holding that a breach of contract for sale of goods "accrues when the breach occurs and, in the absence of a warranty explicitly extending to future performance, a breach occurs when tender of delivery is made."Summary of this case from Rouse v. Elliot Stevens, Ltd.
Argued January 10, 1985
Decided March 26, 1985
Appeal from the Appellate Division of the Supreme Court in the Second Judicial Department, Anthony J. Ferraro, J.
Sheldon Diesenhouse for Robert Heller, appellant.
James R. McCarl for Jim Moroney's Harley-Davidson Sales, Inc., appellant.
Arnold I. Katz and Robert A. Calinoff for respondent.
On February 15, 1983 plaintiff instituted this action against defendants U.S. Suzuki Motor Corp. and Jim Moroney's Harley-Davidson Sales, Inc., seeking to recover damages for injuries he sustained in a motorcycle accident which occurred July 7, 1979. U.S. Suzuki Motor Corporation is the Japanese manufacturer's distributor of the motorcycle in the United States and Jim Moroney's Harley-Davidson Sales, Inc., is the retailer who sold the motorcycle to plaintiff. The tort causes of action against both defendants were barred by the three-year Statute of Limitations. Accordingly, plaintiff sought to recover on claims that defendants expressly and impliedly warranted the motorcycle safe, merchantable and fit for its intended use. On this appeal he presses only a claim based upon implied warranty pursuant to Uniform Commercial Code § 2-318. The issue before us is the timeliness of plaintiff's action against defendant U.S. Suzuki Motor Corporation, specifically, whether the cause of action accrued on the date of sale to plaintiff by the retailer or on the date of transfer of the motorcycle by the distributor to its immediate purchaser, one Bakers Recreational Equipment, Inc., who then apparently transferred it to the retailer, defendant Jim Moroney's Harley-Davidson Sales, Inc.
Uniform Commercial Code § 2-725 provides that a cause of action for breach of a contract of sale must be commenced within four years after it accrues. The action accrues when the breach occurs and, in the absence of a warranty explicitly extending to future performance, a breach occurs when tender of delivery is made. Construing this language, Special Term denied defendant Suzuki's motion for summary judgment and dismissed its affirmative defense alleging the Statute of Limitations. It held that the cause of action against the distributor accrued when the retailer sold the motorcycle to plaintiff on April 21, 1979. The Appellate Division reversed and dismissed the complaint, holding that plaintiff's cause of action against the distributor accrued when the distributor tendered delivery to its immediate purchaser, March 30, 1978, and therefore that the action was time-barred because it was commenced more than four years later.
Actions to recover for personal injuries based upon implied warranty originally developed in an effort to impose strict liability on manufacturers and sellers for defects in their products. The action sounded in contract and, accordingly, when contract law was applied, the warranty was considered an incident of the sale and the cause of action for its breach accrued on tender of delivery ( see, Mendel v Pittsburgh Plate Glass Co., 25 N.Y.2d 340; Blessington v McCrory Stores Corp., 305 N.Y. 140; 1 N Y PJI2d 342, 1984 Cum Supp 155-156). Moreover, because recovery was permitted only by those in privity with the defendant, the cause of action accrued at the time of sale or tender of delivery from the seller to the purchaser in privity with him. Inasmuch as the purchaser usually had no contract with the manufacturer or distributor, he had no right to recover from him in an action on implied warranty ( Martin v Dierck Equip. Co., 43 N.Y.2d 583, 589-590). Indeed, following this reasoning, some States refused to recognize an implied warranty cause of action for personal injuries by a purchaser against a remote party under Uniform Commercial Code former § 2-318 ( see, e.g., Southgate School Community School Dist. v West Side Constr. Co., 399 Mich. 72, 247 N.W.2d 884). Others, including New York, developed certain narrow exceptions to the general rules governing the statutory and common-law actions to permit warranty actions for personal injuries notwithstanding the traditional requirement of privity ( see, e.g., UCC former 2-318, L 1962, ch 553; Greenberg v Lorenz, 9 N.Y.2d 195). As we noted in Martin v Dierck Equip. Co. ( supra), however, there is no need to recognize an action on implied warranty for personal injuries, and contend with the serious conceptual problems which arise when it is applied to personal injury actions, if the jurisdiction recognizes a tort action in strict products liability as New York does ( see also, generally, 3A Frumer and Friedman, Products Liability § 40.02; Prosser and Keeton, Torts § 97 et seq. [5th ed]). The tort remedy permits the injured plaintiff to seek redress from remote parties in the distributive chain regardless of privity.
Notwithstanding this state of the law, in 1975 the Legislature completely eliminated the requirement of privity for personal injury actions based on implied warranty by adopting a new section 2-318 of the Uniform Commercial Code (L 1975, ch 774). In doing so, it adopted the section recommended by the National Conference of Commissioners on Uniform State Laws in 1966 and described as Alternative B to section 2-318 ( see, 1A ULA 53). Its purpose was to make uniform the law in the several jurisdictions desiring to expand the class of beneficiaries entitled to sue in implied warranty but which had not yet adopted the tort theory of strict products liability. Although the Code amendment was proposed to enable consumers to sue remote parties ( see, 1975 N.Y. Legis Ann, at 110), it was not entirely necessary in New York because we had decided they could do so in 1973 when we decided Codling v Paglia ( 32 N.Y.2d 330) and other strict products liability cases following it.
When the Legislature amended section 2-318, it did not amend the limitations period provided in section 2-725 of the Code, however, and notwithstanding the elimination of the requirement of privity, it remains the law that a cause of action against a manufacturer or distributor accrues on the date the party charged tenders delivery of the product, not on the date that some third party sells it to plaintiff ( Doyle v Happy Tumbler Wash-O-Mat, 90 A.D.2d 366; Fazio v Ford Motor Corp., 69 A.D.2d 896; 1 Weinberger, New York Products Liability § 11.04; cf. Rosenau v City of New Brunswick, 93 N.J. Super. 49, 224 A.2d 689). It may be inferred from the amendment of section 2-318, as the dissent does, that the Legislature, by removing the prior requirement of privity, intended the date of retail sale to be the date of accrual, even for causes of action against others in the distributive chain. The short answer to that argument is that the Legislature did not say so and inasmuch as it did not amend section 2-725 to alter the existing rules on the subject we assume it intended no change (McKinney's Cons Laws of NY, Book 1, Statutes § 222).
A major purpose of the uniform acts, and for the Statutes of Limitation they contain, is to eliminate jurisdictional variations so that concerns doing business nationwide will not be governed by different periods of limitation. With that in mind, the Commissioners proposed the four-year limitation period stated in section 2-725 as consistent with modern business record keeping procedure ( see, 1A ULA 525; Voth v Chrysler Motor Corp., 218 Kan. 644, 545 P.2d 371; Mysel v Gross, 70 Cal.App.3d Supp 10, 138 Cal.Rptr. 873). This purpose is frustrated, however, and the period of exposure to liability becomes unpredictable if the cause of action accrues at the date of sale to the plaintiff because the product may have left the hands of remote third parties such as the manufacturer or the distributor years earlier. If the product is resold, as it was here, the limitations period for an action on implied warranty may be extended even longer. Thus, our interpretation is consistent with the purpose for the tender of delivery rule set forth in the uniform laws and by the general rule that the function of Statutes of Limitation is repose ( see, Schwartz v Heyden Newport Chem. Corp., 12 N.Y.2d 212, 218).
This interpretation does not result in plaintiff's remedy being foreclosed before his cause of action accrued ( see, dissenting opn, at p 415, n 4). Plaintiff was injured 15 months after Suzuki sold the motorcycle to Bakers Recreational Equipment, Inc., but he waited almost four more years before instituting this suit. His rights have been lost by his own delay, not by any construction we place on the statute. Furthermore, our interpretation does not limit available remedies generally. A consumer who acts within three years of the accident or four years from the date of sale, as the pertinent statutes provide, may now maintain causes of action in New York to recover against both immediate and remote parties based on express or implied warranty, negligence or strict products liability ( see, Voss v Black Decker Mfg. Co., 59 N.Y.2d 102, 106). Thus, there is no need or occasion for us to reinterpret section 2-725 in a manner contrary to its language and past usage. If the limitation period for causes of action based upon warranty is to be extended by fixing a new date of accrual, the Legislature should make that change.
Accordingly, the order of the Appellate Division should be affirmed, with costs.
Chief Judge WACHTLER and Judges KAYE and ALEXANDER concur with Judge SIMONS; Judge MEYER dissents and votes to reverse in a separate opinion in which Judge JASEN concurs.
Order affirmed, with costs.
Prior to 1975 Uniform Commercial Code § 2-318 authorized an action by one injured in person by breach of warranty but limited a seller's warranty liability to "his buyer," members of the buyer's family or household and guests in the buyer's home. As thus written the provision required both vertical and horizontal privity. Vertically the warranty ran only from the seller to the immediate buyer from him; horizontally it included not only the buyer but his family, household and guests.
The amendment made by chapter 774 of the Laws of 1975 removed the words "who is in the family or household of his buyer or who is a guest in his home". Its effect was to extend the warranties provided for by the UCC, not only horizontally but vertically, for after amendment the section contained no reference to the buyer and made the seller's warranty run to "any natural person if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty." The amended section, therefore, broadened its coverage not only horizontally to encompass bystanders of all types, but also vertically to include a manufacturer whose product is distributed through a dealer to the consumer, for it is reasonable for such a manufacturer to expect that the purchaser from a dealer in his product may use, consume or be affected by the product and be injured in his or her person. That such was the legislative intent is supported, if support be needed, by the memorandum of the Assembly sponsor of the amendatory bill, which stated its purposes as "to extend more intelligently the warranty provided to a purchaser of goods under the UCC" (1975 N.Y. Legis Ann 110).
The 1975 amendment adopted Alternative B, proposed by the Editorial Board of the Uniform Commercial Code in 1966, which was "designed for states * * * that desire to expand the class of beneficiaries" (1A ULA 54, Official Comment 3).
The majority accepts the premise that despite the absence of privity a manufacturer is liable to a purchaser from a dealer in the manufacturer's product for a breach of warranty resulting in injury to the purchaser, but nevertheless concludes that the four-year limitations period established by UCC 2-725 begins upon delivery of the product by the manufacturer to the dealer rather than with the dealer's delivery to the purchaser. For a number of reasons I cannot accept that restrictive reading of the phrase "tender of delivery" used in UCC 2-725 and, therefore, respectfully dissent.
Jaffee Assoc. v Bilsco Auto Serv. ( 58 N.Y.2d 993) is not to the contrary for it involved not personal injury but economic loss ( see, 89 A.D.2d 785).
Primary among those reasons is the misconception involved in the majority's reasoning (majority opn, at p 411) that the 1975 amendment was not necessary because it had been previously held in Codling v Paglia ( 32 N.Y.2d 330) that a consumer had a cause of action in strict product liability against a manufacturer. The Legislature is presumed to have been aware of the Codling holding ( Transit Commn. v Long Is. R.R. Co., 253 N.Y. 345, 355) and to have intended in enacting the 1975 amendment to effect some change in existing law and accomplish some useful purpose ( Mabie v Fuller, 255 N.Y. 194, 201). With that knowledge and intent and the knowledge that UCC 2-725 imposed a limitation period of four years on an action for breach of warranty measured from "tender of delivery," it amended UCC 2-318 to provide a cause of action in warranty against a manufacturer running to the consumer. The purpose of the amendment, and the change it accomplished, was the addition to the consumer's rights against the manufacturer of a new cause of action dependent not upon proof of negligence, as was Codling's strict liability action, but upon proof of unfitness for intended purpose, or other breach of warranty.
But although amendment of section 2-318 was necessary to broaden consumer rights, amendment of section 2-725 was not. This follows from the facts that there cannot be a warranty running from manufacturer to consumer until there is a consumer and that in the nature of the transaction there is no consumer until delivery by the dealer-retailer of the product to a particular purchaser. Thus the "tender of delivery" which brings into operation the manufacturer's warranty to the consumer is from the dealer to the purchaser, not from the manufacturer to the dealer.
There is nothing foreign about such a concept. Not only does it underlie the strict liability action recognized in Codling v Paglia (32 N.Y.2d, at p 339, supra), but also in Martin v Dierck Equip. Co. ( 43 N.Y.2d 583), relied on by the majority, we held that a warranty cause of action arose in Virginia where the injury occurred rather than in New York where the product was delivered. The reasoning on which that holding was based was that "if a third party chooses to sue in `warranty' * * * he may not nevertheless by asserting that the cause of action arose at the time of the manufacturer's tender of delivery contend that his cause of action `accrued' before in fact it had" ( id., at p 590 [emphasis supplied]) and that, "No contract of sale, without more, made between plaintiff's employer and the manufacturer and distributor of the forklift could create any liability to plaintiff [citation omitted]. Plaintiff possessed no cause of action, in tort or in contract, any where in the world until he was injured in Virginia" ( id., at p 591). That the plaintiff in Martin was a bystander, whereas the present plaintiff is a purchaser from the dealer, furnishes no basis for distinction, for section 2-318, as amended, replaced the prior requirement of privity, whether horizontal or vertical, with a statutory right of action which could not come into existence until sale by the dealer to the purchaser. To hold otherwise, said the Martin majority, would be to repeat "the all but inconceivable result reached in Mendel v Pittsburgh Plate Glass Co. ( 25 N.Y.2d 340), overruled in Victorson v Bock Laundry Mach. Co. ( 37 N.Y.2d 395) * * * a rule that would have barred a plaintiff's cause of action before it ever came into existence." (43 N.Y.2d, at pp 590, 591, supra.)
In view of that construction of "tender of delivery" the majority's reference to "past usage" (majority opn, at p 412) is difficult to understand.
Judge Breitel, as he then was, dissenting in Mendel, had called it "all but unthinkable that a person should be time-barred from prosecuting a cause of action before he ever had one" (25 N.Y.2d, at p 346), and Judge Jerome Frank put it even more forcefully in his dissent in Dincher v Marlin Firearms Co. ( 198 F.2d 821, 823): "Except in topsy-turvy land, you can't die before you are conceived, or be divorced before ever you marry, or harvest a crop never planted, or burn down a house never built, or miss a train running on a nonexistent railroad. For substantially similar reasons, it has always heretofore been accepted, as a sort of legal `axiom,' that a statute of limitations does not begin to run against a cause of action before that cause of action exists, i.e., before a judicial remedy is available to the plaintiff."
The majority's citation of Doyle v Happy Tumbler Wash-O-Mat ( 90 A.D.2d 366) suggests that the rationale for its holding is its agreement with Doyle's reasoning that (at p 370) "`tender of delivery' * * * is more readily applicable to commercial transactions between a seller and buyer." But Doyle's restrictive reading of "tender of delivery" not only makes it possible that the newly expanded cause of action could be barred by limitations before it came into existence, a result we should not lightly infer was intended by the Legislature, but also wholly overlooks the fact that the amended section 2-318 is a part of the Uniform Commercial Code, which directs that, "The remedies provided by this Act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed" (§ 1-106 ) and that, "This Act shall be liberally construed and applied to promote its underlying purposes and policies" (§ 1-102 ). The fact that "tender of delivery" may connote a buyer-seller relationship does not exclude interpretation of the phrase as it relates to a buyer's cause of action against the manufacturer to refer to the tender of delivery made by the seller-distributor as the manufacturer's conduit to the buyer, nor in light of the liberal administration and liberal construction provisions of the Code should it be so limited.
Prosser, Law of Torts, at 651 (4th ed): "The middleman is no more than a conduit, a mere mechanical device, through whom the thing sold is to reach the ultimate user"; Kassab v Central Soya ( 432 Pa. 217, 227, 246 A.2d 848, 853): "the typical consumer * * * buys from a retail merchant who is usually little more than an economic conduit."
No greater support for the majority's conclusion is provided by the suggested relationship (majority opn, at p 412) between limitations, the record keeping procedures of modern business and the unpredictable period of exposure that results if the action accrues on sale to the plaintiff. While that apparently was the origin of the four-year period established by UCC 2-725 (1) when it was adopted in 1964 ( see, Comment to the original section), strict products liability was not then generally recognized. With our acceptance in Codling v Paglia ( supra), of the strict liability concept, however, and our subsequent holding that the three-year tort limitations period accrued from the date of injury ( Victorson v Bock Laundry Mach. Co., supra), the unpredictability of the manufacturer's exposure became for him a way of life and record keeping procedures were no longer sufficiently significant "to dictate the outcome" as to limitations ( Victorson v Bock Laundry Mach. Co., 37 N.Y.2d, at p 404, supra). No more so should those considerations determine when a purchaser's warranty action against a remote manufacturer accrues with respect to the expanded warranty action authorized by the 1975 amendment to UCC 2-318.
The final basis for my disagreement with the majority is that the cases holding that the UCC's four-year limitation period begins to run in favor of a manufacturer only from the date of the retail sale are more numerous (and those that state reasons more closely reasoned) than those on which the majority rely. Of the latter Doyle v Happy Tumbler Wash-O-Mat ( supra), has been discussed above, and Fazio v Ford Motor Corp. ( 69 A.D.2d 896) concerned an action brought more than four years after the consumer's purchase from the retailer and, therefore, is not in point. And while Rosenau v City of New Brunswick ( 93 N.J. Super. 49, 224 A.2d 689) held that limitations began to run from the time the manufacturer sold a water meter to the city which the city later installed in plaintiff's home, the case is readily distinguishable for the court was at pains to point out (93 NJ Super, at pp 55-56, 224 A.2d, at pp 692-693, supra) that installation in plaintiff's home was the result of pure happenstance, that the meter was not intended to be resold by the city nor was it advertised in any way, but rather was intended to be installed by the city as part of its own public system. Moreover, the original sale of the meter was in 1942, long before the UCC was enacted, let alone amended, and the court held both implied warranty and strict liability causes of action barred.
Not in point for like reason, though not cited by the majority, are Rivera v Berkeley Super Wash ( 44 A.D.2d 316, 326, affd 37 N.Y.2d 395); Reis v Pfizer, Inc. ( 61 A.D.2d 777); Weinstein v General Motors Corp. ( 51 A.D.2d 335); Johnson v Hockessin Tractor ( 420 A.2d 154 [Del]); Cumberland Val. Joint School Auth. v Halderman, Inc. (23 Pa DC3d 616); see, Garcia v Texas Instruments ( 610 S.W.2d 456 [Tex]); Garvie v Duo-Fast Corp. ( 711 F.2d 47); Quadrini v Sikorsky Aircraft Div. ( 425 F. Supp. 81, 505 F. Supp. 1049).
There are, in contrast, a number of cases holding timely an action against a manufacturer brought within four years of the consumer's purchase ( Singer v Federated Dept. Stores, 112 Misc.2d 781; Bort v Sears, Roebuck Co., 58 Misc.2d 889; Berry v Searle Co., 56 Ill.2d 548, 309 N.E.2d 550; Ouellette v Sturm, Ruger Co., 466 A.2d 478 [Me]; Waldron v Armstrong Rubber Co., 64 Mich. App. 626, 236 N.W.2d 722; Gillespie v American Motors Corp., 51 N.C. App. 535, 277 S.E.2d 100; Redfield v Mead, Johnson Co., 266 Or. 273, 512 P.2d 776; Williams v West Penn Power Co., 502 Pa. 557, 467 A.2d 811; Commercial Truck Trailer Sales v McCampbell, 580 S.W.2d 765 [Tenn]; Rapp Co. v Whitlock Equip. Corp., 222 Va. 80, 279 S.E.2d 133; Patterson v Her Majesty Indus., 450 F. Supp. 425; see, McCarthy v Bristol Labs., 61 A.D.2d 196, on later appeal 86 A.D.2d 276; Falker v Chrysler Corp., 119 Misc.2d 375). The holding in many of those cases is equivocal in that the decision does not articulate the basis for its conclusion. But the Singer, Bort, Ouellette and Patterson cases are squarely in point and their reasoning (that UCC 1-102 requires courts to construe its provisions liberally [ Singer]; that "otherwise the warranties of all manufacturers would be mere paper words with plaintiffs having to prove negligence in every case" [ Bort, 58 Misc.2d, at p 890, supra]; "[o]nly when plaintiff came into possession of the gun * * * did he achieve the status of a foreseeable user which could serve as the predicate for the assertion of warranty liability" [ Ouellette, 466 A.2d, at p 483 (Me)]; the fact that the Legislature in abolishing vertical and horizontal privity sought to protect the ultimate user requires the conclusion that the cause of action accrues when the user receives the product [ Patterson]) is for me persuasive. Likewise persuasive though not so directly in point is the similar reasoning of the Redfield and Commercial Truck cases that the statutory warranty action given the consumer should not be narrowly construed.
Accord, 3A Frumer and Friedman, Products Liability § 40.02, at 12-34: "It would seem that the courts which apply the time-of-sale rule will hold that the action accrues when plaintiff purchases the product from the retailer. If a warranty is held to extend to a remote purchaser, which is the effect of abrogating privity, it cannot on principle be breached before the product is purchased by him."
It is no answer, as the majority suggests (at p 412), that its interpretation "does not limit available remedies generally" or that this plaintiff waited more than three but less than four years before suing. The issue is not what other remedies might have been available but what the Legislature intended when in 1975 it amended UCC 2-318. That plaintiff may have had other remedies now outlawed furnishes no basis for the majority's restrictive reading of what the UCC says is to be liberally construed and liberally administered.
For the foregoing reasons I would reverse the order of the Appellate Division and reinstate Special Term's dismissal of the limitations defense.