Ron Vanalstine v. Diversified Farms LLC

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
RON VANALSTINE and JOAN VANALSTINE, UNPUBLISHED
doing business as ROLJOS DAIRY, April 29, 2021
Plaintiffs-Appellants,
v No. 351993
Clinton Circuit Court
DIVERSIFIED FARMS, LLC, LC No. 2018-011808-CK
Defendant-Appellee.
Before: JANSEN, P.J., and RONAYNE KRAUSE and GADOLA, JJ.
PER CURIAM.
In this action regarding the sale of allegedly defective cattle-feed supplements, plaintiffs
appeal as of right the trial court’s order granting summary disposition under MCR 2.116(C)(10) in
favor of defendant. We affirm.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
In 2013, plaintiffs entered into an oral contract with defendant for the purchase of cattle-
feed supplements, at least two of which were manufactured by Land O’Lakes Purina Feeds, LLC
(Purina). In a previous suit, plaintiffs made similar arguments against both defendant and Purina,
although that case only resulted in a decision on the merits as against Purina. VanAlstine v Land
O’Lakes Purina Feeds, LLC, 326 Mich App 641, 646-647; 929 NW2d 789 (2018). When the case
reached this Court on appeal, a set of background facts were provided:
Plaintiffs operate a dairy farm in Eaton County. [Purina] is a Minnesota
corporation that manufactures and distributes animal feed and related products.
[Defendant] is a distributor of those products in Michigan. In July 2008,
[defendant] executed a Credit Application and Agreement (the Credit Agreement)
with [Purina] 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 [defendant] in
which [defendant] agreed to supply [Purina]’s products to plaintiffs. The two
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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 [defendant] a salt-and-mineral
supplement commonly referred to as “SE-90,” which was not [Purina]’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 [defendant]. It was ultimately
determined that the herd suffered from iodine toxicity. After performing tests of
the feed, plaintiffs concluded that [Purina]’s products sickened the herd. [Purina]
disagreed, arguing that the iodine toxicity came from another source, likely the SE-
90.
Plaintiffs sued, alleging that [Purina]’s products caused iodine toxicity in
plaintiffs’ herd and, as a result, [Purina] breached the implied warranties of
merchantability and fitness for a particular purpose under [Michigan’s] Uniform
Commercial Code (UCC)[, MCL 440.1101 et seq]. [Purina] 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.
* * *
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
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remedy does not revive effectively disclaimed implied warranties. Accordingly,
the trial court granted [Purina]’s motion for summary disposition. [VanAlstine, 326
Mich App at 645-647.]
This Court ultimately affirmed the trial court’s decision that Purina’s disclaimer of implied
warranties was enforceable and barred plaintiffs’ claim for violation of those warranties against
Purina. Id. at 651-654.
After losing on the merits against Purina, plaintiffs filed the present lawsuit against
defendant, arguing that defendant breached the implied warranties of merchantability and fitness
for a particular purpose, breached an express warranty regarding the ingredients in the dairy-
protein supplement, and violated the Michigan Commercial Feed Law (MCFL), MCL 287.521 et
seq. Defendant moved for summary disposition of those claims, arguing that Purina’s disclaimer
of the implied warranties barred plaintiffs’ claims in that regard, that defendant and plaintiffs had
not negotiated any express warranties, that plaintiffs’ claims under the UCC were barred by the
statute of limitations, and that the MCFL did not create a private cause of action. Plaintiffs argued
that defendant could not benefit from Purina’s disclaimer of implied warranties, that defendant
created an express warranty by printing an ingredient list on the dairy-protein supplement that did
not mention toxic levels of iodine, that the previous litigation tolled the statute of limitations long
enough to make its current claim timely, and that the MCFL did contain language allowing for a
private cause of action. The trial court considered those arguments and ultimately agreed with
defendant regarding each issue, summarily disposing of all of plaintiffs’ claims and dismissing the
case. This appeal followed.
II. STANDARDS OF REVIEW
A grant or denial of summary disposition is reviewed de novo on the basis of the entire
record to determine if the moving party is entitled to judgment as a matter of law. Maiden v
Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999). When reviewing a motion under MCR
2.116(C)(10), which tests the factual sufficiency of the complaint, this Court considers all evidence
submitted by the parties in the light most favorable to the non-moving party and grants summary
disposition only where the evidence fails to establish a genuine issue regarding any material fact.
Id. at 120. Appellate courts will generally affirm a correct result, even if the trial court’s reasoning
was incorrect. Mulholland v DEC Internat’l Corp, 432 Mich 395, 411 n 10; 443 NW2d 340
(1989). “A genuine issue of material fact exists when reasonable minds could differ on an issue
after viewing the record in the light most favorable to the nonmoving party.” Auto-Owners Ins Co
v Campbell-Durocher Group Painting & Gen Contracting, LLC, 322 Mich App 218, 224; 911
NW2d 493 (2017) (quotation marks and citation omitted). “Questions of statutory interpretation
are also reviewed de novo.” Rowland v Washtenaw Co Road Comm, 477 Mich 197, 202; 731
NW2d 41 (2007). More specifically, “[w]hether a plaintiff has a cause of action under [a] statute
presents a question of statutory interpretation, which we review de novo.” Pitsch v ESE Mich, Inc,
233 Mich App 578, 586; 593 NW2d 565 (1999).
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III. IMPLIED WARRANTIES
Plaintiffs argue that the trial court erred when it concluded that no implied warranties were
created in the sale of cattle-feed supplements from defendant to plaintiffs. We agree in part, but
we conclude that any implied warranty was effectively excluded.
Article 2 of the UCC sets forth two relevant implied warranties. Pursuant to MCL
440.2314(1):
Unless excluded or modified ([MCL 440.2316]), a warranty that the goods shall be
merchantable is implied in a contract for their sale if the seller is a merchant with
respect to goods of that kind. . . .
There is no serious dispute that defendant’s sale of cattle-feed supplements to plaintiffs constituted
a sale of goods under Article 2 of the UCC. MCL 440.2105(1); MCL 440.2102. Defendant is
undisputedly in the business of selling cattle-feed supplements to farmers. Because the procedural
posture of this matter is a review from summary disposition, and in the absence of any argument
or evidence to the contrary, defendant appears to be a “merchant” within the meaning of MCL
440.2104(1) of the UCC. The above implied warranty is therefore applicable unless it was
disclaimed.
The second warranty is set forth in MCL 440.2315:
Where the seller at the time of contracting has reason to know any particular
purpose for which the goods are required and that the buyer is relying on the seller’s
skill or judgment to select or furnish suitable goods, there is unless excluded or
modified under the next section an implied warranty that the goods shall be fit for
such purpose.
Plaintiffs argue that they discussed their need for cattle-feed supplements, for both milking cows
and dry cows, with defendant. However, plaintiffs’ testimony reflects that they only worked with
Paul Samp, who was described as a “nutritionist,” regarding feed supplements. Although plaintiff
Ron VanAlstine thought Samp might have been paid in part by defendant, he conceded he did not
actually know that. Samp is actually a Purina employee. Plaintiff Joan VanAlstine believed Samp
worked for defendant because defendant sent Samp to talk to them when they began buying feed
from defendant. However, she admitted that any negotiations with defendant were conducted by
Ron, and she never personally talked to defendant other than when Ron was present. At a
deposition for the prior appeal, Ron VanAlstine testified that it was common practice for feed
companies to use nutritionists to formulate products for dairy farms.
Ron VanAlstine also admitted he had nothing to show that defendant had any input into
the formulation of Purina’s products. Otherwise, he conceded that defendant did not even store
Purina’s products, but rather acted largely as a delivery agent. At a deposition for the prior appeal,
Ron VanAlstine testified that he had never heard of such a thing as a warranty with entities like
defendant. It is difficult to suppose that defendant would have been ignorant of the purpose for
which plaintiffs purchased the cattle-feed supplements. However, the evidence shows that
plaintiffs relied on Purina’s skill and judgment, not on defendant’s skill and judgment. The implied
warranty set forth in MCL 440.2315 therefore cannot apply.
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Defendant correctly argues that each of the above warranties may be disclaimed under
Article 2 of the UCC pursuant to MCL 440.2316. Defendant observes that this Court previously
established that Purina had properly disclaimed the above warranties in the credit agreement
between Purina and defendant. VanAlstine, 326 Mich App at 653. This Court also agreed that
Purina could enforce that disclaimer against plaintiffs because “[i]f the indirect purchaser seeks to
enforce the manufacturer’s implied warranty, then the indirect purchaser is limited to what the
manufacturer and direct purchaser negotiated.” Id. at 651. Notably, however, because defendant
had been dismissed from the case before the appeal, this Court did not consider whether plaintiffs
could claim violations of the implied warranties arising from the sale of the goods from defendant
to plaintiffs. See id. at 650-654. Defendant argues that it can enforce and benefit from Purina’s
disclaimers under Article 2 of the UCC. We disagree.
Both MCL 440.2314(1) and MCL 440.2315 plainly indicate that the implied warranty is
given by the seller, and by necessary implication, must be disclaimed (if at all) by the seller. There
is simply no evidence that defendant made a disclaimer to plaintiffs. Defendant relies on this
Court’s holding that a manufacturer’s disclaimer of implied warranties extends to a buyer who
purchased the goods from a distributor. VanAlstine, 326 Mich App at 651. Specifically, this Court
held that, “[i]f the indirect purchaser seeks to enforce the manufacturer’s implied warranty, then
the indirect purchaser is limited to what the manufacturer and direct purchaser negotiated.” Id.,
citing Heritage Resources, Inc v Caterpillar Fin Servs Corp, 284 Mich App 617, 641 & n 15; 774
NW2d 332 (2009). Defendant seeks to take the second half of that quotation out of context. Under
this Court’s prior holding in VanAlstine, plaintiffs would not be able to enforce Purina’s implied
warranties against defendant, because Purina disclaimed those warranties. However, plaintiffs are
no longer seeking to enforce Purina’s implied warranties. Instead, they are suing to enforce
defendant’s implied warranties, which arose in the contract of sale between plaintiffs and
defendant. Moreover, defendant’s analysis of the previous opinion in VanAlstine misses the
important point—Purina actually disclaimed the implied warranties, defendant did not.
Defendant also argues that its contention is supported by Heritage Resources, 284 Mich
App at 641. We disagree. In Heritage Resources, the buyer claimed a breach of implied warranties
by the manufacturer, not by the distributor. See id. at 618-629. This Court reasoned that “a remote
purchaser is subject to the manufacturer’s disclaimer of implied warranties in the same manner as
is the original purchaser, and can acquire no greater implied-warranty rights from the manufacturer
than the original purchaser can.” Id. at 641. Again, plaintiffs are not now seeking to enforce
Purina’s implied warranties in Purina’s contract with defendant, but rather defendant’s implied
warranties in defendant’s contract with plaintiffs. Thus, the reasoning provided in Heritage
Resources, 284 Mich App at 641, and VanAlstine, 326 Mich App at 651, simply is not applicable
to this case. To the contrary, this Court noted that “even if [the manufacturer] had disclaimed the
UCC implied warranties in its initial sale to [the distributor], new implied warranties could have
arisen in the subsequent sale from [the distributor] to [the buyer].” Heritage Resources, 284 Mich
App at 641 n 15. The panel in that case continued, noting that “the sales agreement between [the
distributor] and [the buyer] sufficiently disclaimed any new implied warranties of merchantability
and fitness for a particular purpose that otherwise would have been created by [the distributor]’s
sale to [the buyer].” Id.
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Nevertheless, defendant also argues1 that any implied warranty was disclaimed
independent of Purina’s disclaimer. The implied warranty in MCL 440.2314(1)2 arises by
implication in the sale of goods, and therefore a new warranty was created by defendant when it
sold the cattle-feed supplements to plaintiffs. However, MCL 440.2314(1) expressly provides that
the warranty may be disclaimed pursuant to MCL 440.2316. We note that MCL 440.2316(2)
requires any such disclaimer to be in writing and conspicuous, and no such conspicuous writing
was provided here. However, defendant points out that pursuant to MCL 440.2316(3)(c), “an
implied warranty can also be excluded or modified by course of dealing or course of performance
or usage of trade.”
As noted above, plaintiffs’ testimony indicates that defendant was little more than a
delivery service. Notwithstanding admitted speculation that Samp might have been paid by both
Purina and defendant, which their testimony regarding other manufacturers’ nutritionists strongly
undermines, plaintiffs clearly understood defendant to have otherwise had no involvement in the
cattle-feed supplements beyond being a go-between and payment processor. Especially persuasive
is plaintiff Ron VanAlstine’s denial of ever having heard of a warranty with an entity like
defendant. The evidence shows that there was a mutual understanding that the merchantability of
Purina’s cattle-feed supplements was entirely between plaintiffs and Samp and Purina. We
conclude that the implied warranty under MCL 440.2314(1) was excluded pursuant to MCL
440.2316(3)(c).
We therefore conclude that the trial court arrived at the correct result in granting summary
disposition as to plaintiffs’ implied warranty claims.
IV. EXPRESS WARRANTY
Plaintiffs argue that the trial court improperly granted summary disposition of their claim
for violation of an express warranty. We disagree.
As discussed above, the parties do not dispute that Article 2 of the UCC applies to this
case. Plaintiffs contend that an express warranty was created during the sale of the dairy-protein
supplement from defendant to plaintiffs. Under MCL 440.2313(1)(b), “[e]xpress warranties by
the seller are created” by “[a] description of the goods which is made part of the basis of the bargain
creates an express warranty that the goods shall conform to the description.” “An express warranty
may be created only between a seller and a buyer, and any such express warranty becomes a term
of the contract itself.” Heritage Resources, 284 Mich App at 634. Here, plaintiffs contend that
the description of the goods on the label that was printed on the dairy-protein supplement qualified
as an express warranty. Plaintiffs reason that the label guaranteed that there would not be toxic
levels of iodine in the supplement.
We agree with plaintiffs in part. The dairy-protein supplement delivered to plaintiffs bore
a label containing an ingredient list, instructions for preparation, and the words “GUARANTEED
1
Defendant helpfully clarified and articulated this theory at oral argument.
2
As discussed, we conclude that the implied warranty in MCL 440.2315 does not apply.
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ANALYSIS.” Iodine was not mentioned in the ingredients. Any reasonable person reading such
a label would immediately conclude that, as a substance not listed in the ingredients, iodine would
not be present, or at least would not be present in any noteworthy amount. Thus, the label could
have constituted an express warranty that no significant amount of iodine was present in the
supplement. However, critically, for a description of the goods to be considered an express
warranty, it has to be “made part of the basis of the bargain . . . ” MCL 440.2313(1)(b). The
ingredients in the dairy-protein supplement, however, was not a basis of the bargain between
plaintiffs and defendant. Instead, there is no dispute among the parties that it was Purina that
curated the product specifically for plaintiffs’ farm. Consequently, the ingredient list on the dairy-
protein supplement was not part of the basis of the bargain between plaintiffs and defendant in this
case, and thus, did not qualify as an express warranty by defendant. Id. To the extent the label
might have constituted an express warranty, it would have been an express warranty by Purina
only. Consequently, the trial court properly granted summary disposition in favor of defendant
regarding plaintiffs’ breach of express warranty claim.3
V. STATUTE OF LIMITATIONS UNDER THE UCC
Plaintiffs contend that the trial court erred when it held that plaintiffs’ complaint was filed
after expiration of the statute of limitations. We note that we agree, but because we uphold the
trial court’s grant of summary disposition as to plaintiffs’ UCC claims on other grounds, we need
not address this argument.
VI. PRIVATE CAUSE UNDER THE MCFL
Plaintiffs assert that the trial court erred when it determined that the MCFL did not create
a private cause of action. We conclude that plaintiffs’ sole remedy for the injuries and damages
claimed lie under Article 2 of the UCC, so we need not address whether the MCFL creates a private
cause of action.
As discussed above, the parties’ contract was for a sale of goods and fell under the auspices
of Article 2 of the UCC. MCL 440.2102. Further, plaintiffs sought damages in the form of
economic loss—deceased milking cows, decreased milk production in the cows that survived, and
reduced reproductivity. Those damages were permitted as consequential damages under MCL
440.2715(2). “In Neibarger v Universal Cooperatives, Inc, 439 Mich 512, 527-528; 486 NW2d
612 (1992), our Supreme Court expressly adopted the ‘economic loss doctrine’ and held that
‘where a plaintiff seeks to recover for economic loss caused by a defective product purchased for
commercial purposes, the exclusive remedy is provided by the UCC . . . ’ ” Citizens Ins Co v
Osomse Wood Preserving, Inc, 231 Mich App 40, 43; 585 NW2d 314 (1998). “Unlike some
jurisdictions, the economic loss doctrine applies in Michigan even when the plaintiff is seeking to
recover for property other than the product itself.” Id. at 44, citing Neibarger, 439 Mich at 530.
3
We therefore decline to consider defendant’s alternative argument for affirmance that the dairy-
protein supplement was not actually high in iodine. “[A]s a general rule, this Court will not
entertain moot issues or decide moot cases.” TM v MZ, 501 Mich 312, 317; 916 NW2d 473 (2018)
(quotation marks and citation omitted; alteration in original).
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In the complaint plaintiffs filed in this case, they claimed damages in the form of, “loss of
the fair market value of a significant portion of [] [p]laintiffs’ herd, los[t] profits from reduced
milk consumption [sic], fair market value of the loss of reproduced cattle, and other consequential
damages.” They claimed that those damages were caused by defendant’s sale of tainted goods,
the dairy-protein supplement and the dry-cow supplement. Notably, in Neibarger, 439 Mich at
516, our Supreme Court considered a case in which the plaintiffs claimed that the defendant sold
it faulty milking equipment. The plaintiffs asserted that, after using the equipment, “their cattle
became ill and died or had to be sold for beef because of their nonproductivity and unsuitability as
milking animals, suffered a loss of milk production, had severe instances of mastitis, and
experienced a loss of a portion of their udders.” Id. (citation omitted). The plaintiffs in that case
brought claims under the product-liability statutory scheme, seeking a more beneficial statute of
limitations and a more forgiving discovery rule to establish an accrual date. Id. at 517. The Court
held that this was not permitted, reasoning that because “the damages sought in these cases are
economic losses resulting from the commercial sale of goods, the plaintiffs’ exclusive remedies
are provided by the UCC.” Neibarger, 439 Mich at 537-538.
The Court’s decision in Neibarger is both factually similar and legally binding for this
issue. Although the plaintiffs in that case were seeking application of statutes related to product
liability, and plaintiffs in the present case are seeking to enforce the MCFL, the legal reasoning in
Neibarger still applies here. Plaintiffs’ sole remedy for the economic damages caused by the sale
of goods lies under Article 2 of the UCC. Neibarger, 439 Mich at 537-538. Although the parties
did not argue this issue or raise this case, the trial court’s grant of summary disposition on
plaintiffs’ claim under the MCFL was still proper for this reason. Id. We “will affirm the trial
court’s grant of summary disposition in favor of defendant[], as long as it was the correct result,
albeit for the wrong reason.” Sabbagh v Hamilton Psychological Servs, PLC, 329 Mich App 324,
345; 941 NW2d 685 (2019).
Affirmed.
/s/ Kathleen Jansen
/s/ Amy Ronayne Krause
/s/ Michael F. Gadola
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