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Indiana Farm Bureau as Subrogee of Lemler v. CNH Industrial America, LLC

Court of Appeals of Indiana

July 24, 2019

Indiana Farm Bureau as Subrogee of Chester Lemler, Garry Lemler, and Zak Lemler, Appellant-Plaintiff,
v.
CNH Industrial America, LLC and Bane-Welker Equipment, LLC, Appellees-Defendants.

          Appeal from the Marshall Circuit Court The Honorable Curtis D. Palmer, Judge Trial Court Cause No. 50C01-1710-PL-48

          ATTORNEYS FOR APPELLANT Cameron A. Morgan Michelle A. Cobourn-Baurley McNeely Stephenson Shelbyville, Indiana

          ATTORNEYS FOR APPELLEE BANE-WELKER EQUIPMENT, LLC Daniel W. Glavin Kathleen M. Erickson O'Neill McFadden & Willett LLP Schererville, Indiana

          ATTORNEYS FOR APPELLEE CNH INDUSTRIAL AMERICA, LLC Nicholas C. Pappas Maggie L. Smith Jessica Williams Schnelker Frost Brown Todd LLC Indianapolis, Indiana

          KIRSCH, JUDGE.

         [¶1] Indiana Farm Bureau Insurance ("Farm Bureau") appeals the trial court's grant of summary judgment in favor of CNH Industrial America, LLC ("CNH Industrial") and Bane-Welker Equipment, LLC ("Bane-Welker") in Farm Bureau's action seeking subrogation from CNH Industrial and Bane-Welker for payment Farm Bureau paid to its insureds for damages to farm equipment. On appeal, Farm Bureau contends that the trial court erred in granting summary judgment in favor of Bane-Welker and CNH Industrial, specifically raising the following issues:

I. Whether Bane-Welker effectively disclaimed the implied warranty of merchantability by the language used in the documents signed at the time of purchase;
II. Whether the Corn Head is considered "other property" under Indiana law such that tort recovery for damages to the Corn Head is barred by the economic loss doctrine; and
III. Whether Farm Bureau's claim for negligent service of the Combine is barred by the economic loss doctrine.

         [¶2] We affirm.

         Facts and Procedural History[1]

         [¶3] Tri L Farms ("the Farm") was formed in 1985 and operates as a commercial farm, growing, harvesting, and selling corn and soybeans. Appellant's App. Vol. 3 at 73-75, 100. The Farm is owned and operated by Garry Lemler ("Garry") and Zak Lemler ("Zak") in equal partnership with their father, Chester Lemler. Id. at 73-74, 99-100. In its operation as a commercial farm, the Farm uses a combine to harvest its corn and soybean crops. Id. at 81. A combine is "a harvesting machine that heads, threshes, and cleans grain while moving over a field." https://www.merriam-webster.com /dictionary /combine (last visited May 30, 2019). When harvesting crops, a combine must have a "head" attached to the front of the combine, which feeds the crop into the combine so that the combine can process and harvest the crop. Appellant's App. Vol. 3 at 81-82. When the Farm harvests its corn crops, it uses a "corn head" attached to the combine, and without the corn head attached, a combine cannot harvest corn. Id. at 81-82, 91-92.

         [¶4] The Farm likes to replace its combines and corn heads every two or three years, and, in preparation for the 2015 harvest season, the Farm decided to trade in its existing combine and corn head and purchase updated models. Id. at 101-02. At that time, Garry was a salesman for Bane-Walker, in addition to owning and operating the Farm. Id. at 77. Prior to the beginning of the 2015 harvest season, Garry arranged for the Farm to purchase from Bane-Welker a used Case IH 8230 combine ("the Combine") in January 2015 and a used Case IH 4412F-30 corn head ("the Corn Head") in August 2015. Id. at 84; Appellant's App. Vol. 4 at 70. Both the Combine and the Corn Head had been manufactured by CNH Industrial. Appellant's App. Vol. 2 at 20. CNH Industrial had no involvement in the 2015 retail transactions between Bane-Welker and the Farm.

         [¶5] As part of the purchase of both the Combine and the Corn Head, the Farm executed, in January 2015, a Retail Purchase Order and Security Agreement ("the Purchase Order") and a Retail Installment Sale Contract and Security Agreement ("the Sale Contract") for the Combine and, in August 2015, a Retail Purchase Order and Security Agreement ("the Purchase Order") and a Retail Installment Sale Contract and Security Agreement ("the Sale Contract") for the Corn Head. Appellant's App. Vol. 3 at 56-58, 118-20; Appellant's App. Vol. 4 at 70-71, 73-75. Garry completed these forms on behalf of Bane-Welker, as the salesperson on the transactions, and Zak signed the documents on behalf of the Farm. Appellant's App. Vol. 3 at 86-87, 105-06.

         [¶6] The Purchase Order for the Combine contained the following provisions, informing the Farm that it must: "1. Read this contract before you sign it;" and "4. The additional terms and conditions set forth on the reverse side are a part of this contract and are incorporated herein by reference." Id. at 56 (emphasis added). On the reverse side of the Purchase Order in the center of the page, under the headings, "WARRANTY" and "USED EQUIPMENT," which were in all caps and bold typeface, the following language appeared: "USED EQUIPMENT covered by this Purchase Order is sold AS-IS, WHERE IS, WITH NO REPRESENTATIONS OR WARRANTIES, other than those stated on the reverse side for equipment 5 years old or newer." Id. at 58. The Purchase Order for the Corn Head contained identical language. Appellant's App. Vol. 4 at 70-71. Garry and Zak testified they received these terms and conditions on behalf of the Farm when they received the Purchase Order and that they understood the terms and conditions associated with the "USED EQUIPMENT" warranty provisions applied to their purchase. Appellant's App. Vol. 3 at 87-88, 107-08. Both Garry and Zak also stated that they were aware and understood that the Combine, because it was used, did not come with any warranties. Id. at 80-81, 104-05.

         [¶7] In addition to the Purchase Orders, the Farm also executed the Sale Contracts as part of its purchase of the Combine and the Corn Head. Id. at 118-20; Appellant's App. Vol. 4 at 73-75. Each of the Sale Contracts spelled out the financial terms and secured the financial consideration of the transaction. Appellant's App. Vol. 3 at 66. The first page of the Sale Contract for the Combine provided, just above the signature lines, "DO NOT SIGN THIS BEFORE YOU READ THE TERMS ON THE THREE AGREEMENT PAGES (PLUS ANY ADDENDUMS), EVEN IF OTHERWISE ADVISED." Id. at 118. At the top of the second page of the Sale Contract, it specifically stated in all capital letters "NO WARRANTY." Id. at 119. It further stated, "THE EQUIPMENT IS SOLD AS IS AND WITH ALL FAULTS . . . . NEITHER SELLER NOR MANUFACTURER MAKE ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AND SPECIFICALLY DISCLAIM THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE." Id. The Sale Contract for the Corn Head contained identical language. Appellant's App. Vol. 4 at 73-74. Garry and Zak acknowledged receiving all three pages of the Sale Contract. Appellant's App. Vol. 3 at 89, 110-11.

         [¶8] On October 29, 2016, the Combine and the attached Corn Head were being used to harvest the Farm's corn crops when the Combine caught fire, which resulted in complete destruction of the Combine and the Corn Head, allegedly causing damage in the amount of $357, 699. Appellant's App. Vol. 2 at 21. At the time of this property damage, the Combine and the Corn Head were insured under a single Farmowners Policy issued by Farm Bureau. Appellant's App. Vol. 4 at 7. Farm Bureau provided payment to the Farm for the property damage to the Combine and the Corn Head and then filed a complaint, as subrogee of the Lemlers, against CNH Industrial and Bane-Welker to recover that payment. Appellant's App. Vol. 2 at 19-25.

         [¶9] In the complaint, Farm Bureau asserted a product liability claim, seeking tort damages against CNH Industrial and Bane-Welker for the damage to the Combine and the Corn Head. Id. Farm Bureau also asserted a breach of implied warranty of merchantability against Bane-Welker and a separate negligence claim against Bane-Welker for improperly servicing the Combine after purchase. Id. CNH Industrial and Bane-Welker sought summary judgment on the product liability claim, arguing the tort claim for property damage to the Combine and the Corn Head was barred by the economic loss doctrine. Appellant's App. Vol. 3 at 27-29; Appellant's App. Vol. 4 at 97-100. In response, Farm Bureau conceded that the economic loss doctrine barred any tort claim for property damage to the Combine but asserted that its claim for damage to the Corn Head was not barred by the economic loss doctrine because the Corn Head is considered "other property," which is not precluded from recovery of damages. Appellant's App. Vol. 3 at 157-160. Bane-Welker also sought summary judgment against the breach of warranty and negligence claims asserted by Farm Bureau, arguing that all implied warranties had been disclaimed and that the negligence claim against it was barred by the economic loss doctrine. Id. at 15-37; Appellant's App. Vol. 4 at 96-108. The trial court granted summary judgment in favor of CNH Industrial and Bane-Welker as to all of Farm Bureau's claims. Appellant's App. Vol. 2 at 17. Farm Bureau now appeals.

         Discussion and Decision

         [¶10] When reviewing the grant of summary judgment, our standard of review is the same as that of the trial court. FLM, LLC v. Cincinnati Ins. Co., 973 N.E.2d 1167, 1173 (Ind.Ct.App. 2012) (citing Wilcox Mfg. Grp., Inc. v. Mktg. Servs. of Ind., Inc., 832 N.E.2d 559, 562 (Ind.Ct.App. 2005)), trans. denied. We stand in the shoes of the trial court and apply a de novo standard of review. Id. (citing Cox v. N. Ind. Pub. Serv. Co., 848 N.E.2d 690, 695 (Ind.Ct.App. 2006)). Our review of a summary judgment motion is limited to those materials designated to the trial court. Ind. Trial Rule 56(H); Thornton v. Pietrzak, 120 N.E.3d 1139, 1142 (Ind.Ct.App. 2019), trans. denied. Summary judgment is appropriate only where the designated evidence shows there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. T.R. 56(C). For summary judgment purposes, a fact is "material" if it bears on the ultimate resolution of relevant issues. FLM, 973 N.E.2d at 1173. We view the pleadings and designated materials in the light most favorable to the non-moving party. Id. Additionally, all facts and reasonable inferences from those facts are construed in favor of the non-moving party. Id. (citing Troxel Equip. Co. v. Limberlost Bancshares, 833 N.E.2d 36, 40 (Ind.Ct.App. 2005), trans. denied). The initial burden is on the moving party to demonstrate the absence of any genuine issue of fact as to a determinative issue, at which point the burden shifts to the non-movant to come forward with contrary evidence showing an issue for the trier of fact. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014).

         [¶11] A trial court's grant of summary judgment is clothed with a presumption of validity, and the party who lost in the trial court has the burden of demonstrating that the grant of summary judgment was erroneous. Henderson v. Reid Hosp. and Healthcare Servs., 17 N.E.3d 311, 315 (Ind.Ct.App. 2014), trans. denied. We will affirm upon any theory or basis supported by the designated materials. Id. When a trial court grants summary judgment, we carefully scrutinize that determination to ensure that a party was not improperly prevented from having his or her day in court. Id.

         I. Implied Warranty of Merchantability

         [¶12] Indiana's version of the Uniform ...


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