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Professional Lens Plan, Inc. v. Polaris Leasing Corp.

Citations: 710 P.2d 1297; 238 Kan. 384; 1985 Kan. LEXIS 520Docket: 57,947

Court: Supreme Court of Kansas; December 6, 1985; Kansas; State Supreme Court

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Professional Lens Plan, Inc. (PLP) appealed a summary judgment from the Riley District Court favoring Ohio Scientific (OSI). The central issue was whether Impact Systems acted as an agent for OSI. The trial court concluded that no agency relationship existed. In early 1979, PLP hired Loren H. Shellabarger to help select a computer system. Shellabarger, although not deeply knowledgeable about OSI's products, learned about them through extensive advertising. He contacted OSI and was referred to Impact Systems, whose president, Gary Comens, he met multiple times. Eventually, Shellabarger presented several systems to PLP’s Dr. Price, who chose an OSI computer. PLP leased the computer from Polaris Leasing Corporation, which paid Impact for the system. However, the computer malfunctioned from the start, leading PLP to initially sue Polaris for lease cancellation and damages. After settling with Polaris, PLP sought to amend its pleadings to include claims against Impact, OSI, and Okidata, the hard disc manufacturer. An earlier appeal addressed whether PLP could pursue a breach of warranty claim against Okidata despite lacking direct contractual privity, focusing on the right of a corporate purchaser to recover for economic loss without personal injury or property damage.

Implied warranties of fitness and merchantability do not extend to remote sellers or manufacturers of non-inherently dangerous defective products concerning economic losses suffered by buyers without contractual privity with those sellers or manufacturers. Therefore, the district court's ruling that Professional Lens had a valid claim against Okidata Corporation for economic loss from breach of implied warranty was incorrect. The issue regarding the binding nature of warranty and damage limitations from Okidata's sale to Ohio Scientific is moot due to the lack of a viable claim against Okidata. Furthermore, the court found that allowing Professional Lens to amend its pleadings after the statute of limitations had expired was also moot concerning Okidata. Procedurally, only Okidata sought an interlocutory appeal on the first three issues, and while Ohio Scientific is an appellee, it did not oppose Okidata's positions. However, since Ohio Scientific shares the same legal standing as Okidata regarding the implied warranty and statute of limitations issues, the lack of privity likewise negates claims against Ohio Scientific. 

The sole issue in the interlocutory appeal by Professional Lens concerns the existence of privity of contract with Impact Systems, which the district court did not decide. The court held that this matter is not suitable for interlocutory appeal, leading to the dismissal of Professional Lens's appeal. Additionally, it was noted that Impact Systems is a retailer of computer products, which selected a computer package for Professional Lens and ordered equipment from various manufacturers, with the selection based on the customer's needs as advised by a consultant.

Impact Systems did not receive preferential treatment from Ohio Scientific that would indicate an agency relationship. Comens sought a solution for equipment issues and inquired about interface boards, leading to a sale agreement with Ohio Scientific. When the new equipment failed to resolve the issues, Impact Systems did not pursue a refund or had their request denied. Shellabarger contacted Ohio Scientific, which directed him to Impact Systems for resolution. The plaintiff, Professional Lens Plan, disputes claims that Ohio Scientific had a dealer system requiring payment for dealership status, asserting that Shellabarger selected Ohio Scientific's equipment from numerous vendors. There is no documented communication between Ohio Scientific and Professional Lens Plan regarding the intended use of the equipment, although Shellabarger asserts calls were made. Attached invoices indicate no contractual relationship or fiduciary duty between Impact Systems and Ohio Scientific. The computer delivered to Professional Lens Plan in 1979 never functioned properly, despite Comens' multiple discussions with Ohio Scientific. The Supreme Court ruled no privity of contract exists between Professional Lens Plan and Ohio Scientific, as the plaintiff's theory of suing Ohio Scientific based on an alleged agency relationship with Impact Systems is newly presented and unsupported by evidence. The court emphasizes that the term "dealer" does not imply fiduciary responsibility or control, and concludes that no facts support the claim of Impact Systems acting on behalf of Ohio Scientific. The court references a precedent affirming that privity of contract is necessary for breach of implied warranty claims, which does not apply here since the plaintiff did not purchase directly from Ohio Scientific.

Ohio Scientific sold a computer to Impact Systems, which then sold it to the plaintiff, primarily for tax benefits and business reasons. Impact Systems purchased the computer from Ohio Scientific and subsequently sold it to Polaris Leasing Corporation. Polaris entered into a lease agreement with Professional Lens for this equipment. The court rejected the plaintiff's claim of agency by implication, stating that simply seeing an advertisement from Ohio Scientific does not establish any agency relationship. The court found no evidence that Impact Systems had apparent or ostensible authority as an agent of Ohio Scientific. Furthermore, there was no indication that Ohio Scientific knowingly allowed Impact Systems to act on its behalf. The court emphasized the necessity of specific privity for the plaintiff to pursue a claim against Ohio Scientific, and even if there were an implied agency, the plaintiff failed to show any unaltered representations made by Ohio Scientific to the plaintiff through Impact Systems. The evidence indicated that the plaintiff had multiple dealer options and that Impact Systems acted as an independent dealer aiming for profit, rather than as an agent. The court noted the lack of direct warranties from Ohio Scientific to the plaintiff and concluded that Impact Systems was not an agent. Consequently, the court granted summary judgment in favor of Ohio Scientific, which the plaintiff subsequently appealed. The court found no evidence supporting the plaintiff's assertion that anyone could sell Ohio Scientific equipment as a dealer, noting that Impact Systems merely paid for equipment without any dealer agreement. The standards for summary judgment were reiterated, indicating it is appropriate when no genuine issues of fact exist.

In McAlister v. Atlantic Richfield Co., the appellate court emphasized that when reviewing a summary judgment, the record must be considered in favor of the party opposing the motion. 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, particularly in cases where only legal questions arise from undisputed facts. In this case, the plaintiff claimed the existence of an implied agency, which the trial court rejected, determining that the issue of agency is a question of law. The definition of agency was agreed upon by both parties, identifying it as a contract allowing one party to manage business on behalf of another.

The court outlined two types of agency: actual (with express or implied authority) and ostensible (inducing third parties to believe in an agency relationship). The plaintiff argued that Impact was either an implied or ostensible agent of OSI based on OSI's referral of Shellabarger to local dealers, including Impact. However, there was no express agency agreement, and the term "dealer" was clarified to mean one who buys for resale, not a designation of exclusivity or agency. The testimony indicated that anyone could buy and sell OSI products, negating the notion that retail activity implied an agency relationship. Ultimately, the court affirmed the trial court's summary judgment, finding no evidence of implied or ostensible agency.