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COA affirms denial of summary judgment to dump truck manufacturer in timeliness dispute

September 28, 2018

A divided Indiana Court of Appeals affirmed the denial of summary judgment to a dump truck manufacturer who unsuccessfully argued that its customer filed an untimely complaint against the manufacturer and that genuine issues of material fact existed when causes of action accrued.

In 2005, Kenworth of Indianapolis, Inc. manufactured and sold a fleet of dump trucks to Seventy-Seven Limited who, upon delivery, immediately discovered the trucks vibrated excessively while idling or at specific RPMs. After several failed attempts to fix the problem within the one-year/100,000-mile basic vehicle warranty period specified in the parties’ warranty agreement, Kenworth extended the warranty period to four years/250,000 miles.

Then, more than four years after the trucks were delivered and after continued unsuccessful attempts at resolving the issue, Seventy-Seven filed a complaint against Kenworth asserting claims for breach of warranty, breach of contract, fraud, rescission and estoppel. Kenworth filed a motion for summary judgment, contending Seventy-Seven’s causes of action accrued when the trucks were delivered and, thus, were barred by the warranty agreement’s one-year time limit for commencing legal action and by Indiana Code Section 26-1-2-725.

The Marion Superior Court denied Kenworth’s motion for summary judgment, but the Indiana Court of Appeals determined that Kenworth had not waived its timeliness argument and reversed and remanded for further proceedings in 2016.  A second motion for summary judgment failed on remand, prompting the instant interlocutory appeal.

The majority of the appellate panel agreed that Kenworth had failed to prove its timeliness argument in a Friday opinion in Kenworth of Indianapolis, Inc., et al. v. Seventy-Seven Limited, et al.,49A02-1710-PL-2502.

In its decision, the majority found genuine issues of material fact concerning when Seventy-Seven’s causes of action accrued and determined as a matter of law that the warranty period at issue was four years/250,000 miles. It also rejected Kenworth’s reliance on Ludwig v. Ford Motor Co., 510 N.E.2d 691 (Ind. Ct. App. 1987) to support its position.

“The Defendants contend that ‘Ludwig is binding, on point, and should be followed.’ We disagree,” Judge Terry Crone wrote for the majority joined by Judge Margret Robb. The majority then concluded the Ludwig panel erred in treating a manufacturers’ promise to repair defective parts as a warranty under the Uniform Commercial Code and in determining when Ludwig’s claims accrued under Section 2-725.

“Our conclusion is based on the persuasive analysis of the Supreme Court of Illinois in Mydlach v. DaimlerChrysler Corp., 875 N.E.2d 1047 (Ill. 2007)…,” Crone continued. “…(T)he Mydlach court’s determination that a promise to repair or replace is not an express warranty and that a cause of action for the breach of that contractual obligation does not accrue until the promisor refuses or fails to repair or replace is the only sensible interpretation of such an obligation with respect to Sections 2-313 and 2-725 of the UCC.”

The majority found that Kenworth consistently maintained that Seventy-Seven’s causes of action accrued at tender of delivery and, thus, “failed to specifically designate any evidence or make any legal argument regarding whether and when an action for breach of the contractual promise to repair or replace accrued.”

The appellate court also noted that the viability of a warranty claim hinges on the duration of the warranty, and a cause of action for breach of warranty must accrue during the warranty period.

“The Defendants insist that their extension of the original basic vehicle warranty period from one year/100,000 miles to four years/250,000 miles was merely a goodwill gesture with no legal ramifications. We disagree,” Crone concluded. “It is crystal clear that the Defendants intended to make the warranty extension retroactive to the trucks’ delivery dates.”

But Judge Robert Altice dissented from the panel’s affirmation of the denial of summary judgment to Kenworth.

 

“…I view the repair or replace provision of the warranty agreement as a limitation of a seller’s liability, not as a separate contractual undertaking,” Altice wrote in his dissent. “…I would hold that because the future performance exception does not apply, the Plaintiffs’ cause of action accrued upon delivery of the trucks.”

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