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Anixter Bros, Inc. v. Cen. Steel & Wire

OPINION FILED MAY 2, 1984.

ANIXTER BROTHERS, INC., D/B/A ANIXTER COMMUNICATIONS SYSTEMS, PLAINTIFF-APPELLEE,

v.

CENTRAL STEEL & WIRE COMPANY, DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT (BRIDGEPORT BRASS COMPANY, THIRD-PARTY DEFENDANT-APPELLEE).



Appeal from the Circuit Court of Cook County; the Hon. Myron T. Gomberg, Judge, presiding.

PRESIDING JUSTICE RIZZI DELIVERED THE OPINION OF THE COURT:

Plaintiff, Anixter Brothers, Inc., brought an action against defendant, Central Steel & Wire Company, to recover damages resulting from defective brass tubing. In turn, Central brought a third-party action against third-party defendant Bridgeport Brass Company. Bridgeport filed a motion to dismiss Central's amended third-party complaint, which was allowed. Central appeals from the dismissal order. We affirm the dismissal of counts 1 and 2 of the amended third-party complaint, reverse the dismissal of counts 3 and 4, and remand.

Anixter manufactures and sells microwave antennas which contain brass tubing as a component part. Central is in the business of selling metal products, including brass tubing. Bridgeport is in the business of manufacturing brass tubing.

Central received a number of purchase orders from Anixter for brass tubing, and it then ordered brass tubing from Bridgeport to fill Anixter's purchase orders. After receiving the tubing from Central, Anixter incorporated the tubing into microwave antenna systems which were sold to its customers.

There was no written contractual indemnity agreement between Bridgeport and Central. However, in the written purchase orders between Bridgeport and Central, Bridgeport expressly warranted that the tubing would have the "minimum label analysis reflected on labels" and "that we have used that degree of care general in our normal manufacturing process, and make no other warranty." In the written purchase orders between Central and Anixter, Central expressly warranted that the tubing would be "of good material and workmanship, and free from defect."

According to the allegations in the amended third-party complaint, after the microwave antennas were sold by Anixter to its customers, the tubing proved to be defectively manufactured, causing the microwave antenna assemblies to crack. As a result, claims for damages were made against Anixter. Anixter then filed an action against Central, seeking to recover damages for the replacement of the tubing and microwave antennas, together with the resulting loss of business, consulting fees, and loss of its overhead and employees' time. The complaint contained two counts. Count 1 alleged a breach of warranty and count 2 alleged a breach of contract. Central tendered the defense of Anixter's suit to Bridgeport, which was refused. Central then filed this third-party action against Bridgeport.

Central's amended third-party complaint consists of four counts, each of which seeks indemnity only. Count 1 is based on a breach of warranty. In count 1, Central alleges that if it breached its warranty to Anixter, it is because Bridgeport breached its warranty to Central. Count 2 is based on breach of contract. In count 2, Central alleges that if Central breached its contract with Anixter, it is because Bridgeport breached its contract with Central. Count 3 seeks indemnity from Bridgeport based on Bridgeport's negligence, and count 4 seeks indemnity from Bridgeport based on product strict liability.

• 1 We first address the issue of whether the amended third-party complaint states contract and warranty actions for indemnity. Since there was no contractual indemnification agreement between Bridgeport and Central, and the warranties between Bridgeport and Central were not the same as the warranties between Central and Anixter, *fn1 we conclude that the amended third-party complaint does not state a contract or warranty action for indemnity. Accordingly, we hold that the trial court properly dismissed counts 1 and 2 of the amended third-party complaint.

• 2 We next address Bridgeport's contention that counts 3 and 4 of the amended third-party complaint are barred under Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 435 N.E.2d 443. We disagree with Bridgeport's contention. Bridgeport argues that Moorman is controlling here because this case involves solely economic loss. *fn2 In our view, we need not decide whether this case involves solely economic loss because this case is controlled by Maxfield v. Simmons (1983), 96 Ill.2d 81, 449 N.E.2d 110, rather than Moorman.

In Moorman, the court stated that the law of sales has been carefully articulated to govern the economic relations between suppliers and consumers of goods, and that to allow tort theories of recovery for economic loss in that context would eviscerate the warranty sections of the Uniform Commercial Code (UCC). (Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 78-79, 435 N.E.2d 443, 447.) Recently, in Foxcroft Townhome Owners Association v. Hoffman Rosner Corp. (1983), 96 Ill.2d 150, 155-57, 449 N.E.2d 125, 127-28, the court referred to Moorman and held that economic losses resulting from failure to construct certain buildings in a workmanlike manner were not recoverable under a negligence theory. *fn3 However, nine days before Foxcroft was decided, the court decided Maxfield. In Maxfield, the court held that the recognition of tort recovery in an implied contract of indemnity action would not eviscerate the provisions of the UCC and that Moorman does not control an implied contract of indemnity action. *fn4

Here, when we consider the alleged cause of Central's damages and the relative positions of the parties to the amended third-party complaint, it is clear that the harm alleged in Central's amended third-party complaint is from a third party's use of the product, and that the third party was not a party to the contract between Bridgeport and Central. Thus, this case involves an implied contract of indemnity action. It follows that this case is controlled by Maxfield. Moorman is simply not applicable. See Maxfield v. Simmons (1983), 96 Ill.2d 81, 85-86, 449 N.E.2d 110, 111-12.

The operative facts in this case are analogous to the operative facts in Maxfield. In Maxfield, the court analogized the facts in that case to those found in a product liability case in which the assembler of a completed product brings an implied contract of indemnity action against a manufacturer of a component part. The court noted that under the latter circumstances, it has held that the assembler of a finished product may recover in an implied contract of indemnity action. The court referred to Liberty Mutual Insurance Co. v. Williams Machine & Tool Co. (1975), 62 Ill.2d 77, 338 N.E.2d 857.

In the present case, the amended third-party complaint alleges acts by Bridgeport that are sufficient to give rise to the right of indemnification in that it was the tortious conduct of Bridgeport or an unreasonably dangerous condition of the product manufactured by Bridgeport that caused the damages. The implied contract of indemnity arose from the relationship between the parties, but the liability, if any, that is imposed on Bridgeport will be the result not of breach of contract, but of tortious conduct on the part of Bridgeport or of an unreasonably dangerous condition of the product manufactured by Bridgeport. Thus, the indemnity here is no different from the indemnity involved in any other product liability case, and there is no more reason to dismiss the amended third-party complaint in this case than there would be to dismiss a third-party complaint for indemnity in any other product liability case. It follows that if we were to hold that the existence of Central's third-party cause of action in implied contract of indemnity is barred in this case, we would be consciously disregarding Maxfield and shunting a whole body of established Illinois law on implied contract of indemnity actions. We therefore hold that the action is not barred.

• 3 We next address the question of whether Central's cause of action for implied contract of indemnity is barred by the four-year limitation period in the UCC for bringing an action. (See Ill. Rev. Stat. 1983, ch. 26, par. 2-725(1).) Although the relationship between Central and Bridgeport may have arisen as the result of a contract, an implied contract of indemnity action is not a contract action. Except to establish the relationship between the parties, contract principles of law are not involved. Thus, the period of ...


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