Nationwide Insurance v. General Motors Corp.
Nationwide Insurance v. General Motors Corp.
Opinion of the Court
OPINION OF THE COURT
This appeal presents the issue of whether an express, 12 month/12,000 mile “New Car Limited Warranty” promising “repairs and needed adjustments” to correct manufacturing defects is a warranty that “explicitly extends to future performance of the goods” for purposes of determining when a cause of action for breach of that warranty accrues under the statute of limitations provision of the Uniform Commercial Code— Sales, 13 Pa.C.S. § 2725. We are also asked to determine whether the implied warranties of merchantability and fitness for a particular purpose so extend. For the following reasons, we hold that the express warranty does explicitly extend to future performance of the goods but that the implied warranties do not. We now reverse in part and affirm in part the decision of the Superior Court.
The essential facts are undisputed. On June 20, 1986, the Appellant, Nationwide Insurance Company, instituted this action against Appellee General Motors Corporation/Chevrolet Motor Division and Durbiano Chevrolet Company
Appellee filed a motion for summary judgment, which the Court of Common Pleas of Allegheny County initially denied. Upon reargument, however, the court granted the motion on the basis that the action was barred by the four-year statute of limitations at 13 Pa.C.S. § 2725: Although the action had been filed within four years of the date the car allegedly malfunctioned or displayed a defect, it had not been filed within four years of the date of tender of delivery. The trial court deemed the cause of action to have accrued upon tender of delivery because the court specifically found that the express, 12 month/12,000 mile warranty did not “explicitly extend to future performance of the goods” and therefore that the “discovery rule” exception of § 2725 did not apply. The Superior Court affirmed in an unpublished opinion, with Judge Brosky dissenting. 396 Pa.Super. 662, 570 A.2d 1093.
Section 2725 of the Uniform Commercial Code — Sales states, in pertinent part:
§ 2725. Statute of limitations in contracts for sale
*427 (a) General rule. — An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued....
(b) Accrual of cause of action. — A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. A breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.
13 Pa.C.S. § 2725 (emphasis added). In this case, the question is whether the warranties explicitly extended to future performance of the vehicle so that the cause of action accrued when the breach was discovered (allegedly November 2, 1982)
In the ordinary case, a breach of warranty action accrues on, and suit must be filed within four years of, the date the seller tenders delivery of the goods, even if the breach is not apparent until after delivery has been tendered. Section 2725 sets tender of delivery as the point at which the cause of action accrues because the section “presumes that all warranties, express or implied, relate only to the condition of the goods at the time of sale.” Max E. Klinger, The Concept of Warranty Duration: A Tangled Web, 89 Dick.L.Rev. 935, 939 (1985) (hereinafter, “A Tangled Web ”). Such warranties are breached, if at all, when the goods are delivered but do not meet that standard. Of course, the deficiency contained in the goods may not be discovered by the buyer within four years of delivery. However,
*428 [I]n the usual circumstances, ..., defects are apt to surface within that time period, and the few odd situations where this is not the case, resulting in hardship to the buyer, are thought to be outweighed by the commercial benefit derived by allowing the parties to destroy records with reasonable promptness.
William D. Hawkland, Uniform Commercial Code Series § 2-725:02, at 480 (1984). See 13 Pa.C.S. § 2725, Uniform Commercial Code Comment (four year period “is most appropriate to modern business practice” because it “is within the normal commercial record keeping period”). Thus, in breach of warranty cases the four-year statute of limitations is essentially a statute of repose.
Section 2725 contains an exception, however, for warranties that “explicitly extend to future performance of the goods” where discovery of the breach must await the time of future performance. Where such a warranty is involved, the cause of action does not accrue until “the breach is or should have been discovered.” This exception has caused confusion among courts, lawyers, and commentators for years. See generally, e.g., James J. White & Robert S. Summers, Uniform Commercial Code § 11-9 (3d ed. 1988); Klinger, A Tangled Web, 89 Dick.L.Rev. at 937-950 (discussing conflicting cases). Professors White and Summers have noted that “[although the time of accrual under [§ 2725] is ordinarily clear — ‘when tender of delivery is made’ — the exception to this general rule poses interpretive difficulties.” White & Summers, Uniform Commercial Code § 11-9, at 477. They go on to cite the very type of express warranty at issue here as an agreement that “leaves one in considerable doubt about its true meaning” and that could be interpreted either as a warranty that “explicitly extends to future performance” or as simply an agreement to repair.
Despite its ambiguity, one thing the plain language of § 2725(b) makes clear is that our analysis of whether the
WHAT IS COVERED
CHEVROLET
Chevrolet Motor Division, General Motors Corporation, warrants each new 1982 car.
DEFECTS
This exclusive warranty covers any repairs and needed adjustments to correct defects in material or workmanship. REPAIRS
Your Chevrolet dealer will make the repairs or adjustments, using new or remanufactured parts.
WHICHEVER COMES FIRST
This warranty is for 12 months or 12,000 miles, whichever comes first.
WARRANTY BEGINS
The warranty period begins on the date the car is first delivered or put in use.
NO CHARGE
Warranty repairs and adjustments (parts and/or labor) will be made at no charge. A reasonable time must be allowed after taking the car to the dealer.
WARRANTY APPLIES
This warranty is for Chevrolets registered and normally operated in the United States or Canada.
(R 25.)
Appellant argues that the express warranty explicitly extends to future performance of the goods because the warranty is for a specific duration, “12 months or 12,000 miles, whichever comes first.” According to Appellant, such a warranty must contemplate the vehicle’s future performance, at least for the stated period following delivery. Appellee, on the other hand, argues that the warranty does not explicitly extend to future performance of the goods because it does not promise that the goods will perform in a particular way in the future.
Second, the essence of Appellee’s position is that the document here is not a warranty, but a promise to repair or replace defective parts.
Moreover, Appellee’s attempt to argue, in essence, that this is not really a warranty reveals the internal inconsistency, and
We recognize that the document does not create a classic warranty that fits neatly within the UCC view of warranties. Although it is a “promise made by the seller to the buyer which relates to the goods,” 13 Pa.C.S. § 2313(a)(1) (“Express warranties by affirmation, promise, description or sample”),
15 U.S.C. § 2301(6)(B).
Furthermore, we will not permit Appellee and other sellers who draft similar documents to escape the consequences of
Finally, reading the express warranty as one that “explicitly extends to future performance of the goods” will do no violence to the purposes of § 2725. Sellers will still be able to determine the time period for which they should maintain their records, simply by adding the limitation period to the warranty period. In addition, nothing in our analysis would prevent the parties from reducing the period of limitation in accordance with § 2725(a), which provides that “[b]y the original agreement the parties may reduce the period of limitation to not less than one year but may not extend it,” provided, of course, that the period is reduced in a. way that is not unconscionable. See generally 13 Pa.C.S. § 2302.
Because we find that the express warranty “explicitly extends to future performance of the goods” for purposes of applying 13 Pa.C.S. § 2725, we find that the cause of action alleging breach of that warranty was timely filed and reverse the decision of the Superior Court with respect to Count One of the Complaint. We express no opinion, however, as to whether a cause of action has been stated or as to the appropriate remedy for breach of the express warranty.
Although we find the express warranty to explicitly extend to future performance of the goods, we cannot find that the implied warranties of merchantability and fitness for a particular purpose so extend. The warranty contains the
Because the implied warranties do not explicitly extend to future performance of the car, we conclude that Counts Two and Three of the complaint, alleging breach of implied warranties, were filed too late.
Accordingly, we reverse the decision of the Superior Court as to Count One and affirm as to Counts Two and Three. The case is remanded to the Court of Common Pleas of Allegheny County for further proceedings consistent with this opinion.
. Pursuant to a Consent Order of Discontinuance dated February 5, 1988, Durbiano Chevrolet Company is no longer a party to this action.
. Although Appellant did plead breach of an express warranty of fitness for a particular purpose, it did not plead facts; indicating that such a warranty was created. Therefore, we will consider only its allegation that Appellee breached an implied warranty of fitness for a particular purpose.
. The lower courts did not address Appellee’s argument that it was entitled to summary judgment because the express warranty promised only the repair or replacement of defective parts and specifically excluded liability for consequential damages, and that issue is not before us.
. This point fell within the warranty period because it was less than 12 months from the date the car was "first delivered or put in use" (R 25), and the car had been driven less than 12,000 miles (R 10).
. The example cited is an agreement in which "the manufacturer promises to repair any defect in a car’s drivel rain that occurs within two years or 24,000 miles, whichever occurs first.”
. Under "WHAT IS NOT COVERED,” the warranty excludes tires; damage due to accidents, misuse, or alterations; damage from the environment; and damage due to lack of maintenance or use of the wrong fuel, oil or lubes. It also states that normal maintenance is the owner's responsibility and that “extra expenses” relating to the loss of use of the car during repairs are not covered. (R 25.)
. This position has been taken by courts in ocher states that have considered similar automobile warranties. See, e.g., Tittle v. Steel City Oldsmobile GMC Truck, Inc., 544 So.2d 883 (Ala. 1989); Voth v. Chrysler Motor Corp., 218 Kan. 644, 545 P.2d 371 (1976); Stoltzner v. American Motors Jeep Corp., 127 Ill.App.3d 816, 82 Ill.Dec. 909, 469 N.E.2d 443 (1984) (also holding that express disclaimer of implied warranties "for any period beyond the express warranty” did not amount to explicit extension), appeal denied; Poppenheimer v. Bluff City Motor Homes, 658 S.W.2d 106 (Tenn.Ct.App. 1983); Muss v. Mercedes-Benz of North America, Inc., 734 S.W.2d 155 (Tex.Ct.App. 1987). In construing the same General Motors warranty language that is at issue in this case, the Supreme Court of Alabama stated:
This language clearly does not guarantee that the car will perform free of defects for the term of the agreement. In fact, as the court in Voth [v. Chrysler Motor Corp., 218 Kan. 644, 545 P.2d 371 (1976)] recognized, the language of the guarantee anticipates that defects will occur. We, therefore, hold that the warranty provided Tittle upon the purchase of his car did not extend to the car’s future performance.
Tittle, 544 So.2d at 891.
Decisions of the courts of other states on this issue are influential, given the purposes of the UCC. One of the explicit purposes of the Code in general is ”[t]o make uniform the law among the various jurisdictions.” 13 Pa.C.S. § 1103(b)(3). Section 2725 is intended specifically to "introduce a uniform statute of limitations for sales contracts.” 13 Pa.C.S. § 2725, Uniform Commercial Code Comment. It would, therefore, be both acceptable and tempting simply to follow the lead of other courts. However, we decline to do so because we believe that the other courts’ reasoning is flawed and would lead to absurd results if extended to its logical conclusion. For example, carrying through with the analysis described above would lead to a
. The Superior Court agreed with Appellee because it found this case to be similar in all significant respects to Ranker v. Skyline Corp., 342 Pa.Super. 510, 493 A.2d 706 (1985). In Ranker, the Superior Court stated that a warranty did not explicitly extend to future performance of the goods under § 2725 where it provided that the dealer would correct all manufacturing defects reported within one year after delivery. That statement, however, was dicta unnecessary to the court’s holding that the action was untimely filed, because the buyer in that case did not commence suit until more than four years after discovery of the breach. 493 A.2d at 709.
. Appellee never explicitly argues that the document is not a warranty. Indeed, having drafted the document and labeled it a warranty, Appellee would be hard-pressed to so argue. Instead, Appellee argues, somewhat disingenuously, that this is not a "performance warranty,” but a "repair warranty.” Section 2725 draws no such distinction. In addition, although Appellee argues that the document makes no promise regarding the condition or performance of the vehicle, its statement that it "warrants each new 1982 car” could be read to provide otherwise.
. The other ways of creating an express warranty — by description of the goods, § 2313(a)(2), or by sample or model, § 2313(a)(3) — are not relevant to this discussion.
Dissenting Opinion
dissenting.
I dissent. I would hold that the implied warranties of merchantability and fitness for a particular purpose also extend to the future performance of the vehicle because these implied warranties are expressly linked temporally to the express warranty by the following language contained in the express warranty at issue: “ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE APPLICABLE TO THIS CAR IS LIMITED IN DURATION TO THE DURATION OF THIS WRITTEN WARRANTY,” (Reproduced Record at R25). Accordingly, I would reverse the decision of the Superior Court as to Counts One, Two and Three, and remand to the Court of Common Pleas.
Dissenting Opinion
dissenting.
I am compelled to dissent from the opinion of the Court because I believe a number of serious flaws in the reasoning lead the Court to an incorrect result.
First, the majority finds that the warranty in this ease, by specifying a 12 month/12,000 mile duration, “explicitly extends to future performance of the goods.” See Opinion at 431. I do not follow the logic. Granted, a warranty that explicitly extends to future performance of goods will by definition in most cases specify a certain time period. It does not follow, however, that because a certain time period is specified a warranty necessarily applies to future performance of the goods. The scope of the warranty — what is promised — may be something other than a representation about how the goods will perform and yet still contain a specified time period.
Here, the promise is to repair or adjust defective parts for 12 months or 12,000 miles. This is not the same as a promise
The majority applies a faulty grammatical analysis of the phrase “where a warranty explicitly extends to future performance of the goods” to expand the reach of 13 Pa.C.S. § 2725(b). It is true that the adverb “explicitly” modifies the verb “extends” and not the noun “warranty,” and thus it is the extension that must be explicit. In this context, however, the verb “extend” does not merely describe temporal duration, as the majority suggests. Rather, it describes scope or application. The conceptual difficulty with this case is that the Appellant characterized the warranty as a representation “that said vehicle would be free from defects in material and workmanship, for at least 12 months or 12,000 miles,” Complaint ¶ 8, in order to bring this action within the exception of 13 Pa.C.S. § 2725(b), when in fact the warranty was not so worded.
Second, the majority, states that “the essence of Appellee’s position is that the document here is not a warranty, but a promise to repair or replace defective parts.” Opinion at 1176. In doing so, it sets up a straw man, mis-characterizing the Appellee’s position in order to more easily refute it. The essence of the Appellee’s argument is not that the document is not a warranty, but that it is not a warranty within the definition of 13 Pa.C.S. § 2313.
In the Uniform Commercial Code, the term “warranty” is given a very specific definition. “Any affirmation of fact or promise made by the seller to the buyer which relates to the
A warranty, in this sense, establishes as a term of the agreement certain qualities of the goods being sold. If the goods actually delivered do not possess such qualities, the buyer has remedies for breach of warranty. It is thus entirely sensible that in setting out when a cause of action accrues, the Code states that “[a] breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered.” 13 Pa.C.S. § 2725(b). Since a warranty as defined by the Code is a promise as to qualities of the goods, if the goods, when tendered, possess the qualities promised, the warranty has been satisfied; if the goods, when tendered, do not possess the promised qualities, the warranty has been breached. In the limited case where the promise is that the goods will have certain qualities, or will perform in a certain way, at a time beyond when the goods are delivered, it cannot be determined at the time of delivery whether the goods possess the promised qualities. Because the promise endures over a period of time, whether a breach has occurred can only be determined when the specified time has passed.
Here, in the document captioned “1982 Chevrolet New Car Limited Warranty”, the seller did not promise that the car would perform without defect for twelve months or 12,000 miles; in fact, the “Limited Warranty” contained no specific promise or affirmation of fact relating to the car. The only promise was that any repairs and adjustments to correct
Indeed, as the majority notes, “although ‘repair and replace’ warranties are not traditional warranties, they do fit within the modern concept of warranty,” and a document such as the one involved here fits within the definition of “warranty” under the federal Magnuson-Moss Warranty Act, 15 U.S.C. § 2301(6)(b). Opinion at 432-33. This, I believe, is the ultimate source of the difficulty in this case. General Motors, selling its product in a national market, produces a standard document that includes a promise to repair or adjust defective parts. Under federal law, such a promise is properly captioned a warranty. Unfortunately, it does not “fit[ ] neatly within the UCC view of warranties.” Id. When an action is later brought under the UCC, GM suffers the consequence of having the “difficulty interpreting the agreement,” id. at 432, be resolved against it, the drafter.
I think it entirely unjust to apply this rule of construction in these circumstances. As noted above, the Appellant miseharacterized the nature of the warranty in order to bring it within the exception to the limitations period under § 2725(b) of the UCC. To my mind, the Appellant is as much responsible for the “difficulty interpreting the agreement” as the Appellee. Had the action been brought under the Magnuson-Moss Warranty Act, 15 U.S.C. § 2310(d)(1)(A), the “difficulty” would not have arisen. The warranty could then have been analyzed as a promise as to the Appellee’s conduct and a determination made whether the failure, or practical inability, to repair the vehicle constituted a breach of that promise.
This analysis also avoids the “problem” identified by the majority with respect to warranties of duration longer than four years. Id. at 431, n. 8; id. at 433-35. Because such warranties set forth promises as to the seller’s conduct during
In the case presently before the Court, if the defect was such that the car delivered was not in fact possessed of a quality that had been bargained for, a breach of warranty action pursuant to the UCC could have been maintained. Such claim, however, would have to have been brought within four years of the date of delivery. Because this action was not commenced within four years of delivery, the Appellant could no longer make such a claim. Instead, the Appellant attempted to make the seller’s promise into something that it plainly is not — a guarantee of the future performance of the car — in order to bring the action within the exception of the statutory limitation period.
Had the Appellant alleged that the seller breached the promise that it had made, the action would have been timely and the grant of summary judgment would have been improper. The Appellant made no such allegation. It was not alleged that the seller refused to make repairs or needed adjustments to correct defects in material or workmanship; nor was it alleged that any such refusal was the cause of the Appellant’s damages.
By obligingly adopting the Appellant’s transmogrification of this action in order to secure a remedy, the majority has, I fear, thrown the entire law of warranty under the Code in Pennsylvania into confusion.
I dissent and would affirm the grant of summary judgment.
. The majority also errs in perceiving an internal inconsistency in the appellee’s argument based on its erroneous characterization of the argument. The appellee argues that if the warranty is construed as a promise about the quality or condition of the car, it does not "explicitly extend to future performance,” therefore an action under that theory had to be commenced within four years of the date of delivery. If, however, the warranty is construed as a promise to repair, I believe the Appellee would concede that the four year limitation would not have commenced until this promise had been breached, if the complaint had alleged this as the basis for the action.
Reference
- Full Case Name
- NATIONWIDE INSURANCE COMPANY as Subrogee of Michael Joseph Villi, Appellant, v. GENERAL MOTORS CORPORATION/CHEVROLET MOTOR DIVISION and Durbiano Chevrolet Co., Appellees
- Cited By
- 46 cases
- Status
- Published