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filed: August 2, 1989.


Appeal from the Order of November 17, 1987, in the Court of Common Pleas of Allegheny County, Civil Division, at No. GD 84-3188.


Arthur R. Gorr, Pittsburgh, for appellant.

Dennis A. Watson, Pittsburgh, for REM Coal, appellee.

Cirillo, President Judge, and Cavanaugh, Brosky, McEwen, Olszewski, Beck, Tamilia, Popovich and Johnson, JJ.

Author: Beck

[ 386 Pa. Super. Page 402]

This case presents the question of whether purely economic losses are recoverable in a product liability action between commercial enterprises and sounding in negligence and/or strict liability. We hold that they are not.

The relevant facts are not in dispute. Appellee REM Coal Company owned a front-end loader used in its strip mining business. On February 25, 1982 the loader caught fire and was severely damaged. REM instituted this action against Clark Equipment Company, the manufacturer of the loader, and against Anderson Equipment Company, the seller of the loader. Appellant Anderson later joined Apex, Inc., the manufacturer of the fire suppression system on the loader, and Bridgeville Industrial Supply, the seller of the fire suppression system.

REM's complaint pleaded three theories: negligence, strict liability and breach of warranty. All parties concede that the complaint alleged only economic losses, i.e., the loss of the front-end loader itself. No personal injuries or damage to REM Coal's property other than the loader itself were alleged.

At the close of the pleadings, appellants Clark and Anderson moved for summary judgment. On November 17, 1987 the trial court granted summary judgment against REM on the breach of warranty claim, holding that it was barred by the statute of limitations, but denied summary

[ 386 Pa. Super. Page 403]

    judgment on the negligence and strict liability claims.*fn1 The trial court then certified the denial of summary judgment on the tort claims for immediate appeal, stating that the denial involved a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order would materially advance the ultimate termination of the matter. Permission to appeal was granted. Pa.R.A.P. 1301 et seq.

Summary judgment is appropriate when two basic requirements are fulfilled. There must be no genuine issue as to any material fact and the moving party must be entitled to judgment as a matter of law. Pa.R.C.P. 1035(b); Washington Federal Savings & Loan Assn. v. Stein, 357 Pa. Super. 286, 515 A.2d 980 (1986). Instantly, we need only determine whether the appellants have fulfilled the second requirement. Since all parties concede the material facts, our inquiry is only whether appellants are entitled to judgment as a matter of law.

At issue is the appropriateness of permitting recovery in tort where a product malfunctions because of an alleged defect in the product, causing damage to the product itself and consequential damages in the nature of costs of repair or replacement or lost profits, but the malfunction causes no personal injury and no injury to any other property of the plaintiff. Obviously, the question is not whether a plaintiff in such a case is entitled to a recovery at all, but rather whether a cause of action in tort, as opposed to one sounding solely in contract, is an appropriate vehicle for obtaining such a recovery.

Beginning in 1965 with the decision of the California Supreme Court in Seely v. White Motor Co., 63 Cal.2d 9, 403 P.2d 145, 45 Cal.Rptr. 17 (1965), the national trend has increasingly classified cases of this nature as sounding purely in contract. See, e.g., Lloyd Wood Coal Co. v. Clark Equipment Co., 543 So.2d 671 (Ala.1989); Superwood Corp. v. Siempelkamp Corp., 311 N.W.2d 159 (Minn.1981).

[ 386 Pa. Super. Page 404]

The basic rationale employed by courts that have followed this trend is that the goals of tort theories of recovery are not implicated in a product malfunction case involving only economic losses. A contract action, on the other hand, is perfectly suited to providing an adequate remedy for such losses and recognizes the parties' ability to structure their relative liabilities and expectations regarding the product's performance by setting the terms of their contractual bargain.

The public policy that spawned tort recovery in the product liability context was a desire to provide protection of the public from unsafe products beyond that provided by contract law. Tort product liability theories impose responsibility on the supplier of a defective product whenever it causes personal injury or damage to other property because this is deemed to be the best way to allocate the risk of unsafe products and to encourage safer manufacture and design. Where a product malfunctions in a manner that does not cause damage outside of the product itself, many courts have found that this public policy is not involved because contract theories such as breach of warranty are specifically aimed at and perfectly suited to providing complete redress in cases involving such economic losses. All of such losses are based upon and flow from the purchaser's loss of the benefit of his bargain and his disappointed expectations as to the ...

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