DAN FORSTER V NAVISTAR INTL TRANSPORTATION CORP
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STATE OF MICHIGAN
COURT OF APPEALS
DAN FORSTER,
UNPUBLISHED
August 27, 2002
Plaintiff-Appellant,
v
NAVISTAR INTERNATIONAL
TRANSPORTATION CORP., and TRI COUNTY
INTERNATIONAL TRUCK, INC.,
No. 233048
Wayne Circuit Court
LC No. 98-831343-CK
Defendants-Appellees.
DAN FORSTER,
Plaintiff-Appellee,
v
NAVISTAR INTERNATIONAL
TRANSPORTATION CORP., and TRI COUNTY
INTERNATIONAL TRUCK, INC.,
No. 234995
Wayne Circuit Court
LC No. 98-831343-CK
Defendants-Appellants.
Before: White, P.J., and Hoekstra and O’Connell, JJ.
PER CURIAM.
In these consolidated cases, plaintiff appeals as of right the grant of summary disposition
to defendant Navistar of his breach of express warranty claim (No. 233048). In Docket No.
234995, defendants appeal as of right the circuit court’s determination to grant approximately
one-half the attorney fees they sought under the mediation sanctions rule, MCR 2.403(O). This
appeal is being decided without oral argument pursuant to MCR 7.214(E). We reverse and
remand in Docket No. 233048. Our disposition renders moot defendants’ appeal in No. 234995.
Plaintiff is a sole proprietor of a bread delivery service. On October 25, 1996, plaintiff
took delivery of a new International 4700 4 x 2 truck from Tri County, a truck dealer. Defendant
Navistar manufactures engines, chassis, and other components, and sells “incomplete” trucks;
-1-
buyers can choose various components. Plaintiff chose a Navistar engine, cab and chassis.1
Plaintiff paid over $44,000 for the truck, and the truck was his only business delivery vehicle.
The sale of the truck was accompanied by a Navistar written Limited Warranty,2 which
was adopted by Tri County when it serviced and repaired the vehicle. Plaintiff took the truck to
1
Plaintiff chose an Allison transmission and a Morgan box. Navistar assembled the cab, engine
and chassis of the truck. Morgan Box Company then mounted the body on the chassis.
2
Navistar’s written “limited warranty” provided “basic vehicle coverage” for 12
months/unlimited mileage, which included the cab and chassis, and additional warranty coverage
on the engine (36 months and 150,000 miles), and on certain other components, as stated below:
LIMITED WARRANTY FOR MEDIUM DUTY MODELS
BASIC VEHICLE COVERAGE:
Navistar International, at its option, will repair or replace any part of this
vehicle which proves defective in material and/or workmanship in normal
use and service, with new or ReNEWed parts, for the first 12 months from
new vehicle delivery date, regardless of distance traveled. Exceptions are
listed below under What Is Not Covered.
***
COMPONENT COVERAGE:
The components described below are given additional warranty coverage
of variable time periods and distance traveled limitations, as shown in the
Warranty Coverage Schedule.
1. Frame Side Rails [60 months/unlimited mileage]
2. Cab/Cowl Structure (on-highway applications) [60 mos, unltd miles]
3. The Cab/Cowl is warranted against perforation due to corrosion, except
for perforation caused by industrial chemicals and/or corrosion caused by
use in a corrosive industrial environment. [60 mos, unltd miles]
4. International Diesel Engines including Fuel Injection Pump, Electronic
Control Modules, and Nozzles; excluding attaching accessories,
thermostats, and electrical and filtration systems. Glow plugs are covered
for 12 months/unlimited mileage. [36 mos, 150,000 miles]
5. Five-part Spicer System (front & rear axles, clutch, propshaft and
transmission); or, Three-part Spicer System (front & rear axles and
propshaft when used with Allison transmission). [24 mos, unltd miles]
***
(continued…)
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Tri County for repairs approximately 11 times in the first year he owned it. On October 27,
1997, the truck had to be towed to Tri-County, where it was kept for 8 days because of water
(…continued)
WHAT IS NOT COVERED
Items warranted by their respective manufacturers (e.g., non-International brand
engines, tires & tubes, Allison Transmissions, lubricants, etc.)
***
Maintenance and/or service items/repairs, including tune-ups, brake/clutch lining,
windshield wiper blades, lubrication and other similar procedures/parts required
to keep vehicle in good working condition.
***
Repairs to any part of the vehicle subjected to misuse, negligence, improper
maintenance, improper operation, or which are the result of an accident.
***
Loss of time or use of the vehicle, loss of profits, inconvenience, or other
consequential or incidental damages or expenses.
***
Repairs as a result of normal wear and tear.
***
DISCLAIMER:
NO WARRANTIES ARE GIVEN BEYOND THOSE DESCRIBED
HEREIN. THIS WARRANTY IS IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED. THE COMPANY
SPECIFICALLY DISCLAIMS WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, ALL OTHER REPRESENTATIONS TO THE
USER/PURCHASER, AND ALL OTHER OBLIGATIONS OR
LIABILITIES. THE COMPANY FURTHER EXCLUDES LIABILITY
FOR INCIDENTAL AND CONSEQUENTIAL DAMAGES, ON THE
PART OF THE COMPANY OR SELLER. No person is authorized to
give any other warranties or to assume any liabilities on the Company’s
behalf unless made or assumed in writing by the Company; and no other
person is authorized to give any warranties or to assume any liabilities on
the seller’s behalf unless made or assumed in writing by the seller.
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leaking in to the oil. At that time, plaintiff requested and was given an extended engine
warranty, to 84 months (7 years) from three years. Between October 27, 1997 and July 31, 1998,
plaintiff took the truck to Tri-County 7 more times.
Plaintiff filed a complaint on September 28, 1998, alleging revocation of acceptance3 and
breach of express warranty, among other things. After mediation,4 defendants filed a motion for
summary disposition. By this time, plaintiff had taken the truck to Tri-County 8 more times,
beginning in October 1998 (at 73,469 miles) and ending in June 2000 (at 128,523 miles),
bringing the total number of visits to Tri-County for repairs to 27 in 3½ years of ownership.
The circuit court granted defendants’ motion on both claims.5 Plaintiff appeals solely the
dismissal of the breach of express warranty claim under MCR 2.116(C)(10).
This Court reviews the circuit court’s grant of summary disposition under MCR
2.116(C)(10) de novo. Smith v Globe Life Ins Co, 460 Mich 446, 454; 597 NW2d 28 (1999). A
motion under MCR 2.116(C)(10) tests the factual support for a claim. Id. The moving party
must support its position by documentary evidence; the burden then shifts to the nonmoving
party to establish that a genuine issue of fact exists. Id. at 455.
Michigan adopted the Uniform Commercial Code and it is codified at MCL 440.1101 to
440.11102. See 2002 supplement to MCL Sections 440.1 to 440.3805, pp 6-7, Table of
Jurisdictions Wherein Code Has Been Adopted. Breach of warranty is addressed in § 440.2714:
(1) Where the buyer has accepted goods and given notification (subsection (3) of
section 2607) he may recover as damages for any nonconformity of tender the
loss resulting in the ordinary course of events from the seller’s breach as
determined in any manner which is reasonable.
(2) The measure of damages for breach of warranty is the difference at the time
and place of acceptance between the value of goods accepted and the value they
would have had if they had been as warranted, unless special circumstances show
proximate damages of a different amount.
(3) In a proper case any incidental and consequential damages under the next
section[6] may also be recovered.
3
By letter dated September 1, 1998, plaintiff’s counsel notified defendants that plaintiff was
revoking acceptance of the truck, noting that, since taking delivery, the truck had been in for
repairs at least nineteen times, and that the problems/defects included engine oil leak, defective
warning lights, windshield reservoir leaks, defective brake lights, exhaust noise, blower motor
noise, inoperative tail-lights, and an inoperative air conditioner.
4
The case was mediated in June 1999 and resulted in a $1,500 award against defendants, jointly
and severally; defendants accepted the award and plaintiff rejected it. Trial was adjourned
several times, and ultimately scheduled for January 2001.
5
The circuit court seemed persuaded at the hearing, at which time only the breach of warranty
and revocation of acceptance claims remained, that plaintiff’s breach of warranty claim failed
because plaintiff drove the vehicle for 140,000 or so miles, i.e., plaintiff waited “too long.”
-4-
MCL 440.2719 provides:
(1) Subject to the provisions of subsections (2) and (3) of this section and of the
preceding section on liquidation and limitation of damages
(a) the agreement may provide for remedies in addition to or in
substitution for those provided in this article and may limit or alter the measure of
damages recoverable under this article, as by limiting the buyer’s remedies to
return of the goods and repayment of the price or to repair and replacement of
nonconforming goods or parts; and
(b) resort to a remedy is optional unless the remedy is expressly agreed to
be exclusive, in which case it is the sole remedy.
(2) Where circumstances cause an exclusive or limited remedy to fail of its
essential purpose, remedy may be had as provided in this act.
Both parties rely on King v Taylor Chrysler-Plymouth, Inc, 184 Mich App 204, 212-213;
457 NW2d 42 (1990), in which the plaintiff bought a demonstration 1981 Plymouth car from the
defendant dealer in May 1981. The car had been driven about 3,000 miles by a salesperson, but
had no previous owner. The salesman handling the plaintiff’s purchase wrote on the purchase
order “full new car warranty” and told the plaintiff the car would be rustproofed and the paint
chips touched up. When the plaintiff picked up the car, neither had been done, and in fact
neither was ever done. The plaintiff began experiencing problems with the car in the first week
she had it, and drove the car for about ten months, until mid-March 1982 (for 6,000-7,000 miles),
but then placed it in storage and rented a different car:
The temperature light began to go on and off sporadically, the temperature and
fuel gauges malfunctioned, and the car began to stall periodically. Plaintiff also
(…continued)
6
MCL 440.2715 provides:
(1) Incidental damages resulting from the seller’s breach include expenses
reasonably incurred in inspection, receipt, transportation and care and
custody of goods rightfully rejected, and commercially reasonable
charges, expenses or commissions in connection with effecting cover and
any other reasonable expense incidental to the delay or other breach.
(2) Consequential damages resulting from the seller’s breach include:
(a) any loss resulting from general or particular requirements and
needs of which the seller at the time of contracting had reason to know and
which could not reasonably be prevented by cover or otherwise; and
(b) injury to person or property proximately resulting from any
breach of warranty.
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had problems with the power antenna, the right rear storage latch, the stereo tuner
knob, the rear door lock, the molding, and the transmission. Eventually the
speedometer broke and the transmission began leaking.
Plaintiff brought the car to defendant for service approximately eight times before
she stopped driving the car on March 12, 1982. Although many of the problems
were repaired, the paint, stalling, speedometer, speed control and transmission
leakage problems were never corrected. Plaintiff and her husband stored the car
in their one–car garage and started it every other day. Plaintiff rented a 1979
Granada from her father . . . between April 4, 1982, and January 27, 1983, and
continued to insure her car at a cost of $500 per year. Plaintiff had driven her car
approximately 6,000 to 7,000 miles before storing the vehicle.
The jury returned a verdict in favor of plaintiff finding a revocation of acceptance
by plaintiff and breach of warranties by defendant. A damage award of $16,580
was rendered.
***
[D]efendant argues that, because the written new warranty expressly excludes
incidental and consequential damages, the issue was not properly before the jury
and defendant is entitled to a new trial as to damages. We disagree.
Although MCL 440.2719(a). . . allows a warranty agreement to “limit or alter the
measure of damages recoverable under this article as by limiting the buyer’s
remedies to return of the goods and repayment of the price or to repair and
replacement of nonconforming goods or parts,” § (b)(2) provides that “[w]here
circumstances cause an exclusive or limited remedy to fail of its essential
purpose, remedy may be had as provided in this act.”
***
Incidental and consequential damages are allowable under [MCL 440.2714 and
2715]. Kelynack v Yamaha Motor Corp, USA, 152 Mich App 105; 394 NW2d 17
(1986). Moreover, the seller must repair or replace the defective part or condition
within a reasonable time, which depends on the nature and circumstances of the
case. Id.
In the present case, the evidence showed that plaintiff took the car to defendant
for repair of the stalling problem seven times over a period of nine months. The
repairs were unsuccessful and, as a result, plaintiff became fearful of driving the
car.
Thus we find that evidence was presented that the limited warranty failed in its
essential purpose and plaintiff was entitled to pursue other remedies. Having
placed this issue before the jury, plaintiff was entitled to present evidence of
consequential damages, which are allowable under MCL 440.2714-440.2715. . .
[Id. at 213.]
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Both parties also rely on Kelynack v Yamaha Motor Corp, USA, 152 Mich App 105, 110
111; 394 NW2d 17 (1986), in which the plaintiff purchased a motorcyle from the defendant.
Less than two months later, when the vehicle had been driven 3,115 miles, it developed “a
tapping noise in the engine.” The plaintiff stopped operating it and returned it to the dealer, who
told him five days later that the engine had seized up while a mechanic was working on it, but
not to worry because the problem was not serious and would be covered by warranty. The
plaintiff wrote the financing bank a letter advising that he was stopping payment because of
breach of warranty, had filed a complaint with the attorney general, and that an action was
pending in the matter. The dealer took almost three months to repair the motorcycle, for a
variety of reasons, including misdiagnosis of problems. There was no dispute that the vehicle
was in fact in working order at the end of the three months. The plaintiff refused to accept the
vehicle, and attempted to revoke the sales contract on the ground that the repairs were not made
within a reasonable time and his faith in the motorcycle had been destroyed. The defendant
refused to take the motorcycle back and return the purchase money. The bike was later sold, the
bank paid off, and the plaintiff received a partial refund of the purchase price. The plaintiff then
brought suit alleging several claims, including under the UCC. The case was tried, and the trial
court concluded that the limited warranty of repair or replacement had failed in its essential
purpose, thereby permitting the plaintiff to seek remedies provided by the UCC, and that the
plaintiff had properly revoked his acceptance because the nonconformity substantially impaired
its value to him. Id. at 110-111. The trial court awarded the plaintiff the unrefunded balance of
his purchase money, court costs and attorney fees. The defendant appealed, arguing that the trial
court erred in finding that there was a proper and timely revocation of acceptance, and that
awarding attorney fees as consequential damages was error where the warranty excluded
consequential damages. This Court affirmed on both bases, noting in pertinent part:
The purchase agreement between plaintiff and defendant contained a limited
warranty that provided [for repair or replacement of any part adjudged defective
by Yamaha due to faulty workmanship or material from the factory, and for
repairs made necessary by faulty workmanship or material from the factory].
While the terms of this provision would generally restrict plaintiff’s remedies to
replacement of the defective part, we agree with the finding of the trial court that
in this case the limited warranty failed in its essential purpose and plaintiff was
therefore entitled to pursue other remedies. MCL 440.2719. . .
Here, plaintiff had the motorcycle in his possession for only ten weeks before it
became totally inoperable. He immediately returned it to the dealer where it
remained for over three months. By the time the motorcycle was returned to him,
it was late November and the weather precluded its use.
While we do not dispute defendant Yamaha’s contention that it acted in good
faith, it’s good faith efforts do not excuse its failure to have the motorcycle
repaired and returned to plaintiff within a reasonable time. “Commendable efforts
alone do not relieve a seller of his obligation to repair.” Jacobs v Rosemone [sic]
Dodge-Winnebago South, 310 NW2d 71, 75 (Minn, 1981).
Where a
manufacturer or dealer has limited its obligation under the sales agreement to
repair or replace defective parts the seller does not have an unlimited time to
make the repairs, but rather must repair or replace the parts within a reasonable
-7-
time. See Anno: Construction and effect of new motor vehicle warranty limiting
manufacturer’s liability to repair or replacement of defective parts, 2 ALR4th
576, § 5[d], pp 602-604 and cases cited therein; 67A Am Jur 2d, Sales, § 923, pp
326-327. Further, the manufacturer’s or dealer’s failure to make repairs need not
be willfully dilatory or even negligent for the damage to the buyer is the same
whether the seller acts in good faith or in bad. In either case, the buyer loses the
substantial benefit of his bargain. Cayuga Harvester, Inc v Allis-Chalmers Corp,
95 App Div 2d 5; 465 NYS2d 606 (1983).
What is a reasonable time for taking any action depends on the nature and
circumstances of the case. Here plaintiff’s motorcycle remained inoperable for
more than three months. Moreover, the court found that the cause of the delay
was the misdiagnosis by defendant’s employee. Under the circumstances of this
case, we are not persuaded that the court erred in finding the delay unreasonable.
We conclude that, since defendant failed to repair the motorcycle within a
reasonable time, plaintiff was deprived of his exclusive remedy and the limited
warranty failed in its essential purpose. [Kelynack, supra at 111-113.][7]
7
Plaintiff also relies on Walker Ford Sales v Gaither, 265 Ark 275; 578 SW2d 23 (1979), in
which the plaintiff automobile retailer sold the defendant buyer a demonstrator car with 4,250
miles on it. The manufacturer and dealer extended the new car warranty, under which the car
was warranted for twelve months/12,000 miles, and repair or replacement of parts was the only
remedy. After the dealer had attempted several times without success to fix a vibration in the car
(that occurred at speeds of 50 mph or more), the defendant refused to make further payments on
the car. The dealer initiated suit against the defendant twenty-two months after the car was
purchased. The defendant drove the car for more than 3 years and over 60,000 miles. Following
a bench trial, the trial court found in the defendant’s favor and awarded $2,000. The Arkansas
Supreme Court affirmed, but remanded for a redetermination of damages:
The measure of damages for a breach of warranty is “the difference at the time
and place of acceptance between the value of the goods accepted and the value
they would have if they had been as warranted . . .” [] Here, appellees paid
$6,300 for the automobile. However, admittedly, they have driven the car 60,000
miles in the 3 years since their purchase. The car does not vibrate until it reaches
speeds in excess of 50 m.p.h. Therefore, we cannot say that the car was of no
value to the appellees. Even so, they argue that the testimony given by appellant
Noil Walker, the retailer, indicating he was willing to give them $2,000 credit,
was relied upon by the trial court in determining the correct amount of damages.
The record shows, however, that Mr. Walker testified that at one time he offered
to purchase the automobile for its market value and deduct $2,000 still due him
from appellees. . . We hold there is no evidence to support the finding that the
damages were $2,000. Upon remand, the actual market value of the car when
sold in its defective condition can be determined and the appropriate figure for
damages established. [Walker Ford, supra, 265 Ark at 280.]
-8-
See also 67A Am Jur 2d, Sales, §§ 921-925, pp 325-330, noting that “[w]hether an exclusive or
limited remedy has failed of its essential purpose is a question of fact and consideration must be
given to the facts of the case,” and that
[w]hen a seller does not repair or replace in order to cure a nonconformity. . . the
limited remedy stated in terms of repair or replacement has failed of its essential
purpose. Such remedy also fails of its essential purpose when a seller is simply
unable to cure the nonconformity notwithstanding that the seller’s failure to cure
was neither willful nor negligent. Moreover, the nonconformity must be removed
within a reasonable time. The buyer is not bound to permit the warrantor to tinker
with the goods indefinitely in the hope that it ultimately may be made to conform.
We conclude that a genuine issue of fact existed whether Navistar’s limited remedy failed
of its essential purpose by virtue of defendant not repairing multiple defects within a reasonable
time, which is a factual question to be determined by a consideration of the circumstances.
Plaintiff presented evidence that he took the truck for repairs approximately 29 times in 3 ½
years, 11 of them in the first year of ownership. Repeated repairs were needed regarding engine
oil leaks, warning and brake lights, air conditioner, and windshield reservoir leaks, among others.
Defendant argues that many items on plaintiff’s repair list were not within the 12 month
warranty period, but fails to acknowledge that a number of defendant’s warranties extended
beyond the 12 month period. The UCC and the cases discussed above do not support
defendants’ argument that plaintiff’s breach of warranty claim failed because plaintiff kept the
truck “too long.” In King, supra, the plaintiff drove the car for ten months and then stored it for
another ten months. In Walker Ford, supra at n 7, the plaintiff drove the auto at issue for more
than three years and over 60,000 miles. Plaintiff presented numerous repair orders below that
clearly stated that the repairs done were “warranty” items, contrary to defendants’ argument that
plaintiff has not met his obligation to show that the alleged problems were covered by Navistar’s
warranty. Plaintiff argued below that the other points defendants raised, including whether the
frequency of repairs on plaintiff’s truck was not excessive, whether plaintiff’s misuse of the
truck caused certain problems, whether all the repairs performed were not properly considered
“warranty” repairs (despite the repair orders so stating), and whether the number of days plaintiff
stated the truck was in the shop was exaggerated, simply raised questions of fact and did not
preclude recovery. We agree that those arguments are properly considered by the fact-finder.
Nor does plaintiff’s deposition testimony that he suffered no business losses preclude his
warranty claim. As discussed above, “the measure of damages for breach of warranty is the
difference at the time and place of acceptance between the value of the goods accepted and the
value they would have had if they had been as warranted, unless special circumstances show
proximate damages of a different amount.” MCL 440.2714(2).
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We reverse the grant of summary disposition and remand. Our disposition renders defendants’
appeal in No. 234995 moot. We do not retain jurisdiction.
/s/ Helene N. White
/s/ Joel P. Hoekstra
/s/ Peter D. O’Connell
-10-
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