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Bagel v. American Honda Motor Co.





Appeal from the Circuit Court of Cook County; the Hon. Thomas R. Rakowski, Judge, presiding.


Plaintiff, William J. Bagel, filed this action against defendant-appellee American Honda Motor Company, Inc., and defendant Carr's Motorcycle Division seeking to recover damages for the repair, loss of use and loss of value for a Honda motorcycle. No personal injury or other property damage was sustained. Plaintiff sought recovery under theories of negligence, strict products liability and breach of implied warranty. Pursuant to section 2-615(a) of the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-615(a)), the trial court dismissed with prejudice both counts of plaintiff's complaint against American Honda.

Plaintiff purchased a used Honda CX500 motorcycle from Fred Humphreys, the original purchaser, in 1979. American Honda had provided an express limited warranty to Humphreys. This warranty was expressly given to the first retail purchaser only and was not transferable to subsequent owners. It provided coverage for six months from the date of purchase or 6,000 miles. The express limited warranty limited all implied warranties to the duration of the written guaranty and specifically disclaimed responsibility for all consequential damages.

In November 1978, American Honda undertook a recall campaign of its CX500 motorcycles to correct a possible cam chain defect, which would cause breakage and engine lock-up. Pursuant to the recall directive, Carr's Honda modified and repaired Humphreys' motorcycle. On April 19, 1981, while plaintiff's motorcycle was idling in his garage, the engine seized and the motorcycle ceased operating. Plaintiff did not sustain personal injury and there was no property damage other than to the motorcycle.

In 1983, plaintiff filed a three-count complaint against American Honda and Carr's Honda. Plaintiff alleged that the engine seizure was a direct result of cam chain breakage, causing a complete mechanical failure of the motorcycle. Count I alleged that American Honda negligently designed and manufactured the motorcycle and that its defective condition was unreasonably dangerous to plaintiff and his property. Count II alleged that Carr's Honda negligently repaired the cam shaft mechanism prior to the engine seizure. Count III alleged that American Honda breached an implied warranty of merchantability pursuant to the Uniform Commercial Code. Finally, plaintiff alleged that he sustained damages, including cost of repair, loss of use, of profits, and of value of the motorcycle, due to its mechanical failure.

American Honda filed its motion to dismiss, contending that count I of plaintiff's complaint failed to state a cause of action allowing tort recovery for negligence or strict products liability according to the economic loss doctrine set out in Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 435 N.E.2d 443. American Honda also contended that count III failed to state a cause of action for breach of implied warranty pursuant to the terms of the express limited warranty which limited the duration of the implied warranty and type of damage recoverable. The trial court granted American Honda's motion to dismiss both counts of the complaint directed against it. Count II of plaintiff's complaint remains pending in the trial court against Carr's Honda.

• 1, 2 In ruling upon a motion to dismiss, all well-pleaded facts in the complaint are taken as true and all reasonable inferences are drawn in favor of the opponent. (Palatine National Bank v. Greengard Associates, Inc. (1983), 119 Ill. App.3d 376, 456 N.E.2d 635.) A motion to dismiss, however, does not admit conclusions of law or fact which are unsupported by allegations of specific facts. (Harvey v. Mackay (1982), 109 Ill. App.3d 582, 440 N.E.2d 1022.) A complaint should not be dismissed for failure to state a cause of action unless it clearly appears that no set of facts could be proved entitling plaintiff to relief. (Palatine National Bank v. Greengard Associates (1983), 119 Ill. App.3d 376, 456 N.E.2d 635.) Moreover, the granting of a motion to dismiss is within the sound discretion of the trial court. Harvey v. Mackay (1982), 109 Ill. App.3d 582, 430 N.E.2d 1022.

• 3 Plaintiff initially contends that the complaint, which alleges only damage to a defective product and resulting losses, states a cause of action allowing tort recovery. Both parties agree that Moorman and Vaughn v. General Motors Corp. (1984), 102 Ill.2d 431, 466 N.E.2d 195, are controlling. Plaintiff contends that damages to a motorcycle caused by a defective cam chain in the engine which posed a risk of harm to plaintiff and his property are the type of loss for which tort recovery is allowed. Defendant counters that the present allegations preclude recovery under Moorman and Vaughn.

In Moorman, the court delineated the scope of tort and contract actions for economic losses caused by defective products. The court held that physical injury to a person or his property was compensable under tort theories of strict products liability or negligence where plaintiff has been exposed to unreasonable risk of injury. On the other hand, economic loss resulting from a qualitative defect in a product was within the realm of contract law which protected a consumer's expectation interests. In a situation where the harm alleged is damage to a product itself, the court distinguished between physical property damage (tort remedy) and economic loss (contract remedy). Quoting with approval the reasoning of Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co. (3d Cir. 1981), 652 F.2d 1165, the court stated:

"`In drawing this distinction [between physical damage and economic loss] the items for which damages are sought, such as repair costs, are not determinative. Rather, the line between tort and contract must be drawn by analyzing interrelated factors such as the nature of the defect, the type of risk, and the manner in which the injury arose. These factors bear directly on whether the safety-insurance policy of tort law or the expectation-bargain protection policy of warranty law is most applicable to a particular claim.' [Citation.]" (Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 85, 435 N.E.2d 443.)

The court further explained the distinction by focusing on the element of causation to determine the type of loss involved:

"`When the defect causes an accident "involving some violence or collision with external objects," the resulting loss is treated as property damage. On the other hand, when the damage to the product results from deterioration, internal breakage, or other non-accidental causes, it is treated as economic loss. * * *' [Citation]." (91 Ill.2d 69, 83, 435 N.E.2d 443.)

See also Vaughan v. General Motors Corp. (1983), 118 Ill. App.3d 201, 454 N.E.2d 740, aff'd (1984), 102 Ill.2d 431, 466 N.E.2d 195.

In Moorman, the supreme court found that the type of loss resulting from a crack in a grain storage tank was economic loss for which there was no recovery in tort. Although plaintiff had alleged a "sudden and violent" occurrence, the court concluded that since the crack had developed over a period of time the harm resulted from a qualitative defect. In Vaughan, the court held that plaintiff had stated a cause of action based on strict products liability where plaintiff's truck sustained damage due to an accident involving defective brakes. Plaintiff was driving the truck when the brakes locked, causing the truck to overturn. The court reiterated the distinction announced in Moorman between physical harm or property ...

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