Performance Motors, Incorporated v. Allen

186 S.E.2d 161, 280 N.C. 385, 10 U.C.C. Rep. Serv. (West) 568, 1972 N.C. LEXIS 1256

• Court: Supreme Court of North Carolina
• Decided: January 28, 1972
• Docket: 84
• Status: Published

Opinion

HUSKINS, Justice.

The security agreement signed by defendant contains the following language as part of the “provisions” printed on the reverse side of the instrument itself: “Buyer further warrants and covenants that: 1. The Buyer admits, upon examination, that the Collateral is as represented by Seller and acknowledges acceptance and delivery thereof in good condition and repair.” Plaintiff contends the security agreement was intended by the parties' as a final expression of their agreement and that the quoted language constitutes a waiver by defendant of all warranties and renders incompetent her testimony with respect to the defective condition of the mobile home after it was installed on defendant’s lot. Admission of her testimony is assigned as error.

Plaintiff’s position on this point is unsound. Obviously, the security agreement was signed by defendant at plaintiff’s place of business before the mobile home was delivered and installed. In light of that fact, the buyer at that time could not acknowledge “delivery thereof in good condition and repair.” As a part of the contract of sale, plaintiff agreed to deliver the mobile home “and block it up on her lot.” Until that was done plain tiff’s obligations under the contract remained unfulfilled. Defendant’s testimony was competent, not to contradict the terms of a written contract, but as evidence of additional consistent terms of the sale. “Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented ... (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.” G.S. 25-2-202. Here, the evidence of both parties shows that the mobile home was1 to be delivered and set up on defendant’s lot. Hence the security agreement was not intended “as a complete and exclusive statement of the terms of the agreement.” This assignment is overruled.

Plaintiff’s allegation of the sale and delivery of the mobile home at the agreed price, and defendant’s admission that she purchased the goods, executed the note and security agreement, and refused to pay a portion of the purchase price agreed upon, makes out a prima facie case entitling plaintiff to go to the jury and, nothing else appearing, to recover the balance due on the note. Joyce v. Sell, 233 N.C. 585, 64 S.E. 2d 837 (1951). “The obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract.” G.S. 25-2-301.

Here, to negate her obligation to pay the balance due on the note, defendant alleges (1) fraudulent representations inducing the purchase, (2) breach of express warranty, (3) breach of implied warranty of fitness, and (4) rescission of the contract due to plaintiff’s breach of the warranties. We now examine her degree of success in proving these allegations.

There is no evidence of fraud, and the evidence is insufficient to show an express warranty by the seller. The only evidence in this respect is defendant’s testimony that “the trailer was supposed to last a lifetime and be in perfect condition.” A seller’s language to that effect, if used in negotiating a sale, is ordinarily regarded as an expression of opinion in “the puffing of his wares,” and does not create an express warranty. G.S. 25-2-313 (2); Hollenbeck v. Fasteners Co., 267 N.C. 401, 148 S.E. 2d 287 (1966). Our prior decisions are in accord with the current provisions of the Uniform Commercial Code with respect to the creation of express warranties. G.S. 25-2-313; Wrenn v. Morgan, 148 N.C. 101, 61 S.E. 641 (1908); Swift & Co. v. Aydlett, 192 N.C. 330, 135 S.E. 141 (1926); Potter v. Supply Co., 230 N.C. 1, 51 S.E. 2d 908 (1949).

The ordinary purpose for which a mobile home is used is residential. Here, the mobile home was sold and purchased for that purpose. “Unless excluded or modified (§ 25-2-316), 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. . . . (2) Goods to be merchantable must be at least such as . . . (c) are fit for the ordinary purposes for which such goods are used. ...” G.S. 25-2-314(1), (2). Plaintiff is a merchant with respect to the sale of mobile homes, and the security agreement executed by defendant contains no language, as permitted by G.S. 25-2-316, excluding or modifying the implied warranty of merchantability. Hence, the sale under discussion carried with it an implied warranty that the mobile home was fit for the purpose for which such goods are ordinarily used, i.e., residential purposes. The Uniform Commercial Code in this respect accords with prior decisions of this Court on the subject. Aldridge Motors, Inc. v. Alexander, 217 N.C. 750, 9 S.E. 2d 469 (1940); Swift & Co. v. Aydlett, supra; Swift & Co. v. Etheridge, 190 N.C. 162, 129 S.E. 453 (1925); Jewelry Co. v. Stanfield, 183 N.C. 10, 110 S.E. 585 (1922); Ashford v. Shrader, 167 N.C. 45, 83 S.E. 29 (1914); Medicine Co. v. Davenport, 163 N.C. 294, 79 S.E. 602 (1913).

While there is no implied warranty when the buyer, before entering into the contract, examines the goods as fully as he desires, G.S. 25-2-316(3) (b), and has knowledge equal to that of the seller, Driver v. Snow, 245 N.C. 223, 95 S.E. 2d 519 (1956), this principle is not applicable to the facts here because the contract of sale imposed on the seller the obligation to deliver the mobile home and “block it up” on defendant’s lot. Until that was properly done, fitness or unfitness for use as a home could not be ascertained by the buyer’s examination and inspection of the goods on the seller’s premises. Unless otherwise agreed, “[w]hen the seller is required ... to send the goods to the buyer, the inspection may be after their arrival,” G.S. 25-2-513(1); and the buyer is entitled to a reasonable time after the goods arrive at their destination in which to inspect them and to reject them if they do not comply with the contract. Parker v. Fenwick, 138 N.C. 209, 50 S.E. 627 (1905). Moreover, defendant’s down payment would not impair her right to inspect following delivery. G.S. 25-2-512(2). Here, delivery was not accomplished until plaintiff “blocked it up” on defendant’s lot. Plaintiff could have cured the defects which rendered the mobile home unfit for the use for which it was sold by repairing the defective product it delivered, G.S. 25-2-508, but it failed to do so. For these reasons plaintiff may not now contend that defendant’s inspection of the mobile home at plaintiff’s place of business destroyed the implied warranty of fitness imposed by law upon the sale.

What remedies are available to defendant for breach of implied warranty of fitness? The answer to this question turns on whether defendant accepted the mobile home. This requires consideration of the Uniform Commercial Code’s concept of rejection, acceptance, and revocation of acceptance.

Acceptance is ordinarily signified by language or conduct of the buyer that he will take the goods, but this does not necessarily indicate that the goods conform to the contract. G.S. 25-2-606(1) (a). Acceptance may also occur by failure of the buyer “to make an effective rejection” after a reasonable opportunity to inspect. G.S. 25-2-606(1) (b). Effective rejection means (1) rejection within a reasonable time after delivery or tender and (2) seasonable notice to the seller. G.S. 25-2-602. Acceptance precludes rejection of the goods accepted and, if made with knowledge of a nonconformity, cannot be revoked because of it unless the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured. G.S. 25-2-607(2). Thus, the buyer may revoke Ms acceptance if (1) “the acceptance was on the reasonable assumption that the nonconformity would be seasonably cured,” G.S. 25-2-607 (2), and (2) the nonconformity substantially impairs the value of the goods. G.S. 25-2-608(1). Revocation of acceptance must be made within a reasonable time after the buyer discovers, or should have discovered, the ground for it, Hajoca Corp. v. Brooks, 249 N.C. 10, 105 S.E. 2d 123 (1958), and it is not effective until the buyer notifies the seller of it. G.S. 25-2-608(2). A buyer who so revokes his acceptance is no longer required to elect between revocation of acceptance on the one hand and recovery of damages for breach of implied warranty of fitness on the other. Both remedies are now available to him. G.S. 25-2-608.

The Uniform Commercial Code does not speak of rescission, as such. We need not now decide whether a buyer may still obtain a judicial rescission of the contract by virtue of pre-Code concepts of law or equity which have not been displaced and therefore continue under the Code as an “invalidating cause” supplementing the provisions of the Code within the meaning of G.S. 25-1-103. Assuming without deciding that rescission remains available to the buyer as a remedy by virtue of G.S. 25-1-103, defendant’s allegation of “rescission” will be given effect here as an allegation of “revocation of acceptance” since that Code concept more nearly reflects the claims asserted by the defendant. 2 R. Anderson, Uniform Commercial Code, § 2-711:19 at 420 (2d Ed., 1971). See Lanners v. Whitney, 247 Ore. 223, 428 P. 2d 398 (1967).

Applying the foregoing principles to the evidence in this case, if defendant (1) made an effective rejection of the mobile home, or (2) justifiably revoked her acceptance of it, she has a right to recover “so much of the price as has been paid” plus any incidental and consequential damages she is able to prove. G.S. 25-2-711(1); G.S. 25-2-715. On the other hand, if defendant did not reject but accepted the mobile home, and there has been no revocation of acceptance, she is obligated to pay the balance due on the contract price, and she is limited on her counterclaim to recovery of damages for breach of implied warranty of fitness. The measure of damages in that event is “the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless circumstances show damages of a different amount,” G.S. 25-2-714(2), plus incidental damages and such consequential damages as were within the contemplation of the parties. G.S. 25-2-715; Hendrix v. Motors, Inc., 241 N.C. 644, 86 S.E. 2d 448 (1955); Harris v. Canady, 236 N.C. 613, 73 S.E. 2d 559 (1952).

Here, defendant’s evidence is insufficient to support a finding that she rejected the mobile home. She testified that when the mobile home was installed she told plaintiff’s agent “now this is not right and I do not want it.” While this statement could have been effective as a rightful rejection, G.S. 25-2- 601(a), she did not pursue that remedy. Instead, her evidence tends to show she moved into the mobile home, all the while complaining of numerous defects — some of which plaintiff attempted but failed to correct — and made three monthly payments under the terms of the contract. She complained of the defects “continually from September to the last of December [1968] when he [plaintiff] hung up on me and said Happy New Year.” Thereafter defendant made no further payments, and plaintiff made no further attempt to correct the defects or to collect the monthly payments until May 1969 when the mobile home was repossessed and sold at public auction for $9115. This evidence, considered in the light most favorable to defendant, would permit a jury to find that she initially accepted the mobile home on the reasonable assumption that plaintiff would correct the nonconforming defects and subsequently revoked her acceptance by reason of plaintiff’s failure to do so. Constant complaints from September to December with cessation of payment would seem to constitute sufficient notice of revocation of acceptance. “Any conduct clearly manifesting a desire of the buyer to get his money back is a sufficient notice to revoke.” 2 R. Anderson, Uniform Commercial Code, § 2-608:16 at 245 (2d Ed., 1971). Furthermore, “[a] tender of the goods by the buyer to the seller is not an essential element of a revocation of acceptance. All that is required by the Code is a notification of revocation.” Ibid., § 2-608:18 at 246.

Since there must be a new trial, we have made no attempt to consider seriatim plaintiff’s several assignments of error. With respect to the court’s charge as given on the measure of damages, and plaintiff’s request for special instructions on the issue of damages which the court declined to give, it suffices to say that both are incomplete and inadequate and neither should have been given. At the next trial issues should be submitted to determine, among other things: (1) whether defendant accepted the goods; (2) whether plaintiff breached the implied warranty of fitness; (3) whether defendant justifiably revoked her acceptance; (4) the amount, if any, plaintiff is entitled to recover of defendant on the purchase price; and (5) the amount of damages, if any, defendant is entitled to recover of plaintiff. We have already stated the correct measure of damages upon the permissible alternative findings.

The parties may be permitted to amend their pleadings, if they so desire, to conform to the evidence. G.S. 1A-1, Rule 15, Rules of Civil Procedure.

The decision of the Court of Appeals awarding a new trial is modified to conform to this opinion and, as modified, affirmed.

Modified and affirmed.