No. 236 March Term, 1979, Appeal from the Order of the Court of Common Pleas, Civil Action, Law of York County at No. 76 - S - 2587.
Robert J. Brown, York, for appellant.
Michael J. Brillhart, York, for appellee.
Cercone, President Judge, and Price, Spaeth, Hester, Cavanaugh, Brosky and Montgomery, JJ. Cercone, President Judge, files a concurring statement. Brosky, J., files a concurring opinion, in which Cavanaugh, J., joins. Montgomery, J., files a dissenting opinion, in which Hester, J., joins.
[ 292 Pa. Super. Page 348]
Appellant seeks to recover $35,815 as the value of jewelry stolen from her home when a burglar alarm system installed by appellee failed to work. The action is in two counts. The first count is in assumpsit for breach of warranty. The second count is in trespass and alleges strict liability under the Restatement (Second) of Torts § 402A. The lower court heard the case without a jury. On the first count the court held that by the terms of the contract for the installation of the burglar alarm system, damages for breach of warranty were limited to the cost of repairs. On the second count the court held that "[Section 402A] does not apply in the present case. [The alarm system] was not dangerous and did not cause any physical harm to [appellant] or her property."
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Opinion of the Lower Court, R. 62a. It being stipulated that appellee had repaired the alarm system without expense to appellant, the court found that appellant had suffered no damages. Appellant filed exceptions. The court dismissed the exceptions and entered judgment in favor of appellee. Appellant's appeal from this judgment was argued before a panel of this court, and was re-argued before the court en banc. We affirm, although on the trespass count alleging strict liability under Section 402A our reasoning is somewhat different from the lower court's.
The contract to install the burglar alarm system provided:
Alarm system equipment installed by Property Protection, Inc. is guaranteed against improper function due to manufacturing defects of workmanship for a period of 12 months. The installation of the above equipment carries a 90-day warranty. The liability of Property Protection, Inc. is limited to repair or replacement of security alarm equipment and does not include loss or damage to possessions, persons or property.
As installed, the alarm system included a standby battery source of power, in case the regular source of power failed. Appellant contends: that the burglary of her home and the theft of her jewelry occurred on November 22, 1975, which was within the 90 day warranty period (complaint, para. 8); that after "destroy[ing] [the electric meter] . . . so that there was no electrical source to operate the said alarm system" (id., para. 11), the burglar, or burglars, entered through a rear door (id., para. 10); but that "no outside siren was detonated [ sic ] by the break-in as well as no telephone calls were received" (id. para. 9), because "[t]he standby alarm system . . . failed to operate in that the batteries installed by [appellee] . . . had no power and were 'dead'" (id., para. 12).
Appellant argues that the clause limiting appellee's liability to the cost of repairing the burglar alarm system is
[ 292 Pa. Super. Page 350]
invalid for two reasons. First, she says, the clause is unconscionable under the Uniform Commercial Code § 2-719 (12A P.S. 2-719, repealed and re-enacted as 13 Pa.C.S. § 2719). Second, she says, the clause is a modification of appellee's express and implied warranties of merchantability and fitness and as such, fails to conform to the requirement of Section 2-316 of the Code that it be in conspicuous type.
Before addressing these arguments, we must determine whether, as appellant assumes, the installation of the burglar alarm system was a sale of "goods" within the meaning of the Uniform Commercial Code. We conclude that it was. The Code defines "goods" to mean:
[A]ll things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities, and things in action.
13 Pa.C.S. § 2105(a) (cross reference omitted).
This definition embraces every species of property other than real estate, choses in action, or investment securities. Duffee v. Judson, 251 Pa. Superior Ct. 406, 380 A.2d 843 (1977) (mobile homes). See also, Belmont Industries, Inc. v. Bechtel Corp., 425 F.Supp. 524 (E.D.Pa.1974) (structural steel accompanied by design services).
Section 2-719(c) of the Uniform Commercial Code provides:
Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.
Here, neither presumption applies. There was no "injury to the person" of appellant; nor was the loss "commercial." We must therefore look elsewhere to determine whether the clause limiting appellee's liability to the cost of repairing the burglar alarm system should be enforced.
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Generally, provisions in sales contracts limiting a seller's liability to repair or replacement have been enforced when a defect in the product sold could result in excessive liability for consequential damages. See e. g., Ebasco Services, Inc. v. Pennsylvania Power & Light Co., 460 F.Supp. 163 (E.D.Pa.1978) (steam turbine generator); Posttape Associates v. Eastman Kodak Co., 450 F.Supp. 407 (E.D.Pa.1978) (motion picture film); Lincoln Pulp & Paper Co. Inc. v. Dravo Corp. v. Babcock & Wilcox Co., 445 F.Supp. 507 (N.D.Me.1977) (dictum) (heat and chemical recovery boiler); American Electric Power Co., Inc. v. Westinghouse Electric Corp., 418 F.Supp. 435 (S.D.N.Y.1976) (dictum) (steam turbine generator); Rust Engineering Co. v. Lawrence Pumps, Inc., 401 F.Supp. 328 (D.C.Mass.1975) (dictum) (circulating acid pumps); Schultz v. Jackson, 24 Ill.Dec. 395, 385 N.E.2d 162, 67 Ill.App.3d 889 (1979) (grain drier); D.O.V. Graphics, Inc. v. Eastman Kodak Co., 46 Ohio Misc. 37, 347 N.E.2d 561 (1976) (photographic paper); Murray v. Holiday Rambler, Inc., 83 Wis.2d 406, 265 N.W.2d 513 (1978) (recreational vehicle). But cf., Tuttle v. Kelly-Springfield Tire Co., 585 P.2d 1116 (Okl.1978) (sale of automobile tires; clause limiting liability held unconscionable when raised in defense of personal injury claim).
Clauses limiting liability in security alarm contracts have uniformly been upheld, although no case appears to have done so in the context of the Uniform Commercial Code. In Better Food Markets, Inc. v. American District Telegraph, 40 Cal.2d 179, 253 P.2d 10, 42 A.L.R.2d 580 (1953), the contract called for the defendant to send guards to the plaintiff's premises and to notify the local police if the alarm was activated. A burglary took place, the alarm was activated, but the defendant failed to respond promptly. The burglars left with $35,930. Holding as a matter of law that it was impractical to estimate the actual damages resulting from the failure of the system, the California Supreme Court, applying the California Civil Code, upheld a cause limiting the defendant's liability to $50. Id. at 186, 253 P.2d at 15. Similar reasoning has been applied in other states.
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is not contra. For here the clause limiting appellee's liability did not render the contract illusory. Appellee could not at its option escape its duty of performance. Appellant remained entitled to performance, that is, to require appellee to repair the alarm system so that it would work. Like the plaintiff in Wedner, appellant was capable of assuming the risk of loss that the contract left her with; she "had a choice as to how to protect [her] property, and whether or not [she] should obtain insurance."
We therefore conclude, as have courts in other states, that the clause limiting appellee's liability to the cost of repairing the burglar alarm system should be enforced. This conclusion, moreover, is consistent with the Uniform Commercial Code's underlying purposes and policies in that it "permit[s] the continued expansion of commercial practices through custom, usage and agreement of the parties," and conforms to the "law among the various jurisdictions." U.C.C. § 1-102(2)(b) & (c). To avoid misunderstanding, we add that our conclusion extends only to so much of the clause as refers to "loss or damage to possessions . . . or property;" insofar as the clause refers to "loss or damage to . . . persons," we express no opinion regarding its validity, as that issue is not before us.
Section 2-316(2) of the Uniform Commercial Code provides:
[T]o exclude or modify the implied warranty of merchantability or any part of it, the language must mention merchantability and in the case of a writing, must be conspicuous, and to exclude or modify any warranty of fitness, the exclusion must be by a writing and conspicuous . . . .
Appellant's argument that this provision required the clause limiting appellee's liability to the cost of repairing the burglar alarm system to be in larger or contrasting type is without merit. As the lower court observed, appellee
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is not seeking to exclude the warranties but rather is simply attempting to limit its liability, despite the warranties.
Opinion of lower court, R. 64a.
In this regard we also note that the clause limiting appellee's liability, while not in larger or contrasting type, is in the same type as the body of the contract, and is in the paragraph where it logically belongs.
In Webb v. Zern, 422 Pa. 424, 220 A.2d 853 (1966), our Supreme Court expressly adopted the Restatement (Second) of Torts § 402A. This section states:
§ 402 A. Special Liability of Seller of Product for Physical Harm to User or Consumer
(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold
(2) The rule stated in Subsection (1) applies although
(a) the seller has exercised all possible care in the preparation and sale of his product, and
(b) the user or consumer has not bought the product from or entered into any contractual ...