Jones v. Linebaugh

191 N.W.2d 142, 34 Mich. App. 305, 9 U.C.C. Rep. Serv. (West) 1187, 1971 Mich. App. LEXIS 1610

• Court: Michigan Court of Appeals
• Decided: June 22, 1971
• Docket: Docket 9256
• Status: Published

Opinions

McGregor, J.

This appeal involves important questions under the Sales Article (art 2) of the Uniform Commercial Code¹ (UCC) and, as an incidental matter, the propriety of the granting of summary judgment in favor of the defendant.²

On October 23, 1969, the buyer brought suit against the seller, claiming the latter had breached the warranty of title in the sale of an antique automobile, known as a Bugatti. On January 2, 1970, seller filed a motion for summary judgment on the grounds that: (i) there was no genuine issue as to any material fact and (ii) buyer had failed to state a claim upon which relief could be granted. The trial court, on February 2, 1970, granted seller’s motion and dismissed the complaint. The buyer appeals as of right.

The issues on appeal are confined to the propriety of the granting of summary judgment on Count I of the complaint, which charged the seller with a breach of the warranty of title in the sale of the chattel. The record, viewed most favorably to the buyer, reveals the following facts:

Seller and buyer were both engaged in the business of restoring antique cars. In 1964, buyer learned that seller had two Bugatti automobiles at his premises. Buyer then went to seller and orally offered to purchase these cars. The seller informed buyer that he did not have title to the chattels, that they were owned by a man named Clarence Vann. Buyer requested that seller obtain title to the cars. Seller stated that the price would be $6,000.

Later, seller indicated that he was in the process of obtaining title, that some paper work remained to be done, and that seller’s attorneys were at work on accomplishing this task. Next, buyer paid the purchase price to seller and took possession of the cars.

Within a few weeks, after the transfer of possession, buyer received, by certified mail, a bill of sale to the one Bugatti in issue here. Two and one-half years later, buyer was sued by a third party who claimed paramount title to that automobile. Buyer settled that suit and then brought the present action against the seller.

On these facts, the trial court granted summary judgment to the seller upon the following grounds: (1) the bill of sale excluded the warranty of title and (2) buyer had reason to know that his seller did not claim title in himself and was “purporting to sell only such right or title as he or a third person may have”. MCLA §440.2312(2) (Stat Ann 1964 Rev § 19.2312 [2]).

It is clear that the bill of sale did not contain “specific language” as required by UCC 2-312(2) to exclude the warranty of title, which, under UCC 2-312, arises in every contract for the sale of goods. The bill of sale provided, in pertinent part, that the seller sold and assigned to the buyer all of the seller’s “right, title, and interest” in the chattel, and that to the “best of [his] knowledge there [was] no title in existence by way of registration with the State of Michigan or with any other state or with any nation”. The bill of sale was represented to be “the original evidence of title to the aforedescribed vehicle”.

Although this case raises questions of first impression in Michigan concerning the interpretation of UCC 2-312(2), prior Michigan law appears to be in accord with the UCC requirement that specific language be used to exclude this type of warranty.

In Croly v. Pollard (1888), 71 Mich 612, the Supreme Court held that a bill of sale by which the seller conveyed his “right, title, and interest” in certain chattels did not, as a matter of law, negate the creation of the warranty of title. UCC 2-312(2) requires “specific language” to exclude the title warranty. “Specific” has been defined to mean:

“characterized by precise formulation * * * free from such ambiguity as results from careless lack of precision or from the omission of pertinent matter.” Webster’s Third New International Dictionary (Unabridged Edition, 1966).

The language of the bill of sale in the present case is not precise and free from ambiguity. Indeed, it would appear to convey to a reader an ambiguous connotation. The seller transferred all of his right, title, and interest, stated that no other title, to his knowledge, existed, and that the bill of sale was the original evidence of title. Such language, as a matter of law, is not sufficient to exclude the warranty of title.

We believe that very precise and unambiguous language must be used to exclude a warranty so basic to the sale of goods as is title.³ ****8 In view of the failure to exclude the warranty in the bill of sale, little need be said concerning the other ground for excluding this warranty. UCC 2-312(2) (MCLA § 440.2312[2]) provides, in pertinent part:

“A warranty [of title] will be excluded or modified only by * * * circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.”

Under the record herein, and absent the claimed exclusion in the bill of sale, the question of whether the buyer had “reason to know” that the seller did not have title is one of fact which cannot be resolved on summary judgment. See Durant v. Stahlin (1965), 375 Mich 628; American Parts Go., Inc. v. American Arbitration Association (1967), 8 Mich App 156, 170.

In view of the remand, however, we deem it our duty to point out that a number of important factual questions, not fully answered on this record, may be involved in the proceedings below. Under UCC 2-607(3) (MCLA § 440.2607[3]) (Stat Ann 1964 Rev § 19.2607[3]), as applied to the facts presented in the record, buyer was required to give notice of the defect in title to seller within a reasonable time after he discovered the same. We cannot speculate as to whether such notice was given or not. If it was not given, then, under that section of the UCC, buyer is “barred from any remedy.” Furthermore, under UCC § 2-403 (MCLA § 440.2403), a person with a voidable title, such as the seller herein may have had, has power to transfer good title to a good faith purchaser, which buyer may have been in the present ease. Accordingly, seller’s title may have been paramount to that of the third party who sued the buyer, and settlement without notice to seller (if, indeed, such notice was not given) may have prejudiced his rights. Stewart & Foulke, Inc. v. Robertshaw Comtrol Co. (5th Cir. 1968), 397 F2d 971. None of these issues can be disposed of at this stage of the litigation without further proceedings.

Reversed and remanded for further proceedings consistent with this opinion.

O’Hara, J., concurred.

1 “See. 2312(1) Subject to subsection (2) there is in a contract for sale a warranty by the seller that

“(a) the title conveyed shall be good, and its transfer rightful} and

“(b) the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.

“(2) A warranty under subsection (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.

“(3) Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.” MOLA 8 440.2312 (Stat Ann 1964 Bev § 19.2312).

2 Defendant is hereinafter referred to as the seller} plaintiff is referred to as buyer.

3 An example of this type of language, as found in 4 Henson & Davenport, Uniform Laws Annotated, Uniform Commercial Code Forms & Materials, at 103 (Master Edition, Forms Volume, 1968):

“§ 2-312 — FORM 1

“Disclaimer of Warranty of Title

“Disclaimer of Warranty of Title. Seller, as Trustee in bankruptcy of XYZ Solvents Company, transfers only his right, title and interest to the goods herein described. Since he is without knowledge as to what claims may or may not exist with respect to ownership of the goods, SELLER MAKES NO WARRANTY WHATEVER WITH RESPECT TO TITLE.”