Des Moines Flying Service, Inc. v. Aerial Services Inc. Cedar Valley Aviation, LLC and Kirk P. Fisher , 880 N.W.2d 212 ( 2016 )

IN THE SUPREME COURT OF IOWA
No. 14–0632
Filed June 3, 2016
DES MOINES FLYING SERVICE, INC.,
Appellee,
vs.
AERIAL SERVICES INC.; CEDAR VALLEY AVIATION, LLC;
and KIRK P. FISHER,
Appellants.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Black Hawk County,
Andrea J. Dryer, Judge.
Defendants seek further review of court of appeals decision
affirming a grant of summary judgment on counterclaim based on
statutory immunity. DECISION OF COURT OF APPEALS AFFIRMED
IN PART AND VACATED IN PART; DISTRICT COURT JUDGMENT
REVERSED AND REMANDED.
John R. Walker Jr. and Kate B. Mitchell of Beecher, Field, Walker,
Morris, Hoffman & Johnson, P.C., Waterloo, for appellants.
Steven V. Lawyer of Law Firm of Steven V. Lawyer & Associates,
P.L.C., West Des Moines, for appellee.
2
CADY, Chief Justice.
In this appeal, an aviation company challenges the application of a
statutory immunity provision to its claim of a breach of the implied
warranty of merchantability found in the Uniform Commercial Code
(UCC) arising from an alleged defect in product design or manufacturing.
On our review, we must determine whether the immunity provision only
applies in tort cases or if it also applies to contracts. We hold the
statutory immunity only applies in products liability cases involving
personal injury or property damage, not in cases based solely on
economic loss. On our review, we affirm in part and reverse in part the
court of appeals, reverse the district court judgment, and remand.
I. Factual Background and Proceedings.
On February 20, 2009, Cedar Valley Aviation, a wholly owned
subsidiary of Aerial Services, Inc. (ASI), brought a Piper 522AS
(Cheyenne II) in for maintenance to Des Moines Flying Service, Inc.
(DMFS). Among numerous other checks and repairs, DMFS noted both
the pilot’s and copilot’s windshields were “delaminated” and installed
new windshields. The replaced windshields were original to the aircraft,
thirty-three years old. The new windshields cost $19,323.63 each with
an additional $6300 charge for labor. The entire bill, dated August 31,
2009, included many other services and totaled $69,655.58. No
warranties or disclaimers were contained on the invoice.
Replacement windshields in aircraft are limited to the part number
in the original type design or one approved under a Parts Manufacturing
Authorization. The windshields DMFS installed were the part specified
by the manufacturer, Piper Aircraft, Inc. (Piper), and manufactured by
PPG (Pittsburgh Plate Glass) Industries, Inc. No other windshield was
approved for installation under a Parts Manufacturing Authorization.
3
DMFS is an authorized dealer for Piper parts. Piper provided a
limited warranty on parts. 1 The warranty extended for six months after
purchase of the part, not to exceed twenty-four months from when the
part shipped from the Piper Factory. According to the dealer agreement
between DMFS and Piper, DMFS was required to ask each customer to
read and acknowledge in writing the warranty policies for the parts
provided.
DMFS purchased the windshields from Piper. Piper had inspected
the windshields to confirm they met with design specifications prior to
sale. DMFS did not provide ASI with a copy of Piper’s written warranty
or otherwise inform ASI of the limited time period covered by the
warranty for any of the parts installed. DMFS installed the windshields
sometime between February 20 and August 30, 2009, resulting in
February 28, 2010, as the last possible date for Piper’s warranty
coverage.
On June 24, 2010, ASI was making a routine photography flight at
24,000 feet when the copilot’s windshield cracked without impact from
another object. The pilot performed an emergency descent and
proceeded to Des Moines for inspection and repair. The crack occurred a
few days shy of ten months after the new windshield was installed and
the plane had been returned to ASI. ASI submitted an affidavit from an
expert stating that the average life of the windshield should be “ten (10)
or twenty (20) years absent improper installation, a product defect, or an
1The warranty limited Piper’s liability to repair or replace any defective part that
fails during the warranty period. It also expressly provided in red capital letters that
Piper gave no implied warranty of merchantability (or other warranty express or
implied). Other provisions excepted Piper from liability for general consequential,
incidental, or punitive damages including those arising from personal injury or death,
property damage, or economic loss, including loss of use or profits.
4
impact with a foreign object.” No person or property (other than the
windshield) was harmed by the crack in the windshield. 2 Only economic
losses resulted—the cost of the windshield repair and the cost to hire
another aviation company to complete contracted work during the
repairs.
On June 29, 2010, DMFS replaced the cracked copilot’s
windshield, returned the aircraft, and invoiced ASI on June 30. The
invoice total for the part, labor, and adhesive used to install the part
came to a total of $23,046.08. Of that total, $19,323.63 was the cost of
the replacement windshield. Trident Engineering Associates examined
the broken windshield to determine the cause of the crack. The firm
made three findings:
1. the primary crack in the pilot’s windshield from N522AS
originated at a point on the ground edge of the exterior
glass lamination;
2. the point of origin was most probably a grinding mark
which raised the local stress on the edge of the outer
glass ply and initiated cracking; and,
3. there is no evidence of impact by a foreign object.
ASI refused to pay the June 30 bill from DMFS. On October 22,
DMFS brought suit against ASI in Polk County for breach of contract (for
failure to pay the invoice) and fraudulent misrepresentation (for
assurances of future payment made to get DMFS to release the aircraft
and give up its artisan lien). On January 24, 2011, a change of venue
was granted moving the case to Black Hawk County. Upon transfer, ASI
raised affirmative defenses regarding negligent inspection and
installation and defective product. ASI also counterclaimed against
2If other damage or injury had occurred, PPG Industries, Inc. would have been
strictly liable.
5
DMFS for product defect, negligence for failure to inspect, negligent
installation, res ipsa loquitur, breach of warranty of implied
merchantability, breach of implied warranty of fitness for a particular
purpose for the windshield, and breach of implied warranty of fitness for
a particular purpose for the services installing the windshield.
On November 9, ASI filed a cross-claim against Piper, alleging
product defect, negligent inspection, and breach of implied warranty of
merchantability. On July 13, 2012, Piper moved for summary judgment,
claiming the economic loss doctrine barred recovery of economic
damages against Piper, citing Iowa Code section 554.2318 (2009)
(limiting third-party warranty recovery to one “who is injured by breach
of the warranty”). In a reply to the resistance to summary judgment,
Piper asserted for the first time it was immune from suit under Iowa
Code section 613.18. On December 4, the district court found ASI was
not in privity with Piper and granted Piper’s motion for summary
judgment, as the third-party plaintiffs could not recover indirect
economic losses from Piper.
On December 19, DMFS filed a motion for summary judgment on
all of ASI’s counterclaims and partial summary judgment on the original
claims. DMFS also argued the economic loss doctrine, lack of control for
the res ipsa loquitur claim, immunity under section 613.18, a failure to
establish elements for the implied warranty of fitness for particular
purpose, and that delivery of the aircraft to DMFS for repair created an
implied contract under which no party had alleged DMFS’s performance
was defective. ASI conceded the economic loss doctrine barred the
product defect, negligence, and res ipsa loquitur claims. However, ASI
alleged that the grinding mark was not the sole cause of the damage to
the windshield and the installation process may have been part of the
6
cause of the crack. 3 ASI further contested the implied warranty of
fitness and the contract claim. ASI argued the costs of the replacement
windshield and installation are equitable benefits owed to ASI for the sale
and installation of an unmerchantable windshield.
On February 7, 2013, the district court granted summary
judgment in favor of DMFS on the tort claims based on the economic loss
doctrine. As to the implied warranty of merchantability, the district
court found ASI did not set forth facts under which the crack arose from
anything other than a product defect and barred the claim under Iowa
Code section 613.18. The implied warranty of fitness for a particular
purpose claims were denied because DMFS had no reason to know the
windshield would not be put to anything other than ordinary use
(ordinary use is a merchantability claim) and had no discretion in what
windshield to install. The court denied DMFS summary judgment on its
breach of contract claim, finding a genuine issue of material fact.
On May 6, DMFS filed another motion for summary judgment, this
time on the affirmative defenses offered by ASI. As support, DMFS
argued that the February 7 summary judgment ruling decided all the
defenses. ASI resisted, but the court found in DMFS’s favor on
September 12. A bench trial was held on October 21 on the breach of
contract issue after the fraudulent misrepresentation count was
dismissed at the request of DMFS. The court found no evidence of any
factor other than the grind mark causing the windshield crack and that
the defect was concealed beneath a seal attached during manufacturing.
The court held the defect in the windshield did not negate ASI’s duty to
3DMFS notes that if the installation was part of the problem with the windshield,
that claim would be under the implied warranty of workmanship, not merchantability.
7
pay for the replacement costs incurred in June 2010 and ordered ASI to
pay the invoice plus interest.
ASI appealed the judgment, and DMFS cross-appealed the
calculation of interest. We sent the case to the court of appeals. The
court of appeals held that the UCC applied to the action, but that the
claim was barred under section 613.18 immunity because the plain
language of the statute had no limiting language excepting suits claiming
economic loss based on contract law from its coverage. The court of
appeals also recalculated the interest owed DMFS to a lower rate and
remanded for entry of the award. DMFS does not appeal, and we do not
address, the interest calculation. ASI applied for further review on the
question of the applicability of section 613.18 immunity to economic
losses under section 554.2314.
II. Scope of Review.
“We review the district court’s summary judgment ruling to correct
errors at law.” Vossoughi v. Polaschek, 859 N.W.2d 643, 649 (Iowa
2015). Our review is limited to determining whether the law was applied
correctly or whether there is a genuine issue of material fact. Sanford v.
Fillenwarth, 863 N.W.2d 286, 289 (Iowa 2015). In this case, no genuine
issue of material fact is in dispute, and our decision will rest entirely on
interpretation of law. We concur with the court of appeals decision
regarding the application of the UCC to this case and do not address the
issue here.
III. Analysis.
Today the parties ask us to clarify the application of Iowa Code
section 613.18(1)(a). The section states,
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613.18 Limitation on products liability of
nonmanufacturers.
1. A person who is not the assembler, designer, or
manufacturer, and who wholesales, retails, distributes, or
otherwise sells a product is:
a. Immune from any suit based upon strict liability in
tort or breach of implied warranty of merchantability which
arises solely from an alleged defect in the original design or
manufacture of the product.
Id. We are asked to decide whether the legislature intended section
613.18(1)(a) to apply to all retailer breaches of implied warranty of
merchantability due to product defect or if the legislature intended the
immunity to be limited to cases resulting in property damage or personal
injury. Before turning to the provision itself, we must frame how strict
liability and the implied warranty of merchantability work with each
other and the lines we have drawn regarding liability for each.
A. Implied Warranty of Merchantability.
The warranty of merchantability . . . is based on a
purchaser’s reasonable expectation that goods purchased
from a “merchant with respect to goods of that kind” will be
free of significant defects and will perform in the way goods
of that kind should perform.
Van Wyk v. Norden Labs., Inc., 345 N.W.2d 81, 84 (Iowa 1984) (quoting
Iowa Code § 554.2314). To be merchantable under the statute, goods
must
a. pass without objection in the trade under the
contract description; and
b. in the case of fungible goods, are of fair average
quality within the description; and
c. are fit for the ordinary purposes for which such
goods are used; and
d. run, within the variations permitted by the
agreement, of even kind, quality and quantity within each
unit and among all units involved; and
e. are adequately contained, packaged, and labeled as
the agreement may require; and
9
f. conform to the promises or affirmations of fact
made on the container or label if any.
Iowa Code § 554.2314(2).
Under section 554.2318, express and implied warranties extend to
third-party beneficiaries—for example, remote buyers—reasonably
expected to use or otherwise be affected by the goods who are injured by
the warranty breach, and the remote seller cannot exclude or modify the
extension of the warranty as applied to the injury incurred. Id.
§ 554.2318. Express and implied warranties can generally be limited or
modified as part of the contract for sale; disclaimers or modifications of
the implied warranty of merchantability require specific language and, if
in a writing, must be conspicuous. Id. § 554.2316. In fact, “[t]he implied
warranty of merchantability is usually disclaimed and to the extent a
warranty exists, remedy limitations, notice requirements, or the statute
of limitations generally prevent the plaintiff from recovering
consequential economic losses.” Linda J. Rusch, Products Liability
Trapped by History: Our Choice of Rules Rules Our Choices, 76 Temp. L.
Rev. 739, 761 (2003).
The statutory remedies available for a breach of the implied
warranty of merchantability are explained in Part 7 of Article 2 of the
UCC, found at Iowa Code sections 554.2701 through .2725. As it relates
to products liability, the damages we are concerned with today include
both the direct and indirect damages provided for in sections 554.2714
and .2715. Section 554.2714 provides the buyer’s “damages for breach
of warranty is the difference . . . between the value of the goods accepted
and the value they would have had if they had been as warranted.” Iowa
Code § 554.2714(2). Incidental and consequential damages may also be
recovered. Id. § 554.2714(3). Incidental damages are those expenses
10
reasonably incurred incident to the breach. Id. § 554.2715(1).
Consequential damages include losses caused by the breach the seller
had reason to know were possible at the time of contracting and any
“injury to person or property proximately resulting from any breach of
warranty.” Id. § 554.2715(2). For the first kind of consequential
damages, “the buyer who has accepted goods and then discovers their
defects must show that the seller had reason to know at the time of
contracting of the buyer’s possible losses caused by a breach to recover
consequential damages.” Nachazel v. Miraco Mfg., 432 N.W.2d 158, 160
(Iowa 1988).
B. Products Liability and the Economic Loss Doctrine.
“Products liability law broadly refers to the legal responsibility for injury
resulting from the use of a product.” Huck v. Wyeth, Inc., 850 N.W.2d
353, 373 (Iowa 2014); Lovick v. Wil-Rich, 588 N.W.2d 688, 698 (Iowa
1999). “Product liability may involve causes of action stated in
negligence, strict liability or breach of warranty.” Bingham v. Marshall &
Huschart Mach. Co., 485 N.W.2d 78, 79 (Iowa 1992). Warranty theories
of liability relate to products liability through the statutory
consequential-damages remedy for “injury to person or property
proximately resulting from any breach of warranty.” Iowa Code
§ 554.2715(2)(b). Section 1 of the Restatement (Third) of Torts: Products
Liability, adopted by our court in Wright v. Brooke Group Ltd., 652
N.W.2d 159, 169 (Iowa 2002), imposes tort liability on sellers or
distributors of defective products “for harm to persons or property
caused by the defect.” Restatement (Third) of Torts: Prods. Liab. § 1, at 5
(1998).
We examined the general contours of the economic loss doctrine
relating to the recoverability of losses when no injuries are incurred or
11
property damaged or destroyed in Annett Holdings, Inc. v. Kum & Go,
L.C., 801 N.W.2d 499, 503–04 (Iowa 2011) (examining the economic-loss
doctrine’s relation to contract, tort, and certain exceptions to the general
rule). In the case of purely economic damages, a plaintiff cannot recover
in tort. Van Sickle Constr. Co. v. Wachovia Commercial Mortg., Inc., 783
N.W.2d 684, 692–93 (Iowa 2010). We have found “that a plaintiff who
has suffered only economic loss . . . has not been injured in a manner
which is legally cognizable or compensable” whether that loss arose out
of negligence or strict liability cases. Nelson v. Todd’s Ltd., 426 N.W.2d
120, 123 (Iowa 1988) (quoting Neb. Innkeepers, Inc. v. Pittsburgh-
Des Moines Corp., 345 N.W.2d 124, 126 (Iowa 1984)). Instead, the
parties to a contract are assumed to have allocated that risk of economic
loss as part of the contract; therefore, “that document should control the
party’s rights and duties.” Annett Holdings, 801 N.W.2d at 503–04.
In American Fire and Casualty Co. v. Ford Motor Co., we developed
the distinction between tortious and contractual products liability when
damage beyond economic loss did occur, specifying tort theory was
“available when the harm results from ‘a sudden or dangerous
occurrence, frequently involving some violence or collision with external
objects, resulting from a genuine hazard in the nature of the product
defect.’ ” 588 N.W.2d 437, 439 (Iowa 1999) (quoting Nelson, 426 N.W.2d
at 125). Thus, if the damage resulted from a failure of the product to
work properly, the claim would sound in contract, but if it resulted from
a genuine hazard resulting in a sudden or dangerous occurrence based
on the nature of the product defect, the claim would sound in tort. See
id.; Nelson, 426 N.W.2d at 125.
Under contract law, the economic loss doctrine can apply when “a
contractual chain of distribution lead[s] to the defendant.” Annett
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Holdings, 801 N.W.2d at 505. We have applied this principle when
determining the third-party coverage of warranties under Iowa Code
section 554.2318 in the context of consequential economic losses. In one
case, we looked at the damages a third-party plaintiff could recover from
the manufacturer under an express warranty. Beyond the Garden Gate,
Inc. v. Northstar Freeze-Dry Mfg., Inc., 526 N.W.2d 305, 306, 309–10
(Iowa 1995). First, we noted that a nonprivity buyer can recover for
direct economic loss damages when the remote seller/manufacturer
breaches an express warranty. Id. at 309. However, when considering
the compensability of consequential economic loss damages, we agreed
with an academic treatise noting that a seller cannot foresee the uses a
remote purchaser might have for the product, that a seller has the right
to sell product at a lower price and exclude consequential economic
losses, and that the buyer should have to bargain with the immediate
seller for consequential economic losses. Id. at 309–10 (discussing
James J. White & Robert S. Summers, Uniform Commercial Code § 11-5,
at 539–40 (3d ed. 1988)). We held “nonprivity buyers who rely on
express warranties are limited to direct economic loss damages.” Id. at
310.
Another 1995 case examining the economic loss doctrine under the
UCC was Tomka v. Hoechst Celanese Corp., 528 N.W.2d 103, 107–08
(Iowa 1995). The plaintiff had sued a manufacturer of growth hormones
for breach of express warranty and the implied warranties of
merchantability and fitness for a particular purpose, as well as under
tort theories of negligence and strict products liability. Id. at 105. First,
we dismissed the tort claims because the cattle belonged to a third party,
were not actually damaged by the hormone but simply failed to grow at
the rate expected, and the defect did not result in danger to the user. Id.
13
at 106–07. We then turned to Tomka’s warranty theories, dismissing his
express warranty claim as using the same reasoning as in Beyond the
Garden Gate—he was not in privity with the manufacturer and only
sought consequential economic losses with no recoverable direct
economic loss. Id. at 107–08. We found the same reasoning applied to
disallow using implied warranty theories against remote manufacturers
for only consequential economic losses and that allowing such losses
would undermine the legislative scheme of the UCC. Id. at 108. Instead,
we directed the plaintiff to look to the immediate sellers to recover under
warranty theories. Id. Thus, although the section 554.2318 warranty
extension applies to those damaged by defective goods, it does not extend
when a remote buyer seeks only economic loss damages. Kolarik v. Cory
Int’l Corp., 721 N.W.2d 159, 163 & n.3 (Iowa 2006).
C. Application. Our goal in interpreting statutes is to resolve
conflicting constructions in a way consistent with the intent of the
legislature. Teamsters Local Union No. 421 v. City of Dubuque, 706
N.W.2d 709, 713–14 (Iowa 2005). To determine legislative intent, we look
to the language used, the purpose of the statute, the policies and
remedies implicated, and the consequences resulting from different
interpretations. Iowa Individual Health Benefit Reins. Ass’n v. State Univ.
of Iowa, 876 N.W.2d 800, 804–05 (Iowa 2016). We assess the entire
statute and its enactment to “give the statute its proper meaning in
context.” Sanon v. City of Pella, 865 N.W.2d 506, 511 (Iowa 2015). “[A]
statute should not be interpreted to read out what is in a statute as a
matter of clear English” and should not render terms superfluous or
meaningless. 1A Norman J. Singer & Shambie Singer, Statutes and
Statutory Construction § 21:1, at 163 (7th ed. 2009) [hereinafter Singer].
14
If two provisions conflict, we construe them to give effect to both, if
possible. Iowa Code § 4.7.
The UCC is to be “liberally construed and applied to promote its
underlying purposes and policies,” which include simplifying,
standardizing, and modernizing contract law. Iowa Code § 554.1103.
Moreover, “no part of it shall be deemed to be impliedly repealed by
subsequent legislation if such construction can reasonably be avoided.”
Id. § 554.1104. “[R]emedies . . . must 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 . . . .” Id. § 554.1305(1).
Section 613.18 was passed as part of an act on “Liability and
Liability Insurance.” 1986 Iowa Acts ch. 1211 (codified in scattered
sections of Iowa Code (1987)); see id. ch. 1211, § 32 (codified at Iowa
Code § 613.18). Other examples of provisions found in the Act include a
change in social host liability and the dramshop law, insurance
assistance, the creation of a tort liability state-of-the-art defense, a new
chapter on punitive or exemplary damages, and the creation of a study
commission on liability. Id. ch. 1211, §§ 11–12, 26–31, 41–42, 44
(codified at Iowa Code §§ 123.49, .92; id. § 507D.1–.6; id. § 668.12; id.
§ 668A.1). These sections relate to types of tort liability or insurance
coverage for that liability, all of which depend on the presence of
personal injury or property damage to be in effect. The Act was referred
to in the 1986 Summary of Legislation as “a major revision of Iowa’s tort
liability system,” further indicating the legislature’s specific intention for
the act. Iowa Legislative Serv. Bureau, Summary of Legislation 25, 29–30
(Iowa 1986), https://www.legis.iowa.gov/docs/publications/SOL/
401754.pdf (describing one modification to tort liability effected by the
Act as “[c]reating a retailer’s exemption in products liability actions”).
15
The title of the Iowa Code section we seek to interpret, and part of
the statute passed, is “Limitation on products liability of
nonmanufacturers.” Iowa Code § 613.18 (2009); see 1986 Iowa Acts
ch. 1211, § 32. “Although the title of a statute cannot limit the plain
meaning of the text, it can be considered in determining legislative
intent.” State v. Tague, 676 N.W.2d 197, 201 (Iowa 2004) (quoting T & K
Roofing Co. v. Iowa Dep’t of Educ., 593 N.W.2d 159, 163 (Iowa 1999)).
This is known as the title-and-headings canon.” Antonin Scalia & Bryan
A. Garner, Reading Law: The Interpretation of Legal Texts 221 (2012)
(noting titles and headings can be useful to shed light on an ambiguous
word or phrase as tools for the resolution of doubt). “A statute’s title may
be used only to resolve existing doubts or ambiguities as to the statutory
meanings and not to create ambiguity where none existed.” 1A Singer
§ 18:7, at 78–79. We have used this principle—along with our other
statutory interpretation rules—to exclude “claims for purely economic
loss or non-torts” from the Iowa Comparative Fault Act despite a
statutory definition including breach of warranty within the meaning of
“fault.” Flom v. Stahly, 569 N.W.2d 135, 140–41 (Iowa 1997). Similarly,
the title of section 613.18, “Limitation on product liability of
nonmanufacturers,” indicates the statutory immunity limits product
liability claims for personal injury or other property damage, not contract
claims for damage to the product itself.
Moreover, words must be interpreted in context. U.S. Bank Nat’l
Ass’n v. Lamb, 874 N.W.2d 112, 117–18 (Iowa 2016). The
noscitur a sociis canon of construction “summarizes [a] rule of both
language and law that the meanings of particular words may be
indicated or controlled by associated words.” Peak v. Adams, 799
N.W.2d 535, 547–48 (Iowa 2011) (quoting 11 Richard A. Lord, Williston
16
on Contracts § 32:6, at 432 (4th ed. 1999)). Section 613.18 couples the
phrases “strict liability in tort” and “breach of implied warranty of
merchantability.” Context is king, and this juxtaposition signals the
breach of warranty should be construed to require personal injury or
property damage apart from the product itself, consistent with strict tort
liability and the title of the act.
The legislature knows how to cross-reference the immunity statute
and UCC warranty statute with other enactments. 4 Although the official
version of Iowa Code section 554.2314 includes the editor’s note
“Limitation; § 613.18” at its end, that limitation was added by the Code
editor and is not an indication of the legislature’s intention. If the
legislature had intended the retailer statutory immunity provision to
defeat contractual warranty claims, it could have done so by adding
section 613.18 immunity to the limitations in section 554.2314(1) or to
the exclusion and modification of the warranties statute in section
554.2316. Indeed, considering the express modifications and limitations
on warranties found in sections 554.2316 through .2318, it seems far
more likely that the legislature, if it had intended to do so, would have
provided the implied warranty of merchantability does not apply to a
seller of a product with any design or manufacturing defects in chapter
554 rather than among the tort liability provisions in chapter 613. The
4For example, Iowa Code section 554A.1 governing the sale of livestock expressly
excludes the implied warranties of section 554.2314 when certain disclosures are made.
See, e.g., Iowa Code § 554A.1(1) (“Notwithstanding section 554.2316, subsection 2, all
implied warranties arising under sections 554.2314 and 554.2315 are excluded from a
sale of cattle . . . if the following information is disclosed to the prospective buyer . . . .”).
Conversely, Iowa Code section 455B.803 expressly extends section 613.18’s immunity
to vehicle recyclers. Id. § 455B.803(4) (“A vehicle recycler that performs as required
under a removal, collection, and recovery plan shall be afforded the protections
provided in section 613.18.”).
17
legislature did not cross-reference either statute to the other. Our job is
to harmonize these statutes to give effect to each. Our interpretation
does so.
Contrary to the position advocated by DMFS, section 613.18(1)(a)
cannot be interpreted to grant nonmanufacturing sellers complete
immunity from suit in manufacturing and design defect cases. Such a
construction would run counter to the construction provision in section
554.1104 against implied repeal and to the mandates of Iowa Code
chapter 4 to construe conflicting statutes to give effect to both, promote a
“just and reasonable result,” and promote public interests over private
interests. Iowa Code §§ 4.4, .7; id. § 554.1104. The interpretation
sought by DMFS would effectively invalidate the implied warranty of
merchantability for the majority of consumer and commercial
transactions involving product failure. Further, it would place solely on
the buyer the entire burden of risk of a product purchased for general
use that suffers a manufacturing or design defect but does not injure a
person or cause additional property damage. As a result, this
interpretation could promote adverse behaviors by product consumers.
Here, such a construction would penalize ASI because the pilot of the
aircraft took immediate steps to mitigate any potential damage to the
aircraft or injury to himself, thereby preventing compensable damage.
Moreover, it could encourage reckless behavior so product failure would
result in damage and a compensable claim. This kind of harm to
consumers and its possible result could not have been the legislature’s
intention in passing section 613.18.
We hold a products liability case must exist—requiring that
personal injury or property damage occur due to a manufacturing or
18
design defect—to trigger the immunity provision of section 613.18(1)(a). 5
In so holding, we utilize the same distinctions consistently used in our
cases to determine if a party is liable for damages under tort products
liability law and third-party beneficiary warranty claims. If a defective
product results only in economic loss, we only allow the buyer to bring a
claim under an express warranty for direct economic losses against a
remote seller and warranty claims for consequential economic losses
against the seller in privity with them unless disclaimed. See Tomka,
528 N.W.2d at 108; Beyond the Garden Gate, 526 N.W.2d at 310. Once
any property damage or personal injury exists resulting from a
manufacturing or product defect, the manufacturer becomes the liable
party under tort law and Iowa Code section 554.2318. The manufacturer
then has access to the tort defenses and any permissible disclaimers
made in the warranty. See Iowa Code §§ 554.2316, .2318; id. § 668.12
(products liability defenses). In economic loss cases, the immediate seller
is liable for the breach of implied warranty, subject to any warranty
exclusions, modifications, or disclaimers found in the sales contract. Id.
§ 554.2316.
IV. Conclusion.
For the reasons stated, we conclude the district court erred in its
application of Iowa Code section 613.18(1)(a) in a case limited to
economic losses. Section 613.18(1)(a) immunity only applies to claims
that include claims of personal injury or property damage. The decision
of the court of appeals is therefore affirmed in part and vacated in part,
5The federal court also uses this interpretation: “[Defendant]’s statutory
protection [under section 613.18(1)(a)] from claims of breach of the implied warranty of
merchantability is co-extensive with its statutory protection from product defect
claims.” Nationwide Agribusiness Ins. Co. v. SMA Elevator Constr. Inc., 816 F. Supp. 2d
631, 666 (N.D. Iowa 2011).
19
and the district court summary judgment dismissing ASI’s implied
warranty claim is reversed. The case is remanded for further
proceedings consistent with this opinion.
DECISION OF COURT OF APPEALS AFFIRMED IN PART AND
VACATED IN PART; DISTRICT COURT JUDGMENT REVERSED AND
REMANDED.
All justices concur except Wiggins, Mansfield, and Zager, JJ., who
dissent.
20
#14–0632, Des Moines Flying Serv., Inc. v. Aerial Servs., Inc.
WIGGINS, Justice (dissenting).
The interpretation of section 613.18 the majority adopts does not
reflect the intent of the legislature. In interpreting a statute, we observe
the following rules:
The goal of statutory construction is to determine legislative
intent. We determine legislative intent from the words
chosen by the legislature, not what it should or might have
said. Absent a statutory definition or an established
meaning in the law, words in the statute are given their
ordinary and common meaning by considering the context
within which they are used. Under the guise of
construction, an interpreting body may not extend, enlarge
or otherwise change the meaning of a statute.
Auen v. Alcoholic Beverages Div., 679 N.W.2d 586, 590 (Iowa 2004)
(citations omitted).
The statute in question provides,
A person who is not the assembler, designer, or
manufacturer, and who wholesales, retails, distributes, or
otherwise sells a product is:
a. Immune from any suit based upon strict liability in
tort or breach of implied warranty of merchantability which
arises solely from an alleged defect in the original design or
manufacture of the product.
b. Not liable for damages based upon strict liability in
tort or breach of implied warranty of merchantability for the
product upon proof that the manufacturer is subject to the
jurisdiction of the courts of this state and has not been
judicially declared insolvent.
Iowa Code § 613.18(1) (2009).
Section 613.18 is not ambiguous; rather, its plain language
precludes courts awarding any damages in suits based on strict liability
or breach of implied warranty brought against nonmanufacturers due to
alleged design or manufacturing defects. Had the legislature intended to
21
extend immunity to nonmanufacturers in suits based on strict liability or
breach of implied warranty unless an alleged defect resulted in purely
economic losses, it could have done so by adding additional language to
section 613.18. Instead, the legislature enacted a bill that created broad
statutory immunity from such claims for nonmanufacturers and
contained no language limiting that immunity based on the damages
claimed. The majority opinion ignores the meaning of the plain language
of the statute to eliminate immunity for nonmanufacturers in strict
liability and breach of implied warranted suits involving purely economic
losses. Because the plain language clearly precludes recovery regardless
of what damages are claimed, we cannot ignore it to fashion a remedy.
Moreover, the legislative history of section 613.18 clearly
demonstrates that, under a proper interpretation of the statute,
nonmanufacturers are not liable for any damages in suits alleging strict
liability or breach of implied warranty based on alleged design or
manufacturing defects in products they did not design or manufacture.
As early as 1970, we established the principle that a person may collect
purely economic damages in suits for breach of an implied warranty
under the Uniform Commercial Code. 6 W & W Livestock Enters., Inc. v.
Dennler, 179 N.W.2d 484, 488 (Iowa 1970). Thus, by 1986 when the
legislature enacted section 613.18, it was well-settled law that purely
economic losses were recoverable as damages in breach of warranty
suits. This fact indicates we should not interpret section 613.18 to limit
nonmanufacturers’ statutory immunity in breach of implied warranty
suits involving defective products they did not design or manufacture to
6The legislature refers to chapter 554 as the Uniform Commercial Code. Iowa
Code § 554.1101.
22
cases in which the alleged defect caused property damage or personal
injury.
The title of the bill the legislature enacted in 1986 clearly indicated
the provision to be codified at section 613.18 was intended to “limit[] the
liability of nonmanufacturers for claims based upon strict liability in tort
or breach of implied warranty.” S.F. 2265, 71st G.A., 2nd Sess. (Iowa
1986). The attached bill explanation made clear that if the bill passed,
nonmanufacturers would be “liable for damages . . . only where the
original manufacturer is not subject to service or has been judicially
declared insolvent” in suits for damages in strict liability or breach of
implied warranty suits based solely on alleged design or manufacturing
defects in a product. Id. explanation.
Though the legislature knew Iowa recognized breach of implied
warranty as a viable cause of action in cases involving purely economic
losses, it enacted a bill granting broad statutory immunity from breach of
implied warranty claims to nonmanufacturers. The bill plainly did not
contain an exception to that statutory immunity for breach of implied
warranty claims resulting in purely economic losses. Even the Code
editor recognized the legislature’s enactment of section 613.18
unambiguously limited claims for breach of implied warranty against
nonmanufacturing merchants. Thus, the Code editor added a note to the
1987 Code following section 554.2314 indicating section 613.18
constituted a “Limitation” on the availability of breach of implied
warranty claims provided for in that section. Iowa Code § 554.2314
(1987).
The note indicating section 613.18 constitutes a “Limitation” on
the scope of claims available under section 554.2314 has appeared in
every subsequent edition of the Code. See Iowa Code § 554.2314 (2015).
23
Yet the legislature has not acted. Surely, if the legislature thought the
Code editor incorrectly interpreted section 613.18 to limit the scope of
claims that may be brought under section 554.2314, it would have
enacted clarifying legislation by now.
The majority asserts interpreting section 613.18(1)(a) to grant
nonmanufacturers complete immunity from suit in manufacturing and
design defect cases would impliedly repeal the cause of action afforded
against sellers under section 554.2314. However, the majority does not
deny the legislature’s subsequent passage of section 613.18 was
intended to limit the cause of action provided for in section 554.2314.
This dispute concerns the scope of that limit. The majority has grafted a
limiting principle onto section 613.18(1)(a) that has no basis in the text
of either section 613.18 or section 554.2314.
In contrast, my interpretation of section 613.18 gives the words the
legislature adopted in that section their clearly intended effect. Section
613.18(1)(a) grants nonmanufacturers immunity from strict liability and
breach of warranty claims arising due to product defects. Iowa Code
§ 613.18(1)(a). Section 613.18(1)(b) clarifies that a nonmanufacturer
may conclusively establish it is not liable for damages when such claims
are brought against it by proving the courts of this state have jurisdiction
over the product manufacturer and the product manufacturer has not
been declared insolvent. Id. § 613.18(1)(b). Section 554.2314 permits
breach of warranty claims not premised on product defects against
nonmanufacturing merchant sellers. Unlike the interpretation adopted
by the majority, this interpretation gives effect to section 554.2314
without grafting an arbitrary limit onto the plain language of section
613.18.
24
Under a proper interpretation of section 613.18(1), Des Moines
Flying Service is not liable for any damages for breach of implied
warranty based on the alleged manufacturing defect in the windshield it
did not manufacture, including damages based on purely economic loss.
The majority has narrowed the statutory immunity that section 613.18
grants nonmanufacturers in claims based on design or manufacturing
defects by crafting an exception to it. Had the legislature intended to
create such narrow statutory immunity for nonmanufacturers, it could
have done so. However, the statutory text provides no indication that
was its intent. I cannot agree with the majority’s reasoning or its
conclusion. Therefore, I dissent.
Mansfield and Zager, JJ., join this dissent.