Dorman v. International Harvester Co.

• Decision Date: 13 March 1975
• Citation: 46 Cal.App.3d 11,120 Cal.Rptr. 516
• Court: California Court of Appeals Court of Appeals
• Parties: , 16 UCC Rep.Serv. 952 William A. DORMAN, Appellant and Cross-Respondent, v. INTERNATIONAL HARVESTER COMPANY and International Harvester Credit Corporation, Respondents and Cross-Appellants. Civ. 42842.

Page 516

120 Cal.Rptr. 516

46 Cal.App.3d 11, 16 UCC Rep.Serv. 952

William A. DORMAN, Appellant and Cross-Respondent, v. INTERNATIONAL HARVESTER COMPANY and International Harvester Credit Corporation, Respondents and Cross-Appellants.

Civ. 42842.

Court of Appeal, Second District, Division 5, California.

March 13, 1975.

Rehearing Denied April 1975.

Hearing Denied May 8, 1975.

Charles A. Laufer, Van Nuys, for appellant and cross-respondent.

Pacht, Ross, Warne, Bernhard & Sears, Inc., Ira H. Lurvey, Virgil Roberts, Los Angeles, for respondents and cross-appellants.

STEPHENS, Associate Justice.

This case involves an action arising out of the purchase of a tractor and backhoe by the appellant and cross-respondent, William A. Dorman (hereinafter, Dorman) from the respondents and cross-appellants, International Harvester Company (hereinafter, I.H.) and International Harvester Credit Corporation. ¹ Dorman alleged two causes of action: (1) for breach of express and implied warranties of merchantability and fitness for particular purpose, seeking damages 'in the sum of $7,729.98, which sum includes monies paid to the defendants and each of them, on account of the contract price . . . and loss of earnings and business sustained by the plaintiff to date'; (further loss was left open for proof); (2) for 'rescission.' At the time of trial, Dorman dismissed his cause of action for rescission and proceeded to trial on the breach of warranty cause of action. ²

The jury returned a verdict for Dorman in the sum of $19,500 on the complaint, and against the cross-complainants on the cross-complaint (which sought recovery of the equipment). After entry of the verdict, I.H. filed motions for a new trial and for judgment notwithstanding the verdict on the complaint and cross-complaint. The trial court denied the motion for a new trial, granted the motion for judgment notwithstanding the verdicts, and reduced the verdict from $19,500 to $7,233.68. ³ It also denied Dorman his costs.

Dorman appeals from the judgment entered on the jury verdict, and from the judgment notwithstanding the verdict. I.H. cross-appeals from the portion of the judgment notwithstanding the verdict which awards Dorman $7,233.68 on the complaint, from the portion of the judgment notwithstanding the verdict which failed to award I.H. attorney fees on its cross-complaint, and from the original judgment on the complaint and cross-complaint.

Facts

Dorman entered into a 'Retail Instalment Conditional Sales Contract' with I.H. purportedly on October 31, 1968 (he testified that he executed a second contract on November 3) to purchase a new tractor and backhoe for $12,912.26, including finance charges, and had paid a total of $7,233.68 on the contract. Dorman purchased this equipment for use in his earthgrading business and took delivery on November 4, 1968. The evidence adduced at trial shows that Dorman experienced problems with the tractor from the day he took delivery. The tractor broke down on numerous other occasions during the period of November 7, 1968 to August 21, 1969 and it had to be returned to I.H. for repairs. On August 13, 1969, Dorman sent a Notice of Rescission and Breach of Warranty to I.H., and filed suit on December 19, 1969.

Disclaimer

At the outset of the trial, the court considered the issue of whether the Retail Instalment Conditional Sales Contract contained a valid disclaimer of implied warranties. The disclaimer in question is shown in its context in the facsimile below (appearing after paragraph '9. Terms of Payment'):

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

The court concluded that the disclaimer provision was sufficiently conspicuous to constitute a valid disclaimer of the implied warranties of merchantability ⁴ and fitness for particular purpose ⁵ pursuant to California Commercial Code section 2316. ⁶ The court thus limited the issues to be determined at trial to whether I.H. had fulfilled its standard printed warranty. ⁷

Contentions

Dorman contends that the trial court erred in its ruling on the validity of the disclaimer provision for the following reasons (1) the disclaimer provision is not 'conspicuous'; (2) the disclaimer provision as interpreted by the court is unconscionable; and (3) the court did not allow the introduction of parol evidence of warranties consistent with the contract provision as well as the parties' interpretation of the provision by their subsequent actions.

(1) Conspicuousness

It was well settled in California under pre-Commercial Code law that a provision disclaiming implied warranties was to be strictly construed (Burr v. Sherwin Williams Co., 42 Cal.2d 682, 694, 268 P.2d 1041) and was ineffectual unless the buyer assented to the provision or was charged with notice of the disclaimer before the bargain was completed. (Id., at p. 693, 268 P.2d 1041; Klein v. Asgrow Seed Co., 246 Cal.App.2d 87, 97, 54 Cal.Rptr. 609; Hayman v. Shoemake, 203 Cal.App.2d 140, 157, 21 Cal.Rptr. 519; India Paint Co. v. United Steel Prod. Corp., 123 Cal.App.2d 597, 608, 267 P.2d 408.) At trial, Dorman testified that he did not sign the contract dated October 31, 1968 but that he did read it on that date; that on November 3, 1968, he signed but did not read a contract represented to him to be the same as the one he had read on October 31; and that he did not receive a copy of the standard manufacturer's warranty at the time he signed the contract even though the contract contained a clause stating that he acknowledged receipt of the warranty. Although Dorman did not assent to the disclaimer provision and did not read the contract at the time he signed it, the court concluded that the provision was conspicuous and that he should be charged with notice of the disclaimer.

Commercial Code section 2316, subdivision (2) provides that an exclusion of the implied warranty of merchantability 'in case of a writing must be conspicuous,' and that an exclusion of the implied warranty of fitness for particular purpose 'must be by a writing and conspicuous.' The code defines 'conspicuous' as 'so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capital letters (as: NONNEGOTIABLE BILL OF LADING) is conspicuous. Language in the body of a form is 'conspicuous' if it is in larger or other contrasting type or color . . . Whether a term or clause is 'conspicuous' or not is for decision by the court.' (§ 1201, subd. (10).) ⁸

There is no statutory counterpart of section 1201, subdivision (10) in precode law; nor have we found any California cases under the code which have dealt with this section. Therefore, we must rely predominantly on the official comments to sections 2316 and 1201, subdivision (10), and to foreign law. The official comment to subdivision (10) of section 1201 states that the 'test (of conspicuousness) is whether attention can reasonably be expected to be called to (the disclaimer provision).' (Cf. Gray v. Zurich Insurance Co., 65 Cal.2d 263, 271, 54 Cal.Rptr. 104, 419 P.2d 168.) We must examine this comment in the light of the official comment to section 2316, which states: 'This section is designed principally to deal with those frequent clauses in sales contracts which seek to exclude 'all warranties, express or implied.' It seeks to protect a buyer from Unexpected and unbargained language of disclaimer by denying effect to such language when inconsistent with language of express warranty and permitting the exclusion of implied warranties only by conspicuous language or other circumstances which protect the buyer from surprise.' (Emphasis added.) In other words, section 2316 seeks to protect the buyer from the situation where the salesman's 'pitch,' advertising brochures, or large print in the contract, giveth, and the disclaimer clause--in fine print--taketh away.

Here, the disclaimer provision appears in close proximity to where Dorman signed the contract, but emphasized (italicized) the implied-warranties wording 'merchantability and fitness for particular purpose shall apply.' Although the disclaimer provision was printed in a slightly larger type face than was the preceding paragraph of the contract, it was not in bold face type, and we are of the opinion that it was not sufficiently conspicuous to have negated the implied warranties, particularly where no 'standard printed warranty' was in fact given to Dorman at the time of execution of the contract. ⁹ The slightly larger type face and location of the disclaimer paragraph are not conclusive. As stated by the court in Woodruff v. Clark County Farm Bureau Coop. Assn. (Ind.App.1972) 286 N.E.2d 188, 198 (quoting from Greenspun v. American Adhesives, Inc. (E.D.Pa.1970) 320 F.Supp. 442), '(w)hile there is some slight contrasting set-off, this is not sufficient. A provision is not conspicuous when there is only a slight contrast with the balance of the instrument.' The instant disclaimer does not reach that level of conspicuousness so as to exclude the right of the buyer to implied warranties which are an integral part of the transaction. (Henningsen v. Bloomfield Motors, Inc. (1960), 32 N.J. 358, 161 A.2d 69, 76.) It thus violated the underlying rationale of section 2316 as set forth in the official comment of protecting the buyer from an unbargained for limitation in the purchase of a product. In order to have a valid disclaimer provision, it must be in clear and distinct language and prominently set forth in large, bold print in such position as to compel notice. (§ 1201, subd. (10).) In the instant contract, the only large size type (in relation to other type on the page) that may satisfy these criteria is that used for the words 'ADDITIONAL PROVISIONS' on the signature page (in a reference to matters on the reverse side of the contract which are extraneous to the warranties disclaimer). Though the size of the type in those words may be large enough, the remainder of the...