Wilson v. Style Crest Products, Inc.

627 S.E.2d 733, 367 S.C. 653, 59 U.C.C. Rep. Serv. 2d (West) 98, 2006 S.C. LEXIS 69

• Court: Supreme Court of South Carolina
• Decided: March 6, 2006
• Docket: 26122
• Status: Published

Opinions

Justice WALLER:

This is a class action in which -the circuit court granted the defendants summary judgment. We affirm.

FACTS

The Appellants (hereinafter referred to as “Homeowners”) own mobile homes in South Carolina which were manufactured by several of the respondents (hereinafter referred to as “Home Defendants”). The homes are secured by a soil anchor tie down system with component parts which were manufactured and sold by the respondents Style Crest Products, Tie Down Engineering, and Minute Man Products (hereinafter referred to as “Anchor Defendants”). The Homeowners allege all the Defendants are liable for the failure of the anchor system to adequately secure their homes in high winds. They allege the anchor systems do not meet applicable United States Department of Housing and Urban Development (HUD) and the South Carolina Manufactured Housing Board codes. The Homeowners are seeking to recover the cost of the anchor systems, approximately $1,000-$1,200 each, the cost to upgrade the anchor system to one which is effective, or the cost of a permanent foundation, approximately $2,500-$7,000 each.

In their complaint, the Homeowners allege: 1) negligence; 2) negligence per se; 8) breach of express warranty; 4) breach of implied warranty of workmanlike service; 5) breach of implied warranty of merchantability; 6) fraud and misrepresentation; 7) negligent misrepresentation; and 8) fraudulent concealment. In two separate orders, the circuit court granted the Defendants’ summary judgment motions primarily on the ground that the Homeowners have not suffered any actual damages. The Homeowners appeal only the grant of summary judgment as to: Count 3 (breach of express warranty) against only the Home Defendants; and Counts 4, 5, and 8 (breaches of implied warranty of workmanlike service and merchantability and fraudulent concealment) against both Defendants. The Homeowners do not appeal the grant of summary judgment as to the other claims, i.e. negligence/tort claims.

DISCUSSION

Standard of Review

Summary judgment is proper only when it is clear that “there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Rule 56(c), SCRCP. In determining whether any triable issues of fact exist, the evidence and all inferences which can be reasonably drawn from the evidence must be viewed in the light most favorable to the non-moving party. Hamilton v. Miller, 301 S.C. 45, 47, 389 S.E.2d 652, 653 (1990). Even when there is no dispute as to the evidentiary facts, but only as to the conclusions or inferences to be drawn from them, summary judgment should be denied. Id.

Damages

The Homeowners concede that they have not suffered any personal injuries or physical damage to their homes. However, they contend they have suffered an economic loss by purchasing a defective product.¹ They allege they purchased a faulty anchor system which does not adequately secure their homes. The pivotal issue in this case is whether the Homeowners must prove an actual injury to person or property to bring their warranty and fraudulent concealment claims.²

Arguably, a few cases support the Homeowners’ position that the loss of the benefit of the bargain is sufficient damage in a warranty action. Coghlan v. Wellcraft Marine Corp., 240 F.3d 449 (5th Cir.2001) (holding damage was loss of “benefit of the bargain”); Microsoft Corp. v. Manning, 914 S.W.2d 602 (Tex.App.1995) (holding buyer of defective software program has warranty action even if he never suffers data loss as a result of the defect because buyer did not get what he bargained for). However, the no-injury approach to product litigation has been rejected in most decisions. See, e.g. Briehl v. General Motors Corp., 172 F.3d 623 (8th Cir.1999). In Briehl, the plaintiffs brought a class action fraud lawsuit based on an allegedly defective anti-lock brake system (ABS) in vehicles manufactured by General Motors. The plaintiffs did not allege that the brake system had ever malfunctioned or failed. The Eighth Circuit Court of Appeals held that “[t]he Plaintiffs conclusory assertions that they, as a class, have experienced damages ... are simply too speculative to allow this case to go forward. The Plaintiffs’ assertions that their ABS-equipped vehicles are defective and that they have suffered a loss in resale value as a result of the defect is insufficient as a matter of law to plead a claim under any theory the plaintiffs have advanced.” Id. at 629. See also e.g. Jarman v. United Industries Corp., 98 F.Supp.2d 757 (S.D.Miss.2000) (dismissing fraud, warranty, and various statutory claims for purchase of allegedly ineffective pesticide where there is no allegation of actual product failure); Weaver v. Chrysler Corp., 172 F.R.D. 96 (S.D.N.Y.1997)(dismissing class-action fraud and warranty lawsuit for allegedly defective integrated child seats where there is no allegation that the product has malfunctioned or the defect manifested itself); Yost v. General Motors Corp., 651 F.Supp. 656 (D.N.J.1986)(dismissing fraud and warranty claims for alleged engine defect where engine has not malfunctioned and plaintiff alleges diminished value only).

In most of these cases, the defective products the plaintiffs had purchased had performed satisfactorily and, therefore, the courts found that the plaintiffs had reaped the benefit of their bargain and could not bring a warranty action. “That is simply another way of saying that the products were, in fact, merchantable, and therefore there was no breach of warranty.” In re Bridgestone/Firestone, Inc. Tires Products Liability Litigation, 155 F.Supp.2d 1069, 1100 (S.D.Ind.2001). Likewise, here, the anchors are merchantable. The evidence here is that the plaintiffs have received what they bargained for— an anchor system which has been effective in high winds. There is no evidence that the anchor systems have not, to date, been exactly what the Homeowners bargained for. In fact, here, several Homeowners testified at their depositions that their mobile homes have weathered hurricanes without any damage.³

Additionally, a few jurisdictions have concluded that the “diminution in value” of a product alone is enough to succeed on a common-law fraud claim. Miller v. William Chevrolet/GEO, Inc., 826 Ill.App.3d 642, 260 Ill.Dec. 735, 762 N.E.2d 1 (2001). However, without an injury or a defect, there has been no diminution in value to support the Homeowner’s fraudulent concealment claim.

We hold the Homeowners need to show that the product delivered was not, in fact, what was promised and they have not shown that. Accordingly, the circuit court’s grant of summary judgment is

AFFIRMED.

TOAL, C.J., MOORE and BURNETT, JJ., concur. PLEICONES, J., concurring in part and dissenting in part in a separate opinion.

1 . A defective product causes a purely economic loss when the product causes no personal injuries and damages no property other than the "product itself.” East River S.S. Corp. v. Transamerica DeLaval, Inc., 476 U.S. 858, 870, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986).

2 . The Homeowners contend the circuit court misconstrued their claims as alleging products liability claims rather than claims for breaches of warranties. We disagree. The circuit court judge specifically noted that under either a tort or products liability theory, the Homeowners must establish an actual injury citing Small v. Pioneer Machinery, Inc., 329 S.C. 448, 494 S.E.2d 835 (Ct.App.1997).

3 . The Homeowners rely on studies conducted over the past twenty-five years which they contend establishes that the anchor systems are flawed and do not adequately secure mobile homes. Many of these studies were conducted by HUD. As the Homeowners contend, the studies have "questioned the effectiveness of the soil anchor system.”