Beard Plumbing & Heating, Inc. v. Thompson Plastics, Inc.

Present: Carrico, C.J., Compton, Stephenson, 1 Lacy, Hassell,
Keenan, and Koontz, JJ.

BEARD PLUMBING AND HEATING, INC.

v. Record No. 970131 OPINION BY JUSTICE ELIZABETH B. LACY
September 12, 1997
THOMPSON PLASTICS,
INCORPORATED, ET AL.

UPON A QUESTION OF LAW CERTIFIED BY THE
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Pursuant to our Rule 5:42, the United States Court of

Appeals for the Fourth Circuit certified a question of Virginia

law to this Court which we accepted by order entered February

18, 1997. The question involves the application of two

sections of the Uniform Commercial Code, Code §§ 8.1-101

through 8.11-108 (UCC), to a case in which consequential

damages are sought for breach of an implied warranty of

merchantability in the absence of privity.
The following facts are set forth in the Court of Appeals'

order of certification. Beard Plumbing and Heating, Inc.

(Beard) was the plumbing subcontractor in a condominium

development in Woodbridge, Virginia. Beard installed post-

chlorinated polyvinyl chloride plumbing fittings in the homes

in the project. The fittings were manufactured by Thompson

Plastics, Inc. (Thompson) and NIBCO, Inc. (NIBCO) and purchased

from third-party suppliers. There was no contract between the

manufacturers and Beard. The fittings cracked and subsequently

leaked when hot water was used in the system. The general
1
Justice Stephenson participated in the hearing and
decision of this case prior to the effective date of his
retirement on July 1, 1997.
contractor required Beard to replace the fittings and to repair

the damage to the homes and then dismissed Beard from the job.

Beard filed suit against Thompson and NIBCO in the United

States District Court for the Eastern District of Virginia,

alleging both negligence and breach of warranty. 2 Beard

claimed the fittings were defective and that "certain adapters

failed when they attempted to shrink around thermally-expanded

metal fittings during cool-down." Beard identified its damages

as the uncompensated cost to repair the homes, loss of the

remainder of its contract with the general contractor, revenue

lost due to damage to business reputation, $165,878.93 which it

paid to settle a lawsuit filed against it by the general

contractor, and legal fees it incurred. NIBCO and Thompson

filed motions for summary judgment. The district court granted

the motions, holding that Beard's damages were economic loss

damages which could not be recovered in the negligence claim

and that Beard failed to "meet the basic requirements" for

establishing its breach of warranty claim. Beard appealed this

ruling.
In its order of certification, the Court of Appeals

determined that the district court correctly held that Beard's

negligence claim was barred as a matter of law because it

sought only economic damages. Finding that no Virginia case

2
Beard also named a third-party supplier as a defendant
but was granted a voluntary dismissal as to that defendant.

2
has construed § 8.2-318 to determine whether it abrogated the

privity requirement for recovery of economic loss damages in

negligence cases, the Court of Appeals nevertheless concluded

that its own precedent and Virginia case law, particularly

Blake Construction Co. v. Alley, 233 Va. 31, 353 S.E.2d 724

(1987), and Sensenbrenner v. Rust, Orling & Neale, Architects,

Inc., 236 Va. 419, 374 S.E.2d 55 (1988), "strongly supports the

conclusion that § 8.2-318 has not abrogated the privity

requirement in negligence actions seeking recovery for economic
3
loss." The Court of Appeals, however, determined that the

district court's ruling addressed only Beard's claims for

negligence and breach of the implied warranty of fitness for a

particular purpose and did not resolve Beard's claim that NIBCO

and Thompson had also breached the implied warranty of

merchantability.

Before remanding the case to the district court for

resolution of Beard's breach of the implied warranty of

merchantability claim, the Court of Appeals observed that

Beard's claim would be barred, as a matter of law, if privity

were required to recover the damages claimed by Beard for

breach of the warranty. The Court of Appeals noted that, as in

the case of negligence actions, the effect of § 8.2-318 on the

privity requirement in breach of warranty actions seeking

3
The certified question does not ask that we consider or
comment on this issue.

3
economic loss damages has not been considered by this Court.

The Court of Appeals concluded, however, that unlike negligence

actions, Virginia precedent did not provide sufficient

direction for the construction of § 8.2-318 as it relates to

the damages sought in this case. To resolve this issue, the

Court of Appeals certified the following question to us and

stated that the answer would be determinative of the proceeding

pending before it:
Is privity required to recover economic loss under
Va. Code § 8.2-715(2) due to the breach of the
implied warranty of merchantability, notwithstanding
the language of Va. Code § 8.2-318?

To answer this question, we must first determine whether

§ 8.2-715(2) requires the existence of a contract for the

recovery of economic loss damages in breach of warranty cases. 4

Section 8.2-715(2) provides:
Consequential damages resulting from the seller's
breach include
(a) any loss resulting from general or
particular requirements and needs of which
the seller at the time of contracting had
reason to know and which could not
reasonably be prevented by cover or
otherwise; and
(b) injury to person or property proximately
resulting from any breach of warranty.

This section does not address economic loss damages. However,

because the Court of Appeals directed its inquiry specifically
4
Although Beard asserts that its damages went beyond
economic loss, our consideration of the certified question is
premised on the Court of Appeals' determination in the
certification order that Beard's damages are solely economic
loss damages.

4
to this section, we assume that the Court of Appeals concluded

that the economic loss damages claimed by Beard were

consequential damages rather than direct damages. 5 We also

limit our discussion to subparagraph (a), since injury to

persons or property is not involved in this case.

Section 8.2-715(2)(a) is part of the UCC, a comprehensive

statutory scheme affecting commercial transactions. Although

the UCC is based on a uniform act now adopted by virtually

every state, we found no case interpreting the language of

§ 8.2-715(2)(a) as it relates to the requirement of a
6
contractual relationship between the parties.
Nevertheless, the language of the section itself contains

a presumption that there is a contract between the parties.

The phrase "at the time of contracting" in subparagraph (a)

conveys the understanding of a contract between two parties.
5
Consequential damages are not defined in the UCC, but
"are used in the sense given them by the leading cases on the
subject." § 8.1-106 cmt. 3. Whether damages are direct or
consequential is a matter of law to be determined by the court.
R. K. Chevrolet, Inc. v. Hayden, 253 Va. 50, 56, 480 S.E.2d
477, 481 (1997).
6
See, e.g., Beyond the Garden Gate, Inc. v. Northstar
Freeze-Dry Mfg., Inc., 526 N.W.2d 305, 309-10 (Iowa
1995)(remote nonprivity buyers cannot recover consequential
economic loss damages as a matter of policy, citing reasons
given in White and Summers, Uniform Commercial Code, § 11-5, at
536 (3d. ed. 1988)); Horizons, Inc. v. Avco Corp., 714 F.2d
862, 865-66 (8th Cir. 1983)(lost profits allowed because
seller, as a factual matter, had "reason to know" business
requirements of buyer); Sullivan Industries, Inc. v. Double
Seal Glass Co., 480 N.W.2d 623, 631-32 (Mich. Ct. App.
1991)(economic loss damages disallowed because not proved with
reasonable certainty).

5
To assert, as Beard did at oral argument, that the purpose of

the phrase is only to establish the historical moment for

judging the seller's foreseeability, does not eliminate the

connotation of the existence of a contract inherent in the

phrase. Beard's interpretation would require substituting the

word "sale" for the word "contracting," and we decline the

invitation to rewrite the statute. Therefore, we conclude that

§ 8.2-715(2)(a) requires a contract between the parties for the

recovery of consequential economic loss damages incurred as a

result of a breach of warranty by the seller.
The second part of the certified question asks us to

determine whether the provisions of § 8.2-318 supersede the

contract requirement of § 8.2-715(2)(a). Section 8.2-318

provides in pertinent part:
Lack of privity between plaintiff and defendant shall be
no defense in any action brought against the manufacturer
or seller of goods to recover damages for breach of
warranty, express or implied, or for negligence, although
the plaintiff did not purchase the goods from the
defendant, if the plaintiff was a person whom the
manufacturer or seller might reasonably have expected to
use, consume, or be affected by the goods[.]

The provisions of this section appear to conflict with

§ 8.2-715(2)(a) regarding the requirement of a contract for the

recovery of consequential damages in a breach of warranty

action. Rules of statutory construction, however, resolve the

apparent conflict. In construing conflicting statutes, if one

section addresses a subject in a general way and the other

section speaks to part of the same subject in a more specific

6
manner, the latter prevails. Dodson v. Potomac Mack Sales &

Service, Inc., 241 Va. 89, 94-95, 400 S.E.2d 178, 181 (1991).

Applying this rule, we conclude that, to the extent the two

statues conflict, § 8.2-715(2)(a) prevails.

The general subject of § 8.2-318 is the ability to raise

the common law requirement of privity as a defense. We have

not previously construed § 8.2-318; however, we have referred

to it as modifying the common law privity rule. Ward v. Ernst
& Young, 246 Va. 317, 325-26, 435 S.E.2d 628, 632 (1993);

Copenhaver v. Rogers, 238 Va. 361, 366, 384 S.E.2d 593, 595

(1989). Similarly, commentators have considered the section

and its predecessor as eliminating the common law privity

requirement in certain instances. 7 See, e.g., Time to Adopt

the Uniform Commercial Code, Report of the Virginia Advisory

Legislative Council, H. Doc. No. 5, at 113 (1963); and 1 James

J. White and Robert S. Summers, Uniform Commercial Code § 11-3,

at 591 n.11 (4th ed. 1995).

The contract requirement of § 8.2-715(2)(a), however, is

not a privity requirement imposed by the common law. Part 7 of

Title 8.2 of the UCC imposes a number of limitations and

conditions on the recovery of damages in a breach of warranty

claim. See, e.g., §§ 8.2-714(defining measure of damages), -

715(1)(identifying recoverable incidental damages), and -

7
In 1964, former § 8.654.3 was repealed and reenacted as
§ 8.2-318 of the UCC without change.

7
719(b)(3)(ability to exclude consequential damages). The

contract requirement of § 8.2-715(2)(a) is one of those

limitations. Section 8.2-715(2)(a) does not address the

general subject of the common law privity requirement's effect

on the ability of a litigant to maintain an action for breach

of warranty. It is limited to that part of the litigation

dealing with the damages which may be recovered and imposes a

contract requirement only where recovery of consequential

damages is sought. Applying the rule of statutory construction

recited above, the limited contract requirement of § 8.2-715(2)

prevails over the general provisions relating to common law

privity in § 8.2-318.
Accordingly, because § 8.2-715(2)(a) requires a contract

between the parties for recovery of consequential economic loss

damages in a claim for breach of the implied warranty of

merchantability, we answer the certified question in the

affirmative.

Certified question answered in the affirmative.

8