Vanalstine v. Land O'Lakes Purina Feeds, LLC

326 Mich.App. 641

929 N.W.2d 789

Ron VANALSTINE, and Joan Vanalstine, Plaintiffs-Appellants,

v.LAND O'LAKES PURINA FEEDS, LLC, Defendant-Appellee,andDiversified Farms, LLC, Defendant.

Ron Vanalstine, and Joan Vanalstine, Doing Business as Roljos Dairy, Plaintiffs-Appellants,

v.Land O'Lakes Purina Feeds, LLC, Defendant-Appellee,andDiversified Farms, LLC, Defendant.

No. 340150

No. 342990

Court of Appeals of Michigan.

Submitted November 6, 2018, at Lansing.

Decided December 27, 2018, 9:05 a.m.

Bosch Killman VanderWal, PC (by Kurt R. Killman, Grand Rapids) for plaintiffs.

Honigman Miller Schwartz & Cohn LLP, Kalamazoo (by Christopher E. Tracy ) and Jonathan C. Miesen for Land O’Lakes Purina Feeds LLC.

Before: Riordan, P.J., and Ronayne Krause and Swartzle, JJ.

Swartzle, J.

An implied warranty, once disclaimed, cannot be revived by the inadequacy of an express warranty’s remedy. This rule of law is fatal to plaintiffs' claims of breach of implied warranty under Michigan’s version of the Uniform Commercial Code, and thus we affirm summary disposition against plaintiffs. On the matter of taxable costs, we vacate in part the trial court’s order taxing costs and remand for correction.

I. BACKGROUND

Plaintiffs operate a dairy farm in Eaton County. Land O’Lakes Purina Feeds LLC (defendant) is a Minnesota corporation that manufactures and distributes animal feed and related products. Diversified Farms, LLC (Diversified) is a distributor of those products in Michigan. In July 2008, Diversified executed a Credit Application and Agreement (the Credit Agreement) with defendant that included a disclaimer of warranties and a remedy-limiting provision. Plaintiffs were not parties to the Credit Agreement.

In early 2013, plaintiffs entered into an oral contract with Diversified in which Diversified agreed to supply defendant’s products to plaintiffs. The two products at issue are a dairy-protein supplement and a dry-cow supplement, which are concentrates that are mixed with grain, haylage, and silage before being fed to dairy cattle.

Plaintiffs also purchased from Diversified a salt-and-mineral supplement commonly referred to as "SE-90," which was not defendant’s product. SE-90 was provided to the herd on a "free choice" basis, meaning that the cattle could eat as much or as little of it as they wanted.

Plaintiffs began to notice that the herd showed signs of sickness a few months after entering the oral contract with Diversified. It was ultimately determined that the herd suffered from iodine toxicity. After performing tests of the feed, plaintiffs concluded that defendant’s products sickened the herd. Defendant disagreed, arguing that the iodine toxicity came from another source, likely the SE-90.

Plaintiffs sued, alleging that defendant’s products caused iodine toxicity in plaintiffs' herd and, as a result, defendant breached the implied warranties of merchantability and fitness for a particular purpose under the Uniform Commercial Code (UCC). Defendant moved for summary disposition under MCR 2.116(C)(10), arguing that it effectively disclaimed the implied warranties under the following paragraphs of the Credit Agreement:

17. DISCLAIMER OF WARRANTIES. SUPPLIER EXCLUDES AND DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY GOODS SOLD TO APPLICANT. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES, WHICH EXTEND

BEYOND THE WARRANTIES EXPRESSLY STATED ON THE FACE OF ANY SUCH PRODUCT.

18. EXCLUSIVE REMEDY. Applicant’s sole and exclusive remedy for claims made against Supplier (including, without limitation, claims for breach of contract, breach of warranty, negligence, or strict liability) are limited to the replacement of any products sold or services provided. Supplier is not responsible and Applicant expressly agrees to hold Supplier harmless for any special, indirect, consequential, exemplary, incidental, or additional damages.

The Credit Agreement also contained a choice-of-law provision designating Minnesota law as the applicable state law.

Applying Michigan’s version of the UCC, the trial court found that the disclaimer of implied warranties in paragraph 17 was effective because it adhered to the statutory requirements. Plaintiffs maintained that the remedy limitation in paragraph 18 failed of its essential purpose, thereby invalidating the disclaimer found in paragraph 17 and allowing them to recover under the standard warranty provisions of the UCC. The trial court disagreed, concluding that a failure of a remedy does not revive effectively disclaimed implied warranties. Accordingly, the trial court granted defendant’s motion for summary disposition.

After the trial court granted summary disposition, defendant submitted a proposed taxation of costs, requesting $4,982.26. Plaintiffs filed an objection, arguing that the costs requested were not authorized by statute. Defendant filed an amended taxation of costs and sought a revised amount of $3,331.20. Concluding that the amended taxation was authorized and not extraordinary, the trial court taxed costs against plaintiffs.

Plaintiffs appealed both rulings of the trial court.

II. ANALYSIS

A. STANDARD OF REVIEW

"A motion for summary disposition under MCR 2.116(C)(10) tests the factual sufficiency of a claim and is appropriately granted when, except as to the amount of damages, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." TOMRA of North America, Inc. v. Dep't of Treasury , 325 Mich. App. 289, 294, 926 N.W.2d 259 (2018). We review de novo issues of statutory and contractual interpretation. Heritage Resources, Inc. v. Caterpillar Fin. Servs. Corp. , 284 Mich. App. 617, 632, 774 N.W.2d 332 (2009).

We review a trial court’s ruling on a motion to tax costs for an abuse of discretion. Ivezaj v. Auto Club Ins. Ass'n , 275 Mich. App. 349, 367, 737 N.W.2d 807 (2007). "An abuse of discretion occurs when the court’s decision falls outside the range of principled and reasonable outcomes." Guerrero v. Smith , 280 Mich. App. 647, 660, 761 N.W.2d 723 (2008). "[W]hether a particular expense is taxable as a cost is a question of law" that this Court reviews de novo. Id . at 670, 761 N.W.2d 723.

B. CHOICE OF LAW

In a footnote in their appellate brief, plaintiffs argue that this Court should apply Minnesota law to this dispute because of the choice-of-law provision in the Credit Agreement. "When determining the applicable law, the expectations of the parties must be balanced with the interests of the states." Hudson v. Mathers , 283 Mich. App. 91, 96, 770 N.W.2d 883 (2009). "The parties' choice of law should be applied if the issue is one the parties could have resolved by an express contractual provision." Id . This Court, however, will not defer to the parties' choice of law if "(1) the chosen state has no substantial relationship to the parties or the transaction," "(2) there is no reasonable basis for choosing that state’s law," or (3) when applying the chosen state’s law "would be contrary to the fundamental policy of a state that has a materially greater interest than the chosen state in the determination of the particular issue and whose law would be applicable in the absence of an effective choice of law by the parties." Id . at 96-97, 770 N.W.2d 883.

The Credit Agreement was executed by defendant, a Minnesota corporation, and Diversified, a Michigan limited-liability company. If defendant and Diversified were the only parties to this dispute, then it appears that there would be little question that Minnesota law would apply per the Credit Agreement’s choice-of-law provision. Yet, Diversified was dismissed from the lawsuit, and plaintiffs were not parties to the Credit Agreement.

At no time before this appeal have plaintiffs argued that Minnesota law applies to this case. Rather, only after the trial court granted defendant’s motion for summary disposition—applying Michigan law—did plaintiffs argue that this state’s law was inapplicable. On appeal, plaintiffs have not provided any argument as to why the choice-of-law provision should apply to them despite not being a party to the Credit Agreement. Moreover, plaintiffs do not argue that the choice between Michigan or Minnesota law is outcome-determinative, and, indeed, the two states have both adopted the same model provisions of the UCC at issue here. Compare MCL 440.2316 with Minn Stat 336.2-316. Thus, because Michigan law has been applied from the outset and plaintiffs have not provided any support for their argument that Minnesota law should apply, we apply Michigan law to this dispute. Hudson , 283 Mich. App. at 97, 770 N.W.2d 883.

C. EXPRESS WARRANTY

Moving to the merits of plaintiffs' claims, plaintiffs first argue that the trial court erred by granting summary disposition because the record shows that defendant breached an express warranty. Plaintiffs did not, however, assert a claim of breach of an express warranty in their complaint, nor did they otherwise raise the issue before the trial court. On appeal, plaintiffs did not include the issue in their statement of questions presented. Therefore, we decline to address the issue in the first instance on appeal. Orion Twp. v. State Tax Comm. , 195 Mich. App. 13, 18, 489 N.W.2d 120 (1992).

D. IMPLIED WARRANTIES

Plaintiffs' primary argument on appeal is that the limited remedy in paragraph 18 of the Credit Agreement failed of its essential purpose and, as a result, the disclaimers of implied warranties in paragraph 17 were ineffective. Michigan’s version of Article 2 of the UCC, MCL 440.2101 et seq ., governs the transactions of the sale of goods. "Every contract for the sale of goods under Article 2 of the [UCC] includes implied warranties of merchantability and fitness for a particular purpose." Lumber Mut. Ins. Co. v. Clarklift of Detroit, Inc. , 224 Mich. App. 737, 739, 569 N.W.2d 681 (1997), citing MCL 440.2314 and MCL 440.2315. "The warranty of merchantability requires that...