Cissell Mfg. Co. v. Park, 99CA1581.

• Decision Date: 15 February 2001
• Docket Number: No. 99CA1581.,99CA1581.
• Citation: 36 P.3d 85
• Parties: CISSELL MANUFACTURING COMPANY, Plaintiff-Appellee, v. Young PARK, a/k/a Young D. Park, a/k/a Jim Park, jointly and severally, d/b/a Young's Equipment & Supplies, Defendant-Appellant.
• Court: Colorado Court of Appeals

36 P.3d 85

CISSELL MANUFACTURING COMPANY, Plaintiff-Appellee, v. Young PARK, a/k/a Young D. Park, a/k/a Jim Park, jointly and severally, d/b/a Young's Equipment & Supplies, Defendant-Appellant.

No. 99CA1581.

Colorado Court of Appeals, Div. IV.

February 15, 2001.

Rehearing Denied April 19, 2001.

Certiorari Denied November 27, 2001.

Holland & Hart, LLP, A. Bruce Jones, Stephen G. Masciocchi, Megan C. Bertron, Denver, CO, for Plaintiff-Appellee.

Hamilton and Faatz, P.C., Dwight A. Hamilton, Jan E. Montgomery, Christopher J.W. Forrest, Denver, CO, for Defendant-Appellant.

Opinion by Judge DAVIDSON.

Defendant, Young Park, d/b/a Young's Equipment & Supplies (Park), appeals from the entry of partial summary judgment against him and the judgment of the trial court entered on a jury verdict in favor of plaintiff, Cissell Manufacturing Company. We affirm.

Park, a distributor for Cissell, bought 12 commercial clothing dryers from Cissell to lease to a laundromat owner. Park received and installed the dryers in April 1993, but never paid Cissell.

Difficulties with the dryers arose within days of installation, and Park alerted Cissell to the existence of these problems. After an unsuccessful attempt to meet with Cissell's representative in May 1993, Park and the laundromat owner sent a letter to Cissell on September 7, 1993, "rejecting and revoking acceptance" of the dryers under §§ 4-2-607 & 4-2-608, C.R.S.2000, of the Colorado Uniform Commercial Code (UCC). Ultimately, the dryers were removed and placed in storage.

Cissell sued Park to collect the purchase price. Park counterclaimed for breach of contract, breaches of express and implied warranties, negligence, negligent misrepresentation, fraudulent misrepresentation, and fraudulent concealment, later adding a claim under the Colorado Consumer Protection Act (CCPA). The court granted partial summary judgment in favor of Cissell on its breach of contract claim and on Park's breach of contract counterclaim. Park's two motions for reconsideration — one immediately after the grant of partial summary judgment, and the other immediately preceding trial-were both denied.

At trial on Park's remaining counterclaims, the court granted Cissell's motion for directed verdict on Park's negligence claim. On the other counterclaims, the jury returned verdicts in favor of Cissell on all counts. Park's motion for new trial and for judgment notwithstanding the verdict was denied, and he now appeals.

I.

Park first argues that the trial court improperly granted Cissell's motion for summary judgment on Cissell's claim for payment and on Park's counterclaim for breach of contract. Park also argues that jury instructions based on the summary judgment ruling were incorrect. We agree. However, based on the jury verdicts on the remaining claims, we conclude that the errors were harmless.

A.

Our review of an order granting a motion for summary judgment is de novo. Aspen Wilderness Workshop, Inc. v. Colorado Water Conservation Board, 901 P.2d 1251 (Colo. 1995). Summary judgment is appropriate only if the pleadings, affidavits, depositions, or admissions establish that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. C.R.C.P. 56(c); Cung La v. State Farm Automobile Insurance Co., 830 P.2d 1007 (Colo.1992). In reviewing a motion for summary judgment, we must view the allegations in the complaint in the light most favorable to the nonmoving party. Churchey v. Adolph Coors Co., 759 P.2d 1336 (Colo.1988).

According to the UCC, once a buyer has accepted goods, he or she cannot reject them and is obligated to pay for them at the contract rate. Section 4-2-607. In its order granting partial summary judgment, the trial court determined that, because Park's response to Cissell's summary judgment motion did not dispute that the dryers were accepted, under § 4-2-607, Park was obligated to pay for them. While acknowledging Park's argument that he had "rejected" acceptance under § 4-2-608 of the UCC, the court found that "because the dryers had been accepted in April 1993, [Park] did not provide in September a `formal notice of rejection' pursuant to C.R.S. § 4-2-608. At most, he gave notice of an attempt to revoke acceptance." The court concluded that, although Park was free to "pursue other remedies," because he had accepted and was using the dryers, he was, nonetheless, obligated to pay. Thus, the court determined that no genuine issue of material fact remained regarding Cissell's claim for payment and Park's breach of contract counterclaim.

On appeal, Park argues that the trial court erred in concluding that § 4-2-608 does not allow revocation of goods with latent defects after acceptance of the goods; that a buyer remains obligated to pay the entire price even after a successful revocation of acceptance of the goods under § 4-2-608; and that any purported attempt to revoke was invalid as a matter of law because the required notice was inadequate. We agree with Park.

1.

Initially, to the extent Cissell argues that Park did not raise the issue of revocation of acceptance in the trial court and therefore has waived it, we disagree. Park asserted a counterclaim and defense under § 4-2-608 in his pleadings and in response to Cissell's motion for summary judgment. He also tendered an instruction on the same theory, which was rejected by the court on the ground that it was precluded by the grant of partial summary judgment to Cissell.

2.

Under the UCC, a buyer may either reject or accept delivered goods. Section 4-2-601, C.R.S.2000. As discussed, once a buyer accepts goods, he or she is precluded from rejecting them, § 4-2-607(2), C.R.S.2000, and is obligated to pay at the contract rate for goods accepted. Section 4-2-607(1), C.R.S.2000.

However, even after accepting, the buyer may revoke such acceptance:

(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it:

(a) On the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or

(b) Without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.

(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.

Section 4-2-608.

Revocation of acceptance is a relatively new concept in the UCC, instituted to resolve the ambiguities of the common law doctrine of rescission. But for the fact that rejection is exercised before acceptance and revocation after, the two have the same legal effect. See W. Hawkland, Uniform Commercial Code Series § 2-608:1 (Art. 2) (1998).

In its complaint, Cissell asserted an entitlement to payment and interest on the goods delivered. See § 4-2-709, C.R.S.2000 (action for the price).

In such an action, the seller is entitled to recovery of the price of "goods accepted." Section 4-2-709(1)(a), C.R.S.2000. However, the UCC limits the definition of "goods accepted" to "only goods as to which there has been no justified revocation of acceptance, for such a revocation means that there has been a default by the seller which bars his rights under this section." Section 4-2-709 comment 5, C.R.S.2000. Thus, a procedurally effective rejection or revocation "bars" acceptance, see J. White & R. Summers, Uniform Commercial Code § 7-3 (4th ed. 1995) (White & Summers), and revocation of acceptance, like rejection, allows the buyer to avoid the obligation to pay the price. See Hawkland, supra, § 2-608:1. To the extent the trial court determined otherwise in its summary judgment rulings, it was incorrect.

We also agree with Park that the trial court incorrectly determined that Park could not pursue a remedy under § 4-2-608 because he had not provided to Cissell a "formal" notice of rejection or revocation.

Contrary to the trial court's determination, there is no "formal notice of revocation" requirement under § 4-2-608, nor does it exist under § 4-2-607 (governing rejection). Indeed, § 4-2-608 does not require that a notice of revocation of acceptance assume any particular format, but rather that the content of the notice be determined by "considerations of good faith, prevention of surprise, and reasonable adjustment." Section 4-2-608 comment 5, C.R.S.2000; see also Allis-Chalmers Corp. v. Sygitowicz, 18 Wash.App. 658, 571 P.2d 224 (1977); R. Anderson, Uniform Commercial Code § 2-608:191, 194 (3d ed.1997). The notice of revocation, to be sufficient, should fairly apprise the seller that the buyer wants to give back the goods and receive a substitute or money in return. See Hawkland, supra, § 2-608:5.

Here, Park's September 1993 letter was adequate. The letter described in detail the dryers' alleged defects, attempted to "reject acceptance" of the dryers, demanded that Cissell remove the machines from the premises, and requested that damages be paid to Park and the laundromat owner.

B.

Because the trial court erred in its grant of partial summary judgment on Cissell's claim for payment, we agree with Park that its instruction to the jury that Park had breached the contract by failing to pay was error. Similarly, the trial court erroneously refused to instruct the jury on Park's revocation of acceptance counterclaim. However, we are convinced that, even if the jury had been instructed properly, the verdict against Park would have been the same. Thus, the errors were harmless. See Dunlap v. Long, 902 P.2d 446 (Colo.App.1995).

As Cissell argues, to prove a valid revocation of acceptance, a buyer must show, inter alia, that the goods were nonconforming. Section 4-2-608(1). In this regard,...