Opinion
No. 98 C 2009
March 14, 2000
MEMORANDUM OPINION AND ORDER
Plaintiffs, Timothy J. Miller and Lesa K. Miller, individually and as trustees of the Timothy Joseph Miller Living Trust (collectively "plaintiffs") brought this action against Showcase Homes, Inc. alleging six different counts rising from the purchase of a modular home. Counts I, II, III, and VI were dismissed by this court's action dated March 31, 1999. Miller v. Showcase Homes, Inc., 1999 WL 199605 (N.D.Ill. 1999). Showcase has now moved for summary judgment on the remaining counts. Count IV alleges breach of an implied warranty of merchantability under 810 ILCS § 5/2-314 pursuant to the Magnuson Moss Warranty Act, while Count V alleges breach of an implied warranty of fitness for a particular purpose under 810 ILCS § 5/2-315 pursuant to the Magnuson Moss Warranty Act. For the reasons stated below, Showcase's motion is granted.
I. Facts
In response to advertisements appearing in local magazines, the plaintiffs became interested in purchasing a modular home manufactured by Showcase, On September 23, 1994, the plaintiffs contracted with Willow Creek Homes to build a modular home for them and to purchase for this purpose two modules manufactured by Showcase, each comprising one-half of a prefabricated home, including frame, exterior walls, root windows, insulation, duct work and fixtures, among other structural elements. These modules were intended to be attached to the plaintiffs' real estate in Sandwich, Illinois and were to serve as their primary residence.
During the month of January, 1995, Showcase shipped the modules to the plaintiffs and the modules were installed on the plaintiffs' property. On November 11, 1995, Real-Spec Inc. inspected the Showcase modules and prepared a Property Inspection Report. Seventh Amended Complaint (SAC), Exhibit D. The report "reflect § the substantially poor workmanship and poor quality of materials, fixtures and equipment used and incorporated by Showcase in the manufacture of said modules." Id, Count IV, ¶ 36. As a result of various defects, the plaintiffs claim that the modules failed to meet certain minimum load-bearing requirements imposed upon modular units located in the state of Illinois pursuant to 430 ILCS § 115. Id., Count IV, ¶ 37(b).
At the time the order was placed, plaintiffs allege that they understood, based "on information and belief," that Showcase would send them a written warranty. According to the plaintiffs, Showcase subsequently confirmed this belief in a letter which provided general terms of the warranty. To date, however, the plaintiffs have not received a copy of this warranty despite repeated requests.
The plaintiffs filed a six-count complaint against Showcase alleging violation of a number of state and federal statutes. Counts I, II, III and VI were dismissed by this court in a prior action. Miller v, Showcase Homes, Inc., 1999 WL 199605 (N.D.Ill. 1999). Showcase Homes has now moved for summary judgment on the remaining claims. Count IV alleges breach of the implied warranty of merchantability under 810 ILCS 5/2-314 Pursuant to the Magnuson-Moss Warranty Act. Count V alleges breach of the implied warranty of fitness for a particular purpose under 810 ILCS 5/2-315 Pursuant to the Magnuson-Moss Warranty Act.
Magnuson-Moss Warranty Act creates a federal private cause of action for consumers damaged by the failure of a warrantor to comply with any obligations under an implied warranty. 15 U.S.C. § 2310 (d)(1). The term "implied warranty" refers to an implied warranty arising under state law in connection with the sale by a supplier of a consumer product. 15 U.S.C. § 2301 (7).
II. Summary Judgment Standard
Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law, Thomsen v. Romeis, 198 F.3d 1022, 1026 (7th Cir. 2000). The court views the record and all reasonable inferences drawn from it in the light most favorable to the non-moving party. Id. at 1026-27.
III. Discussion
Showcase contends that the Magnuson-Moss Warranty Act does not apply to alleged defects in a modular home because it is not a "consumer product" under the statute. Rather, the transaction on which this action is based is one in which the plaintiffs contracted with Willow Creek to construct a dwelling, and the dwelling to be constructed was the modular home supplied by Showcase. Showcase argues that this transaction does not fall within those covered by the Magnuson-Moss Act. The plaintiffs counter that modular homes are not specifically excluded from coverage under the Federal trade Commission's interpretive regulations, and that under a systematic analysis the modular home components in question do meet the definition of "consumer products" under the Magnuson-Moss Act.
Section 2301(1) of the Act defines a "consumer product" as "any tangible personal property which is distributed in commerce and which is normally used for personal, family, or household purposes (including any such property intended to be attached to or installed in any real property without regard to whether it is so attached or installed)." 15 U.S.C. § 2301 (1). The FTC has issued rules, regulations, statements and interpretations under the Magnuson-Moss Warranty Act, 16 C.F.R. § 700 et seq. Such constructions are of particular relevance in resolving ambiguities. See Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 414 (1993) ("Confronted with an ambiguous statutory provision, we generally will defer to a permissible interpretation espoused by the agency entrusted with its implementation."). In the present case, subsections (e) and (f) of section 700.1 are highly relevant:
(e) The coverage of building materials which are not separate items of equipment is based on the nature of the purchase transaction. An analysis of the transaction will determine whether the goods are real or personal property. The numerous products which go into the construction of a consumer dwelling are all consumer products when sold "over the counter," as by hardware and building supply retailers. This is also true where a consumer contracts for the purchase of such materials in connection with the improvement, repair, or modification of a home (for example, paneling, dropped ceilings, siding, roofing, storm window, remodeling). However, where such products are at the time of sale integrated into the structure of a dwelling they are not consumer products as they cannot be practically distinguished from realty. Thus, for example, the beams, wallboard, wiring, plumbing, windows, roofing, and other structural components of a dwelling are not consumer products when they are sold as part of real estate covered by a written warranty.
(f) In the case where a consumer contracts with a builder to construct a home, a substantial addition to a home, or other realty (such as a garage or an in-ground swimming pool) the building materials to be used are not consumer products. Although the materials are separately identifiable at the time the contract is made, it is the intention of the parties to contract for the construction of realty which will integrate the component materials. of course, as noted above, any separate items of equipment to be attached to such realty are consumer products under the Act.16 C.F.R. § 700.1
Under these rules, it is apparent that the Magnuson-Moss Warranty Act does not apply in the present case. The interpretive regulations clearly state that the Act does not apply in cases where the consumer contracts with a builder to construct a home. This is what the plaintiffs did when they contracted with Willow Creek Homes. SAC, Exhibit G. The plaintiffs contracted with Willow Creek, and the modules were purchased from Showcase. See SAC, exhibit H. the modules were then installed on and attached to the plaintiffs' realty. SAC, Count IV, ¶¶ 15, 34. The plaintiffs intended for the Showcase home to be their primary residence. SAC, Count IV, ¶ 32. The plaintiffs also characterized the modular home as "a residential-type structure." SAC, Count IV, ¶ 39. In particular, the contract with Willow Creek provides:
the parties dispute the nature of the business relationship between Willow Creek and Showcase. The plaintiffs apparently contend that Willow Creek is a dealer for Showcase, and that they purchased the home from Showcase, not Willow Creek. However, the order form states that the home was sold to Willow Creek, not to the plaintiffs. See Miller Aff, ¶ 5; SAC Exhibit H. This dispute, though, has no bearing on the present issue.
1. Builder agrees to construct and complete in good workmanlike and substantial manner, of a quality equal to industry standards, upon the real property more fully described as follows: 1630 Wright Drive, Sandwich, Illinois, furnishing all labor, materials, tools and equipment therefore, a building (hereinafter called the "structure", whether one or more buildings or improvements).
2. The structure is to be constructed and completed in substantial conformance with plans, specifications and the Custom Home Analysis which are the property of Showcase Homes, Inc. . .
SAC, Exhibit G.
The wording of the FTC Interpretations, as well as the legislative history, stresses the distinction between real and personal property, with the Magnuson Moss Act applying only to the latter. In a recent review of the Interpretations, the FTC stated that "The Interpretations draw the line, apparently contemplated by the language of the statute, to separate personalty (covered by the Act) and realty (not covered) in a manner that is clear and workable, and that is consistent with the intent of Congress, to the extent it can be determined." Final Action Concerning Review of Interpretations of Magnuson-Moss Warranty Act, 64 Fed. Reg. 19,700, 19,703 (1999). Because the Magnuson-Moss Act is intended to apply only to personal property and not to realty, the plaintiffs' modular home should be excluded from coverage under the Act. The plaintiffs contracted for the construction of a house. Under the Act, the building materials used for the construction are not consumer products. The fact that the house was constructed from two preassembled modules rather than from building supplies assembled on the plaintiffs' lot appears to the court to have no relevance for Magnuson-Moss purposes.
Indeed, the Interpretations contain no requirement that the separate component materials be integrated at the final building site. Rather, the explicit focus of Section 700.1(f) is the intent of the parties to contract for the construction of real estate. In this case, the components (e.g., beams, wiring, plumbing, etc.) were integrated into the modular sections, which were then attached to the property. A contract for the construction and installation of a modular home fits the circumstances described in Section 700.1(f), and as a result the modular sections are not consumer products covered by the Magnuson-Moss Warranty Act.
Such modular sections are similar to a structure as described in section 700.1(e). "[W]here such products are at the time of sale integrated into the structure of a dwelling they are not consumer products as they cannot be practically distinguished from realty. Thus, for example, the beams, wallboard, wiring, plumbing, windows, roofing, and other structural components of a dwelling are not consumer products when they are sold as part of real estate covered by a written warning." 16 C.F.R. § 700.1 (e).
Only one court has had the opportunity to interpret the Magnuson-Moss Act in relation to modular homes, and its findings were consistent with the view of this court. In Clark v. Jim Walter Homes, Inc., 719 F. Supp. 1037 (M.D.Ala. 1989), the court focused on the distinction between real property and personal property. "Real property, whatever Congress meant by the term, appears by implication to fail outside the class of consumer products covered by the statute." Id at 1043. The court noted that dwellings in general, like the land to which they are attached, fall in the category of real property as the term is commonly used in property law. Id. "Thus, a plain reading of the statute suggests that sales of dwellings are not covered by the Magnuson-Moss Warranty Act." Id. The court concluded that "[s]ince in this case the Clarks contracted with Jim Walter Homes for the construction of a house, the regulations quite apparently would not encompass a warranty based on that contract." Id at 1044.
The plaintiffs attempt to distinguish Clark from the present case by arguing that the type of contractual agreement between homeowners and a general building contractor for the construction of a dwelling at a particular site does not exist in the present case. Rather, the plaintiffs claim they have brought their claims against a third-party manufacturer of modular units that were moveable at the time they were introduced into commerce. The court finds this argument unavailing. The plaintiffs entered into a contract for the construction of realty that falls within the scope of Section 700.1(f), and therefore the building materials used for that home, the two modular units, are not consumer products. Although the modular units were separately identifiable at the time the contract was made, the intention of the parties was for the construction of realty. As a result, the modules used in the construction of the realty are not covered under the Magnuson-Moss Act.
The plaintiffs make several arguments in favor of application of the Magnuson-Moss Act. First, they claim that neither the definition of "consumer product" under the Act nor the Federal Trade Commission's interpretive regulations expressly exclude the modular units of modular homes from the Act's application. Although the regulations do not expressly exclude modular units of modular homes, they do clearly address the situation in the present case, namely, a contract for the construction of a dwelling, and explicitly exclude building materials in the context of a home construction contract
The plaintiffs contend that their claims are not against a general building contractor who assembles homes from raw materials pursuant to a construction contract, and as a result section 700.1 does not apply to the present case. However, section 700.1 does not contain any sort of restriction limiting its application to situations involving traditional general contractors, nor does it say that pre-assembled building materials should be treated differently from building materials assembled on location. Rather, the section applies in cases "where a consumer contracts with a builder to construct a home," and "it is the intention of the parties to contract for the construction of realty which will integrate the component materials."
The plaintiffs also attempt to define the modules as consumer products by referring to a variety of statutes in addition to the Magnuson-Moss Act, in particular the Uniform Commercial Code, However, given the clear language of the FTC's Interpretations, such analysis is unnecessary. The court in Clark also found the Uniform Commercial Code inapplicable to modular homes. "[T]his court recognizes that modular homes come within the broad category of goods covered by Article 2, but considers more persuasive the fact that no court has yet considered a stationary house to be a consumer product for the purposes of' Article 9." Clark 719 F. Supp. at 1044. Because the parties contracted for the construction of a home, the FTC Interpretations control.
The plaintiffs cite Balser v. Cessna Aircraft Co., 512 F. Supp. 1217 (N.D.Ga. 1981), in support of their UCC contentions. In Balser, the court referred to Article 9 of the UCC in order to reach a determination of the meaning of the term "consumer product" under Magnuson-Moss. However, this decision may be distinguished from the present case in that the FTC Interpretations of the Magnuson-Moss Act make specific reference to "the case where a consumer contracts with a builder to construct a home." 16 C.F.R. § 700.1 (f). In contrast, the court in Balser found no FTC regulations relating to aircraft, the subject of the dispute in that case. See id at 1219 ("the legislative history is not much, if any, assistance because it makes no reference to the inclusion or exclusion of aircraft at all."). The Balser court was forced to look to other areas of law as a result. The existence of the FTC regulations interpreting the Magnuson-Moss Act in relation to home construction contracts obviates the need for such analysis in this case. The plaintiffs' reliance on Lowe v. Volkswagen of America, Inc., 879 F. Supp. 28 (E.D.Pa. 1995), and Snyder v. Boston Whaler, Inc., 892 F. Supp. 955 (W.D.Mich. 1994) is similarly misplaced, as these two cases also deal with the use of the UCC to resolve ambiguities in the Magnuson-Moss Act that are not present in this case.
The plaintiffs also cite Cates v. Morgan Portable Building Corp., 591 F.2d 17 (7th Cir. 1979), in support of their arguments. In Cates, the Seventh Circuit found that prefabricated modular units, each consisting of five motel units, were goods under the UCC. However, this case did not deal with the Magnuson-Moss Act, and it predates the issuance of the FTC Interpretations.
The plaintiffs next argue that the application of Magnuson-Moss in connection with a "consumer product" is measured at the time the tangible personal property is placed or distributed in commerce. However, this argument fails in light of the language of section 700.1(f), which states that in the case where a consumer contracts with a builder to construct a home, the building materials to be used are not consumer products "[a]lthough the materials are separately identifiable at the time the contract is made[.]"
The plaintiffs also argue that the subject modular units are still moveable, and that this creates a question of material fact sufficient to avoid summary judgment. This argument is without merit. The only support for this contention is a statement by plaintiff Lesa Miller that the modules can be moved to another location. Miller Aff. ¶ 14. However, plaintiffs have not identified any support for this contention in the factual record. Although the modules were moveable when they were delivered to the plaintiffs' property, there is no indication that they are presently moveable after being joined together and installed on their foundation. Self-serving affidavits without factual support in the record will not defeat summary judgment. Shank v. William R. Hague. Inc., 192 F.3d 675, 682 (7th Cir. 1999).
The modular home is affixed to a concrete and wood foundation, and an attached garage has been added to the structure. Furthermore, the property inspection report submitted by the plaintiffs describes a permanent residence, not a moveable structure. See SAC, Exhibit D. It is doubtful that the structure described is any more moveable than a residence constructed by traditional means.
IV. Conclusion
The Magnuson-Moss Warranty Act is not applicable to the present case. As a result, Counts IV and V of the plaintiffs' Seventh Amended Complaint must be dismissed.