No. 12613
I N T E SUPREME C U T O TF'E STATE O MONTANA
H OR F F
1974
CHARLES SPURGEON,
P l a i n t i f f and Respondent,
JAMIESON MOTORS, a c o r p o r a t i o n ,
Defendant and A p p e l l a n t .
Appeal from: D i s t r i c t Court of t h e Twelfth J u d i c i a l D i s t r i c t ,
Honorable Thomas Dignan, Judge p r e s i d i n g .
Counsel of Record:
F o r Appellant :
Burns, Solem and MacKenzie, Chinook, Montana
William M. Solem argued, Chinook, Montana
For Respondent :
S i a s and Hendrickson, Chinook, Montana
Oscar Hendrickson argued, Chinook, Montana
Submitted: March 1 9 , 1974
Decided :@R 2 5 1974
Filed : a2 5 1974
Mr. Justice Wesley Castles delivered the Opinion of the Court.
This is an appeal from a judgment of the district court
of Blaine County, sitting without a jury, in favor of the plain-
tiff in an action to rescind a purchase contract for breach of
warranties.
Defendant, Jamieson Motors, is a corporation engaged in
I
the business of selling machinery. Plaintiff, Charles Spurgeon,
is engaged in farming and ranching operations. In January 1970,
plaintiff entered into a contract to purchase from defendant a
used 16' Case Combine approximately ten years old for the sum of
$1,700. Prior to entering into the contract, plaintiff examined
the combine and it was agreed that certain work would be perform-
ed on the combine and that it would be made "field ready". The
agreed-upon wark was performed and the combine was "field ready"
when plaintiff took delivery.
Plaintiff took delivery of the combine in July of 1970 at
defendant's lot and drove it some 62 miles over gravel roads to
his farm. Early in August, 1970, plaintiff began to use the com-
bine to harvest grain; after harvesting approximately five acres,
the variable drive on the combine broke. After 5 or 6 repair
attempts by plaintiff and defendant approximately 15 more acres
were harvested. The combine then broke down again and was not
repaired until mid-November 1970. In 1971 plaintiff used the
combine to harvest approximately 5 acres and again the combine
broke down. After repairs, 3 more acres were harvested and then
the straw walker broke. Plaintiff phoned defendant and defendant
offered the use of another combine. Plaintiff refused this offer
and hired combines to finish the harvest of his 1971 crop. In
September, 1971, plaintiff returned the combine to defendant's lot.
Subsequently, defendant offered to repair and attempt to sell the
combine on plaintiff's behalf but no agreement was reached.
The only representations made as to the condition of the
combine were that it would be "field ready" when delivered. The
district court found that the combine was in fact "field ready"
when plaintiff took possession. The purchase contract was for
a "used combine" and provided in pertinent part:
" * * * This warranty is in lieu of all other
warranties, expressed, implied, or statutory, and
all other obligations or liabilities on the part
of the Dealer and Company. No representative of
the Company has authority to change the terms of
this warranty in any manner whatsoever and no
assistance to Purchaser by the Dealer or Company
in the repair or operation of the Case product
shall constitute a waiver of the conditions of
this warranty, nor shall such assistance extend
or revive it. This warranty does not apply to
used or second-hand machines." (Emphasis added.)
Undisputed testimony in the record indicates that the custom and
usage in the area was that used machinery was not warranted. The
only exception to this practice was the so called 50-50 warranty
given on late model equipment under which the dealer pays one-
half the cost of repairs and the purchaser pays the other half.
During 1970 and 1971 defendant paid one-half the cost of repairs
to the combine. In 1970 plaintiff paid the other half. Plaintiff
refused the cost of one-half of the repairs in 1971 thus giving
rise to defendant's counterclaim for $139.90, which represents
one-half of the cost of repairs performed during 1971 at plaintiff's
request.
The district court based its judgment for plaintiff on
conclusions of law that the implied warranties as to merchantabil-
ity and fitness for purpose of use were not met, and that plaintiff
returned the combine within a reasonable time after discovery of
the breach of these warranties.
Plaintiff raises two issues on this appeal. First, that
the district court erred in finding implied warranties of mer-
chantability and fitness for purpose applicable. Second, that even
if the warranties of merchantability and fitness for purpose were
applicable it was error to find that plaintiff rescinded within
a reasonable time.
Defendant raises three separate arguments in support of
the contention that the district court erred in finding implied
warranties of merchantability and fitness for purpose applicable.
First, defendant asserts that the warranties did not apply to
used goods. Second, defendant claims that the implied warranties
were excluded under the terms of the contract. Finally, he asserts
that the warranties were excluded by usage of trade. If any one
of these claims are valid, then it will be unnecessary to consider
any of the other issues raised.
The implied warranties on which plaintiff relies are
created by 87A-2-314, R.C.M. 1947, which provides:
"Implied warranty--merchantability--usage of
trade. (1) Unless excluded or modified (section
;
87~-2-316) 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. Under this section the serving
for value of food or drink to be consumed either
on the premises or elsewhere is a sale.
"(2) Goods to be merchantable must be at least
such as
"(a) pass without objection in the trade under
the contract description; and
"(b) in the case of fungible goods, are of fair
average quality within the description; and
"(c) are fit for the ordinary purposes for which
such goods are used; and
"(d) run, within the variations permitted by the
agreement, of even kind, quality and quantity within
each unit and among all units involved; and
"(e) are adequately contained, packaged, and
labeled as the agreement may require; and
"(f) conform to the promises or affirmations of
fact made on the container or label if any.
"(3) Unless excluded or modified (section 87A-2-316)
other implied warranties may arise from course
of dealing or usage of trade."
Section 87A-2-315, R.e;M. 1947, provides:
"Implied warranty--fitness for particular purpose.
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 rely-
ing 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."
The warranties created by these two sections are limited by
section 87A-2-316, R.C.M. 1947, which provides:
"Exclusion or modification of warranties. (1) Words
or conduct relevant to the creation of an express
warranty and words or conduct tending to negate
or limit warranty shall be construed wherever reason-
able as consistent with each other; but subject to
the provisions of this chapter on par01 or extrinsic
evidence (section 87A-2-202) negation or limitation
is inoperative to the extent that such construction
is unreasonable.
" (2) Subject to subsection (3), to exclude or
modify the implied warranty of merchantability or
any part of it the language must mention merchant-
ability and in case of a writing must be conspicuous,
and to exclude or modify any impl&ed warranty of
fitness the exclusion must be by/writing and con-
spicuous. Language to exclude all implied warranties
of fitness is sufficient if it states, for example,
that 'There are no warranties which extend beyond
the description on the face hereof.'
" (3) Notwithstanding subsection (2)
" (a) unless the circumstances indicate otherwise,
all implies warranties are excluded by expressions
like 'as is,' 'with all faults' or other language
which in common understanding calls the buyer's
attention to the exclusion of warranties and makes
plain that there is no implied warranty; and
" (b) when the buyer before entering into the con-
tract has examined the goods or the sample or model
as fully as he desired or has refused to examine
the goods there is no implied warranty with regard
to defects which an examination ought in the cir-
cumstances to have revealed to him; and
" (c) an implied warranty can also be excluded or
modified by course of dealing or course of per-
formance or usage of trade.
"(4) Remedies for breach of warranty can be limited
in accordance with the provisions of this chapter
on liquidation or limitation of damages and on con-
tractual modification of remedy (sections 87A-2-718
and 87A-2-719) ."
Applied to the facts of this case provisions of
87A-2-316(3)(c), R.C.M. 1947, which provide for the limitation
of warranties by usage of trade are particularly relevant.
Section 87A-1-205(2), R.C.M. 1947, defines the term usage of
trade saying:
"A usage of trade is any practice or method of
dealipg having such regularity of observance in
a place, vocation or trade as to justify an ex-
pectation that it will be observed with respect
to the transaction in question. * * * "
Undisputed testimony in the record indicates that used farm
machinery, particularly used combines, was not warranted with
the exception of the 50-50 warranty under which each party to
the transaction paid for one-half of the cost of repairs. If
the plaintiff-purchaser was or should have been aware of this
trade usage it will effectively exclude the warranties on which
he relies.
Preliminary to a discussion of plaintiff's knowledge, it
should be noted that he owned a large farm-ranch operation and
had been in the farming business for a substantial length of time.
While there is no direct evidence by the plaintiff in the record
which shows that he was aware of the trade usage with regard to
used equipment, it is not disputed that he paid for one-half, of
the repairs during the first year he had the combine. This will-
ingness to pay in part for repairs is inconsistent with the exis-
tence of the warranties plaintiff now claims existed. Plaintiff
bargained for a combine warranted to be "field readyn when he
took delivery and this he received. He knew or should have known
that used machinery was customarily not warranted beyond a sharing
of the cost of repairs, and he acquiesed for more than a year in
this arrangement with regard to the used combine. From this it
appears plaintiff was aware of the usage of trade limiting war-
ranties on used machinery and that accordingly the implied warranties
of merchantability and fitness for purpose are excluded.
Since we have held the warranties relied on by plaintiff
to be inapplicable, it is not necessary to determine whether
or not return of the combine occurred within a reasonable time.
The judgment of the district court is reversed and the
cause remanded for further proceedings not inconsistent with the
foregoing.
We concur: .
,/ . '
'
? *
f-
-
i
L -- -
-,L-----L--p"----'-----------
Chief Justice ,f-"
u Ju tices