.05.100 or by resort to the limitations of authorized in A.S. 45.05.230. The statutory rights not only preclude extending the theory of strict liability in tort, supra, but also make highly appropriate extension of the theory of implied warranties. Further, by expanding warranty rights to redress this form of harm, we preserve ‘... the well developed notion that law of contract should control actions for purely economic losses and the law of tort should control actions for personal injuries.’ We therefore hold that a manufacturer can be held liable for direct economic loss attributable to a breach of his implied warranties, without regard to privity of contract between the manufacturer and the ultimate purchaser.”
Unlike Salmon Rivers, Morrow abolished the privity requirement for an action in warranty for direct economic loss against a manufacturer not in privity with the ultimate consumer. Both decisions, however, relied upon the California case of Seely v. White Motor Co., [63 Cal.2d 9, 45 Cal.Rptr. 17] 403 P.2d 145 (1965), for bedrock support to deny liability for economic loss in negligence. Justice Bakes in Clark v. International Harvester also recited from the Seely decision. Although the lower court in the present circumstances looked to Salmon Rivers and Clark for assistance when denying an express warranty action without privity, the Judge apparently overlooked or rejected the following analysis and conclusion of Justice Traynor in the Seely case:
“Defendant included the following promise in the printed form of the purchase order signed by plaintiff: ‘The White Motor Company hereby war*340rants each new motor vehicle sold by it to be free from defects in material and workmanship under normal use and service, its obligation under the warranty being limited to making good at its factory any part or parts thereof. * * * ’ This promise meets the statutory requirement for an express warranty: ‘Any affirmation of fact or any promise by the seller relating to the goods is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the goods, and if the buyer purchases the good relying thereon.’ (Civ.Code, § 1732; cf. Com.Code, §§ 2313, 2314.) The natural tendency of White’s promise was to induce buyers to rely on it, and plaintiff did so rely in purchasing the goods. The reliance on the warranty, and the warranty itself, are manifested by plaintiff’s continued efforts to have the truck repaired, and by defendant’s acceptance of the responsibility to correct the galloping. The statute requires only that plaintiff rely on the warranty. It does not additionally require that he be aware that it was made by the manufacturer instead of the dealer to reach the one who in fact made it. Surely if plaintiff sought to have a part replaced that was covered by the warranty, White could not escape its obligation by showing that plaintiff thought the warranty White made was by the dealer.
Defendant contends that its limitation of its obligation to repair and replacement, and its statement that its warranty ‘is expressly in lieu of all other warranties, expressed or implied,’ are sufficient to operate as a disclaimer of responsibility in damages for breach of warranty. This contention is untenable. When, as here, the warrantor repeatedly fails to correct the defect as promised, it is liable for the breach of that promise as a breach of warranty. (Rose v. Chrysler Motors Corp., 212 Cal.App.2d 755, 762-763, 28 Cal.Rptr. 185, 99 A.L.R.2d 1411; Allen v. Brown, 181 Kan. 301, 308, 310 P.2d 923.) Since there was an express warranty to plaintiff in the purchase order, no privity of contract was required. (See Burr v. Sherwin Williams Co., 41 Cal.2d 682, 696, 268 P.2d 1041.) Plaintiff also gave reasonable notice of the defect. (Civ.Code, § 1769; cf. Com.Code, § 2607.)” (emphasis added).
Mitchell Construction Company submits that based upon the current development of Idaho law, a plaintiff not in privity with a manufacturer may still pursue a recovery for economic loss in an action for breach of an express warranty. The remarks of Justice Bakes in Clark and the reliance upon Seely v. White Motors almost compels the conclusion that an express warranty action may be pursued absent privity. The lower court erred in granting summary judgment to The Neogard Corporation upon the allegation of Mitchell Construction Company that Neogard breached an express warranty.
Secondly, I must respectfully dissent from the suggestion that there was no privity in the instant case. The record established the Neogard representative, Greg Chapman, negotiated directly with the state architect and Mr. Mitchell himself relative to the anticipated performance and capabilities of the Neogard product.
A letter from the architect employed by the state to Linton Incorporated in care of Mitchell Construction Company stated:
“We and the State, fully expect Linton, Insulcoat and Neogard, to be aware that the warrantys [sic] and certification will be honored and enforced if necessary”.
As a result of that correspondence the State issued change order no. 1, the deposition of the state architect reading:
Q. ... do you have any knowledge as to why that sentence is within that letter?
*341A. It is in keeping with our change order no. 1.
Q. How is it within keeping with that change order?
A. “Roof warranty/guarantee consigned by manufacturer and roofing contractor to be in effect”, on the project. Q. “As architect on the project, Mr. Kelly being one of the subordinates of you, I would assume you are looking toward Linton, Insulcoat and Neogard for warrantys [sic] on the roof”
MR. KREIS: Object to the form of the question.
A. “Not necessarily. Let’s note the address, Linton Incorporated in care of Mitchell Construction Company. Our bond, our insurance policy, our dealings are with one organization on a building, that organization is the general contractor. We look to the general contractor for the enforcement of warrantys, [sic] guarantees and performance, he and only he. ” (emphasis added).
In the foregoing context the requirement of privity of the type required by Salmon Rivers, supra, would appear to be founded neither upon logic nor sound legal principle.